Sixth Circuit Addresses Union Issues Involving ERISA and Tacit Agreements on Arbitrability of Grievances in a Double-Breasted Shop

 Earlier this month, the Sixth Circuit Court of Appeals issued two interesting union-related decisions.  In one, it held the district court had jurisdiction to hear an ERISA claim even though the parties’ bargaining agreement had expired a years earlier because the union did not request the court to decide an unfair labor practice claim over the duty to maintain the status quo during negotiations. The other case involved whether a double breasted shop was subject to arbitration under the grievance procedure in a subsidiary’s bargaining agreement and whether the parent company had tacitly agreed to permit the arbitrator to decide the initial question of arbitrability by appearing at the arbitration.   The Court remanded the case to determine whether the parent company had tacitly agreed to permit the arbitrator (rather than a court) to determine arbitrability.  The Court also found that the employer’s motion to vacate the award was timely because it was filed within three months of the arbitrator’s supplemental award fixing damages even though it was filed four months after the arbitrator determined liability.

In Greenhouse Holdings v. Int’l Union of Painters and Allied Trades, the Kentucky employer owned 90% of a Tennessee subsidiary, which had a bargaining agreement and shared a similar name with the parent organization.  The union then filed an ambiguous grievance, which was submitted to arbitration.  The Union indicated that it believed that both the Kentucky and Tennessee operations were subject to the bargaining agreement while one management representative insisted that the Kentucky operations were non-union.  The arbitrator sided with the union and ordered wages paid to the Kentucky employees as well as the Tennessee employees.  The employer moved to vacate under the FAA.

The district court agreed that there was insufficient evidence that the employer had agreed that its Kentucky operations were subject to the bargaining agreement and had never signed the CBA.   However, the Sixth Circuit determined that this did not end the question and remanded the case for the trial court to re-examine the facts.  The employer may have tacitly agreed to arbitrate the arbitrability of the dispute (i.e., let the arbitrator decide whether it was subject to the bargaining agreement) instead of permitting a court to determine arbitrability.   If so, the court’s review of the issue would be much more limited and not de novo.

On one hand, the Union’s attorney suggests that Kinney spoke on behalf of Greenhouse at the arbitration. But on the other, Kinney states that he participated only on behalf of Clearview Tennessee. This dispute matters. If Greenhouse wasn’t at the arbitration, or if Kinney appeared on behalf of Greenhouse merely to object to the arbitrator’s authority, then the court can decide de novo whether Greenhouse was bound by the CBA. But if Greenhouse consented to arbitration and the question of whether it was bound by the CBA was clearly before the arbitrator, then a higher standard of review applies.

In Operating Engineers v. Rieth-Riley Construction, the Court reversed the dismissal of the union’s ERISA complaint, but noted that the case may still be ultimately dismissed (on summary judgment) for the same reason.  The union agreed to the termination of the 2013 multi-employer bargaining agreement and refused to accept ERISA contributions from the defendant employer, until the employer discovered an old bargaining agreement (which had expired and been replaced many years earlier), reflecting a previous 9(a) relationship with the union.  The employer insisted on negotiating a new agreement with the union and, thus, maintaining the status quo under NLRA rules.  The union accepted the contributions and then, a year later when negotiations had soured, sought to audit the employer for delinquent contributions and brought suit under ERISA to enforce payment of the allegedly delinquent contributions.  While the union could not attempt to litigate an unfair labor practice charge through ERISA, it could sue the employer for breach of contract under ERISA.  The lack of a live contract – since the bargaining agreement had expired and been replaced years ago – was not a jurisdictional requirement to bring an ERISA action, but it might result in the lawsuit being dismissed on summary judgment or at trial:

The trial court determined that the

source of the obligation . . . . acted as “an essential jurisdictional fact” that it had to “determine before proceeding forward.” . . . And here, [the employer] and the Funds “never entered into another contract” after the CBA expired.  Nor did any independent agreements bind the parties. Without a contract, the court found [the employer’s] contribution duty “[arose] solely” from its “statutory status quo obligation under federal labor law.” . . . . And without a contract, the court held it lacked jurisdiction to hear the Funds’ claim.  So it directed the Funds to the NLRB and dismissed their suit without prejudice.

                 . . . .

Here, the Funds brought an ERISA claim, not an unfair-labor-practices claim. They argued that [the employer] failed to make its “promised [contractual] contributions,” not that it violated the NLRA by refusing to bargain or maintain the status quo. . . . . Because the Funds ask us to find that [the employer] breached a contract, not that it violated the NLRA, their claim does not fall into Advanced Lightweight’s ambit.

