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Kellogg must arbitrate grievance over casual employees’ entitlement to ratification bonus

By Kathleen Kapusta, J.D.

Kellogg Company must arbitrate a dispute over whether casual employees at its Battle Creek, Michigan, plant are entitled to a ratification bonus, ruled the Sixth Circuit, affirming the lower court’s order compelling arbitration. By including all-encompassing arbitration provisions in the applicable collective bargaining agreements, the presumption of arbitrability applied and the contractual language at issue did not clearly exclude this action from arbitration, said the court, finding further that if an arbitrator determines that causal employees are entitled to the bonus, the arbitrator would have authority to grant relief (Bakery Workers v. Kellogg Co., September 19, 2018, Moore, K.).

Master Agreement. Local Union 3-G, which represents employees at Kellogg’s Battle Creek plant, is also affiliated with the international union that represents employees at additional Kellogg’s plants. Kellogg, the international union, and its local unions were all governed by the terms of a Master Agreement, which provided that “[i]n the event that a grievance arising under either this Agreement or under one of the respective Supplemental Agreements is not settled during the grievance procedure, the Union may submit the grievance to arbitration.”

Supplemental Agreement and MOA. Local 3-G also entered into a Supplement Agreement with Kellogg covering only employees within the bargaining unit and providing that [i]f a settlement cannot be reached . . . the matter will be submitted to arbitration in accordance with the procedure provided in Section 7.02 of the Master Agreement.” A Memorandum of Agreement (MOA), appended to the Supplemental Agreement, stated that the terms and conditions of the Supplemental and Master Agreements would not apply to casual employees. Rather, it stated, “Only the following fringe benefits will be granted to Casual employees, and they will not accumulate seniority: Uniforms[,] Lunch and Breaks[,] Shift Differential[,] Wage Appendix of the Master Agreement-COLA.” The MOA also provided that Kellogg would discontinue the employment of casual employees “without such action being subject to the grievance procedure.”

Ratification bonus. In July 15, 2015, Kellogg and the unions entered into the 2015 Master Agreement, which amended the Master and Supplemental Agreements and established wage rates, a $15,000 signing ratification bonus for all employees, and a transitional employee classification to replace casual employees. After the ratification vote occurred, Kellogg refused to pay a ratification bonus to former casual employees. Although the parties proceeded through the grievance process, Kellogg, contending that the arbitration provisions did not apply to casual employees, refused to arbitrate the ratification bonus dispute.

Lower court proceedings. The local and international union then sued Kellogg and moved to compel arbitration. Kellogg, however, claimed that judicial estoppel prevented the international union from arguing that the arbitration provisions applied; the arbitration provisions did not cover this action; and the relief requested was beyond the arbitrator’s authority. The district court ultimately granted the unions’ motion to compel arbitration.

Judicial estoppel. On appeal, Kellogg first argued that judicial estoppel applied because of the Sixth Circuit’s 2016 decision in Kellogg Co. v. NLRB, which dealt with a Supplemental Agreement between Kellogg and the local union for its Memphis plant. According to Kellogg, the international and local Unions admitted to the Sixth Circuit that casual employees, under contract language virtually identical to the language in the Battle Creek Supplemental Agreement, were not covered by the arbitration provisions in the Master or Supplemental Agreements in the Memphis action.

Kellogg, however, failed to show judicial estoppel applied here, said the appeals court. First, the provisions it relied on to support its contention were misleading as the international union simply summarized Kellogg’s proposed contractual changes and Kellogg’s own internal notes. Further, the appeals court pointed out that it did not adopt the international union’s alleged argument that the arbitration provisions did not cover casual employees, nor did the district court or NLRB in that action. Lastly, said the court, Kellogg failed to show that the international union would receive an unfair advantage because a court had not accepted its alleged arguments.

Presumption of arbitrability. Turning to the contractual language at issue in this action, the court observed that when a CBA has a broad arbitration clause, the presumption of arbitrability is particularly applicable and here, the Master and Supplemental Agreements contained broad arbitration clauses. Based on the language in those contracts, said the court, “if a settlement is not possible, then any type of dispute will proceed in arbitration.” By including all-encompassing arbitration provisions, the court found that presumption of arbitrability applied.

Scope of exclusion. The court next examined the MOA’s exclusions for when arbitration provisions do not apply. Specifically, paragraph 1 provides that “The terms and conditions of the Supplemental and Master Agreements will not apply to Casual employees. Only the following fringe benefits will be granted to Casual employees, and they will not accumulate seniority: Uniforms; Lunch and Breaks; Shift Differential; Wage Appendix of the Master Agreement-COLA.” Further, paragraph 8 provides that “The Company may discontinue employment without such action being subject to the grievance procedure.”

The first paragraph, said the court, was subject to at least two interpretations. While it could be interpreted as stating that all of the “terms and conditions of the Supplemental and Master Agreements will not apply to Casual employees,” including the arbitration provision, when considering the second sentence regarding fringe benefits, it could also be referring to the portions of the “terms and conditions of the Supplemental and Master Agreements” that address “fringe benefits.” Further, reasoned the court, if paragraph 1 truly applied to all of the “terms and conditions of the Supplemental and Master Agreements,” then paragraph 8 would not be necessary because the grievance procedures would already not apply under paragraph 1. Thus, because there were two reasonable interpretations of paragraph 1, it did not expressly exclude casual employees’ complaints from arbitration. And although paragraph 8 did describe an express limit to the arbitration provision, the issue here, was whether casual employees were entitled to the ratification bonus and thus the exclusion in that paragraph did not apply.

Extrinsic evidence. While Kellogg argued that the international union’s position that the arbitration provisions did not apply in the Memphis action was forceful extrinsic evidence proving the parties did not intend to arbitrate their claims, the court pointed out that it had already found the international union did not clearly adopt that position. In sum, said the court, the presumption of arbitration applied here as the Master and Supplemental Agreement have broad arbitration language, the contractual language does not clearly exclude this action from arbitration, and Kellogg did not provide forceful evidence of intent not to have this action go to arbitration. Therefore, the parties were required to arbitrate the claims in this action.

Arbitrator’s authority. Finally, the arbitrator rejected Kellogg’s contention that an arbitrator would not have authority to issue a remedy because the Master and Supplemental Agreements state that an arbitrator cannot alter the terms of the agreements. The 2015 Master Agreement, it contended, contains the provision regarding the ratification bonus but it modified only the Master Agreement, not the Supplemental Agreement. Kellogg argued that the Supplemental Agreement’s statement that the terms and conditions of the Master Agreement do not apply to casual employees still stoods.

Pointing out that the Master Agreement states that “[t]he Arbitration Board shall have no power to add to, take from, amend, modify or alter this Agreement or any Supplemental Agreement,” the court observed that the section regarding arbitration in the Supplemental Agreement also states that section 7.02 of the Master Agreement applies. Under the 2015 Master Agreement, however, the “2015 Master Agreement supersedes any Seasonal and Casual language that conflicts with the Master or Supplemental Agreements.” Therefore, said the court, because the $15,000 ratification bonus is in the 2015 Master Agreement, if an arbitrator determines that casual employees are entitled to the bonus, the Supplemental Agreement would not stand in the way of an arbitrator having authority to grant relief.