Friday, June 29, 2012

Arbitrating post contract expiration events

The Sixth Circuit has affirmed the arbitrability of a Steelworkers grievance seeking separation pay for a plant closing that took place after their contract expired. USW v. American Standard Corp.

The labor agreement between the Steelworkers and American Standard covering the Paintsville, KY plant, terminated on July 1, 2008. It provided separation pay, calculated based on continuous service, to certain employees in the event the plant closed. On April 18, 2008 American Standard gave the contractually required 60 day notice of contract expiration. Between that date and the actual date of contract expiration American Standard also announced it was closing the Paintsville plant. The closing took place on October 15, 2008, and the Company did not pay separation pay to any employee.

The Union filed a grievance and sought to arbitrate the eligibility of employees for the separation pay. The Company refused to arbitrate and the Union filed a suit seeking to compel arbitration. The district court found the grievance arbitrable, and the Company appealed.

The Court observed that under the Supreme Court's Litton decision a ”post expiration grievance can be said to arise under the contract only where it involves facts and occurrences that arose before expiration [or] where an action taken after expiration infringes a right that accrued or vested under the agreement…” The Court further noted, however, that there is little case law delineating when a right accrues under a contract but found that the Litton court suggested that to vest or accrue a right must include factors “that remain constant, that cannot improve or atrophy, and that can be measured on a universal scale.”

Without deciding the merits of the grievance, the Court concluded that the record supported the arbitrability of the dispute, finding:

The severance pay right described in the CBA meets each of these prescriptions for accrual under the agreement. The determination of the right is objectively quantifiable based on a specific formula that considers only the number of years of continuous service the employee has had with American Standard. The length of employment is a universal scale that remains constant across all employees. Likewise, the separation pay right accumulated step-by-step; the more years an employee worked, the more pay he was entitled to. Considering these factors, we conclude that the separation pay right in the CBA accrued under the CBA.

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