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January 31, 1980


The opinion of the court was delivered by: SNYDER

General Warehousemen and Employees Union Local No. 636 (Union), affiliated with the International Brotherhood of Teamsters, brought action under Section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. ยง 185, to compel J. C. Penney Company (Company) to arbitrate the discharge of an employee. The matter was heard to the Court. We find no contractual obligation to arbitrate grievances existed at the time of the discharge, and will deny the petition to compel arbitration. The following shall constitute the Court's findings of fact and conclusions of law as required by Rule 52, Federal Rules of Civil Procedure.


 On May 29, 1974, the Company and the Union entered into a collective bargaining agreement (1974-1975 Agreement) covering wages, hours and conditions of employment for the employees at the Company's North Versailles facility. The contract contained grievance and arbitration provisions, *fn1" and expired on April 30, 1975. In the days and weeks preceding the expiration date, the Union and the Company were negotiating the terms of a new collective bargaining agreement when it became obvious to both sides that a new contract would not be reached by April 30, 1975. At the April 21, 1975 bargaining session, Joseph Mardell, a member of the Union's Bargaining Committee, asked the Company's Attorney and Chief Negotiator, William Wollett, what the Company's position would be during the post-contract hiatus; the Union, Mardell said, was willing to work while bargaining continued. Mardell understood Wollett to say that all the terms and conditions of the old contract would continue, and this was the message he conveyed to the Union membership. We find that Wollett said the Company would continue to bargain in good faith over the terms and conditions of the contract and would not make unilateral changes in the terms and conditions of employment unless the parties had bargained to an impasse. This did not occur. Wollett did not elaborate at the meeting on what he meant by "terms and conditions of employment", and he never stated the grievance and arbitration procedure would be extended. The April 30, 1975 deadline passed without a new contract being reached; the employees continued to work and the parties continued their negotiations.

 Subsequent to the April meeting, a dispute arose over the Company's transfer of one of its employees, Eileen Slonaker. Wollett, in a letter dated July 31, 1975, stated that the Company was willing to discuss the matter in an attempt to settle it, but refused to arbitrate contending the arbitration procedure had expired. The Union eventually determined the transfer was permitted by the contract and did not then press its asserted right to arbitration.

 In August 1975, the Company offered the Union a limited agreement in which a grievance and arbitration procedure, similar to that in the 1974-1975 Agreement, would be in effect, in return for the Union's agreement that there would be no strikes, including economic strikes in furtherance of any demands made during negotiations. The Union, believing this unduly restricted their right to strike for a new contract, if necessary, rejected the offer. Robert Baird, Union Business Agent, stated that since the 1974-1975 Agreement was extended, in the Union's opinion, there was no need for an agreement establishing a grievance procedure. As to the no strike clause in the old contract (which ostensibly was as binding on the Union as that proposed in the limited agreement), Baird contended the old contract was continued on a day-to-day basis only and therefore the Union retained the right to strike in furtherance of its economic demands during the post-contract hiatus, if negotiations reached an impasse. *fn2"

 The next pertinent incident is the one at issue here. On August 10, 1977, the Company discharged Joseph Prince. The Union requested arbitration and the Company refused.

 A new collective bargaining agreement was reached on December 6, 1978. Although the Prince matter had been discussed on numerous occasions, the parties were unable to resolve it and both sides agree that the collective bargaining agreement reached December 6, 1978 did not affect it.


 The Union argues that Wollett agreed to extend the 1974-1975 Agreement. They contend that his statements lead only to that one conclusion when reasonably interpreted in light of all the facts and circumstances, and especially since all parties abided by the terms and conditions of the 1974-1975 Agreement during the hiatus.

 The Company argues that its offer at the April meeting was to extend the terms and conditions of employment until a new contract was reached, and that arbitration was not included. Under Hilton-Davis Chemical Company, 185 NLRB 241, 75 LRRM 1036 (1970), they urge, an employer may unilaterally terminate arbitration provisions following expiration of the contract, and, in this sense, it is not a term or condition of employment. *fn3" Furthermore they contend, since the Union refused to give up the right to strike, Wollett never agreed to extend the 1974-1975 Agreement's arbitration procedure, as there was no quid pro quo.


 The duty to arbitrate is a matter of contract, and before a party can be required to arbitrate any dispute there must be a finding that the parties agreed to arbitrate. Gateway Coal Co. v. United Mine Workers, 414 U.S. 368, 94 S. Ct. 629, 38 L. Ed. 2d 583 (1974); International Union of Operating Engineers, Local 150 v. Flair Builders, Inc., 406 U.S. 487, 92 S. Ct. 1710, 32 L. Ed. 2d 248 (1972); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960). Congressional policy favors the settlement of labor disputes by the arbitral process rather than by economic warfare, even to the point of resolving doubts over the arbitrability of disputes in favor of arbitrability, United Steelworkers v. Warrior & Gulf Navigation Co., supra, but, the question here is whether the parties agreed to extend all the terms and conditions of an expired contract, including the grievance and arbitration procedure.

 Even though employees continue to work under the compensation arrangements of an old contract, the court cannot imply that the entire contract was extended. As stated in Procter and Gamble Independent Union v. Proctor and Gamble Mfg. Co., 312 F.2d 181 (2nd Cir. 1962), cert. denied 374 U.S. 830, 83 S. Ct. 1872, 10 L. Ed. 2d 1053 (1963):

"We reject appellee's argument that the agreement continued in effect by reason of the action of the parties. On May 13, the employer offered to continue the agreement in effect for another limited period. This offer met with a flat refusal from the union. The fact that the employer chose thereafter not to change many of the working conditions which had prevailed under the expired agreement does not tend in any way to establish that that agreement was, or was considered to be, or was treated as still effective. It is perfectly natural and entirely customary that, in the short hiatus which is expected to occur between the expiration of one collective agreement and the negotiation of the next, no great change will be made in the existing conditions. Sometimes, as here, a part of the hiatus is covered by an agreed-upon extension of the terms of the expiring agreement. ...

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