Local Number 358, Bakery & Confectionery Workers Union, Afl-Cio v. Nolde Brothers, Incorporated

CRAVEN, Circuit Judge:

In 1970 Nolde Brothers, Inc. and Local No. 358 of the Bakery and Confectionery Workers International Union entered into a collective bargaining agreement covering the employees at the company’s Norfolk bakery. The agreement provided for severance pay upon the closing of the bakery for each employee actively employed by Nolde for at least three years,1 and also contained an all-encompassing arbitration clause.2

On August 21, 1973, following several months of fruitless negotiations over proposed changes in the contract, the Union gave the seven days written notice required to terminate the agreement. Negotiations continued for a few days after the termination, but on August 31, the company, faced with the Union’s threats to strike over certain contract demands, permanently closed the bakery. Nolde subsequently paid wages and vacation pay accrued through the date of the contract termination, and in addition paid wages for the few days between contract termination and the August 31 closing. But the company rejected the Union’s demand that it either give severance pay to all its employees or arbitrate its duty to do so.

The Union then instituted this suit under Section 301 of the Labor Manage*550ment Relations Act, 29 U.S.C. § 185, to compel arbitration of the severance pay issue or, in the alternative, for an award of the severance pay. The district court granted the company’s motion for summary judgment on both counts, holding (1) that “the union’s voluntary termination of its collective bargaining agreement with the company . . . destroyed any right to severance pay created by the collective bargaining agreement for displaced employees; ” (2) that there was thus no severance pay issue to arbitrate; and (3) that even if there had been an arbitrable issue there was no duty to arbitrate, for it had died with the contract that created it.

We disagree. In our view, the district court approached the issues backwards when it first determined whether the company’s obligation for severance pay survived the contract. This is a question more suitable for arbitration than judicial decision, as we explain below. Thus, the first question for the district court was whether the company’s duty to arbitrate this particular issue survived the expiration of the contract. We believe it did, and accordingly we reverse and remand with instructions that the district court order the company to arbitrate.

I.

The Union and the company apparently presented to the district court, as they have to us, contrasting views of the nature of severance pay. The Union argued that severance pay is an “earned” or “vested” right accruing to employees over a period of time, whose benefits cannot be denied them regardless when they come to fruition. The company, on the other hand, characterized severance pay as “a creation of the collective bargaining agreement,” with the right to it contingent upon the occurrence of the triggering event — here the bakery closing — during the term of the contract.

The district court erred in choosing one characterization — the company’s— over the other, for in fact severance pay has no immutable nature. It is indeed a creature of contract, but this means no more nor less than that it is in a given case exactly what the parties intended to make it when they bargained. In one case the parties may intend it to be available only if a triggering event occurs during the contract term. But as the Supreme Court has noted, there is “no reason why parties could not if they so chose agree to the accrual of rights during the term of an agreement and their realization after the agreement had expired.” John Wiley & Sons v. Livingston, 376 U.S. 543, 555, 84 S.Ct. 909, 917, 11 L.Ed.2d 898 (1964). Thus the nature of the employees’ right to severance pay in the-circumstances here depends entirely upon the intent of the Union and the company when they wrote the relevant provision.

Any question of the intent behind a collective bargaining term must be referred to arbitration if it is available. This is in accord with the national labor policy expressed by Congress:

Final adjustment by a method agreed upon by the parties is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement.

LMRA § 203(d), 29 U.S.C. § 173(d) (emphasis added). This is also the clear teaching of the Steelworkers Trilogy,3 and is based on the sound principle that an arbitrator, familiar as he is with both the parties and the industry, is better positioned than a court to divine their intent:

The labor arbitrator’s source of law is not confined to the express provisions of the contract, as the industrial common law — the practices of the industry and the shop — is equally a part of the collective bargaining agreement *551although not expressed in it. The labor arbitrator is usually chosen because of the parties’ confidence in his knowledge of the common law of the shop and their trust in his personal judgment to bring to bear considerations which are not expressed in the contract as criteria for judgment.

United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 581-82, 80 S.Ct. 1347, 1352, 4 L.Ed.2d 1409 (1960).

