New Union, New Agreement: The Third Circuit holds original CBAs with prior labor union invalid

New Union, New Agreement: The Third Circuit holds original CBAs with prior labor union invalid in Utility Workers United Association, Local 537 v. Pennsylvania American Water Company.

By Monvan Hu, Esq., January 11, 2021

 

On December 18, 2020, a Third Circuit panel unanimously affirmed the dismissal of a breach of contract claim brought by a utility workers union, Utility Workers United Association, Local 537 (the “Association”), against the utility company, the Pennsylvania American Water Company (“PAWC”).  The panel reasoned that a breach of contract claim could not be sustained on collective bargaining agreements (“CBA”) struck between PAWC and the prior union representing its workers, Utility Workers Union of America, AFL-CIO, Local 537 (“UW Union of America”) as those contracts became null and void upon the election and certification of a new union.

 

Previously, UW Union of America had entered into two separate CBAs with PAWC setting forth the wages, hours and other conditions of employment in PAWC’s service areas in and around Pittsburgh.  In March 2018, members of UW Union of America decided to disaffiliate from the union and affiliate with the Association as their new exclusive collective bargaining agent.  The Association then notified PAWC that it was adopting all prior CBAs and labor relations practices already in effect, including the two CBAs between PAWC and UW Union of America.  The employees later petitioned the National Labor Relations Board (“NLRB”) to decertify UW Union of America as the exclusive bargaining agent for the labor contracts and to substitute the Association in its place.  The NLRB held elections on the petitions and certified the Association in December 2018.

 

The Association then requested that the NLRB compel PAWC to begin deducting union dues, but the NLRB denied the request. The NLRB also denied the Association’s subsequent appeal, finding that the Association was a “completely new labor organization, bargaining towards a new contract.”  The Association commenced litigation in the Western District of Pennsylvania against PAWC, alleging that PAWC was refusing to abide by the terms of the original CBAs and the arbitration agreement therein.  It sought a declaratory judgment that the Association was the lawful successor to UW Union of America and that the CBAs were binding on PAWC.

 

PAWC then moved to dismiss the complaint arguing that once the Association was certified by the NLRB to be the exclusive bargaining agent, all prior contracts with the predecessor union were null and void. On the motion, the District Court deferred in large part to the NLRB’s holding that the Association is a completely new labor organization bargaining towards a first contract.  On appeal, the Third Circuit panel affirmed the decision, although it relied on a slightly different rationale based on prior NLRB decisions, holding that “[a] contract between a former union and an employer becomes null and void when a challenging union prevails against the former union in an NLRB representation election and the challenging union is certified as the new collective-bargaining representative of the employer’s employees.” Without a valid contract, there could be no breach of contract.

 

The decision is consistent with longstanding NLRB precedent, and it illustrates the importance for employers and successor labor unions to come to the negotiating table. For more information or questions, please contact NFC’s Labor Management Relations Team.

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