While the parties to a collective bargaining agreement may delineate the scope of an arbitration provision according to their design, neither the language of the provision in the instant case, nor the facts, support the contention that the arbitration procedure excluded the arbitrability of the present grievance of the union. We hold, for the reasons that follow, that the trial court, by accepting the posited contentions of the defendant, improperly resolved the merits of the dispute. Instead of narrowly and exclusively determining the question of arbitrability, the court invaded the province of the arbitrator.
Plaintiff O'Malley is president of, and sues in a representative capacity for, the Oil, Chemical and Atomic Workers International, Union Local 1-128, AFL-CIO (hereinafter termed "union"). Defendant, the Wilshire Oil Company (hereinafter termed "company") is engaged in the manufacture and processing of petroleum in interstate commerce. Since 1948 the union has been the certified bargaining agent of the company's employees.
In December 1960 the union submitted a grievance, which, in substance, protested the contracting out by the company of some of its transportation work. Subsequently, the company rejected the grievance. The union, pursuant to the established procedure, sought arbitration of the dispute. The company refused to submit the dispute to arbitration. As a result, the union filed a petition for an order directing arbitration.
In its petition the union incorporated by reference the statement of the grievance contained in its letter to the company, which alleged as to contract work the company's violation of article 15
In its answer to the petition the company relied on language in article 22 of the agreement with respect to arbitration to the effect that: "Under no circumstances may an arbitration decision in any manner nullify, amend, modify, extend, reduce or otherwise change any of the terms or conditions of this Agreement...." The company then set out efforts of the union, prior to and after the grievance, to
The trial court denied the request of the petition, concluding that: "[I]nterpreting the Articles of Agreement of April 10, 1959 in accordance with the intentions of the parties as therein expressed and in the light of all of the facts and circumstances surrounding the negotiations for and execution of prior and subsequent agreements, no agreement can be found between Respondent and Petitioner which requires the arbitration of grievances arising out of or based upon the contracting out of transportation work."
The wellspring of federal law respecting the enforcement of arbitration agreements consists of three cases decided by the Supreme Court in 1960.
We have recently analyzed this trilogy of United States Supreme Court cases in Posner v. Grunwald-Marx, Inc. (1961) 56 Cal.2d 169 [14 Cal.Rptr. 297, 363 P.2d 313]. In that case
We believe the United States Supreme Court cases are dispositive of the present problem. Thus in United Steelworkers of America v. American Mfg. Co., supra (1960) 363 U.S. 564 [80 S.Ct. 1343, 4 L.Ed.2d 1403], the union brought suit to compel arbitration, under an agreement providing for arbitration of all disputes "as to the meaning, interpretation and application" of the provisions of the agreement. The grievance there related to a contractual provision
The Court of Appeals affirmed the District Court on a different basis than that which that court had expressed, holding that the grievance was "a frivolous, patently baseless one, not subject to arbitration under the collective bargaining agreement." (P. 566.) The Supreme Court reversed indicating that the Court of Appeals, in becoming embroiled in the merits, had misconstrued the role of the court.
An analysis of this contention requires consideration of the second decision of the 1960 trilogy, United Steelworkers of America v. Warrior & Gulf Navigation Co., supra (1960) 363 U.S. 574 [80 S.Ct. 1347, 4 L.Ed.2d 1409]. The grievance there, similarly, involved the employer's right to contract out work previously performed by its employees. The employer, Warrior & Gulf Navigation Co., maintained a terminal for the performance of maintenance and repair work on barges used in its business of transporting steel and steel products. It had laid off a number of employees, due in part to the contracting out of maintenance work which had previously been performed by its employees. The companies with which it had contracted out the performance of the work utilized
In rejecting this contention, the Supreme Court called attention to the unique nature of the collective bargaining contract and to the vital and dynamic role of the arbitrator in the area of industrial relations.
Applying these principles the Supreme Court observed: "... if courts, in order to determine arbitrability, were allowed to determine what is permitted and what is not, the arbitration clause would be swallowed up by the exception. Every grievance in a sense involves a claim that management has violated some provision of the agreement." (363 U.S. at p. 584 [80 S.Ct. 1354, 4 L.Ed.2d 1418]; emphasis added.)
