Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

KARL SCHMIDT UNISIA, INC. v. INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE, AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (December 17, 2010)

Karl Schmidt Unisia and the Union representing its workers negotiated a Collective Bargaining Agreement (CBA). It contains several provisions relevant to this case: a "Thirty and Out" provision providing enhanced retirement benefits to employees who reach a certain age and seniority, a provision stating that the retirement plan would remain in effect during the term of the CBA, and a four-step dispute resolution process ending in arbitration. In early 2007, the Company announced its intention to lay off employees at its Fort Wayne facility. The Union initiated the dispute resolution process because of its belief that the Company intended to deny "Thirty and Out" provisions to eligible employees. The Company and the Union exhausted the first three stages of the dispute resolution process. The Union proceeded to arbitration and added a grievance on behalf of two affected employees. The Company filed suit seeking a declaratory judgment that the grievances were not arbitrable. The Union counterclaimed to compel arbitration. Judge Van Bokkelen (N.D. Ind.) granted summary judgment to the Union and ordered arbitration. The Company appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Sykes affirmed. The Court first noted the care it would take in not addressing the merits and set forth some general principles regarding arbitration -- there is a federal policy favoring arbitration, a party cannot be compelled to arbitrate unless it has contractually agreed to do so, and a presumption of arbitrability arises from a broad arbitration clause. Here, the Court had little difficulty in finding the presumption. The CBA states that the dispute resolution process is the "sole and exclusive remedy" for a grievance and that the Union may grieve any alleged violation of the CBA. In order to overcome this presumption, the Court stated, the Company must come forward with either an express exclusion or the "most forceful evidence" of an intent to exclude the issue from arbitration. The Court first rejected the Company's express exclusion argument, concluding that it distorted the Union's claim. The Company offered several "most forceful evidence" arguments -- that the answer to the underlying dispute lies in the Pension Plan and not the CBA, that the provisions in dispute were never negotiated, and that the issue is governed by the Pension Plan's dispute resolution process. The Court concluded that none of these arguments were supported by the record or the case law. 

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PRATE INSTALLATIONS, INC. v. CHICAGO REGIONAL COUNCIL OF CARPENTERS (June 4, 2010)

Prate Installations, Inc. filed a grievance against its Union, the Chicago Regional Counsel of Carpenters, in 2003. Prate alleged that the Union's requirement that Prate pay hourly wages while allowing competitors to pay on a piece work basis violated the Collective Bargaining Agreement (CBA). The parties selected an arbitrator in accordance with the terms of the 2001 CBA. Arbitrator Martin issued an award in September of 2008. He awarded close to $10 million in damages, injunctive relief and attorney's fees. Meanwhile, the parties entered into a new CBA in 2005 that modified the arbitration procedure. It established a rotating panel of arbitrators -- Martin was not on the panel. Prate brought suit to confirm the award. Judge St. Eve (N.D. IL) confirmed the damages award, as amended to eliminate damages after the revised CBA, and the attorneys’ fees. She also vacated the equitable relief because it applied after the expiration of the earlier CBA. Both parties appeal.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Manion affirmed. The Court noted that their review of the arbitration award is quite limited. Here, the arbitrator relied on the contract in concluding that the Union was in violation. The district court correctly upheld that conclusion. The Court also found that the district court correctly determined that Arbitrator Martin had no authority under the 2005 CBA. His damages award covering the period after the new CBA was therefore improper. The analysis of the equitable award is slightly different. Martin could have ordered equitable relief if he issued his award prior to the expiration of the earlier agreement. Since he did not, however, the Court concluded that it had to treat the equitable remedy like the damages remedy and vacated it.

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NEMSKY v. CONOCOPHILLIPS COMPANY (August 3, 2009)

George Nemsky had been an engineer at ConocoPhillips’ Wood River Refinery for over twenty years and had a solid reputation. He was represented by Local 399 of the International Union of Operating Engineers (the Union). In 2004, ConocoPhillips adopted a substance abuse policy which provided for random drug and alcohol testing. It also provided that any employee who had a confirmed positive test result would be terminated. Although the Union filed a collective grievance over the company's adoption of the policy as well as an unfair labor practice charge, it eventually entered into a Memorandum of Agreement with the company in which it agreed not to grieve a termination under the policy. In 2006, Nemsky was selected for a random drug and alcohol test shortly after he used solvent to remove cement from his shoes. The test came back as a confirmed positive. ConocoPhillips terminated Nemsky's employment. The Union indicated its intent to arbitrate his termination. Nemsky filed an action against the Union and ConocoPhillips with the NLRB, complaining that the Union and ConocoPhillips never arbitrated his termination. Nemsky filed suit against both ConocoPhillips and the Union. Nemsky alleged that ConocoPhillips breached the Collective Bargaining Agreement and that the Union had breached its duty of fair representation. The district court granted summary judgment to defendants. Nemsky appeals.

In their opinion, Judges Flaum, Wood and Tinder affirmed. The Court identified Nemsky's claim as a "hybrid 301" action. In such an action, Nemsky must prevail on both his claim that the company breached the Collective Bargaining Agreement and his claim that the Union breached its duty of fair representation. The Court first addressed the fair representation claim. In order to prevail on that claim, the Court noted that Nemsky must show that the Union’s conduct was arbitrary or discriminatory or in bad faith. Nemsky argued that the Union acted arbitrarily in agreeing to the Memorandum of Understanding. The Court concluded otherwise. The Union’s unfair labor practice charge had been dismissed and no other union in the country had been successful in challenging the company's policy. The Court did, however, note that there was evidence that the Union failed to arbitrate Nemsky's termination after he filed his charges. The Court concluded that that was enough to preclude summary judgment on the fair representation aspect of Nemsky's claim. With respect to the company's breach however, the Court concluded that the Union’s agreement to the Memorandum of Understanding defeated any allegation that Nemsky's termination was a breach of the Collective Bargaining Agreement. Since he was required to prevail on both aspects of the hybrid claim, the Court affirmed the lower court's ruling.

