August Brings More Decisions Relating to COVID Fallout.

Courts have continued this month to issue decisions relating to fallout from the COVID pandemic.  In one, the Sixth Circuit reversed an employer’s summary judgment on a Title VII religious discrimination claim alleging that the plaintiff had been fired for not conforming to the employer’s religious beliefs which were hostile to, among other things, his social distancing during the pandemic.  Amos v. LAMPO Group, LLC, No. 24-5011 (6^th Cir. Aug 6, 2024).  In another, the Sixth Circuit affirmed the continuation of a state law lawsuit where the plaintiff had been fired for refusing the COVID vaccine and rejected the employer’s argument that it was immune as a federal contractor because the government’s vaccine mandate was unlawful.  Riggs v. UCOR, LLC, No. 23-6116 (6^th Cir. Aug. 2, 2024).    Finally, the Ohio Supreme Court held that civil service employees were permitted to appeal whether their COVID furlough was a layoff governed by seniority rules.  Harmon v. Cincinnati, No. 2024-Ohio-2889.  “Common pleas court [was] not divested of jurisdiction to hear city employees’ administrative appeal regarding whether separation from employment under temporary emergency-leave program implemented in response to COVID-19 pandemic constituted a layoff.” The Court found that the bargaining agreement permitted civil service appeals and the civil service commission’s failure to conduct an evidentiary hearing when it should have done so did not destroy jurisdiction or render it a non-quasi-judicial matter.

In Amos, the plaintiff alleged that the defendant employer’s policy “was that prayer was the “exclusive way to prevent COVID infection,” and that anything else showed a “weakness of spirit” and was “against the will of God.”  . . . .  Employees that did take precautionary measures were “mocked and derided.” He also alleged that he “was criticized, specifically, for social distancing and wearing a mask.”  He followed “his own deeply held religious beliefs, including the “golden rule” of doing no harm to others and promoting the safety of his own family.”  Ultimately, he alleged that he was fired in July 2020 for “lack of humility” and because [he] “was not a good fit because he ‘would stand off to the side.”  He claimed “that his termination was based on his failure to submit to Lampo’s religious practices and his expression of his own religious beliefs with regard to COVID measures.”

While most religious discrimination claims are based on the employer’s failure to accommodate an employee’s beliefs, it is also true that religious nonconformity is covered because “Title VII “preclude[s] employers from discriminating against an employee because . . . the employee fails to comply with the employer’s religion.”

As with all other types of religious-discrimination claims, the employer is accused of discriminating against the employee on the basis of religion. Here, however, it is the employer’s religion that is the focus. But that doesn’t make the discrimination “reverse.” The employer is still the one allegedly doing the discriminating. The only difference is the alleged motivation—who holds the relevant religious beliefs. If anything, “reverse” might suggest—strangely—that it is the employee doing the discriminating. Accordingly, we will refer to this claim as one for “religious nonconformity.”

The trial court indicated that the plaintiff did not sufficiently allege that the employer failed to accommodate his own religious beliefs and dismissed his noncomformity claims as possibly unrelated to any particular religious belief and based simply on disdain.  The Court, however, found that he had sufficiently alleged a non-conformity claim.  He “provides sufficient facts to support a claim that [the employer] discriminated against him because he did not share [its] religious convictions, and so has met his burden.”

Moreover, the Court also concluded that he had sufficiently alleged that the employer had failed to reasonably accommodate his own religious beliefs.   He   “just need[s] to plausibly allege that [he was] denied a religious accommodation and treated differently because of [his] religion.” In particular, he alleged that the employer

violated Title VII . . . by refusing to respect and/or accommodate Plaintiff’s strongly held religious belief that ‘God helps those that help themselves,’” that he has “a deep religious devotion . . . to follow the ‘golden rule’ to do no harm to others,” and that “[the employer] terminated [him] for taking scientifically prescribed precautions, as required by his sincerely held religious beliefs.” . . . . In short, [he] pleads that his deeply held religious beliefs required him to take COVID precautions to avoid inflicting injury on others, as well as to protect his family—and that [the employer] did not allow him to do so and ultimately terminated him. This is a plausible claim, supported by specific factual allegations . . .

