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Feb. 10 — Allegheny Ludlum LLC doesn't have to arbitrate a dispute with the United Steelworkers over the company's decision to terminate health insurance benefits for its office, clerical and technical employees, the U.S. District Court for the Western District of Pennsylvania ruled.
In her Feb. 9 opinion, Judge Cathy Bissoon granted the employer's motion to dismiss, holding that the dispute between the parties arose from an unwritten insurance agreement that, as such, was unenforceable under the Employee Retirement Income Security Act. Bissoon concluded that because the parties' dispute didn't fall within the provisions of the collective bargaining agreement's arbitration clause, there was no basis to compel arbitration.
The United Steelworkers represented certain employees of Allegheny Ludlum. In 2011, they reached an agreement to cover office, clerical and technical salaried union employees. The CBA was set to expire in June 2015.
In August 2015, Allegheny Ludlum locked out its unionized employees. A month later, it terminated the health-insurance benefits for the union employees covered under the 2011 CBA. The United Steelworkers filed a grievance pursuant to the 2011 CBA seeking arbitration to determine whether a separate insurance agreement—which provided for health benefits coverage until November 2015—applied.
The union claimed that the insurance agreement referred to in the 2011 CBA was never reduced to writing. It further alleged that the parties had the intention to be bound by the standard provisions of the insurance agreement applicable to other Allegheny Ludlum employees under its master insurance agreement, which provided health benefits until a later date.
Allegheny Ludlum refused to participate in the arbitration.
The union filed a lawsuit seeking a court order compelling arbitration. Allegheny Ludlum moved to dismiss, arguing that the 2011 CBA included an appendix that constituted the “insurance agreement” between the parties.
Allegheny Ludlum alleged that the union's separate insurance agreement didn't exist and further rejected the union's alleged intention of modifying the written benefit plans with oral or other extrinsic evidence. It further argued that the union's position would require the court to endorse an oral modification of written ERISA documents in violation of federal law.
The court relied on the U.S. Court of Appeals for the Third Circuit's 1991 decision in Hamilton v. Air Jamaica, 945 F.2d 74 (3rd Cir. 1991), holding that an unwritten amendment to an ERISA plan is unenforceable. The court cited the part of the appeals court's ruling that said that “even if an oral amendment of an ERISA plan would increase employee benefits, ERISA does not provide for the enforcement of that amendment because is not part of the plan.”
The court rejected the United Steelworkers' argument that the case didn't relate to an alleged violation of an ERISA document. The court said that by the union's own allegations, the unwritten agreement pertained to health insurance coverage, and thus was “an ERISA welfare plan document.”
The court concluded that since the union conceded that the insurance agreement hadn't been put in writing, it was an unenforceable document under ERISA. As a result, the dispute didn't fall within the provisions of the 2011 CBA's arbitration clause.
The union was represented by Joseph Stuligross. Allegheny was represented by K&L Gates LLP.
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