The arbitrator’s absolute authority in such a matter, and a court’s corresponding lack of power, was affirmed in another passage from the Steelworkers Trilogy:

[T]he question of interpretation of the collective bargaining agreement is a question for the arbitrator. It is the arbitrator’s construction which was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.

United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 599, 80 S.Ct. 1358, 1362, 4 L.Ed.2d 1424 (1960). The district court below pre-empted the arbitrator rather than overruling him. But he may do neither under the labor law.

II.

The company argues most strenuously, however, that it cannot be ordered to arbitrate the severance pay issue because the collective bargaining agreement containing its duty to arbitrate had been terminated before the instant dispute arose. In support of its position the company cites several Supreme Court statements to the effect that a party cannot be required to arbitrate any issue unless it has agreed to do so.4 We think the statements do not support the company’s contention that a duty to arbitrate cannot survive the termination or expiration of a contract.

First, the Supreme Court has itself undercut the apparent premise that arbitration must rest upon contract by holding that in some circumstances a new employer who takes over a unionized business can be compelled to arbitrate under the arbitration clause of its predecessor’s agreement, even though the new employer — a stranger to the bargaining — never agreed to such arbitration. John Wiley & Sons, supra. Although the potential implications of the Wiley case have since been narrowed, see Howard Johnson Co. v. Hotel Employees, 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974); NLRB v. Burns Security Services, Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972), the Court has not retreated from its recognition that in some instances the national labor policy can impose an arbitration duty upon an unconsenting party:

While the principles of law governing ordinary contracts would not bind to a contract an unconsenting successor to a contracting party, a collective bargaining agreement is not an ordinary contract. “. . . [I]t is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. . . . The collective agreement covers the whole employment relationship. It calls into being a new common law — the common law of a particular industry or of a particular plant.” . . . Central to the peculiar status and function of a collective bargaining agreement is the fact, dictated both by circumstance, and by the requirements of the National Labor Relations Act, that *552it is not in any real sense the simple product of a consensual relationship.

John Wiley & Sons, supra, 376 U.S. at 550, 84 S.Ct. at 914 (citations omitted).

It is true that in Wiley there was a contract with an arbitration clause in existence when the union filed suit to compel arbitration,5 whereas here there was none either when the dispute arose or when suit was filed. But we believe the Supreme Court has indicated that the principle of Wiley requires arbitration in the latter circumstance as well. In Piano & Musical Instrument Workers v. W. W. Kimball Co., 221 F.Supp. 461 (N.D.Ill. 1963), the district court held that a union-employer dispute over rehiring of discharged employees, centering on the employees’ seniority rights, was arbitrable even though the dispute arose several days after termination of the parties’ collective bargaining agreement. The Seventh Circuit reversed, holding that arbitration could not be required in such circumstances. 333 F.2d 761, 765 (1964). The Supreme Court granted certiorari and summarily reversed the Seventh Circuit. 379 U.S. 357, 85 S.Ct. 441, 13 L.Ed.2d 541 (1964). Significantly, the Supreme Court cited only the first Steelworkers Trilogy case6 and Wiley.

We believe Wiley and its use by the Supreme Court in Piano Workers support our view that a dispute that turns on whether parties intended certain accruable rights to be enjoyable, even after contract expiration, must be arbitrated if the contract provided for arbitration of such disputes, even if the contingency giving rise to the dispute itself transpired after expiration of the contract. Accord, Steelworkers v. H. K. Porter Co., 64 L.R.R.M. 2201 (W.D.Pa. 1966); cf. IAM v. Howe Sound Co., 350 F.2d 508 (3d Cir. 1965). But see U.A.A. & A.I.W. v. Robertshaw Controls Co., 405 F.2d 29 (2d Cir. 1968) (en banc); Ward Foods, Inc. v. Bakery & Confectionery Workers, 360 F.Supp. 1310 (S.D. N.Y.1973); cf. Milk Drivers v. Thompson’s Dairy, Inc., 80 L.R.R.M. 3403 (D.D. C.1972), aff’d mem., 489 F.2d 1272 (D.C. Cir. 1974).