Finally, the Court rejected a distinction between religious beliefs and religious conduct.

Title VII defines “religion” as “all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate . . . [the] religious observance or practice without undue hardship on the conduct of the employer's business.”  . . . .  And the Supreme Court has explicitly denied attempts to create a distinction between religious belief and conduct in the Title VII context. . . . . Thus, religious practice is one of the protected characteristics that cannot be accorded disparate treatment and must be accommodated.”

In Riggs, the employer was a federal contractor who was required by federal regulation to maintain a safe workplace.  Prior to the government requiring contractors and employers to mandate COVIC vaccines, the employer implemented such a policy.  The Court enjoined the government’s mandate on government contractors, but not OSHA’s similar requirement on employers. The plaintiff’s request for a religious accommodation was denied by the employer and she was fired in January 2022 for refusing to be vaccinated.  She filed suit under a state law that prohibited the termination of employees who refused to get vaccinated.  The employer claimed that it was immune from such suit because it was a federal contractor which was required to mandate the vaccination.

Federal contractors may assert derivative immunity as a defense where (1) the government “directed” the contractor to take the action for which the plaintiff seeks to hold it liable, and (2) the government’s direction was legally valid, meaning that federal law authorized the government to issue that directive.  

In this case, the employer could not assert that the government’s direction was legally valid.  The Court had already enjoined the contractor mandate and the Supreme Court later struck down the OSHA mandate.   Further, the employer had implemented its policy before either government mandate. “A contractual provision granting UCOR the discretion to choose which measures it felt were “reasonable” to protect the health of its employees does not amount to a command from the government that UCOR implement a Covid-vaccination policy.”

Finally, in Harmon, the employees challenged the City’s Temporary Emergency Leave policy, which was implemented because of the (correctly) anticipated reduction in tax revenues and increased expenses being caused by the COVID pandemic and shutdown.  The employees alleged that it violated the City’s Civil Service rules governing layoffs.  After appearing before the City Civil Service Commission, the Commission ruled that the TEL was not a layoff and that the employees were not entitled to an evidentiary hearing as to whether the TEL was a layoff.  The employees appealed and the court reversed.  The City then appealed, arguing that the employees’ claims should be submitted to mandatory arbitration under their collective bargaining agreement and the Commission is entitled to interpret its own rules, but the appellate court affirmed.  The Supreme Court likewise affirmed.

The Court rejected the argument that the appeal was preempted by the CBA because it explicitly permitted employees to appeal layoffs to the Commission.  Arbitration was not mandatory in such cases.

The City also argued that only Commission decisions which result from quasi-judicial proceedings are appealable and a mere “appearance” before the Commission does not satisfy that requirement. “A quasi-judicial proceeding is a proceeding that requires notice, a hearing, and the opportunity to introduce evidence.”  The Court found that this is a question of law:

“Whether there is an adjudication depends not upon what the administrative agency actually did, but rather upon what the administrative agency should have done. Where the administrative agency should have given notice, conducted a hearing and afforded the parties an opportunity to be heard and to introduce evidence, the order is the result of an adjudication even if the administrative agency fails to afford such notice and hearing.”

 . . . .

Just as it did below, the city’s arguments here rest on the fact that the commission determined that a full hearing was unnecessary because, in its view, the TEL program was not a layoff. We conclude that the commission exercised its discretion in deciding that the program was not a layoff, rendering the appearance a quasi-judicial proceeding.  . . . . . And while the commission did not follow the requirements under Cincinnati Civil Service R. 17 for conducting a hearing, it was required to do so.

 . . . . Because there was some doubt regarding whether the program was a layoff, the commission should have proceeded with a hearing to allow the parties to argue their positions. As the First District noted, “[t]he commission may not abandon its own rules and sua sponte decide that the leave under the TEL program was not a layoff prior to holding a hearing on that issue.” 2023-Ohio-788 at ¶ 19. If the commission had conducted a hearing, there would have been no doubt that the common pleas court had jurisdiction over Harmon and Beasley’s appeal, and a hearing would have provided greater insight and detail into the matter for the court to consider in making its decision. Regardless, because the commission’s decision was the result of a quasi-judicial proceeding, the common pleas court had subject-matter jurisdiction to review the decision on administrative appeal and to ultimately remand the matter to the commission for a hearing.