The Supreme Court then held the arbitration clause covered the grievance as to contracting out. "... A specific collective bargaining agreement may exclude contracting out from the grievance procedure. Or a written collateral agreement may make clear that contracting out was not a matter for arbitration. In such a case a grievance based solely on contracting out would not be arbitrable. Here, however, there is no such provision. Nor is there any showing that the parties designed the phrase `strictly a function of management' to encompass any and all forms of contracting out. In the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail, particularly where, as here, the exclusion clause is vague and the arbitration clause quite broad. Since any attempt by a court to infer such a purpose necessarily comprehends the merits, the court should view with suspicion an attempt to persuade it to become entangled in the construction of the substantive provisions of a labor agreement, even through the back door of interpreting the arbitration clause, when the alternative is to use the services of an arbitrator." (363 U.S. at pp. 584-585 [80 S.Ct. 1354, 4 L.Ed.2d 1418-1419]; emphasis added.)
Subsequent federal decisions have reemphasized the principle of Warrior that the arbitration clause covers the grievance in the absence of manifest exclusion. Thus in Procter
In Taft Broadcasting Co. v. Radio Broadcast Technicians Local Union No. 253 (5th Cir.1962) 298 F.2d 707, 709, the Court likewise stated, "Two principles are emphasized. First, the purpose to exclude a particular type of dispute from the arbitration promise must be clearly spelled out. And second, courts must overcome the temptation of passing on the intrinsic merits of the controversy under the guise of determining whether the dispute is within the promise to arbitrate." (See also Association of Westinghouse Salaried Emp. v. Westinghouse Electric Corp. (3d Cir.1960) 283 F.2d 93; International Assn. of Machinists v. International Aircraft Services, Inc. (4th Cir.1962) 302 F.2d 808; International Union, U.A.W. v. Cardwell Mfg. Co. (10th Cir.1962) 304 F.2d 801.)
The company seeks to avoid Warrior by describing alleged elements in the instant case which it considers to be distinguishing factors. First, it argues that the arbitration clause there was broader and the exclusion clause was "vague." Second, it notes that here, unlike in Warrior, the contract includes a specific clause dealing with contract work. Finally, it relies upon the instant bargaining history with respect to the contract-work provision. We shall explain why we have concluded that the attempted distinctions cannot prevail.
The arbitration provision in Warrior provided for arbitration "Should differences arise ... as to the meaning and application of the provisions of this agreement, or should any local trouble of any kind arise." The company emphasizes the reference to "local trouble." The Supreme Court, however, specifically relied upon the language in the provision before it which was essentially the same as that of the instant contract. The court stated: "The grievance alleged that the contracting out was a violation of the collective bargaining
Any remaining doubt is resolved by the fact that the subsequent federal cases which we have cited supra held that arbitration provisions similar to the present one were of sufficient breadth to invoke the principles of the Warrior decision.
The company's argument that in Warrior, unlike here, the exclusion clause was "vague" is equally without merit. The instant clause is not only "vague," but hardly seems to reach the status of an "exclusion" clause. To state that the arbitrator lacks power to amend, modify or otherwise change an agreement is merely to restate explicitly the inherent limitation in the arbitrator's power to handle grievances relating to the "application and interpretation of this Agreement." If the provision empowers the arbitrator only to apply and interpret the agreement, he is not authorized to amend it.
In any event, whatever the company contends as to vagueness, to construe the exclusion clause as the company desires would countenance a full-scale leap into the merits of the dispute in order to construe the limitations of arbitrability. In Association of Westinghouse Salaried Emp. v. Westinghouse Electric Corp. (3d Cir.1960) 283 F.2d 93, the employer relied upon a similar provision which stated that an arbitrator could not "[a]dd to, detract from, or in any way alter the provisions of this Agreement...." The employer sought to show that the parties had understood a controverted provision to have a particular meaning and that the grievance was therefore excluded from arbitration. The court observed: "This is just the thing which the Supreme Court has told us to avoid." (283 F.2d at p. 95.)
