Teamsters Local Union No. 89 v. Kroger Co.

Citations: 921 F. Supp. 2d 733; 2013 WL 441993; 195 L.R.R.M. (BNA) 2035; 2013 U.S. Dist. LEXIS 15164Docket: No. 3:10-CV-00647-CRS

Court: District Court, W.D. Kentucky; February 4, 2013; Federal District Court

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The court is addressing two motions for summary judgment related to a grievance involving Teamsters Local Union No. 89 (the Union) and The Kroger Co. (Kroger). The Union's motion seeks to compel Kroger to arbitrate a grievance of a former employee based on Kroger's collective bargaining agreement (CBA), while Kroger argues that the CBA does not apply to this grievance and thus it is not required to arbitrate. The Union claims Kroger's refusal to arbitrate breaches the CBA, violates the Labor Management Relations Act of 1947, and contravenes the Federal Arbitration Act. The Union is requesting a court order mandating arbitration and the awarding of attorneys' fees.

The court will grant Kroger’s motion for summary judgment and deny the Union's motion. Key undisputed facts include that Kroger owns the Kroger Distribution Center (KDC) and previously employed warehouse and transportation workers there under two agreements: the Kroger Master Agreement (KMA), which included grievance and arbitration provisions, and a supplemental CBA. In late 2006, Kroger decided to outsource operations at the KDC and negotiated a Letter of Understanding (LOU) with the Union to ensure employee protections while negotiating with new vendors. The LOU allowed Kroger to process pending grievances under the KMA until new agreements were reached with vendors Transervice Logistics Inc. and Zenith Logistics, which occurred in early 2007. An amendment in April 2007 specified that Kroger would resolve certain grievances under the KMA and established the conditions for the LOU's expiration in 2011. Notably, the LOU did not address future grievances, and Kroger expressly rejected Union proposals to maintain CBA coverage for all former KDC employees or to be designated a joint employer for these employees.

In February 2007, Kroger transitioned KDC operations to Transervice and Zenith, resulting in the hiring of most former Kroger employees, including Frank Herdt, who became a bargaining unit employee under Transervice's CBA with the Union. Following a failed negotiation between the Union and the vendors, the Union finalized CBAs with both companies. In late 2009, Herdt was arrested for theft from Kroger, prompting Kroger’s risk management to inform Transervice that Herdt was banned from Kroger property, which effectively barred him from performing his work duties.

In July 2010, the Union filed a grievance on Herdt’s behalf, despite acknowledging his employment with Transervice, claiming Kroger violated the KMA by terminating Herdt without just cause. The grievance contended that Kroger's actions amounted to an effective termination, even though Herdt was not a Kroger employee. Herdt's criminal charges were subsequently dismissed, and Transervice reinstated him with backpay and benefits per their CBA with the Union.

Both Transervice and the Union reached out to Kroger to contest the ban on Herdt, but Kroger refused, asserting that the decision regarding Herdt’s employment was solely Transervice's responsibility and denying any liability for backpay related to Herdt's theft. Kroger's Vice President of Labor Relations reiterated that Herdt was an employee of Transervice, not Kroger, in correspondence regarding the grievance.

Kroger and Local 89 (the Union) no longer maintain a collective bargaining relationship, and Local 89 does not represent any Kroger employees. Kroger asserts it did not discipline Herdt; any employment-related actions were taken by his employer, Transervice. Consequently, Kroger will not arbitrate the grievance alleging violations of the Kroger Master Agreement and advises contacting Transervice instead. Key points made by Kroger include: (1) it has not employed Herdt since 2007 and did not terminate him; (2) it is not a party to a Union CBA covering Herdt; (3) Transervice employs Herdt and has a Union CBA relevant to his grievance; (4) Herdt exercised his right to grieve his dismissal with Transervice; (5) Kroger is not obligated to grant former employees ongoing access to its property; and (6) banning Herdt from its property does not constitute termination. 

In August 2011, the Union filed an unfair labor practices charge against Kroger with the National Labor Relations Board (NLRB) regarding Kroger's alleged failure to bargain in good faith after a changeover at the KDC, but the NLRB dismissed the charge due to insufficient evidence. The Union's appeal was also denied. The NLRB found no joint employer status between Kroger and Transervice based on the evidence presented, which indicated Kroger's role as a customer rather than an employer.

Both Kroger and the Union seek summary judgment under Fed. R. Civ. P. 56(a), asserting that there are no genuine disputes over material facts. The moving party must demonstrate the absence of such disputes, and the nonmoving party must show specific facts that could create a genuine issue for trial, with evidence viewed favorably for the opposing party.

