Labor & Employment Law

Union Has Standing To Arbitrate Retirees Grievances

Union Has Standing To Arbitrate Retirees Grievances
Source: Adjunct Law Prof Blog; http://lawprofessors.typepad.com/adjunctprofs/

Reproduced with permission. Copyright © 2008, Mitchell H. Rubinstein, Esq., Adjunct Professor of Law, St. Johns Law School and New York Law School, All rights reserved

The status of retirees is a difficult one in labor law. This is because the Supreme Court held long ago that retirees are not employees under the NLRA. The NLRA only applies to employees and employers as those terms are defined in Section 2 of the Act.

Having said that, it is very common for unions to negotiate retirement benefits and those retirement benefits may be set forth in the collective bargaining agreement. What happens if something goes wrong? Can these disputes be arbitrated?

Yes, says the Southern District of New York in Frontier Communications v. IBEW, ___F.Supp. 2d___, NYLJ May 14, 2008 (S.D.N.Y. May 6, 008) (registration required). In a brilliantly reasoned decision, the court draws a distinction between the right of unions to represent retirees and the right of the union to represent itself. The court held that a union has the right to represent itself in order to enforce the terms of a collective bargaining agreement. As the court reasoned:

Frontier's arguments are unavailing. First, the question of whether Local 503 has standing to litigate on behalf of retirees need not be reached because Local 503 has standing to litigate on its own behalf. It is "axiomatic" that a party to an agreement has standing to sue a counter-party who breaches that agreement, even where some or all of the benefits of that contract accrue to a third party. Highland Capital Management, L.P. v. Schneider, No. 02 Civ. 8098 (PKL), 2008 WL 282769, at *19 (S.D.N.Y. Jan. 31, 2008) (party to contract has standing to sue even though third-party beneficiary also has standing to sue).3 Where an employer has agreed by contract with a union to provide benefits to retirees, "then under accepted contract principles the union has a legitimate interest in protecting the rights of the retirees and is entitled to seek enforcement of the applicable contract provisions." United Steelworkers of America, AFL CIO v. Canron, Inc., 580 F.2d 77, 80-81 (3d Cir. 1978). Courts in the Second and Ninth Circuits have reached this same conclusion. See International Brotherhood of Elec. Workers AFL-CIO v. Citizens Telecommunications Co. of California, Inc., No. Civ S-06-0677, 2006 WL 1377102, at *4 (E.D. Cal. May 18, 2006), appeal docketed, No. 06-16189 (9th Cir. Jul. 3, 2006) ("[A]ccepted principles of contract law provide further support for [union] standing" to enforce retirement benefits provision.); Textile Workers of America, AFL CIO, Local 129 v. Columbia Mills, Inc., 471 F. Supp. 527, 531 (N.D.N.Y. 1978) (same).4 Frontier made contractual promises to Local 503 to pay certain benefits, in exchange for contract provisions desired by Frontier, and Frontier agreed to arbitrate disputes over the meaning of those promises. As a counterparty to the contract, Local 503 has a right to enforce it, and the way to enforce it is through arbitration.

Local 503's interest in enforcement is based not merely on the formality that Local 503 is a party to the contract, but also on the "undeniable" interest unions have "in assuring that negotiated retirement benefits are in fact paid and administered in accordance with the terms and intent of their contracts." Allied Chemical and Alkali Workers of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 176 n.17 (1971). Unions are empowered by the LMRA to negotiate retiree benefits on behalf of their workers. "To be sure, the future retirement benefits of active workers are part and parcel of their overall compensation and hence a well-established statutory subject of bargaining." Id. at 180. To say that a union may negotiate a term but is powerless to enforce it is to severely undermine one of the core reasons workers elect to organize in the first place. A "union's efforts in ensuring employer compliance with all of the terms of a collective bargaining agreement are a significant consideration for the active employees when choosing to retain the union as their exclusive bargaining representative." UAW v. Yard-Man, Inc., 716 F.2d 1476, 1486 (6th Cir. 1983). As the party that bargained for the CBA on its members' behalf, Local 503 has significant institutional interests in seeing that the terms of that agreement are enforced.

This is a major decision in this important area of law. Given the cost of retiree benefits and health care, this issue is not going to go away soon.

Mitchell H. Rubinstein

Full post as published by New York Public Personnel Law on May 16, 2008 (boomark / email).