The company does not deny that the contract by its terms contemplated arbitration of any dispute over severance pay. Thus it is clear that the company literally agreed to arbitrate any issue of its obligation for severance pay. See note 4, supra, and accompanying text.

Judge Widener, concurring and dissenting, advances an argument that the employer rejects. The battle was not joined here or in the district court over whether the court or the arbitrator should decide that the question was arbitrable. What the fight is about, as stated in appellee’s brief, is whether the duty to arbitrate can survive contract termination. We think the issue to which our brother Widener has addressed himself is not before us, but because of our respect for his viewpoint, we would add that we read the cases upon which he relies as being consistent with the general rule that the initial question of arbitrability is a matter to be determined by the court. An exception to the rule is where a clause in a labor contract purporting to exclude some matters from arbitration is vague and ambiguous. In such a case an arbitrator may be expressly empowered to not only adjudge grievances but also to decide whether the instrument gives him the power to do so. That is all that we held in A. S. Abell Co. v. Baltimore Typographical Union No. 12, 338 F.2d 190 (4th Cir. 1964). Indeed, Judge Sobeloff said in that case that if the meaning of the exclusionary section “were entirely clear it would become the duty of the court to declare the meaning.” Again, in Winston-Salem Printing Pressmen & Assistants’ Union No. 818 v. Piedmont Publishing Co., 393 F.2d 221 (4th Cir. *5531968), Judge Sobeloff writing for the court, acknowledged that “submission to arbitration cannot precede judicial determination that the collective bargaining agreement does in fact create such a duty.” Only then did he conclude that the contract in that case specifically provided that the construction to be placed upon any clause, including the clause authorizing arbitration, was to be resolved through the grievance procedure and by the arbitrator himself. Judge Winter, sitting as a district judge, has written to the same effect. Local 24, IBEW v. Wm. C. Bloom & Co., 242 F.Supp. 421, 428-29 (D.Md.1965). Indeed, the rule and its exception are now so well settled that both have found expression in one of the encyclopedias:

Since the duty to arbitrate is of contractual origin, a compulsory submission to arbitration cannot precede judicial determination that the collective bargaining agreement does in fact create such a duty. The questions whether a party to a collective bargaining agreement must arbitrate, and what issues he must arbitrate, must be determined by the court on the basis of the contract entered into by the parties.
However, the arbitrability of a dispute may itself be subject to arbitration if the parties have clearly so provided in the agreement. Of course, the court must decide the threshold question whether the parties have in fact conferred this power on the arbitrator. If they have, the court should stay proceedings pending the arbitrator’s determination of his own jurisdiction, unless it is clear that the claim of arbi-trability is wholly groundless.

48 Am.Jur.2d “Labor and Labor Relations” § 1257 at 783-84.

We simply hold that the company must abide by that agreement even after the contract embodying it has terminated. Not only the decisions in Wiley and Piano Workers, but also policy considerations indicate such a result. The company s obligation for severance pay depends upon the parties’ intent behind the contract provision for severance pay. A court, after the Steelworkers Trilogy, is not the proper forum in which to inquire into that intent. If the expiration of the contract were held to strip the arbitrator of power, the best means of determining the true content of the parties’ original agreement would not be available— which would increase the possibility of the parties’ resorting to economic warfare in support of their respective interpretations. But this is precisely the kind of industrial unrest that collective bargaining, coupled with arbitration of difference over contract terms, is intended to avert. See LMRA § 101, 29 U.S.C. § 151. Our holding that arbitration is still available serves the most basic policy of our labor laws.

