Nolde Brothers, Inc v. Local No 358, Bakery Confectionery Workers Union

• Decision Date: 07 March 1977
• Docket Number: No. 75-1198,AFL-CIO,75-1198
• Citation: 430 U.S. 243,51 L.Ed.2d 300,97 S.Ct. 1067
• Parties: NOLDE BROTHERS, INC., Petitioner, v. LOCAL NO. 358, BAKERY & CONFECTIONERY WORKERS UNION,
• Court: U.S. Supreme Court

430 U.S. 243

97 S.Ct. 1067

51 L.Ed.2d 300

NOLDE BROTHERS, INC., Petitioner,

v LOCAL NO. 358, BAKERY & CONFECTIONERY WORKERS UNION, AFL-CIO.

No. 75-1198.

Argued Nov. 9, 1976.

Decided March 7, 1977.

Rehearing Denied April 25, 1977.

See 430 U.S. 988, 97 S.Ct. 1689.

Syllabus

Petitioner corporation entered into a collective-bargaining agreement with respondent Union which contained a provision for severance pay on termination of the employment of certain employees. The agreement, which specified that any grievance arising between the parties was subject to binding arbitration, was to remain in effect until its expiration date and thereafter until execution of a new agreement or the existing agreement was terminated by either party upon seven days' written notice. While contract changes were being negotiated after the contract's expiration date, respondent on August 20, 1973, gave notice of cancellation, and the contract terminated August 27. Negotiations nevertheless continued but ended on August 31, when petitioner, threatened with a strike, informed respondent that it was closing its plant effective that day. Plant operations ceased shortly thereafter. Petitioner paid accrued wages, but rejected respondent's demand for severance pay under the collective-bargaining agreement and declined to arbitrate the claim therefor on the ground that its obligation to do so terminated with the collective-bargaining agreement. Respondent then brought this action in District Court to compel petitioner, inter alia, to arbitrate the severance-pay issue. The District Court granted petitioner's motion for summary judgment, holding that the employees' right to severance pay expired with respondent's voluntary termination of the agreement; that consequently there was no longer a severance-pay issue to arbitrate; and that, in any event, the duty to arbitrate ended with the contract. The Court of Appeals reversed, concluding that the parties' arbitration duties under the contract survived its termination with respect to claims arising by reason of the agreement. Held: Respondent's claim for severance pay under the expired contract is subject to resolution under the contract's arbitration terms. Pp. 248-255.

(a) The obligations of parties under the arbitration clause of a collective-bargaining agreement may survive contract termination when the dispute is over an obligation arguably created by the expired agreement. John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898. Pp. 250-252.

(b) The parties agreed to resolve all disputes by resort to the mandatory grievance-arbitration machinery established by the agreement. There is nothing in the arbitration clause that expressly excluded from its operation a dispute arising under the contract but based on events occurring after its termination. Absent some contrary indication, there are strong reasons to conclude that the parties did not intend their arbitration obligations to end automatically with the contract. Pp. 252-253.

(c) The parties clearly expressed their preference for an arbitral, rather than a judicial, interpretation of their obligations and drafted their broad arbitration clause against a backdrop of the well-established federal labor policy favoring arbitration as a means of resolving disputes. There is a strong presumption favoring arbitrability. Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-583, 80 S.Ct. 1347, 1352-1353, 4 L.Ed.2d 1409. Pp. 253-255.

(d) Where the dispute is over a provision of the expired collective-bargaining agreement, the presumptions favoring arbitrability must be negated expressly or by clear implication. P. 255.

4 Cir., 530 F.2d 548, affirmed.

Allan L. Bioff, for petitioner.

Ronald Rosenberg, for respondent.

Mr. Chief Justice BURGER delivered the opinion of the Court.

This case raises the question of whether a party to a collective-bargaining contract may be required to arbitrate a contractual dispute over severance pay pursuant to the arbitration clause of that agreement even though the dispute, although governed by the contract, arises after its termination. Only the issue of arbitrability is before us.