In short, “[t]he commission was required to conduct a hearing on [their] appeals. Since the commission should have conducted a hearing, its failure to do so rendered its decision the result of a quasi-judicial proceeding and [they] were thus permitted to appeal the commission’s decision to the court of common pleas under R.C. 2506.01(A).”

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Recent Developments Concerning Mandatory Pre-dispute Arbitration

 

In light of the recent federal legislation carving out sexual assault and sexual harassment cases from the provisions of mandatory pre-dispute arbitration, it is worth remembering that mandatory arbitration is not as one-sided as some may think.  There were several cases decided within last year which indicated that arbitrations are not automatically compelled.   None of these decisions involved sexual harassment or assault allegations.   In Robie v. Maxill, Inc., 2021-Ohio-2264, the court remanded the dispute for the trial court to conduct an evidentiary hearing on the alleged unconscionability of the arbitration agreement.  In Boykin v. Family Dollar Stores, 3 F.4th 821 (6th Cir. 2021), the Court remanded the dispute so that the trial court could evaluate whether the underlying contract had even been made.   Finally, in Ciccio v. SmileDirectClub, LLC, 2 F.4th 577 (6th Cir. 2021), the Court held that the AAA Administrator lacked authority to determine the arbitrability of the dispute; only the arbitrator was authorized to conduct that analysis.

In Robie, the plaintiff alleged that she had been fired in retaliation for complaining about illegal compensation practices (i.e., being required to work without pay answering client questions while she was on furlough and receiving unemployment compensation).  The trial court granted the employer’s motion to stay pending arbitration.  The Trumbull County Court of Appeals found that the trial court was typically not required to conduct an evidentiary hearing before staying litigation pending arbitration, but was required to consider evidence that the agreement was unconscionable if so alleged.   The case was remanded on that issue.

In Boykin, the plaintiff alleged that he had been unlawfully fired on account of his age and race.  The employer moved for judgment under Rule 12(b)(3) and to compel arbitration based on an e-signed agreement.  The trial court dismissed the case under Rule 12(b)(6) even though it considered evidence outside the pleadings.  The Sixth Circuit reversed:

Although the Federal Arbitration Act requires a court to summarily compel arbitration upon a party’s request, the court may do so only if the opposing side has not put the making of the arbitration contract “in issue.” 9 U.S.C. § 4. The district court in this case should have evaluated whether Boykin adequately challenged the making of the contract using the standards that apply on summary judgment. And Boykin’s evidence created a genuine issue of fact over whether he electronically accepted the contract or otherwise learned of Family Dollar’s arbitration policy. Although his affidavit denying that he accepted the contract may have been “self-serving,” that description alone does not provide a valid basis to ignore it.

In Ciccio, a group of plaintiffs brought their claims (mostly relating to false advertising) in court, but the appellant voluntarily dismissed and submitted his claim to the AAA in accordance with a previously signed arbitration agreement.  However, the AAA Administer refused to accept it unless the plaintiff signed a new post-dispute arbitration agreement, which he refused to do.  When the plaintiff returned to court, the trial judge found he had satisfied his obligations under the arbitration agreement, meaning that his dispute was not covered by the agreement.  The Sixth Circuit reversed and ordered the dispute to be submitted to an arbitrator (rather than the AAA administrator) to determine arbitrability.

But whether an arbitration agreement covers a dispute is a gateway question of arbitrability, and here the parties delegated such questions to an arbitrator. Under the agreement and the incorporated AAA rules, it was improper for an administrator to effectively answer that gateway question or to overlook it altogether . . .

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Congress Amends FAA to Restrict Mandatory Arbitration and Class Action Waivers of Sexual Assault and Harassment Claims

President Biden is expected to sign H.R.4445, “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” to amend the Federal Arbitration Act in Chapter 9 of the U.S. Code and permit sexual harassment victims to reject mandatory pre-dispute arbitration and class action waivers of sexual assault, sexual contact and harassment claims.   It will apply to any disputes or claims which arise or accrue after the Act’s enactment.  Courts and not arbitrators will determine the applicability of the statute, regardless of the terms of any agreement to the contrary.  “An issue as to whether this chapter applies with respect to a dispute shall be determined under Federal law.”

