Arbitrating employment discrimination claims in the collective bargaining context: the future is far from certain

The following contribution to our arbitration symposium is written by Dan Ratner, a member of Levy, Ratner, LLC, and the general counsel of United Health Care Workers East, a 300,000-member union headquartered in New York City.   This essay is the result of a collaborative effort by several union-side labor lawyers to capture the major concerns of the union-side bar with the Pyett decision.

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In 14 Penn Plaza LLC v. Pyett (2009), the Court, in its continuing paean to arbitration, held that unions have the authority to negotiate collective bargaining agreements that require bargaining unit members to arbitrate their individual employment discrimination claims.  The Court distinguished, but effectively overruled, its 1974 decision in Alexander v. Gardner Denver.

Given Pyett’s procedural posture, the Court essentially opined on the abstract issue of the union’s authority but remanded for consideration the issues of whether, if the union controlled access to, or could bar the plaintiffs from, the arbitration forum, the judicial forum would have to remain open to plaintiffs to avoid vitiating their claims. The question of who controlled access to the arbitral forum had not been – and still has not been – definitively resolved between the collective bargaining parties.

In addition, the majority did not address, much less deal with, the intersection of legal principles mandating procedural fairness and questions of forum adequacy within the collective bargaining context.  The arbitration mechanism provided for in the Pyett collective bargaining agreement (“CBA”) is not atypical:  it provided for arbitration before a tribunal operated by a partnership consisting of a multi-employer association and the collective bargaining agent – the very parties adverse to the plaintiffs’ claim – with those partners having total control over the composition of the arbitration panel, and the union and the employer bearing the full cost of the arbitration proceeding.  The Pyett majority simply did not consider whether such a structure provides sufficient procedural fairness that an employee might lawfully be required to submit the discrimination claim to it.

It is not surprising, therefore, that the Court’s decision has spawned a second generation of lower court decisions grappling, without much guidance, with these issues.  Our experience strongly suggests that compelling bargaining unit members to pursue individual statutory discrimination claims through traditional labor-management grievance/arbitration mechanisms where the union has declined to bring the claim forward advances neither the goals of the anti-discrimination laws nor labor-management relations.  And, attempting to construct elaborate parallel arbitration mechanisms alongside the traditional labor-management arbitration machinery in an effort to address the procedural fairness deficits of a unitary procedure creates its own formidable and practical problems.

Following Pyett, the lower courts have focused on whether the CBA’s language was sufficiently explicit to constitute a waiver of the right to pursue statutory discrimination claims in a judicial forum, and, if so, whether the plaintiff had sought to have his claim vindicated in the contractual arbitration procedure before bringing the claim to court.  Where the pertinent clause was explicit and the individual had not sought to have the claim pursued in the grievance and arbitration forum, courts have dismissed the judicial action or have granted a motion to compel arbitration.

In several instances, courts have found that the plaintiff had sought to advance the claim in the arbitration forum, that the union controlled access to arbitration under the terms of the CBA, and that the union had declined the plaintiff’s request to advance the claim to arbitration, and in those instances, the courts denied a motion to dismiss or compel arbitration  These cases were correctly decided, adhering to the principle, cited by both the majority and the dissent in Pyett, that the judicial forum waiver may not be given effect if the result is to deprive the plaintiff of any forum in which to bring a discrimination claim.

Where the union has declined to take the case to arbitration, there is no viable alternative to permitting the individual plaintiff to proceed in a judicial forum. No other course of action will meet the goals underlying anti-discrimination statutes.

The bargaining unit member whose union declined to litigate his/her discrimination claim in the contractual arbitration forum might claim the union violated its duty of fair representation (“DFR”).  But that DFR claim is no substitute for a substantive discrimination claim.  A union would not breach its DFR even in declining to take an individual’s meritorious discrimination claim to arbitration where the union did so for reasons that are consistent with its role as the bargaining representative of a large number of employees or for reasons that would not be contrary to the latitude the union is traditionally accorded in handling grievances.  This is because, in deciding whether to take an individual’s claim to arbitration, unions are “allowed the discretion to balance many considerations and interests, including the effect of various resolutions of the grievance on other employees, the requirements of group organization and coherence, the desire for consistent treatment of similar claims, the appropriate allocation of limited resources for pursuing both individual and group claims, the maintenance of the [u]nion’s bargaining power and the necessity of maintaining an effective continuing relationship with the employer.”