(1)

In 1970, petitioner Nolde Brothers, Inc., entered into a collective-bargaining agreement with respondent Local No 358, of the AFL-CIO, covering petitioner's Norfolk, Va., bakery employees. Under the contract, 'any grievance' arising between the parties was subject to binding arbitration.¹ In addition, the contract contained a provision which provided for severance pay on termination of employment for all employees having three of more years of active service.² Vacation rights were also granted employees by the agreement;³ like severance pay, these rights were geared to an employee's length of service and the amount of his earnings. By its terms, the contract was to remain in effect until July 21, 1973, and thereafter, until such time as either a new agreement was executed between the parties, or the existing agreement was terminated upon seven days' written notice by either party.

In May 1973, the parties resumed bargaining after the Union advised Nolde, pursuant to § 8(d) of the National Labor Relations Act, 29 U.S.C. § 158(d), of its desire to negotiate certain changes in the existing agreement. These negotiations continued without resolution up to, and beyond, the July 21 contract expiration date. On August 20, the Union served the requisite seven days written notice of its decision to cancel the existing contract. The Union's termination of the contract became effective August 27, 1973.

Despite the contract's cancellation, negotiations continued. They ended, however, on August 31, when Nolde, faced by a threatened strike after the Union had rejected its latest proposal, informed the Union of its decision to close permanently its Norfolk bakery, effective that day. Operations at the plant ceased shortly after midnight on August 31. Nolde then paid employees their accrued wages and accrued vacation pay under the canceled contract; in addition, wages were paid for work performed during the interim between the contract's termination on August 27 and the bakery's closing four days later. However, the company rejected the Union's demand for the severance pay called for in the collective-bargaining agreement. It also declined to arbitrate the severance-pay claim on the ground that its contractual obligation to arbitrate disputes terminated with the collective-bargaining agreement.

The Union then instituted this action in the District Court under § 301 of the Labor Management Relations Act, 29 U.S.C. § 185, seeking to compel Nolde to arbitrate the severance-pay issue, or in the alternative, judgment for the severance pay due. The District Court granted Nolde's motion for summary judgment on both issues. It held that the employees' right to severance pay expired with the Union's voluntary termination of the collective-bargaining contract and that, as a result, there was no longer any sev- erance-pay issue to arbitrate. It went on to note 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 District Court had approached the case from the wrong direction by determining that Nolde's severance-pay obligations had expired with the collective-bargaining agreement before determining whether Nolde's duty to arbitrate the claim survived the contract's termination. Turning to that latter question first, the Court of Appeals concluded that the parties' arbitration duties under the contract survived its termination with respect to claims arising by reason of the collective-bargaining agreement. Having thus determined that the severance-pay issue was one for the arbitrator, the Court of Appeals expressed no views on the merits of the dispute. We granted certiorari to review its determination that the severance-pay claim was arbitrable. 425 U.S. 970, 96 S.Ct. 2165, 48 L.Ed.2d 793 (1976).

(2)

In arguing that Nolde's displaced employees were entitled to severance pay upon the closing of the Norfolk bakery, the Union maintained that the severance wages provided for in the collective-bargaining agreement were in the nature of 'accrued' or 'vested' rights, earned by employees during the term of the contract on essentially the same basis as vacation pay, but payable only upon termination of employment. In support of this claim, the Union noted that the severance-pay clause is found in the contract under an article entitled 'Wages.' The inclusion within that provision, it urged, was evidence that the parties considered severance pay as part of the employees' compensation for services performed during the life of the agreement.⁴ In addition, the Union pointed out that the severance-pay clause itself contained nothing to suggest that the employees' right to severance pay expired if the events triggering payment failed to occur during the life of the contract. Nolde, on the other hand, argued that since severance pay was a creation of the collective-bargaining agreement, its substantive obligation to provide such benefits terminated with the Union's unilateral cancellation of the contract.

As the parties' arguments demonstrate, both the Union's claim for severance pay and Nolde's refusal to pay the same are based on their differing perceptions of a provision of the expired collective-bargaining agreement. The parties may have intended, as Nolde maintained, that any substantive claim to severance pay must surface, if at all, during the contract's term. However, there is also 'no reason why parties could not if they so chose agree to the accrual of rights during the term of an agreement and their realization after the agreement had expired.' John Wiley & Sons v. Livingston, 376 U.S....