Contracting and erosion of the bargaining unit

Right to subcontract didn't authorize eliminating unit positions by attrition

The District Court for the District of New Jersey has denied a request by ExxonMobil Research and Engineering to vacate an award of Arbitrator Joyce M. Klein.

The dispute arose over the Union's claim that ExxonMobil violated the cba when it permanently contracted certain bargaining unit positions the Company claimed were non core. While the contract allowed the Company to contract work, it required notice to the Union and prohibited  layoff of unit employees qualified to perform the work and required the recall of any such employee prior to the contracting. 

The Company notified the Union that it intended to contract certain non core positions through attrition in order to enable it to focus on core research and development positions.

Arbitrator Klein sustained the Union's grievance, relying in large part on the cba's recognition clause:

The Company seeks to retain an employee workforce consisting of "core" employees while permanently contracting other non-core positions included in the recognition clause of the parties' Agreement.) 
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At issue is whether the Company has the authority pursuant to Article XVIII to contract out those positions on a permanent basis. Although Article XVIII was drafted broadly providing the Company with the authority to “let contracts," it was not designed to be without limitation.
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Permanently contracting positions covered by the Recognition Clause has the effect, over time, as additional positions are contracted permanently, of changing the scope of the Recognition Clause and potentially eroding both the coverage and size of the bargaining unit. While the concept of unit erosion is not expressly included in the bargaining unit, the Recognition Clause expressly covers all of the job classifications "listed in Exhibit ll and who are based at the Clinton, New Jersey facility." While Article XVIII permits the Company to contract the work performed by these positions without express limitation, these positions remain covered by the collective bargaining agreement and bargaining unit members may work in those positions in the event of demotion or layoff. As a result, both Article XVIII and the Recognition Clause prohibit the permanent contracting of these positions.

The Union sought to confirm the award while the Company sought to vacate it. The Court confirmed the award. Independent Laboratory Employee's Union, Inc v. ExxonMOBIL Research and Engineering Co. Recognizing the limited scope of review of arbitration awards, and noting that it was not passing judgment on the wisdom of the arbitrator's conclusion, the Court found that the award was a good faith interpretation of the cba and was therefore entitled to be confirmed:

Whether or not this Court agrees with the Klein Award's analysis, the arbitrator's good faith interpretation of the CBA is reasonable, especially in light of the history between ILEU and EMRE on which the arbitrator relied. The Klein Award cites the 1977 comments of an EMRE vice president, stating that EMRE will hire independent contractors only when operational needs require and will never seek to reduce the number of ILEU-covered employees. Id. at 6. Those comments are consistent with the 1983 arbitration award which explains that the CBA's language does not justify a program of using the attrition of union employees to permanently replace covered positions with non-union contractors. See Florey Award at 13-14. EMRE's present plan directly conflicts with both its vice president's 1977 comments and the Florey Award's 1983 CBA interpretation. Given this history, the Court cannot say that the Klein Award "is so completely irrational that it lacks support altogether," or is "totally unsupported by principles of contract construction and the law of the shop." Sutter, 675 F.3d at 219-20; Akers, 712 F.3d at 160 (quoting Ludwig Honold, 405 F.2d at 1128).

Update: The Third Circuit has affirmed the District Court decision, similarly rejecteing the argumets for vacating the award.  here