On 1 April 2009, in 14 Penn Plaza LLC v. Pyett, 129 S.Ct. 1456 (2009), the U.S. Supreme Court held (5-4) that provisions of a collective bargaining agreement under the National Labor Relations Act (NLRA) that clearly require union members to submit age discrimination claims under the Age Discrimination in Employment Act (ADEA) to arbitration are enforceable. The court reversed a 2007 decision of the United States Court of Appeals for the Second Circuit, remanded the case for further proceedings, and resolved a circuit split that had divided the federal courts. The court found nothing in the ADEA that precludes the enforcement of agreements to arbitrate ADEA claims, and held that an agreement to arbitrate does not constitute the waiver of any "substantive right" under the ADEA. In addition, the Court rejected the characterisation of an agreement to arbitrate statutory claims as a waiver of "non-economic statutory rights" based on the court's view that "[p]arties generally favor arbitration precisely because of the economics of dispute resolution," and the observation that a union may agree to an arbitration provision in return for other concessions from the employer.

The court also reviewed and rejected what the majority described as "broad dicta" in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974) that is "highly critical of the use of arbitration for the vindication of statutory antidiscrimination claims." Specifically, the court rejected previous indications that an agreement to arbitrate statutory claims constitutes an agreement of substantive statutory rights; arbitration fora are not well-suited for the resolution of federal statutory civil rights claims; and potential conflicts of interest between a Union and one or more individual members weigh against the enforcement of provisions in collective bargaining agreements that require union members to arbitrate claims against their employer. Addressing the conflict of interests issues, the court noted that labor unions balance the economic interests of certain employees against the needs of the larger workforce "on a daily basis" as they negotiate and implement collective bargaining agreements, and that Congress has accounted for such conflicts of interest under both the NLRA and the ADEA.

The decision seems to reflect the court's increasing comfort with arbitration as a suitable forum for resolving a broad range of disputes traditionally addressed by courts. Indeed, writing in dissent, Justice Stevens opined that "the Court has recently retreated from, and in some cases reversed, prior decisions based on its changed view of the merits of arbitration." Less than a month after the court handed down its decision, however, legislation was introduced in both houses of Congress that appears intended to supersede the court's holding (see Legal update, Bills introduced to override Supreme Court Decision in 14 Penn Plaza).