Not only may a union consciously decide not to pursue a claim that it believes is meritorious without breaching the DFR, but a union also does not breach its DFR even when it “fails to process a grievance due to error in evaluating the merits of the grievance.”  This is true even where the error rises to the level of negligence.  In short, a union would not breach the DFR in failing to pursue a meritorious discrimination claim for good reasons related to the union’s representation of the bargaining unit as a whole, or if its failure to do so was based on an erroneous evaluation of the merits even if that error was based on negligence.   Therefore, unless a court is willing to permit the individual to pursue his discrimination claim in a judicial forum after the union has declined to pursue it arbitration, the risk that plaintiffs will have been altogether deprived of the right to vindicate a meritorious discrimination claim is unacceptably high.

This problem is not remedied by forcing the union, over its objection, to pursue the claim in the arbitration forum.   Typically, in the collective bargaining setting, unions control and manage the presentation of claims on behalf of employees.    Compelling a union to arbitrate a discrimination claim that it has previously declined to arbitrate will only put the fate of the individual’s claim in the hands of an unwilling champion.  And if the union were obligated to pursue each individual discrimination claim, without regard to the impact that claim might have on the group represented, the union would simply not be able to perform its principal responsibility of furthering the interests of the group of bargaining unit members as a whole.

These problems are also not resolved by consigning individual discrimination plaintiffs to arbitrate their claims in the labor-management arbitration forum without the union’s participation.  Although in that scenario plaintiff would not have an unwilling advocate foisted upon her, she would be saddled with other structural elements that are wholly inconsistent with procedural fairness.

The typical arbitration clause in a CBA identifies the arbitrators before whom disputes may be brought.  These arbitrators have been jointly selected by the employer and the union and, generally, they serve at the pleasure of the employer and the union.  The arbitrators charge fees for their services, and these costs are shared equally by the union and the employer.  Any arbitrator from such a panel hearing an individual’s claim knowing that the union had, in the first instance, determined not to bring the claim to arbitration would be presented with the following:  neither of the parties that had negotiated the terms of the CBA by which the arbitrator was empowered would have any interest in the arbitrator’s ruling in favor of the individual who brought the claim. That arbitrator, however inclined to be fair and just, would certainly conceive that a decision in favor of the employer against the individual employee would not likely offend either of the parties holding the power to terminate her future participation on the panel.

Such an imbalance clearly gives rise to the appearance that the forum is not a fair forum for the individual employee.  Requiring the employee to litigate in that forum is legally impermissible.  In analogous circumstances, where the selection of the decision-maker was in the control of the employer, courts have refused to enforce contractual agreements that discrimination claims be submitted to arbitration.

One potential way to reconcile Pyett and these procedural fairness mandates would be for the collective bargaining parties to negotiate a second arbitration tribunal for disposition of those individual discrimination claims that the union had declined to arbitrate, a forum in which the plaintiff controlled the management and presentation of the case, the arbitrators were not selected exclusively by the union and the employer, and the fees of the arbitrator did not fall on the plaintiff.  Such structures, however, present many practical problems. For example, neither collective bargaining party will look favorably on the prospect that overlapping claims might be litigated simultaneously in each tribunal (e.g., the union’s claim that an employee was discharged “without just cause” would be litigated in the union-employer arbitration forum, while the individual employee’s claim that he was discharged for discriminatory reasons – a claim that the union had declined to pursue – would be litigated in another).  And, requiring the bargaining unit member to elect his remedies – does he want the union to pursue the “just cause” path or to control his own discrimination claim – presents its own difficulties.  Unions are unlikely to want to bankroll – i.e., spend other bargaining unit members’ dues – on open-ended discrimination litigation by bargaining unit members where there is no merit screening imposed.  And, there are additional problems presented if the arbitrators of claims by individual members have the authority to construe the bargaining agreement or to order relief that affects other bargaining unit members. Does the Union have to intervene in those proceedings to protect the interests of the balance of the unit?

It would be an unfortunate and perverse result of Pyett if unions stopped negotiating anti-discrimination clauses in order to avoid these thickets. Particularly for low-wage workers, the legal marketplace generally provides few opportunities for them to pursue litigation of employment-related claims.  By contrast, a union-negotiated collective bargaining agreement provides significant opportunities for pursuit of such claims, and unions pursue those claims regularly, whether in the guise of traditional “just cause” discipline cases, or styled as discrimination cases.

In the end, employers may thwart the perpetuation of these judicial waivers in the collective bargaining setting: compensatory damages, expert witnesses, and discovery proceedings are not generally the grist of labor arbitrations; the limited scope of judicial review of arbitration awards – which, unlike typical labor arbitration awards – may provide for significant damages; and the disruption to traditional labor-management relationships by importing litigation of this type in to the arena.  Employers might well conclude they would rather litigate these issues in a judicial tribunal.

All this remains to be seen.