Formal collective bargaining agreements ("CBA") almost universally include mandatory grievance and arbitration procedures. In contrast, many other agreements between employers and unions, such as side letters and memoranda of understanding, are silent with respect to dispute resolution procedures. This typical omission can lead to differing results depending on where the dispute arises.
A recent decision from the Court of Appeals for the Sixth Circuit identified a split of authority with respect to the test used to decide whether a dispute regarding a side agreement is arbitrable. In United Steelworkers of America v. Cooper Tire & Rubber Company, __ F. 3d 181, 2007 WL 101990 (6th Cir. 2007), the court observed that the Second, Fourth and Eighth Circuits apply the "collateral" test, whereas the Third, Seventh and Ninth Circuits apply the "scope" test.
United Steelworkers v. The Duluth Clinic, Ltd., 413 F. 3d 786 (8th Cir. 2005) aptly illustrates the "collateral" test. There, the court explained that if the CBA's arbitration clause is broad, such as one that covers all disputes "arising out of or relating to" the CBA, then the court will proceed to determine if the dispute falls within the scope of the arbitration clause. If the arbitration clause is narrow and refers only to disputes arising under or involving an interpretation or application of the CBA, however, then the court will consider whether the side agreement is "collateral" to the CBA. A side agreement is "collateral" to the CBA if it can be considered a separate and independent agreement, even if it coordinates with the CBA. "Collateral" side agreements are beyond the reach of the CBA’s arbitration clause.
The Duluth court concluded that the arbitration clause was narrow because it encompassed only disputes "alleging a violation of specific contract provision," and confined the arbitrator to making an award "relating to the interpretation of or adherence to the written provisions of the agreement." The Duluth court went on to hold that a side letter regarding discounts for certain retiree heath care services was "collateral" to the CBA because it created obligations that were separate and distinct from those in the CBA.
In contrast, Cooper Tire aptly illustrates the "scope" test. There, the court explained that unless the side agreement indicates otherwise, the court must determine whether the subject matter of the side agreement is within the intended scope of the CBA's arbitration clause. The inquiry focuses on the breadth of the arbitration clause, and in general, a broad arbitration clause will encompass a dispute over a side agreement.
The Cooper Tire court initially held that the arbitration clause in a benefits agreement was broad because it included "any dispute … as to the interpretation or application of this Agreement." Next, the court held that a dispute over a side letter regarding retiree health care contribution caps fell within the scope of the benefit agreement’s arbitration clause because the side letter's subject matter pertained to a topic addressed in the benefits agreement (retiree health care), and because the arbitration clause did not expressly exclude disputes over side agreements.
The lesson to be learned is that the arbitrability of a dispute over a side agreement will turn on the circuit in which the dispute arises, the language of the arbitration clause, and the subject matter of the side agreement. However, employers can avoid conflicts over this issue by recognizing the problem and expressly noting in the CBA or the side agreement whether disputes over the side agreement are arbitrable.