The Second Circuit Enforces a Union’s Waiver of Court Adjudication, Sending Them to Arbitration

In 2009, the Supreme Court determined that a union could waive bargaining protected by federal and state law and instead agree to have all statutory disputes decided in an arbitration proceeding.  14 Penn Plaza v. Pyett, 556 U.S. 247 (2009).  However, in order for a union’s waiver to be binding, it had to “clearly and unmistakably” require arbitration of the statutory claims at issue.  Id. at 274.  The “clear and unmistakable” waiver in the Pyett case appeared to be unusual since unions tend to negotiate arbitration clauses that deal with contractual rather than statutory rights.  However, even after being put on notice by the Pyett decision about the implications of clear and unmistakable waivers of access to courts for statutory disputes, some unions are agreeing to the waivers and courts are enforcing them.  The Second Circuit Court of Appeals’ July 2, 2019 decision in the case of Abdullayeva v. Attending Home Care Services, 2019 WL 2750125 (2d. Cir. 7/2/19) (Docket No. 18-0651), is a textbook illustration of the fallout from Pyett.

In Abdullayeva, the union, Home Healthcare Workers of America, had agreed to an arbitration provision in the collective bargaining agreement (CBA) that stated:

B. The parties [the Union and Attending] further agree a goal of this Agreement is to ensure compliance with all federal, state, and local wage hour law and wage parity statutes. Accordingly, to ensure the uniform administration and interpretation of this Agreement in connection with federal, state, and local wage-hour and wage parity statutes, all claims brought by either the Union or Employees, asserting violations of or arising under the Fair Labor Standards Act . . . , New York Home Care Worker Wage Parity Law, or New York Labor Law (collectively, the “Covered Statutes”), in any manner, shall be subject exclusively, to the grievance and arbitration procedures described below. . . .

4) In the event an Employee has requested, in writing, that the Union process a grievance alleging a violation of the Covered Statutes and the Union declines to process a grievance regarding alleged violations of the Covered Statutes, through the grievance/mediation process or to arbitration following the conclusion of mediation, an Employee solely on behalf of himself/herself, may submit their individual claim to mediation, or following the conclusion of mediation, to arbitration.

Abdullayeva at *1 (emphasis added).

Abdullayeva had brought a class action lawsuit in court in October 2017, claiming that Attending Home Care Services, the employer, had violated the federal Fair Labor Standards Act (FLSA) and New York’s Labor Law (NYLL) by failing to pay overtime and spread-of-hours pay.  When Attending sought to compel arbitration of the dispute, District Court Judge Jack Weinstein found that the “may submit” language in paragraph 4 indicated that the employee had a choice between going to court or submitting a grievance if the union declined the employee’s request to pursue his or her statutory claim.  Abdullayeva v. Attending Home Care Services, (E.D.N.Y. 3/5/18) (Docket no. 17-CV-5951).  The Second Circuit reversed, finding that the arbitration clause did not allow either the union or employees to go to court for covered statutory disputes because it stated that “all claims brought by either the Union or Employees . . shall be subject exclusively, to the grievance and arbitration procedures described below.” That language “clearly and unmistakably” required all statutory disputes under the FLSA and NYLL to be arbitrated, the court determined.  According to the Court of Appeals, the “may submit” language in paragraph 4 simply gave the employee the choice of pursuing a covered claim through arbitration or not pursuing it all; there was no option to go to court.  Abdullayeva at *4-*5.

The Second Circuit’s decision means that Abdullayeva will have to pursue her claims in an arbitration proceeding.  Given the contract language that states that an employee “may submit their individual claim to mediation, or following the conclusion of mediation, to arbitration,” it is likely that Abdullayeva will not be able to file a class action.  The Supreme Court’s decision this year in Lamps Plus Inc. v. Varela made it clear that unless parties have made an explicit agreement to permit class actions in arbitration, class actions are not an option.  __ U.S. __, 139 S.Ct. 1407, 1415, 1419 (2019).

In the Abdullayeva decision, the Second Circuit followed the Supreme Court’s lead in Pyett by using judicial doctrine derived from the Federal Arbitration Act (FAA) to justify its decision to compel arbitration of a statutory dispute in the context of a collective bargaining agreement.  This trend ignores the specific applicability of Section 301 of the Labor Management Relations Act (LMRA) to collectively bargained arbitration processes.  29 U.S.C. § 185; Textile Workers Union of America v. Lincoln Mills of Alabama, 353 U.S. 448, 456-457 (1957).  In Abdullayeva, the Second Circuit noted that courts normally resolve “any doubts in favor of arbitration” by quoting from an FAA case, Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983).  The court then went on to state: “This presumption in favor of arbitrability comes from the Federal Arbitration Act, which ‘direct[s] courts to abandon their hostility’ toward arbitration and to instead “respect and enforce agreements to arbitrate.” Epic Sys. Corp. v. Lewis, ––– U.S. ––––, 138 S. Ct. 1612, 1621, 200 L.Ed.2d 889 (2018).”  The Second Circuit did not bother to refer to the well-established doctrine concerning arbitrability of disputes under CBAs pursuant to § 301 of the LMRA.  In United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960), the Supreme Court had held that for arbitration clauses concerning contractual disputes in collective bargaining agreements:

An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clauses is not susceptible of an interpretation that covers the asserted dispute.  Doubts should be resolved in favor of coverage.

363 U.S. at 582-583.

The courts’ use of FAA doctrine in collective bargaining cases has smudged what had been a clear line between commercial arbitration cases governed by the FAA, and labor arbitration cases involving collective bargaining agreements governed by LMRA § 301.  Which law applies is a particularly important question when the two laws diverge, such as on the questions of statutes of limitations or the federal courts’ subject matter jurisdiction over particular disputes.  The Supreme Court has not had to confront these issues yet, but cases are bubbling up in the federal district and appeals courts that the Supreme Court may have to deal with in the future.