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E.M. Diagnostic Systems Inc. v. Local 169

filed: February 13, 1987.


On Appeal from the United States District Court for the District of New Jersey - Camden, D.C. Civil No. 85-4145.

Author: Stapleton


STAPLETON, Circuit Judge :

E.M. Diagnostic Systems, Inc. ("the Company") filed this suit seeking to enjoin arbitration of a grievance that concerned its use of an outside contractor to perform certain cleaning work. The district court held that the grievance was arbitrable and granted summary judgment to Local 169, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America ("the Union"). The Company now appeals. Because the grievance comes within the scope of the contract's broad arbitration clause and because there is no clear evidence of an agreed-upon intent to exclude such a grievance from the arbitration process, we affirm.


The Company and the Union are parties to a collective bargaining agreement effective from April 12, 1985, through April 11, 1988. This litigation involves a grievance filed on April 15, 1985, by Joseph Ehrman, a bargaining unit employee and a member of the Union's negotiating committee. The grievance form states:

This grievance concerns the matter about an outside agency doing our union job as porters. When we met on 4-12-85 the committee asked Jack Holms [sic]*fn1 if they would be leaving since the strike was over and we were coming back to work. Holms [sic] said no. This is a clear case of violating the contract, also unfair to the 15 or so people still on layoff. So in concluding, since the agency is not part of local 169 we demand they be released and the jobs that are rightfully ours are [sic] given back to us.

App. at 61.

The collective bargaining agreement contains the following relevant provisions. Article V, "Functions of Management," provides:

Section 1. The management of the operation and the direction of the working force including the right to hire, suspend, transfer, promote and discharge or discipline for just cause and to maintain discipline and efficiency of its employees, to establish reasonable work rules, to sub-contract, to establish and discontinue incentive systems, and to relieve workers from duty because of lack of work or for other legitimate reasons in accordance with this Agreement are vested in the Company. The Union or its representatives shall not interfere with the exercise of such authority, or responsibility, subject only to the restrictions contained in this Agreement.

App. at 28 (emphasis added). Article XII, "Supervision," states:

Non-union personnel shall not perform the duties normally assigned to Union employees except for emergencies, experimental work, purposes of instruction, production or operational difficulties. The Company has the right to continue the practice of having non-union personnel participate in the taking of inventories.

App. at 37. In addition, Article X, "Seniority," provides that "seniority as used in this ARTICLE shall be the sole determining factor in cases of layoff and recall" and contains a detailed description of the seniority system. App. at 33. Section 6 of Article X states, "When any recall takes place, employees shall rehired by seniority before new employees are hired; . . . ." App. at 35.

Article XIX, "Setting of Disputes," specifies the agreement's grievance and arbitration procedures. This article states:

Section 1. Any dispute arising out of a claimed violation of this Agreement shall be considered a grievance and shall be handled in the following manner:

The Company and the Union both encourage and endorse the principal [sic] that the Union person and his/her immediate supervisor sit and discuss any misunderstanding prior to the beginning of any formal grievance procedures.

Step 1. After such discussions and within three (3) working days following occurrence or first knowledge of the incident complained of, the employee, if not satisfied, shall reduce the grievance to writing and review the matter with his/her immediate Supervisor. . . . The Supervisor shall give an answer within three (3) working days. . . .

Step 2. If the matter is not resolved in Step 1. the grievance shall be referred to the next level of management within one (1) week following the conclusion of Step 1. . . . The company shall provide a written answer within seven (7) working days.

Step 3. If the matter is not resolved in Step 2. it shall, within two (2) weeks of the answer, be referred to the Vice President, Personnel and Organization and the Business Agent for Local 169. These parties, or their designated representative(s), shall discuss, within four (4) weeks, the grievance.

Step 4. In the event of a failure to adjust the grievance satisfactorily by methods set forth in Step 3., the Company and the Union shall agree upon an Arbitrator satisfactory to both. In the event an Arbitrator cannot be decided upon, the parties will utilize the American Arbitration Association procedures for the determination of an Arbitrator. The Arbitrator's decisions shall be final and binding upon all parties. . . . The Arbitrator shall interpret and apply this Agreement but shall not rewrite or add to it.