The text of the statute applies only to pre-dispute waivers, such as contained in employment and separation agreements.  Only named class representatives can make the decision, not unnamed members of the class.  The Act applies to sexual harassment that arises under any federal, state or tribal law. The criminal statute cited by the statute defines sexual contact to include:

the intentional touching, either directly or through the clothing, of the  . . . , groin, breast, inner thigh, or buttocks of any person with an intent to abuse, humiliate, harass, degrade, or arouse or gratify the sexual desire of any person;

(I have edited this quotation to avoid getting caught in spam software, which is why I am also not quoting the criminal statute for sexual assault at 18 U.S.C. §2246).

The “meat” of the Act is as follows:

§ 402. No validity or enforceability.

“(a) In General.—Notwithstanding any other provision of this title, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.

“(b) Determination Of Applicability.—An issue as to whether this chapter applies with respect to a dispute shall be determined under Federal law. The applicability of this chapter to an agreement to arbitrate and the validity and enforceability of an agreement to which this chapter applies shall be determined by a court, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement, and irrespective of whether the agreement purports to delegate such determinations to an arbitrator.”.

As mentioned, it also amends the Federal Arbitration Act by adding the new Chapter 4 to the Table and as follows:

§  2 A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract OR AS OTHERWISE PROVIDED IN CHAPTER 4.

§208  APPLICATION.  Chapter 1 applies to actions and proceedings brought under this chapter to the extent that chapter is not in conflict with this chapter or the Convention as ratified by the United States. THIS CHAPTER APPLIES TO THE EXTENT THAT THIS CHAPTER IS NOT IN CONFLICT WITH CHAPTER 4.

§307. APPLICATION. Chapter 1 applies to actions and proceedings brought under this chapter to the extent chapter 1 is not in conflict with this chapter or the Inter-American Convention as ratified by the United States. THIS CHAPTER APPLIES TO THE EXTENT THAT THIS CHAPTER IS NOT IN CONFLICT WITH CHAPTER 4.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Court of Appeals Affirms Stay in Favor of Arbitration Despite $23K Arbitration Cost for Plaintiff

Last week, the Franklin County Court of Appeals affirmed a trial court’s order staying litigation pending arbitration without first holding an evidentiary hearing despite evidence that the plaintiff would be required to deposit over $23,000 with the American Arbitration Association in order to pursue her claims of disability discrimination. Shearer v. VCA Antech, Inc., 2011-Ohio-5171 (10-6-11). The plaintiff had filed suit challenging the arbitration proceedings and, in doing so, apparently only challenged the arbitration clause on the basis of procedural and substantive unconscionability under state law. She did not rely on any federal court precedent that such expensive arbitration expenses could deprive a victim of discrimination of the benefit of the Americans With Disabilities Act and, thus, be unenforceable. Thus, the Court had no difficulty finding that the arbitration agreement was enforceable when presented with documentary evidence that the plaintiff had consulted with counsel and negotiated over some of its terms and had never been concretely mislead. While the defendant employer had persuaded her to agree to the terms by claiming that it had never sought legal enforcement in the past and was unlikely to do so in the future, it wanted to reserve its right to sue in the event that she prematurely resigned her employment.

According to the Court’s opinion, the plaintiff sold her veterinary practice to the defendant employer. In doing so, she signed an agreement of sale and an employment agreement. Both contained arbitration clauses. They also both required her to remain employed for four years and precluded any voluntary resignation before that time. Before signing, she consulted with counsel and negotiated a requirement to use the AAA in the arbitration clause. The employer refused to include her proposed revision giving her the right to resign on 30 days notice. When she expressed concern, they assured her that they could not force her to continue working, but did not want her to quit right after selling the practice because of her clients would probably go elsewhere. While they had never enforced the termination clause in the past, they wanted the ability to do so in the future – just in case.

