April 19, 2021

Volume XI, Number 109

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April 16, 2021

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Sixth Circuit Rules Retiree Healthcare Benefits Claim Is Not Arbitrable

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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© 2021 Proskauer Rose LLP. National Law Review, Volume XI, Number 96
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About this Author

Russell L Hirschhorn ERISA Litigation, employee benefits attorney, Proskauer
Senior Counsel

Russell Hirschhorn is a Senior Counsel in the Labor & Employment Law Department, where he focuses on complex ERISA litigation and advises employers, fiduciaries and trustees on ERISA benefit and fiduciary issues. 

Russell represents employers, plan sponsors, plans, trustees, directed trustees and fiduciaries in all phases of litigation, arbitration and mediation involving employee benefits, including class action and individual claims relating to ERISA’s fiduciary duty and prohibited transaction provisions, denials of claims for benefits, severance plans, ERISA Section 510,...

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Kyle Hansen Employment lawyer Proskauer
Associate

Kyle Hansen is an associate in the Labor & Employment Law Department and a member of the ERISA Litigation Group.

Kyle graduated summa cum laude from the University of Mississippi School of Law, earning his J.D. and two honors diplomas in the areas of Space & Aviation Law and Business Law. During law school, he won the North American Championship at the 2017 International Manfred Lachs Space Law Moot Court Competition, also winning “best brief.” He went on to represent North America at the world competition and was runner-up. Kyle also served as the senior editor for the ...

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