App. at 41-42 (emphasis added).


Because the Company, in arguing that this grievance is not arbitrable under the collective bargaining agreement, relies on the history of its relationship with the Union, we begin with an account of the events that led up to the current dispute. Prior collective bargaining agreements between the Company and the Union, including the agreement in effect from 1981 to 1984, have also contained the "Functions of Management" provision, with its "right . . . to sub-contract," quoted above.

The Company began contracting out cleaning work at its Gibbstown, New Jersey, facility to Service World Corporation on June 22, 1984. Four days later, a Union member filed the following grievance:

I'm writing this grievance on behalf of Union people who are both in building & out on Layoff & the Company hiring non union persons to do job that has always been considered a union job.

App. at 53. The Company's two written responses to this grievance each acknowledged subcontracting, but stated that the action was "in total conformance with the terms of our labor contract." App. at 53. Although the initial steps of the grievance procedure failed to redress the Union's problem, it did not seek to submit the 1984 grievance to arbitration.

At a July 19, 1984, meeting between Jack Holmes, the Company's Vice President, and the Union's grievance committee, the Union raised the issue of the contract with Service World. According to Mr. Holmes' affidavit, William Nolen, the Union's business agent, said then "that the agreement did provide that the Company can subcontract and that it had the right to do so in these circumstances." App. at 17. Nolen's affidavit, however, states, "At no time did I or any member of the grievance committee state at this meeting that the agreement provided the company with an absolute right to subcontract." App. at 106. Nolen's affidavit also states that the "right . . . to sub-contract" language at no time gave the Company "the right to subcontract out bargaining unit work regularly performed by bargaining unit personnel." Id.

Negotiations for the current collective bargaining agreement commenced in September, 1984. During negotiations the prior agreement was extended, to expire on February 28, 1985. In the initial contract negotiation meetings, the Union proposed prohibiting the subcontracting of work by the Company. According to Holmes' supplemental affidavit, the Union later "modified its position, proposing that there be no subcontracting of work normally done by bargaining unit employees while bargaining unit employees were on layoff." App. at 97.

In November, 1984, the Company expanded its contract with Service World so that this company performed some of the cleaning work in the Gibbstown plant, as well as in the office, reception, and cafeteria areas. The Union did not file a grievance concerning the November expansion of Service World's work.

On March 1, 1985, the bargaining unit employees went on strike. On March 4 the Company contracted with Macke, a successor to Service World, to perform all the cleaning work at the Gibbstown facility. The Company contends that at an April contract negotiation meeting the Union president, Joseph Lyons, voiced concern that if the Company could subcontract janitorial work, then it could subcontract all bargaining unit work. Nolen, who was present at this meeting, states in his affidavit that he did not hear Lyons make any such statement.

The current collective bargaining agreement was signed in April of 1985. It made no change in the "right . . . to sub-contract" language contained in the prior agreement. Nolen's affidavit states that after execution of the 1984-88 agreement,

a bargaining committee member asked the employer when outside employees who had been contracted to perform the parties' work in question during the strike would be released as required under the contract. The employer through its authorized representative advised the union that it intended to use the outside contractor to perform the plant janitorial work despite the clause in question.

App. at 107. Holmes' supplemental affidavit recounts that after agreement on a new contract was reached, he stated that the employees of the subcontractor would remain on the job, but that all strikers should nonetheless return to work, reporting to their supervisors.

On April 15, Union member Ehrman filed the grievance at issue in this case. On April 26, 1985, Holmes gave the company's written response to a Union shop steward. The response states:

The Company has the right to sub-contract work. The grieved subject does not, in any way, violate the collective bargaining agreement. Grievance denied.

App. at 61. According to Holmes' affidavit, he told the shop steward at that time that it did not seem necessary to utilize the subsequent steps in the dispute resolution procedure that provided for further discussion, ...

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