LOCAL NO. 358, BAKERY & C. WKRS. INT. U. v. Nolde Bros., Inc.
| Decision Date | 19 September 1974 |
| Docket Number | Civ. A. No. 73-663-R. |
| Citation | 382 F. Supp. 1354 |
| Parties | LOCAL NO. 358, BAKERY AND CONFECTIONERY WORKERS INTERNATIONAL UNION v. NOLDE BROS., INC. |
| Court | U.S. District Court — Eastern District of Virginia |
Jay J. Levit, Richmond, Va., for plaintiff.
Francis V. Lowden, Jr., Jay J. Swett, Richmond, Va., for defendant.
This matter arises out of plaintiff Local No. 358, Bakery and Confectionery Workers International Union's ("the union") voluntary termination of its collective bargaining agreement with defendant Nolde Brothers, Inc. ("the company"), and the company's subsequent permanent closure of its Norfolk bakery on August 31, 1973, three days subsequent to the termination of the collective bargaining agreement. Despite the fact that there was no collective bargaining agreement in existence on August 31, 1973, when the company ceased operations, the union asserts that its newly unemployed members were entitled to collect severance pay, which had been provided for in Article IX, § 5 of the collective bargaining agreement or, alternatively, that the company was under a contractual obligation to arbitrate the severance pay issue. The company resists both these contentions and further attacks the union's assertion that this Court has jurisdiction under § 301 of the Labor-Management Relations Act, 29 U.S.C. § 185, and under the United States Arbitration Act, 9 U.S.C. § 4.
Each party has filed a motion for summary judgment, and the matter is now ripe for disposition.
The facts are undisputed: The union and the company entered into a collective bargaining agreement on July 28, 1970, having an expiration date of July 21, 1973, and containing the severance pay and arbitration clauses here at issue.1 By the terms of Article XIX the agreement was to remain in full force and effect after July 21, 1973, until a new agreement had been reached and executed, or until either the union or the company terminated the agreement by giving seven days written notice.
On May 16, 1973, the union advised the company, pursuant to § 8(d) of the National Labor Relations Act, that it wished to negotiate certain changes in the existing contract. There followed three months of fruitless negotiations which culminated in the union's giving the company the seven days written notice as required by Article XIX to terminate the contract on August 21, 1973. At a bargaining session held August 31, 1973, the union rejected the company's last offer and stated that it would strike unless the company agreed to its most recent offer. The company thereupon gave notice that it would permanently close its Norfolk bakery and subsequently paid wages and accrued benefits, including vacation pay for vacations earned and due employees, as of August 27, 1973, and additionally paid wages due for any work performed by its employees between August 27, 1973 and the permanent closing date.
Subsequent to August 31, 1973, the union made a demand for severance pay, labeling such either "deferred wages" or a "vested right" established by the terminated contract, and further demanded that the company arbitrate the issue. The company refused to entertain the union's claim for severance pay or, in the alternative, to arbitrate the dispute, asserting that both severance pay and arbitration were rights created solely by the collective bargaining agreement. The company took the position that the union's voluntary termination of the contract on August 27, 1973, deprived its employees of any right to severance pay due under it as a result of the company's plant closure and any right to have the severance pay dispute submitted to arbitration.
The parties present to the Court for resolution two related issues: Whether employees who voluntarily through their union terminate a collective bargaining contract, containing severance pay and arbitration provisions, at the expiration of the contract period are entitled to (1) severance pay, and (2) the right to have the severance pay dispute submitted to arbitration when the employer subsequently closes the plant and terminates the employment of its employees. Because of the Court's disposition of the severance pay issue, it will be unnecessary to resolve the question whether arbitration rights survive the expiration of the collective bargaining agreement which created them.
The union asserts that the right of the company's employees to severance pay was created and vested in them by the collective bargaining contract. The claim of a contract between an employer and a labor organization confers jurisdiction under § 301(a) of the Labor-Management Relations Act, although the plaintiff must prove the existence of the contract to obtain relief. Genesco, Inc. v. Joint Council 13, United Shoe Workers of America, 341 F.2d 482, 484 (2d Cir. 1965).2
Federal law provides the beacon to guide the lower federal courts in fashioning the law of the collective bargaining agreement. Textile Workers v. Lincoln Mills, 353 U.S. 448, 456, 77 S.Ct. 923, 1 L.Ed.2d 972 (1953). The Court undertakes its responsibility to fashion the common law of the collective bargaining agreement, however, with full awareness that Lincoln Mills does not "envision any free-wheeling inquiry into what the federal courts might find to be the most desirable rule, irrespective of congressional pronouncements." Howard Johnson v. Detroit Local Joint Executive Board, 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974).
"Severance Pay" as defined by Article IX, § 5 of the collective bargaining agreement is the right of full time employees who have been actively employed by the company for at least three years to obtain compensation from the company upon displacement from employment by the "introduction of labor saving equipment, the closing of a department, the closing of an entire plant, or by layoff." The plaintiff union proceeds from the premise that severance pay is an "earned" or "vested" right. As evidence in support of this contention, it points out that the severance pay clause appears in Article IX, entitled "Wages," of the collective bargaining agreement and urges that severance pay is earned by the employees of the company and accrue to them in the same manner that the hourly wage is earned and likewise accrues. See, United Steelworkers of America v. H. K. Porter Co., 64 LRRM 2201 (W.D.Pa.1966), where the court said that 64 LRRM at 2202-03.3
The Court, however, must reject the union's major premise that the severance pay in issue constitutes an "earned" or "vested" right. The union's voluntary termination of its collective bargaining agreement with the company on August 27, 1973, in the Court's view, destroyed any right to severance pay created by the collective bargaining agreement for displaced employees.
The Court is not precluded by the fact that the severance pay clause is to be found in the article of the collective bargaining agreement entitled "Wages" from finding, as it does, that severance pay is not an earned or vested right. Mere labels are not always dispositive of legal relations between litigants, and courts often find it necessary to cut through the form in order to discover the substantive relations which lay beneath.
The Court rejects the contention that severance pay constitutes earned but deferred income. In the instant case, only certain employees were eligible for severance pay, they being those who had more than three years continuous employment with the bakery, and those eligible could obtain severance pay in only certain specified instances — when an employee is "permanently displaced from his employment with the company by reason of the introduction of labor saving equipment, the closing of an entire plant, or by layoff." Thus severance pay may be likened to an employee insurance policy to help ameliorate the disruptions caused by technological innovation or economic recession and smooth the displaced employees transition to new employment. The right to collect severance pay, like the right to collect on an insurance policy, is contingent upon the happening of the event in question — here a job layoff, a plant closure, or the introduction of labor saving machinery — during the...
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Nolde Brothers, Inc v. Local No 358, Bakery Confectionery Workers Union
...that even if the dispute had been otherwise arbitrable, the duty to arbitrate terminated with the contract that had created it. 382 F.Supp. 1354 (ED Va.1974). On appeal, the United States Court of Appeals for the Fourth Circuit reversed. 530 F.2d 548 (1975). It took the position that the Di......
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...of contract, the employees' right to it expired with the collective bargaining agreement. Local 358, Bakery & Confectionery Workers, Ind. U. v. Nolde Bros., Inc., 382 F.Supp. 1354, 1358 (E.D.Va.1974). In addition, the district court held that the duty to arbitrate is created by contract and......