A year later, the plaintiff resigned – despite the termination clause requiring her to work four years – and the employer filed a claim with the AAA. She counterclaimed that it had failed to accommodate her disability and retaliated against her, among other things. The AAA ultimately required each party to deposit over $23,000 before proceeding to hearing. At that point, the plaintiff filed suit objecting to the cost of arbitration. There is no discussion in the decision of the Morrison v. Circuit City opinion where the Sixth Circuit found such cost sharing/shifting provisions to be inconsistent with federal employment statutes, and thus, unenforceable. Rather, the only discussion is whether the arbitration clauses – and cost shifting provisions – are procedurally or substantively unconscionable. The Court found they were not.

The plaintiff also objected to the lack of an evidentiary hearing. The Court noted that a hearing was discretionary when the party only sought to stay arbitration and were not mandatory unless the party sought to compel arbitration.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Finds Arbitration Policy is Unenforceable Without Proof Employee Was Given Notice and Knew of It

This morning, the Sixth Circuit reversed an order to compel arbitration based on a lack of evidence that the employee knew about the arbitration policy. Hergenreder v. Bickford Senior Living Group, LLC., No. 10-1474 (6th Cir. 8/31/11). In that case, the plaintiff was hired as a nurse in October 2006 and soon thereafter required a medical leave of absence following a cancer diagnosis. When she attempted to return to work in December 2006, she was told there was no job for her and was notified that she had been fired (with the ability of being rehired) in January 2007 because she had not qualified for a medical leave of absence so soon after being hired. When she filed suit under the ADA, the employer moved to compel arbitration even though she had never signed an arbitration agreement. The employer could not rely on any arbitration provisions in the employee handbook because it contained numerous disclaimers that it was not a binding contract. The employer’s arbitration policy was purportedly distributed to all employees, but there was no evidence that it had been specifically distributed to plaintiff during the application process or after being hired. The plaintiff had never signed it and denied that she had ever seen it before the litigation. The Court, therefore concluded that she could not have agreed to arbitrate her claims and remanded the matter back to the District Court.

The Federal Arbitration Act only requires arbitration agreements to be in writing, but does not require them to be signed. However, both parties must still be aware of the terms of the agreement and agree to them. The employer argued that a reference to the dispute resolution policy in the employee handbook put the employee on notice of the arbitration policy and agreement. However, the Court disagreed because the handbook was not a contract and there were too few details (let alone no mention of the word arbitration) in the employee handbook to have put any employee on notice that s/he was agreeing to arbitrate his or her claims.

This statement says nothing about arbitration, and it says nothing that would indicate to Hergenreder that accepting or continuing her job with Bickford would constitute acceptance. Indeed, it is incorrect to conflate the fact that Hergenreder knew generally of the DRP with the notion that she knew of the arbitration language—and Bickford’s desire to create an arbitration agreement—contained within the DRP. Were Hergenreder required to read, or even notified of the importance of reading, the DRP, the analysis here might be different. But this court’s inquiry is focused on whether there is an objective manifestation of intent by Bickford to enter into an agreement with (and invite acceptance by) Hergenreder, and we are not convinced that there is any such manifestation made by Bickford in the record in this case.

In addition, even if the policy constituted an offer of an arbitration agreement, there was no evidence that the plaintiff’s continued employment constituted acceptance of that offer because she had never been informed that continuing employment constituted acceptance of the arbitration agreement.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Divided Supreme Court Upholds Arbitrator’s Contractual Authority to Determine Arbitrability of Arbitration Agreement

This morning, a divided Supreme Court again reversed the Ninth Circuit Court of Appeals in California on the enforceability of an arbitration agreement in an employment discrimination dispute. Rent-A-Center, West, Inc. v. Jackson, No. 09-497 (6/21/10). This arbitration dispute centered on whether the court or the arbitrator should determine the arbitrability of the dispute when the arbitration agreement itself provided that an arbitrator should resolve any such controversy over arbitrability. In particular, as Justice Scalia put it, whether under the Federal Arbitration Act, "a district court may decide a claim that an arbitration agreement is unconscionable, where the agreement explicitly assigns that decision to the arbitrator." The Court held that the question of arbitrability is for the arbitrator to decide when the challenge goes to the validity of the entire agreement as a whole or when the agreement clearly and unmistakably empowers the arbitrator to decide arbitrability, but is for the trial court to decide when the challenge goes only to the enforceability of the arbitration clause and there is no clear and unmistakable waiver of the trial court jurisdiction.

