14 Penn Plaza v. Pyett and the Fairness in Arbitration Act

Thanks to Dan, Sarah and all for inviting me to continue as a guest for awhile. They did not even require me to promise not to say any more about Ricci!

I finished my Labor Law class with 14 Penn Plaza v. Pyett. My position is that the case represented dysfunctional litigation in a number of ways. First, and foremost, Justice Thomas’ opinion appears to fail to understand anything about how collective bargaining arbitration works. The provision pouring statutory discrimination claims into arbitration is the basis for his conclusion that this “requires union members to submit all claims of employment discrimination claims to binding arbitration.”  Collective bargaining agreements, including arbitration provisions, have only two parties to them – the union and the employer. The employees covered by the collective bargaining agreement are decidedly not parties to the agreement and nothing in the provision Justice Thomas quotes does anything to make them parties to the collective bargaining agreement, the arbitration agreement, or the particular grievance of any individual employee. One wonders if any Justice or any clerk of any Justice has actually taken labor law. A problem was that the union was not a party to the case and did not weigh in until it filed an amicus brief at the Supreme Court.

 Second, the fig leaf of “consent” or voluntary agreement to arbitrate employment claims in individual employment contracts that are contracts of adhesion has been ripped away in 14 Penn Plaza. There is simply no basis for finding that the employees whose discrimination claims now can only go to arbitration ever agreed to that. So, arbitration has been deprived of any claims to being voluntary as to the employees whose claims are being determined. Finding that a union can waive the statutory right of employees simply does not make the resultant arbitration voluntary as to the employee.

 Third, once the union withdrew the grievance from arbitration because it claimed that it had agreed to the change that disadvantaged the employees, the employees should have filed a discrimination claim against the union in addition to the claim it had filed against the employer. With the two parties to the arbitration agreement now both respondents to discrimination claims, it seems hard to conclude that the arbitration process, controlled by these two parties, could be found to be fair. The conflict between the employees on one side and the employer and union on the other should have allowed the employees to seek a neutral forum in the courts.

Fourth, the opinion references the union’s duty of fair representation but the standards of proof for that are so high that a straight discrimination claim might work better for the employees. The employees should, however, have filed duty of fair representation charges with the NLRB on the chance that it would have pursued their claims on their behalf. In sum, it is my position that 14 Penn Plaza is another, in a long line of cases that is transforming voluntary arbitration into a private justice system that is inconsistent with the idea that we follow a rule of law.

The students raised some interesting points that did not necessarily agree with my position.

One student thought that the result in 14 Penn Plaza put employees covered by collective bargaining agreements that include arbitration provisions covering discrimination claims in a marginally better position than employees who go to court with their discrimination claims. While Alan Hyde claims that arbitration is where discrimination claims go to die, the student pointed to data on success rates for plaintiffs in court that is so abysmal that discrimination cases go there to die as well. With collective bargaining arbitration, the employees might be represented by the union, while most plaintiffs in court cases are pro se. Thus, at least some employees would be better off in arbitration than in court. 

Another thought 14 Penn Plaza would have a horrible impact on union organization efforts since it should now be assumed that all employers will, in collective bargaining, push for provisions pouring all discrimination claims of employees into arbitration, just as so many employers now require employees not represented by unions to “agree” to arbitrate their disputes . Workers, deciding whether or not to support a union organization, will have to balance what they might gain from union representation against the loss of their right to take their individual statutory claims to court. 

A third thought that collective bargaining arbitration of statutory claims would only work if all individual grievants would have a right to take their statutory claims to arbitration with the union paying for all those arbitrations either by representing the grievant or paying for the grievant’s representation, along with the union’s share of the cost of the arbitrator. Given the low rate of success of discrimination claims in court, an alternative dispute system like that might work better. 14 Penn Plaza, of course, left open how the arbitration of these disputes would work, especially the role of the union in that process.

Following from that, a fourth argued that the expense and lack of control over all these grievance arbitrations would so drain unions of resources that, given the pressure of employers to accept arbitration of statutory claims, unions would now have a reduced interest in agreeing to arbitrate any disputes in order to escape the obligation to pay for all discrimination grievances to go to arbitration. Without arbitration as the more or less single rule of federal collective bargaining agreement law, section 301 enforcement actions would require the federal courts to build out a real jurisprudence of collective bargaining agreement law. 

After the decision, Senator Feingold introduced Senate Bill 931 which would overturn  14 Penn Plaza:

COLLECTIVE BARGAINING AGREEMENTS- Nothing in this chapter [of the Federal Arbitration Act] shall apply to any arbitration provision in a contract between an employer and a labor organization or between labor organizations, except that no such arbitration provision shall have the effect of waiving the right of an employee to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefrom.

So, should Congress adopt Senator Feingold’s amendment to the Fairness in Arbitration Bill that has been before it for some time 

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