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CLEAR CHANNEL OUTDOOR, INC. v. INTERNATIONAL UNIONS OF PAINTERS AND ALLIED TRADES (March 12, 2009)

Clear Channel Outdoor ("CCO ") owns and maintains hundreds of billboards in and around Milwaukee. Patrick Rogney was a CCO crew chief. In April of 2003, Rogney was working with a crew on a billboard in Milwaukee. They were on a platform about 18 feet off the ground. At some point, he disconnected his safety harness from the cable. A company official, conducting a field inspection, observed Rogney at work without the connected harness. After observing for about eight minutes, he notified the operations manager by phone. CCO suspended Rogney that afternoon, and later discharged him. The union filed a grievance, alleging that the termination was without good cause. Pursuant to the collective bargaining agreement, the parties submitted the matter to an arbitrator. After an evidentiary hearing, the arbitrator determined that Rogney's discharge was without just cause and that an appropriate penalty was a six-month suspension without pay. The arbitrator interpreted "just cause" to require CCO to not only consider whether an offense allowing termination was committed but also to consider whether termination was warranted under the circumstances. CCO brought an action to vacate the arbitrator's award. The district court confirmed the arbitrator's decision. CCO appeals.

In their opinion, Judges Rovner, Wood and Williams affirmed. The Court emphasized its limited role in reviewing a labor arbitrator's decision -- only to determine whether the arbitrator exceeded the powers delegated to him. Here, the Court looked to whether the arbitrator's decision had a plausible foundation in the terms of the collective bargaining agreement. The Court noted that it did not necessarily agree with the arbitrator's construction of the contract. In fact, the collective bargaining agreement gave CCO discretion to fire an employee for a violation of the very safety rule that Rogney violated. Nevertheless, the Court concluded that the arbitrator "without question" interpreted the agreement. Since his decision drew its essence from the agreement, the Court let it stand and affirmed the district court.

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520 SOUTH MICHIGAN AVENUE ASSOC. v. SHANNON (December 15, 2008)

520 South Michigan Avenue Assoc. does business as The Congress Plaza Hotel & Convention Center (“Congress Hotel”) in Chicago, Illinois. It employs approximately 130 room attendants (the employees who clean guest rooms). Unite Here Local 1 union (“Unite Here”) represents these employees. Congress Hotel and Unite Here had a collective bargaining agreement (“CBA”) that expired in 2002. Congress Hotel has agreed to abide by the expired CBA while the parties negotiate a new one. During the negotiations, the Illinois legislature passed the Hotel Room Attendant Amendment (the “Attendant Amendment”) to the One Day Rest in Seven Act. In relevant part, the Attendant Amendment: a) mandates two 15-minute break periods and a 30-minute meal period each day, b) provides a penalty of three times an employee’s wages for a daily violation, c) creates a rebuttable presumption that any adverse employer action after an employee’s exercise of rights under the section constitutes retaliation, and d) provides for an award of attorney’s fees and costs to a prevailing party in an enforcement action. The Attendant Amendment applies only to employees in Cook County, Illinois. Congress Hotel filed suit for a permanent injunction prohibiting enforcement of the Attendant Amendment. It argued that the Attendant Amendment was preempted by the National Labor Relations Act (“NLRA”). The district court granted the motions of the Illinois Department of Labor and Unite Here to dismiss the case. Congress Hotel appeals.

In their opinion, Judges Manion, Kanne and Tinder reversed and remanded. The Court noted that preemption can be either express or implied. Since the NLRA contains no express preemption provision, the question is whether the state statute conflicts with federal law or frustrates a federal scheme, or whether Congress intended to occupy the field. The Court identified two different NLRA preemption doctrines from Supreme Court cases. The Court stated that Congress, in approaching collective bargaining and unions, took a multi-pronged approach. It prohibited some conduct; it protected some conduct; and it specifically left some conduct to the forces of the free market. Garmon preemption seeks to prevent conflict between local regulation and the NLRA’s scheme of regulation. In contrast, Machinists preemption seeks to prevent local regulation of conduct that Congress intended not to be regulated. The Court first addressed Machinists preemption. Three propositions have been established by the Supreme Court in its post-Machinists cases of Metropolitan Life and Fort Halifax: a) the NLRA is more concerned with an equitable bargaining process than its substantive terms, b) the NLRA does not preempt a state law that regulates a mandatory subject of bargaining, and c) the NLRA does not preempt a state law that establishes a minimum labor standard that does not intrude upon the bargaining process. The Court went on to address the defendants’ argument that the Attendant Amendment is simply a minimum labor standard. The Court decided that it is not because: a) it is not a statute of general application (it applied to only one job in one industry in one county), b) it did not provide a low-threshold (i.e., minimum) standard but rather established a term of employment that would be hard to bargain for, and c) it included provisions creating a cause of action, shifting the burden of proof and creating a presumption of retaliation that interfered with and overrode the dispute resolution mechanisms already in place. Since the Court thus found the statute preempted by the Machinists doctrine, it did not reach the Garmon doctrine or consider the Congress Hotel’s equal protection or due process arguments.

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