A Short Primer on Hybrid Section 301 Claims for the Unionized Employer

If you have employees that are represented by a union, you may have terminated an employee who is then unhappy with you for discharging him and also unhappy with his union for deciding not to pursue his grievance and/or request for arbitration. Not possessing a particularly self effacing nature (i.e. being unable to admit, or even comprehend, that he got what he deserved), the employee searches for legal counsel to right this “manifest injustice” which has befallen him.

His selected counsel is likely to be a general practitioner with little or no experience in labor law. The lawsuit will be filed in state or federal court against either you as the sole defendant or together with the union as co-defendants. The complaint will allege either wrongful discharge or breach of the collective bargaining agreement (“labor contract”).

However, as long as the employee’s claim is for breach of the contract and your collective bargaining agreement contains a grievance procedure capped by final and binding arbitration, this lawsuit will be governed by the provisions of § 301 of the Labor Management Relations Act (“LMRA”) and over 50 years of court decisions which interpret how this federal law is applied.

Section 301 of the LMRA

In 1947, Congress enacted the LMRA amendments to the National Labor Relations Act (“NLRA”). Among those changes was the addition of § 301 which provided that lawsuits brought to enforce the terms of labor contracts of employers engaged in interstate commerce (which includes almost all employers) could be brought in federal court without regard to the amount of money involved in the dispute or the citizenship of the parties.

In 1962, the Supreme Court decided that only federal law would apply to such suits. In essence, states are preempted from applying their own common law or statutes to such lawsuits — as long as the state law action is based on a claim of rights or duties under a labor contract and requires an interpretation of a term contained in the labor contract for resolution of the dispute. Thus, even though it is permissible for a state court to hear a § 301 claim, it would be required to apply federal law.

The plain language of § 301 appears to contemplate such suits would be only be brought by and between employers and unions, and such suits by and between employers and unions are commonly referred to as a “straightforward § 301” claims.

Hybrid § 301 Claims

In 1962, the Supreme Court determined that § 301 also contemplated breach of labor contract suits brought by individual employees directly against their employers. The Court limited such employee-generated suits to those based on the “uniquely personal” rights of employees covered by the labor contract such as disputes involving wages, hours, overtime pay and wrongful discharge.

Five years later and reconfirmed in numerous decisions thereafter, the Supreme Court modified its prior position on such employee-generated suits to require that the plaintiff-employee, in order to prevail against the employer, plead and prove that the union also breached its duty of fair representation by failing to represent him properly in the contractually mandated grievance/arbitration procedure. In so doing, the Court recognized long-standing federal labor policy favoring the negotiation of grievance/arbitration procedures which expedite resolution of disputes more quickly than litigation — thereby enhancing industrial peace and stability. Further, the Court recognized that the parties who negotiated a grievance/arbitration procedure had a right to rely both on its use and the outcome it provided.

Therefore, the employee-plaintiff cannot prevail on a hybrid § 301 claim against either the employer or the union if the employee can only show that the employer violated the labor contract or the union breached its duty of fair representation. The employee-plaintiff must be able to prove both elements in order to prevail against either the employer or the union.

This modification did not require the employee to actually name the union as a defendant in his complaint — only that the employee’s complaint states, and the employee proves, that the union also breached its duty of fair representation in regard to its handling of the grievance/arbitration procedures. Whether or not the union is also a named defendant in the employee’s suit, such suits are known as “hybrid § 301” claims.

A Union’s Breach of its Duty of Fair Representation

As to a union’s breach of its duty of fair representation, the employee-plaintiff must prove that the union’s actions tainted the grievance procedure such that the outcome was more than likely affected by the union’s breach. Clearly, a union’s wrongful refusal to process the employee’s grievance through progressive steps or proceed to arbitration would affect the outcome. However, if the dispute has proceeded through arbitration with an unfavorable outcome to the employee, the employee’s proof of such taint is much more tenuous.

In the context of a hybrid § 301 claims, an allegation that the union breached its duty of fair representation must arise from the union’s handling of its employee-member’s grievance and/or arbitration. The employee-plaintiff must plead and prove that the union handled his grievance arbitrarily, in a discriminatory manner or in bad faith.

While a union may not arbitrarily ignore a meritorious grievance or process the grievance in a perfunctory manner (i.e. acting in a capricious manner or without rational explanation), courts give unions a wide range of reasonableness within which to act. Unions have not been found to have breached their duty for mere negligence or poor judgment.

Employer Reliance on Union Conduct

In 1976, the Supreme Court held that an employer may not rely on the union’s conduct in fulfilling its duties pursuant a negotiated grievance/arbitration procedure. In that matter, discharged employees filed a hybrid § 301 claim even though the dispute had gone through the grievance process and been subject to final and binding arbitration. The Court found that if the union had exercised reasonable diligence in its representation of these employees, it would have uncovered conclusive exculpatory evidence which exonerated the discharged employees. Thus, the Court ruled that courts should not give preclusive effect to an arbitration award where the union’s breach of its duty of fair representation “seriously undermines the integrity of the arbitral process,” thereby removing “the bar of the finality provisions of the contract.”