Although the company heavily stresses Local No. 725, Intl. Union of Operating Engineers v. Standard Oil Co. of Indiana
We find no merit in the company's second point of attempted distinction that the contract before us, unlike that in Warrior, incorporates a specific clause as to contract work. If the courts and the arbitrators can find implied limitations on the power to subcontract,
The final refuge of the company in the bargaining history of the clause as a distinguishing feature between this case and Warrior overlooks the very holding and purport of Warrior. There the company presented evidence of bargaining history, but the majority opinion of the Supreme Court did not even refer to it. In his dissent Justice Whittaker stressed the fact that the employer had contracted out work since the beginning of its operation 19 years earlier and that the union had repeatedly sought to negotiate limitations of the employer's power to do so. (363 U.S. 574, 587 [80 S.Ct. 1347, 1355, 4 L.Ed.2d 1409, 1420].) Indeed, the failure of the Supreme Court so much as to consider this history has led some courts and commentators to conclude that consideration
Even if we were to refer to the bargaining history, however, we would do so only to determine the area of the agreement to arbitrate and not the merits of the dispute. The company's showing here reaches to the latter rather than the former province; the effort fails. As the United States Court of Appeals for the Ninth Circuit points out in Pacific Northwest Bell Tel. Co. v. Communication Workers of America (9th Cir.1962) 310 F.2d 244, the test is "whether judicial construction of the arbitrability clause would require that the underlying dispute be first resolved in order to determine whether it is subject to arbitration." (At p. 248.) The essential distinction therefore becomes whether the aim of the presentation is to indicate agreement on the underlying issue or to show that the parties agreed that a particular area was not a subject for arbitration. Only evidence of the latter sort of agreement is admissible under Warrior.
In surveying the bargaining history the court cannot, in determining the question of arbitrability, decide the merits. As the Court of Appeals points out, the court cannot lay hold of the preliminary problem of the province of the arbitrator to reach and resolve the principal question itself. "Such was the case in Warrior," says the Court of Appeals, further declaring: "... before the court could find that the dispute was excluded from arbitration, it was necessary to determine whether the company had retained this disputed right as a function of management: the merits of the underlying dispute itself." (310 F.2d at pp. 248-249.)
The Supreme Court's decision in Warrior thus directly governs the instant issue. The company's claimed distinguishing factors merely fabricate an elaborate camouflage for enticement
For this reason, we hold that the trial court's denial of the petition for order directing arbitration was incorrect.
The judgment is reversed.
Gibson, C.J., Traynor, J., Peters, J., and Peek, J., concurred.
I dissent. I would affirm the judgment for the reasons expressed by Mr. Justice Fourt in the opinion prepared by him for the District Court of Appeal, and concurred in by Presiding Justice Wood and Justice Lillie (O'Malley v. Wilshire Oil Co., (Cal. App.) 25 Cal.Rptr. 748), which is as follows:
Petitioner appeals "from the judgment ... denying Petitioner's Petition for Order Directing Arbitration." The petition was brought in the name of "... EMMETT O'MALLEY individually and in a representative capacity for and on behalf of OIL, CHEMICAL AND ATOMIC WORKS INTERNATIONAL UNION LOCAL 1-128, AFL-CIO, an unincorporated association; its officers and members, for an Order Directing Wilshire Oil Company, a corporation, to Proceed to Arbitration."
A resume of some of the facts is as follows: in April 1959 Wilshire Oil Company (hereinafter referred to as the "Company") and the Oil, Chemical and Atomic Workers International Union, Local 1-128, AFL-CIO (hereinafter referred to as the "Union") entered into a written collective bargaining agreement under which the Company recognized the Union as the exclusive bargaining agent of the employees of the Company in the divisions therein enumerated. This agreement was negotiated through the process of collective bargaining and superseded and cancelled prior agreements similarly negotiated between the Company and the Union, with reference to said employees, respectively, dating back to April 29, 1948, when the Union was certified by the National Labor
During the year 1950 the Union served written notice upon the Company of its desire to modify and amend the collective bargaining agreement then in effect between the Company and the Union and served its proposed written amendments to said agreement upon the Company. One of the proposed amendments provided in effect that no work as listed in the schedules attached to the agreement (transportation work was then embraced in said schedules) would be let to any contractor or subcontractor unless agreed upon by the Employer and the Union's committee. The Company rejected this proposal but finally agreed to the insertion of a provision, article 15, placing certain restrictions upon the Company's contracting-out of upkeep and repair work.
On December 27, 1960, the Union submitted a grievance which in substance protested the contracting out by the Company of some of its transportation work.
The collective bargaining agreement between the Company and the Union, which was in effect at the time that the grievance was presented, contained a provision for the processing
"Right of Grievance
"1.... .... .... .
"Procedure for Handling Grievances
"2.... .... .... .
"(a) .... .... ...
"(b) .... .... ...
"... Under no circumstances may an arbitration decision in any manner nullify, amend, modify, extend, reduce or otherwise change any of the terms or conditions of this Agreement or any amendments hereto, or establish or change wage rates or classifications....
"3.... .... .... ."
