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.

NLRB Snags Another Non-Union Employer with Confidentiality Provision in Employment Agreement.

Late last month, the NLRA concluded that a temporary agency twice violated the National Labor Relations Act when it discharged an employee for breaching an unlawful term in his employment agreement requiring him to maintain the confidentiality of the terms of his compensation. Northeastern Land Services, Ltd. d/b/a The NLS Group and Jamison John Dupuy, Case 1–CA–39447 (NLRB 6/27/08).

The employer temporary agency leased employees to third parties. There is no indication that either the temporary agency employer or its client employers were unionized. The temporary agency employer allegedly violated Section 8(a)(1) of the NLRA “by maintaining in its employment contracts an overbroad confidentiality provision and by terminating [the complaining] employee . . . for breaching that confidentiality provision.” In particular, the temporary agency required its employees to sign an employment which contained the following clause: “Employee also understands that the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal.” The clause did not limit the confidentiality obligation to disclosing the information to competitors or clients, and thus, could unlawfully encompass unions.

After he began work, the employee began to experience problems with getting paid in a timely manner. After complaining to the temporary agency, he also complained to the leasing employer. In addition, the leasing employer had promised him a daily stipend for using his personal laptop at work, but when the temporary agency indicated that it planned to reduce this stipend, the employee objected to both the leasing employer and the HR Coordinator of the temporary agency. He also asked the leasing employer to retain him through another temporary agency if these problems could not be resolved and then refused to bring his laptop to the job site any longer.

The temporary agency CEO then notified the employee that they felt that they had done enough to accommodate him, that nothing would make him happy and that he was being terminated. When he objected (on the grounds he had engaged in protected conduct by filing a complaint with a state agency), the CEO responded that the employee had “not lived up to [his] end of the bargain” in that he had failed “to comply with his contractual agreement—i.e., the confidentiality provision in the temporary employment agreement—not to disclose the terms of his employment to outside parties.”

The NLRB articulated its standard for determining the validity of work rules under the NLRA. “If the rule explicitly restricts Section 7 activity, it is unlawful. If the rule does not explicitly restrict Section 7 activity, it is nonetheless unlawful if (1) employees would reasonably construe the language of the rule to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights. In applying these principles, the Board refrains from reading particular phrases in isolation, and it does not presume improper interference with employee rights.” (citations omitted).

In this case, the confidentiality provision in the temporary agency’s employment agreement “is unlawful because employees reasonably would construe it to prohibit activity protected by Section 7. Specifically, . . . the provision, by its clear terms, precludes employees from discussing compensation and other terms of employment with ‘other parties.’ Employees would reasonably understand that language as prohibiting discussions of their compensation with union representatives.” Therefore, “the confidentiality provision is unlawfully overbroad at least in this respect, in violation of Section 8(a)(1).”

“Under extant Board precedent, an employer’s imposition of discipline pursuant to an unlawfully overbroad policy or rule constitutes a violation of the Act.” Because the employee was fired to violating “an unlawfully overbroad” rule, his termination was also a separate violation of the NLRA.

The Board then ordered the temporary agency to rescind the confidentiality provision from its employment agreements and other publications, to re-hire the employee to the same or substantially similar job with full back pay and benefits, to eliminate any references in its records to the discharge of the employee, to post a standard notice of its NLRA violation and to mail a notice “to all current and former employees employed by the [temporary agency] under its temporary employment agreement (including but not necessarily limited to its right-of-way agents) since July 23, 2001, the date from which the complaint alleged and we have found that the [temporary agency] maintained the overbroad confidentiality provision in its temporary employment agreement.”

Insomniacs can read the full decision at http://www.nlrb.gov/research/decisions/board_decisions/template_html.aspx?file=http://www.nlrb.gov/shared_files/Board%20Decisions/352/v35289.htm&size=147.

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.