If an employer breaches the labor contract, it simply doesn’t matter that the employer relied on the union doing its part because the employer’s own action precipitated the dispute. Under such circumstances, the employer will be held liable for the damages caused by its actions, and the union will be liable for the rest. The same result will occur no matter when during the grievance/arbitration process the union breaches its duty — in refusing to process a grievance in the first instance or representing the employee at arbitration in an arbitrary, discriminatory or bad faith manner.

Apportionment of Damages in Hybrid § 301 Claims

Where a hybrid § 301 claim has been proved by the employee, liability is apportioned between the breaching employer and the breaching union according to the damages caused by the fault of each. Generally, the employer is assessed those damages which occurred prior to the union’s breach of its duty of fair representation, and the union is assessed for those damages occurring after its breach.

Statute of Limitations for Hybrid § 301 Claims

As with many other federal statutes which are silent as to an applicable statute of limitations, federal courts had universally applied the most analogous federal or state statute of limitations to § 301 claims. For instance, in 1986, the Sixth Circuit Court of Appeals (the federal circuit court which hears cases arising in Michigan) applied Tennessee’s 6-year breach of contract limitations period in a § 301 suit against a Tennessee employer for failure to make required payments under its labor contract. This borrowing of an analogous federal or state statute of limitations period still applies to straightforward § 301 claims.

However, in 1983, the Supreme Court decided that the applicable statute of limitations in a hybrid § 301 claim should be derived from federal law — specifically, the 6-month limitations period provided under § 10(b) of the NLRA which governs the time in which an unfair labor practice charge can be filed with the National Labor Relations Board. In that case, an employee sued both the employer for violation of the collective bargaining agreement and his union for breach of its duty of fair representation. The Court found that the employee’s hybrid § 301 claim had no close analogy in state law, but rather presented an array of interests (i.e. the need for speedy resolution of disputes to enhance industrial peace and stability) similar to those balanced by Congress in establishing the short 6-month limitations period in § 10(b) for filing unfair labor practice claims.

Since that ruling, federal circuit courts, including the Sixth Circuit, have uniformly applied a 6-month statute of limitations period to hybrid § 301 claims, regardless of whether the employee sued the employer alone or brought suit against both the employer and his union.

Finally, the federal courts have determined that this 6-month statute of limitations begins to run when the employee knows or reasonably should have known of his union’s failure in its duty of fair representation to him.

Conclusions and Recommendations

Due to procedural and substantive intricacies involved in hybrid § 301 claims, most experienced labor practitioners shy away from undertaking such cases for employees. However, lacking such knowledge before they proceed, general practice plaintiff attorneys will draft and file such complaints without a second thought.

While the employer’s chances of defeating such claims at trial are generally very good, the cost of litigating these matters is significant. Thus, avoiding such litigation in the first instance or taking advantage of technical deficiencies in the employee’s complaint to cause the case to be dismissed prior to trial is important.

Therefore, the following points should be considered:

  • As to any detrimental job action to be taken against a unionized employee, double check the contractual basis for the decision to ensure compliance with your labor contract.
  • If a grievance is filed as a result of the job action taken by you, do not assume that the union will adequately protect the employee’s interest or bring to light a mistake of fact made by you.
  • If the union withdraws the grievance prior to the expiration of the grievance procedure or decides against taking the claim to arbitration, do not rely on the union to notify the employee of its decision. To ensure a quick start to running the 6-month statute of limitations, you should notify the affected employee as to the union’s grievance/arbitration decision.
  • Upon receipt of a complaint by a union-represented employee, determine the basis for the employee’s claim. No matter how the claim is titled or described in the complaint, if the essence of the claim is your breach of the labor contract or an interpretation of a term of the labor contract is necessary to resolve the claim, then the claim will be governed by § 301.
  • If the complaint sets forth a § 301 claim and has been filed in a state court, the case should be removed to the local federal district court where the judges are more familiar with the federal law and precedents involving § 301 claims.
  • Check the facts to determine if the employee filed a timely grievance in this matter. If a grievance was not filed or not filed in the time permitted under the labor contract, the employee has failed to exhaust the contractually-mandated grievance/arbitration procedure and his lawsuit will generally be dismissed.
  • Determine whether the employee filed his complaint within 6-months of the time when he knew or reasonably should have known that the union failed to represent him properly. If the case was filed after this period, his lawsuit will be dismissed.
  • If the union was not also named as a defendant in the complaint, determine if the employee has alleged that his union breached its duty of fair representation. If the plaintiff has done neither, then wait for the 6-month limitations period to expire (if it has not already expired) and move to have the case dismissed for the employee’s failure to plead and prove this essential element. Once the 6-month limitation period has passed, the court will then not permit the plaintiff to amend his complaint by adding the union as a defendant and/or allege that the union breached its duty of fair representation in that such amendment would br futile based on the tolling of the statute of limitations.

If you would like further information on these matters or have questions regarding their impact on your business, please contact Robert Morgan or any other member of our Labor and Employment Law Practice Group.