Evidence from the non-movant is to be accepted, with all reasonable inferences drawn in their favor, as established in Anderson. Plaintiffs must provide evidence to show a genuine issue of material fact, per Celotex. A party is not required to arbitrate a labor dispute unless there is a contractual agreement to do so, as clarified in Litton Financial and United Steelworkers cases. The court determines whether a company is bound to arbitrate based on the contract between the parties, as outlined in John Wiley & Sons. In collective bargaining agreements, disputes are generally presumed to be arbitrable, and this can only be challenged if it can be clearly shown that the arbitration clause does not cover the dispute, according to AT&T Tech. The court's role is limited to assessing if the claim for arbitration falls under the contract, as noted in General Drivers.

Arbitrability issues arise in two scenarios: one involves determining if the collective bargaining agreement encompasses the dispute, while the other concerns whether there is a valid arbitration agreement. If a party claims that the arbitration agreement has expired or terminated, the arbitrator decides on termination. The current case examines Kroger's refusal to arbitrate Frank Herdt’s termination grievance under the KMA. The Union references the Sixth Circuit's Teamsters Local Union No. 89 v. Kroger Co. to argue that the KMA was applicable and effective in July 2010 when the grievance was filed. In Teamsters I, the Union contended that Kroger violated the KMA by subcontracting work to non-union drivers, while Kroger claimed that the KMA was not applicable due to changes made post-2007.

Kroger claimed it no longer had a collective bargaining relationship or grievance procedure with the Union concerning its former employees at the KDC. The Federal District Court for the Western District of Kentucky granted summary judgment in favor of the Union, a decision affirmed by the Sixth Circuit, which found that Kroger was required to arbitrate grievances of former KDC employees related to subcontracting. The court noted that the KMA explicitly addressed subcontracting and did not limit the arbitration provision's applicability. The specific language in the job-security provision indicated protections for former employees affected by subcontracting. The court emphasized that ruling otherwise would leave no one eligible to file grievances if former employees were deemed ineligible due to their employment status. 

The issues in Teamsters I included the existence of a valid arbitration agreement and the relevance of the subcontracting dispute to that agreement. The Sixth Circuit concluded that Kroger had an obligation to arbitrate subcontracting-related grievances, based on the broad arbitration provision in the KMA and the presumption in favor of arbitrability. However, the court did not clarify the overall arbitrable rights of former Kroger employees or state that Kroger had to arbitrate all grievances of former KDC employees.

The Union argued that Kroger must arbitrate Herdt’s termination grievance under the KMA, citing Teamsters I as controlling precedent. Kroger countered that Teamsters I was distinguishable because it involved subcontracting grievances, whereas this case concerned Herdt’s exclusion from Kroger property. The court concluded that Teamsters I was not applicable here since Herdt was not a Kroger employee at the time of the dispute but an employee of Transervice, which had terminated him. Herdt had access to remedies under a CBA with Transervice, including reinstatement and backpay, demonstrating that he was not without recourse, unlike the grievants in Teamsters I.

The cases share similarities in addressing grievances from former employees under the KMA but differ significantly in their contexts. In Teamsters I, the grievants’ only option was to grieve under the KMA, while Herdt is protected by his current employer's CBA, which does not cover him due to Kroger's lack of a CBA for KDC employees at the time of his dispute. Herdt, employed by Transervice for over three years before termination, has already exercised his grievance rights, and forcing Kroger to arbitrate Herdt’s grievance would disregard this fact.

Teamsters I focused on whether a subcontracting dispute was arbitrable under the KMA, not on the broader applicability of the KMA to former KDC employees, as is argued here. The current issue involves Kroger’s action of banning Herdt from its property, which does not constitute a violation of the KMA. Teamsters I recognized a limited protection for former Kroger employees regarding subcontracting grievances only.

A party cannot be compelled to arbitrate disputes unless there is a clear contractual obligation to do so. The Union has not demonstrated that Kroger committed in any CBA to allow former employees unrestricted access to its property, making it improper to compel arbitration of Herdt’s grievance over three years post-employment. 

Teamsters I did not establish that all former Kroger employees have unlimited grievance rights under the KMA; it only allowed grieving subcontracting issues for former employees. The LOU in this case indicates Kroger agreed to arbitrate a limited number of specified grievances under the KMA and explicitly rejected the Union's previous proposal to arbitrate former employee grievances. This rejection signifies Kroger's intent to exclude future grievances from arbitration.

Kroger's Limited Obligation Understanding (LOU) to arbitrate only select grievances and its refusal to cover former employees under the Kroger Management Agreement (KMA) indicates an intention to sidestep the current issue. In contrast to Teamsters I, where the Union's rights regarding subcontracting were at stake despite Kroger having no bargaining unit employees, the current case lacks evidence of any similar commitment from Kroger to allow access or coverage for former employees. Therefore, Kroger is not required to arbitrate Herdt’s grievance under the KMA, as Teamsters I does not apply.

The determination of whether Kroger is a joint employer with Transervice hinges on factual assessments of control over employees. The Sixth Circuit considers four factors: (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. A joint employment relationship is established when multiple employers exert significant control over the same employees and co-determine essential employment terms. Additional factors include the ability to hire, fire, discipline, and manage performance. Previous rulings, such as in Norfolk, found no joint employment where operational ties did not extend beyond contractual obligations, indicating that mere ownership of a facility or financial arrangements do not constitute interrelated operations or control necessary for joint employment.

