Executive Summary: It is quite rare when a three-judge panel on a court of appeals overrules prior precedent. Yet, that is exactly what happened on March 30, 2022, in Pittsburgh Mailers Union Local 22 v. PG Publishing Co. Inc. (3d Cir. 2022), an important labor law case decided by the Third Circuit (covering New Jersey, Pennsylvania, Delaware, and the Virgin Islands). The question was: does an arbitration clause in a collective bargaining agreement (CBA) survive the expiration of the CBA, and does it remain effective while the parties are attempting to negotiate a new CBA? The court answered that question in the negative.
The Case: The CBAs at issue had durational clauses, and each expired in March 2017. Two months before their expiration, defendant PG Publishing (PGP) sent letters to the unions, stating that “all contractual obligations of the current agreement shall expire” on March 31, 2017. This included bargained-for health care benefits members of the union received. The unions filed grievances and expected PGP to arbitrate them. PGP refused on the grounds that it had no obligation to arbitrate under the U.S. Supreme Court’s decision in Litton Financial Printing Division v. NLRB (1991). The unions sued PGB to compel arbitration under prior Third Circuit precedent. The district court disagreed with the unions and awarded PGP summary judgment. The unions appealed and the Third Circuit affirmed.
The Third Circuit case the panel overruled was Luden’s Inc v. Local Union No. 6 of the Bakery, Confectionery & Tobacco Workers International Union (3d Cir. 1994). In Luden’s, the court held that an arbitration clause may survive the expiration of a CBA unless the parties did not intend the provision to survive or if either party manifested to the other a particularized intent to disavow or repudiate the term.
The court concluded that its precedent in Luden’s could not survive the Litton line of cases. In 2015, the Supreme Court decided M & G Polymers USA, LLC v. Tackett. There, the Court considered whether retiree health benefits created in a CBA terminated upon the CBA’s expiration. The Court, relying on black-letter contract law, concluded that the benefits did not survive the expiration of the CBA. Three years later, the Supreme Court decided CNH Industrial v. Reese (2018). There, the lower court found that Tackett was distinguishable on similar facts, ruling that the CBA was ambiguous as to the expiration of health benefits so the court could consider extrinsic evidence. The Supreme Court reversed, flatly holding that the lower court’s interpretation “does not comply with Tackett’s direction to apply ordinary contract principles.”
Consistent with this line of cases, the Third Circuit held in PG Publishing that “[s]ince the arbitration provisions have no durational limit of their own, their survival is governed by the general durational clauses of the CBAs.” Thus, the unions were out of luck and PGB was correct in its decision not to arbitrate their grievances.
Employers’ Bottom Line: The Third Circuit’s decision should provide some much-needed clarity when addressing challenges to the enforceability of arbitration agreements that do not include durational clauses after a CBA has expired. However, to avoid needless litigation that could arise despite the court’s ruling, a best practice for employers is to define a durational clause as applying to the entirety of a CBA.
If you have any questions about this Alert, please contact the author, Jeff Shooman, counsel in our New York City and Berkeley Heights offices at jshooman@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.