Second Circuit rules for union on ‘broad’ arbitration clause

Arbitration of employment disputes is both a blessing and a curse. In discrimination and wage and hour cases, it has helped employers limit litigation exposure and costs. On the flip side, many employers—especially those with a collective bargaining agreement (CBA) with a union—want to avoid arbitration of many other disputes that arise out of an alleged violation of the “terms and conditions” of employment, fearing how an arbitrator may rule. In a recent case, the U.S. Court of Appeals for the Second Circuit, whose decisions control in New York, held that an arbitration clause was so broad it gave an arbitrator the power to rule on an old side agreement that wasn’t part of the CBA that affected retirees who left the company decades ago. If you have an organized workforce or may be facing one soon, read on to understand how this case may affect you.

Background

Local 97 of the International Brotherhood of Electrical Workers, AFL-CIO and NRG Energy, Inc. (a huge utility) were parties to a 2003 memorandum of agreement (MOA) that provided certain retiree life insurance benefits for members who were hired before 2003 but no such benefit for members who were hired after 2003. Subsequent CBA’s executed by NRG and the union, which spanned the period between 2013 and 2019, didn’t reference the 2003 MOA’s agreement to “grandfather” in members who were hired before 2003.