Applying the Sixth Circuit’s four-factor test, it is established that Kroger and Transervice lack common management and ownership. Transervice independently supervises its employees, manages payroll, implements policies, and makes decisions regarding hiring, firing, and discipline. The Union’s argument that Kroger's recommendations on driver employment indicate joint employment is insufficient, as such recommendations align with standard cost-control practices. 

The Union also claims that interrelation of operations and centralized control of labor relations are evident due to various factors: Kroger owns the KDC warehouse and related equipment, covers operational costs, centralizes employee dispatching through its system, requires reports from Transervice, engages in regular management discussions, sets delivery windows, selected the lumping company, and participated in negotiating the Union’s collective bargaining agreement. However, mere operational involvement by Kroger does not prove interrelation without evidence of control over employment terms.

Past cases indicate that joint employment requires direct supervision and control over employment conditions, not just interrelation necessary for coordinating operations. The Union's assertion of Kroger's involvement in Transervice's labor negotiations and actions during a strike is deemed insufficient to demonstrate Kroger's integral influence on employment terms. Thus, the evidence does not support a joint employment relationship between Kroger and Transervice.

Control over labor relations is a critical factor in determining joint employment status, as established by the Sixth Circuit in Hoetger. Joint employment is not supported without evidence of integrated operations, common management, or control, specifically requiring a company to exercise day-to-day control, make hiring or firing decisions, and supervise the other company’s employees. The Union failed to demonstrate that Kroger controlled Transervice’s daily operations or made employment decisions, as Transervice independently terminated employee Herdt. The court rejected the Union's argument that Kroger's ban on Herdt constituted constructive termination, noting the absence of legal authority to support this claim. Furthermore, Kroger’s role as a customer, which involved notifying Transervice about performance issues without direct discipline, does not equate to joint employment. The Second Circuit’s ruling in Clinton’s Ditch affirmed that a company’s concerns about a contractor's employee performance do not imply joint employment. The contractual agreement between Kroger and Transervice explicitly states that they are independent contractors and that Kroger is not a joint employer, reinforcing their non-employment relationship. While contract language is not definitive, it serves as persuasive evidence of the parties' intentions.

Kroger is established as a customer of Transervice, without control over its employee terms and conditions. Transervice fails to demonstrate that their relationship extends beyond their basic contractual obligations. Kroger's involvement at the KDC is minimal, with no on-site supervisors and only a few employees present for produce inspections. The Kroger Supply Chain Manager visits infrequently and participates in regular conference calls, indicating limited operational control. Summary judgment is deemed appropriate for Kroger. 

Regarding the LOU, vendors were required to provide comparable benefits to Kroger’s former KDC employees, but Kroger rejected these proposals in 2007. The Union attempts to revive these rejected proposals in its summary judgment motion, which may be futile as labor arbitration does not allow parties to seek what was previously denied during negotiations. 

The KMA stipulates that Kroger must have just cause to suspend or discharge employees, requiring warning notices except in cases of dishonesty. The Union alleges Kroger failed to negotiate in good faith concerning various employment matters and sought to unilaterally modify employment conditions without consent. The court will not address whether Kroger was obligated to arbitrate the grievance, as the Union has invoked the court's jurisdiction. Crucially, the KMA and LOU do not imply that Kroger agreed to arbitrate disputes between former employees and their current employers.

The court is tasked with determining Kroger's obligation to arbitrate Herdt's termination grievance under the KMA. The Union argues that Kroger's ban effectively terminated Herdt, preventing his reinstatement by Transervice. However, the court agrees with Kroger's assertion that it is not responsible for Herdt's reinstatement, as Transervice, his direct employer, has the authority over his hiring and firing decisions.

The court finds it unnecessary to evaluate whether Kroger has excluded termination grievances from arbitration, as this analysis only applies if the arbitration clause could be interpreted to cover the dispute. Unlike previous cases where arbitration was mandated for specific grievances, the current agreement allows Kroger to settle only a few pending grievances without requiring arbitration for termination-related issues.

The Union's claims of interrelated operations due to former Kroger supervisors managing Transervice are unconvincing, as there is no evidence supporting that these individuals maintain managerial responsibilities or that their access to Kroger's systems indicates operational interrelation. The court dismisses the Union's unsupported allegations regarding Kroger's control over Transervice's transportation work and employment conditions.

Under the existing agreement, Kroger provides equipment and products while Transervice is responsible for performing transportation services and adhering to Kroger's standards. Both parties must mutually agree on delivery schedules, and Transervice has autonomy in monitoring compliance and submitting invoices. Kroger compensates Transervice based on actual costs plus fees and offers additional payments for timely deliveries.