Of course, in the end, the Funds’ contract claims may fall flat for the reasons the district court gave.  But those findings go to the merits of the Funds’ ERISA claim, not our jurisdiction to hear it. To the extent that the district court concluded otherwise, it erred.

                 . . .

[Assuming the employer] is right about the contracts; they don’t exist. Even so, a deficient contract claim by itself doesn’t  convert[] the Funds’ complaint into an unfair labor practice claim” and “divest[]” this court of jurisdiction. . . . . Rather, it would mean what a deficient claim always does in this context: The Funds lose on the merits.

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.

Court Rejects Employer’s Attempt at Two-Bites at the Same Apple When Challenging ULP

Last week, the Sixth Circuit rejected the attempt of a government contractor to avoid an unfair labor practice charge by claiming that it was a joint employer entitled to the benefit of the NLRA exemption for the federal government.  Bannum Place of Saginaw LLC, v. NLRB, No. 21-2664 (6th Cir. 7-14-22).   The employer first raised the argument -- that the federal Bureau of Prisons so regulated its operations under their service contract that the employer constituted a joint employer with the federal government – when the union sought recognition.  However, the employer failed to appeal the Regional Director’s decision rejecting the argument and the NLRB refused to entertain – or relitigate -- the issue when the same employer was then subject to an ULP Charge arising out of that same, or related, election. 29 C.F.R. § 102.67(g).  The Court agreed that courts will defer to the NLRB’s refusal to relitigate legal issues which the party could have but failed to appeal to the Board during the representation phase.  In any event, “because Congress has unambiguously limited the reach of the exemption in § 2(2) to governmental entities and wholly owned government corporations, this court will not extend the exemption to government contractors.”

The Court observed that the no-re-litigation rule only applies when the second proceeding is related to the representation issue when the argument was first raised and then not appealed.  However, the employer could not successfully argue that this ULP was unrelated to the earlier representation proceeding for the first time on appeal because the employer failed to raise the unrelatedness argument before in the underlying ULP proceeding.   The Court will only consider arguments that had first been made to the NLRB.

The employer also failed to point to any new circumstances that could have justified re-litigation of the issue during the ULP phase.

The employer then argued that its joint employer argument went to the NLRB’s statutory jurisdiction and could not be waived.   However, the Court found that this argument would likewise fail because the NLRA did not address joint employment and only exempted certain types of employers, including the federal government.  The Supreme Court had earlier rejected a similar argument by a hospital which claimed its lease with a state government made it a government subdivision.  Other circuit courts had likewise rejected arguments to expand the reach of the limited exemptions:

As the Tenth Circuit held, “because Congress has unambiguously limited the reach of the exemption in § 2(2) to governmental entities and wholly owned government corporations, this court will not extend the exemption to government contractors.”

. . .

In sum, even if Bannum’s contract vests in the BOP substantial control over Bannum’s daily operations, that does not transform the company from a covered employer into either a governmental entity or a wholly owned government corporation and thus beyond the Board’s reach.

 

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.

Some Interesting Arbitration Agreement Legal Issues

 There have been a few interesting arbitration decisions this year.  One is from the Supreme Court and the other from the Sixth Circuit. Both of them rejected the employer's arguments.  

While the Federal Arbitration Act, 9 U.S.C. §1 et seq.  gives federal courts the power to decide disputes over arbitration, the Supreme Court had previously ruled that the FAA does not create federal question jurisdiction.  Accordingly, federal courts – as courts of limited jurisdiction -- must examine and "look through" to the underlying complaint to find federal question or diversity jurisdiction before entertaining petitions to compel arbitration under §4.   In this case, the employee brought federal and state discrimination claims and sought to vacate an adverse arbitration award through state court.  Badgerow v. Walters, No. 20-1143 (3-31-22).  The employer, citing federal question jurisdiction, removed the case to federal court.  Federal courts have the power under §§ 9 and 10 to vacate and confirm arbitration awards.  However, the Court held that the “look-through” authority to find the underlying federal question (or diversity) only applied to petitions brought under §4 and not to petitions to vacate or confirm brought under §§ 9 or 10.   Unlike §§9 and 10, Section 4 specifically explains that petitions may be filed with the federal court which would have jurisdiction “save for [the arbitration] agreement.”  Sections 9 and 10 merely refer to filing the petition in the federal court where the award was made; they do not specifically refer to the question of jurisdiction.  The omission of a reference to jurisdiction in §§9 and 10 was deemed deliberate by Congress.   Moreover, because arbitration awards are creatures of contract and settlement agreements of disputes over federal law are also regular contracts, they are generally creatures of only state law, not the federal law which was implicated by the underlying dispute.   Therefore, an issue over a regular contract dispute does not create a federal question necessary to support federal court jurisdiction over petitions to vacate or confirm under the FAA. 

