Sixth Circuit Rules Retiree Healthcare Benefits Claim Is Not Arbitrable

Proskauer - Employee Benefits & Executive Compensation Blog

The Sixth Circuit, in a split decision, held that a dispute between a union and an employer regarding retiree healthcare benefits was not arbitrable because the issue of retiree healthcare benefits was not encompassed within the collective bargaining agreement’s (CBA’s) grievance procedures.

The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service Workers International Union (the “Union”) commenced suit against LLFlex, LLC, (“Employer”), arguing that the Employer violated the CBA by refusing to arbitrate the Union’s grievance related to the Employer’s unilateral change requiring individuals who retired to pay a share of the premium cost of their healthcare benefits.  The CBA contained a grievance procedure with the last step being arbitration.  The Union utilized the CBA’s grievance procedure, but when the time came for arbitration, the Employer refused to engage in arbitration.

Before reaching the merits, the Sixth Circuit first concluded, contrary to the district court’s ruling, that the Union had Article III standing because a CBA is a contract and a party to the contract has a judicially cognizable interest for Article III purposes regardless of the merits of the claim.

Two of the three judges on the Sixth Circuit panel nevertheless concluded that the case was properly dismissed by the district court because the Union’s dispute over the change in retiree healthcare benefits was not arbitrable.  The Court identified three reasons for its decision.  First, the four-step grievance procedure clause applied only in limited circumstances, such as “working conditions, discharges, seniority rights, layoff and re-employment.”  Second, the retiree health benefits at issue were not mentioned in the CBA and therefore the grievance procedure clause was not susceptible to an interpretation that it covered a dispute regarding such benefits.  Finally, the CBA’s “Purpose of Agreement” article explained that the CBA only concerned conditions of employment for “employees” and retirees are not “employees.”

The dissenting judge reached the opposite conclusion for three reasons:  (i) the arbitration clause was available to “any employee who feels that he/she has a just grievance” and nothing in the grievance procedure clause prohibited the grievance committee from considering other “just grievances” not expressly listed in the clause; (ii) the grievance procedure had been used by the parties and there was no reason to prohibit the use of the final arbitration step; and (iii) the CBA expressly incorporated by reference the pension plan and that plan contained a clause about retiree health benefits.

The case is United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service Workers International Union, AFL-CIO-CLC v. LLFlex, LLC,No. 19-5464, 2021 WL 1123301 (6th Cir. March 24, 2021).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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