United Parcel v. Union De Tronquistas

• Decision Date: 20 October 2005
• Docket Number: No. 04-2275.,04-2275.
• Citation: 426 F.3d 470
• Parties: UNITED PARCEL SERVICE, INC., Plaintiff, Appellant, v. UNIÓN DE TRONQUISTAS DE PUERTO RICO, LOCAL 901, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

426 F.3d 470

UNITED PARCEL SERVICE, INC., Plaintiff, Appellant, v. UNIÓN DE TRONQUISTAS DE PUERTO RICO, LOCAL 901, Defendant, Appellee.

No. 04-2275.

United States Court of Appeals, First Circuit.

Submitted July 26, 2005.

Decided October 20, 2005.

Pedro J. Manzano-Yates, Carlos M. Aquino-Ramos, and Fiddler González & Rodríguez, PSC on brief for appellant.

José E. Carreras Rovira on brief for appellee.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

COFFIN, Senior Circuit Judge.

Appellee Unión de Tronquistas de Puerto Rico, Local 901 (the union), represents a group of United Parcel Service (UPS) employees who claim that the company owes them back wages for unpaid vacation time. The unpaid vacation consists primarily of days that accrued under expired collective bargaining agreements. When the union submitted the claim to arbitration, UPS contended that the arbitrator could not adjudicate such "out-of-time" claims. The arbitrator concluded otherwise, ruling that the claims could proceed. The district court refused to vacate the arbitration award, relying on the well established principle of deference to arbitrators' rulings. On appeal, the company argues that the district court utilized the wrong standard of review and misapplied the law on survival of arbitration provisions. Although we find legal error in the court's approach, we conclude that it correctly left the dispute in the hands of the arbitrator. We therefore affirm its dismissal of the case.

I. Background

UPS and the union have been parties to a series of collective bargaining agreements dating back to at least 1985, each of which included a comprehensive procedure for handling employee grievances and broadly provided for arbitration of disputes. The union submitted the grievance in this case to arbitration in March 1999, seeking compensation for accrued vacation time on behalf of dozens of employees. The employees assert that UPS in 1998 "erased" vacation time they had accumulated before that year. The collective bargaining agreement then in effect covered the period between August 1, 1997 and July 31, 2002. Most, if not all, of the alleged vacation leave at issue had accrued, however, under prior collective bargaining agreements. UPS's position is that the obligation to arbitrate the dispute over that vacation pay expired when the earlier agreements expired, and, indeed, the company appears to contend that the employees have retained no right at all to pursue claims arising from the earlier agreements.¹

The arbitrator, however, ruled that she had the authority to order payment of any compensation determined to be owed. In dismissing UPS's petition to vacate the arbitration award, the district court observed that it was obliged to enforce the award "as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority." Opinion and Order at 1 (internal citation omitted). The court found no flaw in the arbitrator's award and accordingly entered judgment in the union's favor.

On appeal, UPS argues that the court made a pivotal error at the outset of its inquiry by implicitly deferring to the arbitrator on the threshold question of arbitrability. The company maintains that it was up to the court to decide in the first instance whether the arbitrator was empowered to decide the employees' vacation dispute, and it therefore asserts that the district court's first step should have been to consider that issue de novo.

UPS goes on to argue that, had the court properly assumed its authority to make the threshold arbitrability determination, it should have found the dispute non-arbitrable on the grounds asserted above — i.e., that the applicable arbitration provision expired along with the rest of the prior collective bargaining agreement and that the arbitrator had no authority under the current agreement to delve into the issue. In brief, UPS's argument is that the arbitrator lacked jurisdiction under any agreement to entertain the union's claim on behalf of the employees.

We agree with UPS that the district court should have made the initial decision on arbitrability. The district court apparently thought of this as a case requiring interpretation of the contract and therefore a matter for determination in the first instance by the arbitrator. But "[w]hether or not a company is bound to arbitrate . . . is a matter to be determined by the court," Litton Fin. Printing Div. v. N.L.R.B., 501 U.S. 190, 208, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991) (citing AT & T Techs., Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986));² see also Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ("[A] gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability' for a court to decide."). Such a duty must be performed even though it may require the court to interpret a bargaining agreement provision. See Litton, 501 U.S. at 209, 111 S.Ct. 2215. Because we conclude, however, that the arbitrator does have authority to resolve the vacation pay dispute, the court's threshold error was harmless. We explain below the legal and factual foundation for that conclusion.

II. Discussion

As we have noted, UPS maintains that the vacation pay dispute may not be arbitrated because there is no applicable arbitration provision: the one in the current collective bargaining agreement does not apply to benefits accrued before that agreement took effect, and the one that existed when the asserted benefits accrued has since expired. In our view, the case law is to the contrary.

In Litton, the Supreme Court confirmed that a presumption exists "in favor of postexpiration arbitration of matters unless `negated expressly or by clear implication'" in the collective bargaining agreement. 501 U.S. at 204, 111 S.Ct. 2215 (quoting Nolde Bros., Inc. v. Bakery Workers, 430 U.S. 243, 255, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977)). The presumption is limited by a "vital qualification": the arbitration must concern "matters and disputes arising out of the relation governed by the contract." Id. A dispute "can be said to arise under the contract"

only where it involves facts and occurrences that arose before expiration, where an action taken after expiration infringes a right that accrued or vested under the agreement, or where, under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement.

Id. at 205-06, 111 S.Ct. 2215. Our inquiry is thus two-pronged; we must determine if the particular dispute "has its real source in the contract," id. at 205, 111 S.Ct. 2215, and if so, we must consider whether postexpiration arbitration of the issue was negated expressly or by clear implication.

UPS confusingly blends these two inquiries in its brief, and offers its argument on whether the disputed vacation time accrued under the prior agreement only in cursory fashion, embedded within its discussion of the arbitration clause's survivability. Nonetheless, viewing its effort generously, we consider UPS's implicit assertion that Article 34 of the 1993-97 collective bargaining agreement (titled "Vacation") resolves the first prong of the inquiry in its favor. We focus, as did the parties, specifically on whether the dispute involves "a right that accrued or vested under the agreement."³

Section 3 of Article 34 provides that "[e]arned vacation will be taken each year." The section goes on to state that "[o]nly one year earned vacation can be taken in each calendar year." UPS maintains that the combined force of the "clear and unequivocal language" in these two statements confirms that vacation time does not accrue from year to year and likewise could not accrue from one collective bargaining agreement to the next.

In our view, UPS overstates the reach of section 3. That vacations may be taken only in the year earned does not necessarily foreclose the employees from seeking compensation for unused, accrued vacation time. The idea of pay in lieu of vacation time is incorporated, in fact, in the 1997-2002 collective bargaining agreement, which allows employees to elect pay instead of time off for all days in excess of ten vacation days. (See Article 34, Section 1©). The lack of an explicit paid vacation option in the earlier agreement does not negate its possible existence as a matter of practice; indeed, the provision in the...