According to the Court's opinion, the employer moved to compel arbitration after the plaintiff former employee filed a § 1981 employment discrimination suit in federal court based on the arbitration which the plaintiff had signed. The Agreement provided for arbitration of all "past, present or future" disputes arising out of [the plaintiff's] employment . . . , including claims" for employment discrimination. The arbitration clause also provided that "[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable." The plaintiff attempted to avoid the arbitration agreement by arguing that it was unconscionable (in that the parties were required to split the arbitration fees and limits were placed on discovery), but the employer asserted that such a challenge was for the arbitrator to decide. The trial court agreed with the employer, but noted that he did not think the agreement was substantively unconscionable merely because the parties were required to split the arbitration fees. A divided Ninth Circuit Court concluded that the trial court was required to determine unconscionability, but agreed that the clause was not unconscionable merely because of the fee splitting provision. A divided Supreme Court reversed.

The FAA provides that arbitration clauses must be enforced just like any other contracts. Nonetheless, unless the parties clearly and unmistakenly provided otherwise, the question of whether the parties agreed to arbitrate is for the court and not the arbitrator. "The validity of a written agreement to arbitrate (whether it is legally binding, as opposed to whether it was in fact agreed to—including, of course, whether it was void for unconscionability) is governed by §2'sprovision that it shall be valid "save upon such grounds as exist at law or equity for the revocation of any contract." Justice Scalia found it irrelevant that prior cases examining the arbitrability question involved agreements where the substantive provisions concerned subjects other than arbitration (such as check-cashing, consulting, talent management, etc), unlike this case where the "contract as a whole" involved only arbitration of any future disputes.

There are two types of validity challenges under §2: "One type challenges specifically the validity of the agreement to arbitrate," and "[t]he other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid." Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 444 (2006). In a line of cases neither party has asked us to overrule, we held that only the first type of challenge is relevant to a court's determination whether the arbitration agreement at issue is enforceable. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395, 403–404 (1967) . . . That is because §2 states that a "written provision" "to settle by arbitration a controversy" is "valid, irrevocable, and enforceable" without mention of the validity of the contract in which it is contained. Thus, a party's challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate. "[A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract." . . . . But that agreements to arbitrate are severable does not mean that they are unassailable. If a party challenges the validity under §2 of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement under §4 [employer parties to seek enforcement of arbitration clauses in federal court].

Nonetheless, Justice Scalia found it irrelevant that prior cases examining the arbitrability question involved agreements where the substantive provisions concerned subjects other than arbitration (such as check-cashing, consulting, talent management, etc) and merely also contained an arbitration clause, unlike this case where the "contract as a whole" involved only the arbitration of any future disputes. Instead, he found that the plaintiff could only prevail in obtaining the trial court's examination of the arbitrability of the dispute if he had challenged only the delegation clause – which empowered the arbitrator to decide arbitrability – instead of attacking the unconscionability of the arbitration contract as a whole:

It may be that had [the plaintiff] challenged the delegation provision by arguing that these common procedures as applied to the delegation provision rendered that provision unconscionable, the challenge should have been considered by the court. To make such a claim based on the discovery procedures, [the plaintiff] would have had to argue that the limitation upon the number of depositions causes the arbitration of his claim that the Agreement is unenforceable to be unconscionable. That would be, of course, a much more difficult argument to sustain than the argument that the same limitation renders arbitration of his fact bound employment-discrimination claim unconscionable. Likewise, the unfairness of the fee-splitting arrangement may be more difficult to establish for the arbitration of enforceability than for arbitration of more complex and fact-related aspects of the alleged employment discrimination. [Plaintiff], however, did not make any arguments specific to the delegation provision; he argued that the fee-sharing and discovery procedures rendered the entire Agreement invalid.