·     The Sixth Circuit held that the arbitration agreements of the individual employee class plaintiffs – which explicitly applied to ERISA claims -- did not apply to an ERISA plan on whose behalf the employees brought an ERISA breach of fiduciary duty action against the employer.  Hawkins v. Cintas Corp., No. 21-3156 (6^th Cir. 4-27-22).  The plaintiffs alleged that the employer had breached its fiduciary duty to the Plan by failing to include passively-managed fund options in the Plan and charging the Plan excessive fees. “Section 502(a)(2) suits are ‘brought in a representative capacity on behalf of the plan as a whole.’”  The Court distinguished the arbitration clause which covered only “claims” and not the plaintiffs’ “rights” to bring a fiduciary duty claim on behalf of the ERISA Plan. “Had Plaintiffs brought a claim under § 503(a)(1)(B), or a claim that should have been brought under that section, then it might be the kind of individual claim subject to arbitration under an individual participant’s employment agreement.” Further, the Court refused to impute to the Plan the employer’s agreement to arbitrate. There was no evidence that the Plan itself had agreed to arbitrate its claims or to permit the plaintiffs to agree on its behalf.  “In the absence of a sufficient manifestation of the Plan’s consent to arbitrate these claims, we hold that the Plan has not consented to 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.

Ohio Supreme Court Limits Classified Employees to Civil Service Commissions to Redress Civil Service Statutory Rights

 Last month, the Ohio Supreme Court reversed the Court of Appeals and held that Ohio law does not permit classified employees to challenge allegedly unlawful reductions in pay in a private lawsuit because the exclusive remedy is an appeal to the applicable civil service commission.  Binder v. Cuyahoga Cty., Slip Op. 2020-Ohio-5126.  In ordering a dismissal of the class action lawsuits, the Court concluded “R.C. 124.34 does not allow a civil service employee to file an action in common pleas court to vindicate alleged violations of the statute by an appointing authority.” Yet although the plaintiffs failed to state a claim for relief, the Court also concluded that the common pleas court still possessed subject matter jurisdiction over the claims because the statutory scheme had not explicitly divested the courts of such jurisdiction.

Following the County’s adoption of a new form of government, an ordinance adopted a uniform workweek and paid lunch break (i.e., 40 hours and 1 hour), while maintaining salary levels.  This apparently disadvantaged employees who had previously worked only 35 hours/week and received 30 minutes for lunch.  Accordingly, class action lawsuits were filed challenging the ordinance and change in working conditions under O.R.C. § 124.34.   The County moved to dismiss on the ground, among other things, that their exclusive remedy was in the civil service system and did not permit class actions. 

The Court noted that plaintiffs who seek redress for statutory violations must first show that the statute provides the requested relief and right of action.   The applicable statute limits when an employee’s compensation may be reduced and the employee has the right to appeal the reduction to the applicable civil service commission within 10 days of receiving the written notice.   However, just as classified employees who are fired or suspended for five or more days can only appeal to the civil service commission instead of filing a lawsuit, classified employees whose pay is reduced can only challenge the reduction through the civil service system.  

While the statute establishes an administrative scheme in which an aggrieved employee can appeal a reduction in pay to the SPBR or the applicable civil-service commission, we see no language in R.C. 124.34, or elsewhere in R.C. Chapter 124, demonstrating the General Assembly’s intent to authorize a civil action in common pleas court for violations of the statute. Had the General Assembly intended to allow civil actions as an avenue of redress, it could have said so expressly, as it has in other instances.

That being said, although the courts did not have the authority under the relevant statutes to grant the requested relief, the Court also found that the common pleas court possessed subject matter jurisdiction over the claims because the statute did not divest the courts of jurisdiction.

With limited exceptions, R.C. 2305.01 grants the courts of common pleas subject-matter jurisdiction over “all civil cases in which the sum or matter in dispute exceeds the exclusive original jurisdiction of county courts.” Because of this general grant of jurisdiction, “a court of common pleas has jurisdiction over any case in which the matter in controversy exceeds the jurisdictional limit unless some statute takes that jurisdiction away.”

               . . . .

           By contrast, R.C. 124.34 does not contain any express statutory language removing common pleas courts’ general jurisdiction. . . .

               . . .

           While R.C. 124.34 does not divest common pleas courts of their general subject-matter jurisdiction, appellees’ claims here for declaratory relief and damages ultimately fail because R.C. 124.34 does not authorize that relief. Stated another way, appellees’ complaints do not present a jurisdictional defect, but rather a failure to state a claim for which relief can be granted.

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.