Our decision should not be read as disapproving those cases that hold arbitration unavailable for resolution of individual employee grievances, or disputes involving nonaccruable rights, that arise after expiration of a collective bargaining agreement. See, e. g., OGAW v. American Maize Prods. Co., 492 F.2d 409 (7th Cir.), cert. denied, 417 U.S. 969, 94 S.Ct. 3173, 41 L.Ed.2d 1140 (1974); Procter & Gamble Indep. Union v. Procter & Gamble Mfg. Co., 312 F.2d 181 (2d Cir. 1962), cert. denied, 374 U.S. 830, 83 S.Ct. 1872, 10 L.Ed.2d 1053 (1963); Garlick Funeral Homes v. Service Employees, 85 L.R.R.M. 2749 (E.D.N.Y.1974). We consider those cases different. To hold that a company had to arbitrate an employee discharge or a lockout that occurred after expiration of a contract providing for arbitration would mean that an employer who once agreed to submit its managerial actions to potential arbitration would in effect have agreed to do so for all time. That we do not hold. Our decision affects only those rights, like severance pay, that employees earn and that may or may not “vest” for future enjoyment — contingent upon a particular event.7 The best way to determine *554whether the union and the employer meant for employees to enjoy those rights regardless of when the contingency occurs is to arbitrate. That is all we require.

Reversed and remanded with instructions.

. Article IX. Wages.

Section 5. Each full-time employee who is permanently displaced from his employment with the Company by reason of the introduction of labor saving equipment, the closing of a department, the closing of an entire plant, or by lay off, shall be compensated for such displacement providing he has been actively employed by the Company for a period of at least three (3) years. An eligible employee’s compensation for his displacement shall be on the basis of thirty (30) hours of severance pay, at his straight time hourly rate, for each full year or major portion of a year of active employment commencing with the fourth (4th) year following his most recent date of hire. Payment under this formula shall be limited to a maximum of nine hundred (900) hours of severance pay.

. Article XII. Grievances and Arbitration.

Section 1. All grievances shall be first taken up between the Plant Management and the Shop Steward. If these parties shall be unable to settle the grievance, then the Business Agent of the Union shall be called in, in an attempt to arrive at a settlement of the grievance. If these parties are unable to settle the grievance, the dispute will be settled as called for in Sections 2 and 3 of this Article.
Section 2. In the event that any grievance cannot be satisfactorily adjusted by the procedure outlined above, either of the parties hereto may demand arbitration and shall give written notice to the other party of its desire to arbitrate. No individual employee shall have the right to invoke arbitration without the written consent of the Union. The Arbitration Board shall consist of three (3) persons, one selected by the Company and one selected by the Union. The two persons selected shall agree upon a third person who shall act as Chairman of the Arbitration Board.
Section 3. The decision or award of the Arbitration Board, or a majority thereof, shall be final and binding on both parties. If the third party to arbitration is not selected in ten (10) days from receipt of notice, the Director of the U.S. Conciliation Service shall be requested to make the appointment. The expense of the neutral arbitrator shall be borne equally by the parties.
Section 4. Pending negotiations or during arbitration there shall be no strikes, lockouts, boycotts, or any stoppages of work.

. United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960).

. For arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.

United Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960).

Under our decisions, whether or not the company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties.

Atkinson v. Sinclair Ref. Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462 (1962).

The law compels a party to submit his grievance to arbitration only if he has contracted to do so.

Gateway Coal Co. v. UMW, 414 U.S. 368, 374, 94 S.Ct. 629, 635, 38 L.Ed.2d 583 (1974).

. The original employer and the union had entered into a contract with an arbitration clause that was to expire on January 31, 1962. The original employer merged with the new employer on October 2, 1961. The union filed suit against the new employer to compel arbitration one week before the expiration of its contract with the original employer. See 376 U.S. at 544-46, 84 S.Ct. 909.

. United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960).

. We believe one of the cases heavily relied upon by appellee is distinguishable from this case on the ground discussed in the text. In Milk Drivers v. Thompson’s Dairy, 80 L.R.R.M. 3403 (D.D.C.1972), aff’d mem., 489 F.2d 1272 (D.C.Cir. 1974), the court refused to order ar*554bitration over severance pay when a company went out of business after the expiration of the collective bargaining agreement. But the contract there did not on its face grant employees an absolute right to severance pay, as does the contract in the instant case. Instead, the contractual duty of the employer was to “negotiate the terms of discontinuance regarding severance pay.” Under that contract there was no room for an argument that the parties at the time of original bargaining had intended employees to receive severance pay upon a post-termination shutdown. The contract contemplated only that the parties would discuss the possibility of severance pay at the time of shutdown. Nothing could accrue, and the obligation to negotiate simply died with the contract. An agreement to negotiate does not last forever.