Here’s the background. Night watchmen for a New York office building owned by 14 Penn Plaza worked for Temco Service Industries and belonged to the Service Employees International Union (SEIU). In 2003, the building owner hired a different security contractor, and Temco reassigned several of its night guards to cleaning and porter positions. The guards found their new jobs paid less and were less desirable; moreover, they were the only Temco employees over the age of 50. They filed a grievance with SEIU, but the union had agreed not only to the hiring of the new contractor but also to the guards’ reassignment, so it did not pursue the grievance.

The guards sued, despite the union’s agreement that its members would submit all employment disputes to binding arbitration. Here’s where it gets tricky, especially for HR pros whose workforce is not unionized: SEIU had refused, by rejecting the grievance, to submit the charge to arbitration. So the guards felt they had no option but to sue for violation of the Age Discrimination in Employment Act (ADEA).

In federal district court, Temco and 14 Penn Plaza argued that the charge could only be arbitrated, not taken to court; but the judge ruled that individuals whose union had bargained away their right to sue should not be held to that agreement. The defendants appealed, and the U.S. Court of Appeals for the 2nd Circuit (Connecticut, New York, and Vermont) affirmed the district judge’s decision to allow the guards to sue. Again the defendants appealed, this time to the Supreme Court.

What the justices said. A similar case had come before the high court in 1974—Alexander v. Gardner-Denver—in which a fired African American worker sued for race bias under federal civil rights law. Like that of the guards, Alexander’s union had agreed to binding arbitration for all such disputes. Back then, the justices ruled unanimously that an individual could not be barred from suing when it was his union, not he himself, who had signed away his right to sue.

The majority in 14 Penn Plaza, led by Justice Clarence Thomas, overturned that precedent and ruled that the guards could not sue under ADEA. Their only choice, the majority said, was to sue their union for failing to represent them fairly. One point the majority raised was that ADEA, unlike Title VII of civil rights law, doesn’t specifically bar arbitration of claims. The four dissenting justices asserted that the majority had ignored the Gardner-Denver precedent in favor of the principle of promoting arbitration.

A Closer Look

In the case of the Temco security guards, the plaintiffs in 14 Penn Plaza v. Pyett, why did their union agree to their job reassignments and refuse to address their age-bias complaint? We spoke with two attorneys well-versed in labor relations, and the answer is fairly clear.

Says Robert Cleary, a labor and employment specialist in the Southfield office of Michigan law firm Warner Norcross & Judd, “Unions are encumbered by collateral agendas, such as the ‘law of the shop’ and internal union politics,” that get in the way of protecting individual members. Cleary points out further that the only remedies available to the guards from arbitration would have been reinstatement and back pay. “Other remedies available to them in court would include punitive damages and attorney’s fees,” but the union had waived those possibilities in the collective bargaining agreement.

BLR’s labor expert, Patricia Trainor, J.D., put it more simply: “The employees had paid their [union dues], and what did they get for it?” In fact, the attorneys agree, the justices who ruled unanimously in Gardner-Denver did so exactly because they didn’t trust the plaintiff’s union to protect him. Trainor adds, “The court in 1974 made a very clear distinction between the role of arbitration (to vindicate contract rights) and the role of the judiciary (to effectuate the provisions of Title VII.)”

Cleary says, “14 Penn Plaza strikes a blow against unions. Employers who want their workforces to remain union free can point to this ruling as an illustration of the disadvantages of unionizing.” Without a union, no one but the individual employee can waive his or her statutory rights, as he or she might do when signing the employer’s agreement to submit all disputes to binding arbitration. In fact, the Supreme Court ruled in the 1991 case of Gilmer v. Interstate/Johnson Lane that a sophisticated and knowledgeable employee who had signed such an agreement had to abide by it.

Cleary believes that “Congress will find portions of the Penn Plaza ruling offensive,” and that lawmakers may move to overturn the decision. The dissent accused the other justices of ignoring precedent, and the majority argued that the ruling was needed to resolve a split among the circuit courts: Along with the 2nd Circuit, the 6th (KY, MI, OH, TN) and 9th (AK, AZ, CA, HI, ID, MT, NV, OR, WA) Circuits have refused to enforce arbitration agreements in union contracts for discrimination claims, while the 3rd (DE, NJ, PA) and 4th (MD, NC, SC, VA, WV) Circuits have ruled that such claims must be arbitrated. Given the current administration’s pro-union stance, many people in Washington likely view with distaste the majority’s decision to resolve the split in this way.