The Court refused to address an additional argument made by the Plaintiff because he failed to raise it below: that the quid pro quo for the delegation provision failed because of the Supreme Court's decision in Hall Street Associates LLC v. Mattel, Inc. entered after he signed the agreement. He claimed that he had agreed to the clause delegating arbitrability to the arbitrator in exchange for the employer's agreement that the arbitration decision would be subject to substantive judicial review (when the FAA and state laws generally provide that courts will only overturn an arbitration decision for fraud, corruption, etc.). However, his consideration for agreeing to the delegation failed when the Hall Court held that parties cannot agree by contract to alter the exclusive judicial review of arbitration decisions provided by the FAA. The Court found that he could have filed a supplemental brief with the Ninth Circuit on this issue following the Hall Court decision, but that it might have been pointless because that was already the rule in the Ninth Circuit even before the Hall decision.

In light of this decision, one can expect that employers across the country will – and even should – amend their arbitration agreements to reserve the question of arbitrability for the arbitrator in the hopes of avoiding long and expensive battles over the enforcement of an arbitration clause or agreement.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Despite Union Conflict of Interest Supreme Court Enforces Arbitration of Employees’ ADEA Claims Based on CBA’s Reference to ADEA in Arbitration Clause

Today, the United States Supreme Court (in a 5-4 decision) reversed the Second Circuit Court of Appeals’ refusal to enforce the arbitration clause and held that a “a provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act of 1967 (ADEA) . . . is enforceable.” 14 Penn Plaza LLC v. Pyett, No. 07-581. The plaintiffs were members of the SEIU and their collective bargaining agreement provided, among other things that age, race, sex discrimination was prohibited and that “[a]ll such claims shall be subject to the grievance and arbitration procedures (Articles V and VI) as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination." The Court held that this “clear and unmistakable” waiver of their statutory ADEA right to a jury trial was enforceable because the union was the authorized bargaining representative for the plaintiff employees and “the collective-bargaining agreement's arbitration provision expressly covers both statutory and contractual discrimination claims.” The Court brushed off the inherent conflict of interest between the union and its members’ discriminate claims, finding that those issues could be better resolved through the political process, and through breach of fair representation and discrimination claims brought against the union by the employees.

According to the Court’s opinion, one of the joint-employers owed an office building which engaged the other joint employer (a maintenance and cleaning service). The plaintiffs were employed as night watchmen. With the union’s consent, the building management replaced the other joint employer with a unionized security firm (affiliated with the joint employer) which could supply licensed security guards. Thus replaced, the plaintiffs were then reassigned to positions as night porters and light duty cleaners. They objected and filed a grievance under the CBA that the reassignments constituted, among other things, age discrimination and that they were denied seniority benefits and overtime.

The grievances proceeded to arbitration. However,

“[a]fter the initial arbitration hearing, the Union withdrew the first set of . . . grievances--the age-discrimination claims--from arbitration. Because it had consented to the contract for new security personnel [at the office building], the Union believed that it could not legitimately object to respondents' reassignments as discriminatory.”

The plaintiffs then filed Charges with the EEOC alleging that their transfers had violated ADEA, but the EEOC dismissed the Charges as lacking substantiating evidence. With their right-to-sue letters in hand, the plaintiffs then filed suit in federal court and the employers moved to compel arbitration of their claims under the Federal Arbitration Act. The District Court refused to compel arbitration on the grounds that a union cannot waive the individual statutory rights of employees to pursue ADEA claims in a collective bargaining agreement. The Second Circuit Court of Appeals affirmed, stating that “it could not compel arbitration of the dispute because Gardner-Denver, which ‘remains good law,’ held ‘that a collective bargaining agreement could not waive covered workers' rights to a judicial forum for causes of action created by Congress.’”

The Court’s majority found that the union and employers

“collectively bargained in good faith and agreed that employment-related discrimination claims, including claims brought under the ADEA, would be resolved in arbitration. This freely negotiated term between the Union and the RAB easily qualifies as a ‘conditio[n] of employment’ that is subject to mandatory bargaining. . . . The decision to fashion a CBA to require arbitration of employment-discrimination claims is no different from the many other decisions made by parties in designing grievance machinery.”

