My Rod and My Staff

Are you having a dispute with a staff member over a thorny issue, such as a denied request for overtime, which is seen as a vendetta? Or are you involved in a “dismissal for cause,” which is regarded as prejudice-based discrimination? Are you finding that many of those situations lead to drawn-out lawsuits? Certainly many managers are. “We fired someone and they sued,” says Paul Brensilber, president of the management firm Jordan Cooper & Associates. “What with the trial and appeals, we spent a fortune fighting it.”

No more. An April 2009 United States Supreme Court decision will probably do away with most of those lengthy court cases and big bills. The ruling says the parties in the dispute must use an arbitrator – and that his or her decision is the (almost) final word. (The caveat is that the individual can still complain to city or state agencies – such as the Human Rights Commission – and those agencies will determine if there is a case.) Although arbitration was always an option in such disputes, it was never required (nor was it always binding), and it was never the sole choice.

“This decision is huge,” Brensilber notes. “It changes labor law throughout the country.” He adds that the ruling could dramatically alter the way cooperatives and condominiums deal with staff grievances.

He is not alone in that prediction. “It’s a major change,” observes James Berg, president of the Realty Advisory Board (RAB), which negotiates contracts with the union on behalf of the owners and which argued the case before the Supreme Court.

In the situation that became 14 Penn Plaza LLC et al. v. Pyett et al., the owners at 14 Penn Plaza, an office building, engaged a unionized security contractor to provide licensed security guards for the building, and three night watchmen were reassigned to jobs as porters and cleaners. Contending that these reassignments led to a loss in income and were not as desirable as their former positions, the three men asked the union to file grievances alleging, among other things, that the 14 Penn Plaza owners had violated the law of workplace discrimination by reassigning the staff membrs on the basis of their age in violation of the Age Discrimination in Employment Act of 1967. (The union later withdrew the age-discrimination claims on the ground that its consent to the new security contract precluded it from objecting to staff reassignments as discriminatory.)

The three men filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging that 14 Penn Plaza had violated their rights, and the EEOC issued each of them a right-to-sue notice. In the ensuing lawsuits, the lower courts all agreed with the staff – until the appeals on the decisions reached the Supreme Court, which found for Penn Plaza.

The roots of the Supreme Court decision go back to 1997 and 1999, when new residential and commercial property contracts were negotiated between the union and the RAB. The documents each contained a provision requiring that all disputes between employee and employer go to binding arbitration, with no recourse to lawsuits. This lawsuit questioned the constitutionality of that provision. The lower courts all sided with the staff, saying that the requirement eliminated the individual’s right to trial. But the Supreme Court found for management.

“The contract is very, very good for both sides,” asserts Mary Ann Rothman, executive director of the Council of New York Cooperatives. “A tremendous amount of time and money can be saved. It also can resolve awkward situations. You have those drawn-out court cases where the super has been fired but is still living in the building [until the case is resolved] while the new super has to live off-site in a rented apartment. It’s very uncomfortable, and as the case drags on, can get very expensive.”

“The cost of defending these cases in court can get well into the six figures,” agrees Berg, who adds: “If it’s a case of discrimination, you’ll now get it resolved – and if it is actually happening, stopped – much more quickly through arbitration. And it will be done more efficiently.”

For Berg and Rothman, the situation is settled, but for the union, there is still an open point: it is arguing that it can refuse to bring some cases to arbitration, and that by avoiding arbitration, those cases can go to court.

Is the union position correct? Or is it an attempted end-run around the Supreme Court decision?

See you in court.