Since the contract between the Company and the Union in force in December 1960 was to be opened by the Union for the negotiating of amendments, the parties agreed that said grievance be held in abeyance pending the conclusion of such negotiations. The Union sought to obtain an amendment of article 15. The proposed amendment sought to enlarge the restrictions placed upon the Company relative to contract work is as follows:
"1. Except for office janitorial services or in case of an emergency the Company shall not employ or otherwise engage contract labor to perform any work...." (Emphasis added.)
Throughout all of the 1961 negotiations between the Company and the Union, which consumed a period of approximately six months, the Company resisted the proposed change in the contract relating to contract work. Ultimately the parties entered into a new Agreement which contained the same contract work clause as is contained in the Articles of Agreement dated 1959. (See footnote 1.)
At that point the Union elected to prosecute further its grievance under the former contract and demanded that said grievance be submitted to arbitration. The Company refused
On November 14, 1961, the findings of fact and conclusions of law were filed.
The gist of the federal law is that: (1) arbitration is a matter of contract; (2) courts may not examine the merits of the grievance but must limit their inquiry to whether the claim, on its face, is governed by the agreement; (3) doubt as to arbitrability is to be resolved in favor of arbitrability; and (4) unless excluded, disputes pertaining to the agreement are arbitrable. (See United Steelworkers of America v. American Mfg. Co., 363 U.S. 564 [80 S.Ct. 1343, 4 L.Ed.2d 1403]; United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574 [80 S.Ct. 1347, 4 L.Ed.2d 1409].)
Appellant states the issue to be resolved on this appeal as follows: "Under applicable law may arbitration be denied in the absence of uncontrovertible proof that the contract specifically excludes the subject matter from the grievance and arbitration procedures of the collective bargaining agreement?"
Respondent chooses to state the issue as follows: "Where, as in the case at bar, the parties to a collective bargaining agreement have negotiated concerning demands made by the
A more accurate statement of the issue to be resolved is as follows:
Where the parties (Company and Union) have expressly and specifically agreed with reference to the subject matter of the Company contracting out work; and by the express terms of said agreement the restriction on contracting-out of work is limited solely to "contract labor to perform upkeep and repair work normally performed by employees"; and where the grievance does not relate to "contract labor to perform upkeep and repair work normally performed by employees" but relates to the use of contract labor relative to transporting products; and where the arbitration clause (article 22) expressly provides that "Under no circumstances may an arbitration decision in any manner nullify, amend, modify, extend, reduce or otherwise change any of the terms or conditions of this Agreement," did the trial court err in refusing to order the parties to submit the controversy to arbitration?
As stated by the Supreme Court in United Steelworkers of America v. Warrior & Gulf Navigation Co., infra [sic], 363 U.S. 574, 582-585 [80 S.Ct. 1347, 4 L.Ed.2d 1409, at pages 1417-1419]:
"... An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.
".... .... ....
"... Contracting out work is the basis of many grievances; and that type of claim is grist in the mills of the arbitrators. A specific collective bargaining agreement may exclude contracting out from the grievance procedure. Or a written collateral agreement may make clear that contracting out was not
The case at bar differs radically from the factual situation in the Warrior case. The agreement in the Warrior case did not contain a provision which mentioned contracting-out of work. Footnote 8 of the majority opinion (363 U.S. 584, 4 L.Ed.2d, p. 1418) provides as follows:
"8. See Celanese Corp. of America, 33 Lab Arb Rep 925, 941 (1959), where the arbiter in a grievance growing out of contracting out work said:
"`In my research I have located 64 published decisions which have been concerned with this issue covering a wide range of factual situations but all of them with the common characteristic — i.e., the contracting-out of work involved occurred under an Agreement that contained no provision that specifically mentioned contracting-out of work.'" (Emphasis added.)
The parties in the case at bar did specifically mention contracting-out of work in their agreement. The fact that the parties did specifically deal with the problem of contracting-out of work and specifically restricted the Company with reference to contracting-out of work only insofar as "contract labor to perform upkeep and repair work normally performed by employees" constitutes forceful evidence of a purpose to exclude the claim [i.e., contracting-out of transportation work] from arbitration." (See: Local No. 725, Intl. Union of Operating Engineers v. Standard Oil Co. of Ind. (D.C. N.Dak. 1960) 186 F.Supp. 895.)
"Arbitration is the means of solving the unforeseeable" — here there was no question as to the matter being unforeseeable, the Company and the Union had each foreseen the problem and had made a provision in the contract to provide for what could not be contracted-out. Pursuant to the law which is in effect under the circumstances, this court does not undertake to make any determination of the merits of the grievance. It seems perfectly clear however that the arbitration clause in this case is not susceptible to interpretation to have it cover the asserted dispute.