Rejecting the argument that the union is not authorized to bargain away the employees’ statutory rights,

“[a]s in any contractual negotiation, a union may agree to the inclusion of an arbitration provision in a collective-bargaining agreement in return for other concessions from the employer. Courts generally may not interfere in this bargained-for exchange. ‘Judicial nullification of contractual concessions ... is contrary to what the Court has recognized as one of the fundamental policies of the National Labor Relations Act--freedom of contract.’"

In that the ADEA does not preclude the arbitration of ADEA claims, there is nothing in the NLRA which precludes unions from negotiating that the employees’ future ADEA claims are subject to the grievance and arbitration provisions of the CBA.

“Examination of the two federal statutes at issue in this case, therefore, yields a straightforward answer to the question presented: The NLRA provided the Union and the [employers] with statutory authority to collectively bargain for arbitration of workplace discrimination claims, and Congress did not terminate that authority with respect to federal age-discrimination claims in the ADEA. Accordingly, there is no legal basis for the Court to strike down the arbitration clause in this CBA, which was freely negotiated by the Union and the [employers], and which clearly and unmistakably requires [plaintiffs] to arbitrate the age-discrimination claims at issue in this appeal. Congress has chosen to allow arbitration of ADEA claims. The Judiciary must respect that choice.”

In reaching this decision, the Court brushed off contrary language from Gardner-Denver, which indicated that union arbitrations – while suitable for contractual claims -- were not an appropriate forum for resolving discrimination claims and questioned the competence of arbitrators to decide federal statutory claims.

The Court also dismissed its earlier concerns in Gardner-Denver about the inherent conflict of interest between a union and its individual members.

“[I]n arbitration, as in the collective-bargaining process, a union may subordinate the interests of an individual employee to the collective interests of all employees in the bargaining unit. . . . ‘The union's interests and those of the individual employee are not always identical or even compatible. As a result, the union may present the employee's grievance less vigorously, or make different strategic choices, than would the employee.’”

Nonetheless, the Court found that “there is ‘no reason to color the lens through which the arbitration clause is read’ simply because of an alleged conflict of interest between a union and its members.. . . . . This is a ‘battl[e] that should be fought among the political branches and the industry. Those parties should not seek to amend the statute by appeal to the Judicial Branch.’”

Moreover,

"‘[t]he conflict-of-interest argument also proves too much. Labor unions certainly balance the economic interests of some employees against the needs of the larger work force as they negotiate collective-bargain agreements and implement them on a daily basis. But this attribute of organized labor does not justify singling out an arbitration provision for disfavored treatment. This ‘principle of majority rule’ to which [the plaintiffs now] object is in fact the central premise of the NLRA. . . . In establishing a regime of majority rule, Congress sought to secure to all members of the unit the benefits of their collective strength and bargaining power, in full awareness that the superior strength of some individuals or groups might be subordinated to the interest of the majority." . . . It was Congress' verdict that the benefits of organized labor outweigh the sacrifice of individual liberty that this system necessarily demands. [The plaintiffs’] argument that they were deprived of the right to pursue their ADEA claims in federal court by a labor union with a conflict of interest is therefore unsustainable; it amounts to a collateral attack on the NLRA.”

In any event, the union members may sue the union directly for failing in their duty of fair representation or for its own age discrimination.

The ”NLRA has been interpreted to impose a "duty of fair representation" on labor unions, which a union breaches "when its conduct toward a member of the bargaining unit is arbitrary, discriminatory, or in bad faith. . . . This duty extends to "challenges leveled not only at a union's contract administration and enforcement efforts but at its negotiation activities as well. . . . Thus, a union is subject to liability under the NLRA if it illegally discriminates against older workers in either the formation or governance of the collective-bargaining agreement, such as by deciding not to pursue a grievance on behalf of one of its members for discriminatory reasons. In this case, the plaintiffs also had “brought a fair representation suit against the Union based on its withdrawal of support for their age-discrimination claims. . . . Given this avenue that Congress has made available to redress a union's violation of its duty to its members, it is particularly inappropriate to ask this Court to impose an artificial limitation on the collective-bargaining process.”

Insomniacs can read the full court opinion at http://