• Maryland Court of Appeals Holds Arbitration Clause May Survive the Expiration of a Collective Bargaining Agreement
  • December 7, 2012 | Author: Mark J. Swerdlin
  • Law Firm: Shawe & Rosenthal LLP - Baltimore Office
  • The Maryland Court of Appeals recently held that an arbitration clause survives the expiration of a collective bargaining agreement when it concerns rights that vested during the life of the agreement.

    Facts of the case: In Baltimore County Fraternal Order of Police Lodge No. 4 v. Baltimore County, Maryland, the County and FOP were parties to a collective bargaining agreement that contained an arbitration clause and a retiree health insurance provision. The agreement contained a grievance procedure which provided that all disputes concerning the application or interpretation of the terms of the agreement that are not settled internally “shall be subject to binding arbitration.” After the agreement expired, the County decreased the health-insurance subsidy which affected both current and retired members. The FOP initiated arbitration on behalf of the retired officers alleging that they were locked into the health-insurance subsidy split they had at the time they retired and that the retired officers accordingly were not subject to the decreased premium split. The County argued that it had no duty to arbitrate because the collective bargaining agreement had expired and that even if it did have a duty to arbitrate, the retired officers’ health-insurance subsidy was not “locked in place” but subject to change from year to year. The Arbitrator ruled in favor of the FOP, stating that even though the agreement had expired, the retired officers’ health-insurance subsidy was a “vested right” that could not be changed by subsequent negotiations. After the County filed a Complaint to Vacate the Arbitration Award with the Circuit Court, the court granted summary judgment in favor of the FOP, dismissing the case. The County appealed to the Court of Special Appeals, which reversed on the basis that the Arbitrator failed to consider a required factor: whether the arbitration clause itself had expired. The Maryland Court of Appeals granted the FOP’s petition for certiorari.

    The Court's Ruling: The Maryland Court of Appeals reversed the intermediate appellate court’s decision. Although there was no Maryland case on point, the Court noted two U. S. Supreme Court cases, Nolde Bros. v. Bakery & Confectionary Workers Union, 430 U.S. 243 (1977), and Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991), that stand for the proposition that parties do not intend that a pivotal dispute resolution provision like arbitration to terminate for all purposes upon expiration of the agreement. The Court of Appeals adopted Nolde/Litton vesting principles and held that the fact that the agreement had expired does not relieve the County of its duty to arbitrate disputes arising out of the agreement. The Court found the arbitration clause to be broad - not excluding grievances arising after the expiration of the agreement but covering “any dispute concerning the application or interpretation” of the agreement. Turning to the merits, the Court agreed with the Arbitrator’s finding that the agreement’s health-insurance clauses pertaining to retirees vested at the time of their retirement. Accordingly, the Court found the Circuit Court’s grant of summary judgment in favor of the FOP to be legally sound.

    Practical Impact: If a union seeks to arbitrate a dispute after the expiration of a contract, an employer should not assume any such dispute is not subject to arbitration. If the dispute concerns rights that vested during the life of the agreement, the employer should presume that the dispute is subject to arbitration. Moreover, as this case held, it is normally up to the arbitrator to decide which dispute is arbitrable in the first instance.