Schauer, J., concurred.
"Grievances relating to the application and interpretation of this Agreement shall be handled as follows:
"(c) If the grievance is not settled as a result of the foregoing, then the Union may ... request arbitration thereof.... Under no circumstances may an arbitration decision in any manner nullify, amend, modify, extend, reduce or otherwise change any of the terms or conditions of this Agreement...."
"1. Except for office janitorial services or in case of an emergency the Company shall not employ or otherwise engage contract labor to perform up-keep and repair work normally performed by employees covered by this Agreement until all laid off employees who still retain their rehiring rights ... have been offered reemployment with the Company....
"Preference to Wilshire Employees
"2. When it is necessary for the Company to employ contract labor to supplement its work force for upkeep and repair work, preference shall be given to Wilshire employees for the jobs paying the higher wage rates provided such employees are qualified.
"Contractors' Wage Rates
"3.... .... .... ...
"New Construction or Additions
"4. This Article shall not apply to work in connection with the construction of new facilities or additions to existing facilities." (Emphasis added.)
"On December 20, 1960, the Adjustment Committee became aware that the Company was using contractors to do work normally covered by the Agreement while employees of the Company in the Truck Driver classification were laid off. The Adjustment Committee contends that the Company is in violation of the current Articles of Agreement between the ... Company ... and... Union, Article 15, and any other Article or Articles that may be found to be violated in the process of settling this complaint.
"We therefore contend that the Company will have to pay their employee or employees in the Truck Driver classification who were on the laid-off status and who would be doing this work if it were not for a contractor, all lost monies due them since their layoff, and reinstate them with full continuity of seniority."
"FINDINGS OF FACT
"1. That at all times mentioned herein Respondent has been engaged in an industry affecting interstate commerce and has employed in said industry employees for whom the Oil, Chemical and Atomic Workers International Union Local 1-128, AFL-CIO has been certified by the National Labor Relations Board as the duly authorized bargaining agent.
"2. That the dispute which forms the basis for the grievance referred to herein grew out of the contracting out by Respondent of a portion of its transportation and trucking requirements during the term of the Articles of Agreement dated April 10, 1959.
"3. That contracting out of transportation work is and has been for many years a policy of Respondent.
"4. That the only article contained in said Articles of Agreement dated April 10, 1959, which purports in any way to impose restrictions upon the contracting out of work by Repondent is an article numbered Article 15, entitled `Contract Work,' the scope of which article is and was intended to be limited to the contracting out of upkeep and repair work.
"5. The said Article 15 of said Articles of Agreement dated April 10, 1959, does not and was not intended by the parties to extend to or impose any restrictions upon the contracting out of transportation work by Respondent.
"6. That during the collective bargaining negotiations carried on between the Petitioner and Respondent in the year 1960, Petitioner sought unsuccessfully to extend the scope of the restrictions to be contained in said Article 15 to include among other things the contracting out of transportation work.
"7. That during the collective bargaining negotiations carried on between Petitioner and Respondent in 1961, which ultimately were concluded by the adoption of new Articles of Agreement dated September 6, 1961, superseding the Articles of Agreement of April 10, 1959, Petitioner again sought unsuccessfully to extend the scope of the restrictions of Article 15 to include among other things contracting out of transportation work.
"8. That Article 22 of said Articles of Agreement dated April 10, 1959, which sets forth the procedure for processing grievances and the terms and conditions under which the parties have agreed to submit unresolved grievances to arbitration specifically provides that under no circumstances may an arbitration decision in any manner nullify, amend, modify, extend, reduce or otherwise change any of the terms or conditions of said Agreement.
"CONCLUSIONS OF LAW
"1. That the substantive rights of the parties are controlled by the Federal substantive law under Section 301 of the Labor-Management Relations Act.
"2. That interpreting the Articles of Agreement of April 10, 1959, in accordance with the intentions of the parties as therein expressed and in the light of all of the facts and circumstances surrounding the negotiations for and execution of prior and subsequent agreements, no agreement can be found between Respondent and Petitioner which requires the arbitration of grievances arising out of or based upon the contracting out of transportation work.
"3. An order compelling Respondent to proceed with the arbitration of the grievance dated December 27, 1960, would have the effect of modifying or extending the terms and conditions of said Articles of Agreement dated April 10, 1960 [sic], which is specifically prohibited by the terms of said Articles of Agreement."