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District Court of Appeal, First District, Division 2, California.

HALE BROS. STORES (SAN JOSE), Appellant, v. RETAIL CLERKS UNION, LOCAL NO. 428, Respondent. IN RE: the Arbitration between Hale Bros. Stores (San Jose) and Retail Clerks Union, Local No. 428.*

Civ. 19310.

Decided: December 19, 1960

Sheppard, Mullin, Richter & Hampton, Frank Simpson, III, and David A. Maddux, Los Angeles, for appellant. Garry, Dreyfus, McTernan & Keller, Benjamin Dreyfus, San Francisco, for respondent.

During the years 1958 and 1959, Hale Bros. Stores (San Jose), hereinafter referred to as ‘Hale's,’ terminated the employment of five employees solely because they were 65 years of age. The union protested that these compulsory retirements violated its collective bargaining agreement with Hale's, and the matter went to arbitration. From the order confirming the arbitration award in favor of the union and the employees, Hale's appeals.

The questions submitted for arbitration pursuant to a mutual submission agreement were not only the basic dispute as to whether or not Hale's violated the collective bargaining agreement when it terminated the employment, but also the remedy to be applied, the arbitrability of the dispute under the terms of the agreement, and the existence of the agreement after April 30, 1958.

However, on this appeal Hale's contentions are but two, namely: (1) that the basic dispute was not an arbitrable issue under the provisions of the collective bargaining agreement, and, (2) that the arbitrator exceeded his powers by making an award based upon a contract that had expired.

We start our consideration with the concession by the parties that there is no specific provision in the collective bargaining agreement dealing with termination of employment for age. The agreement contains the following pertinent sections:

‘Section 3 Discharge and Discrimination

‘(a) The Employer shall have the right to discharge any employee for unbecoming conduct, insubordination, incompetency, neglect of duty, failure to perform work as required but not contrary to the terms of this agreement, * * *.

‘(b) In case any employee who has been discharged for any of the reasons set forth in subsection (a) hereof, or for any other reason, shall feel that he or she has been unjustly discharged, such employee shall have the right to appeal through the Union to the Adjustment Board hereinafter provided for. * * *’

‘Section 5. Seniority

‘(a) When it is necessary to lay off or rehire employees, the principle of seniority and period of service among employees will be observed when, in the opinion of the Employer, merit and ability are equal.’

‘Section 12 Working Conditions * * *.

‘(f) Any employee whose earning capacity is limited because of age, physical or mental handicap, or other infirmity, may be employed in suitable work at a wage agreeable to the Employer, the employee and the Union.’

‘Section 14 Controversies * * *.

‘(c) * * * It shall be the duty of the Adjustment Board to consider all complaints and disputes arising under the terms of this agreement, all questions of enforcement of this agreement and any appeals in connection with the discharge, demotion, or disqualification of any employee. * * *

‘(d) [Submission agreement provided for sole arbitrator].

‘(g) Pending the decision of any question referred to the Adjustment Board, the conditions in effect at the time the dispute arose shall continue in effect pending the decision of the Adjustment Board.’

‘Section 15 Term of Agreement

‘This Agreement shall be in full force and effect from May 1, 1956 to and including April 30, 1958, subject to written notice by either of the parties to the other sixty (60) days prior to the expiration date, of a desire to alter or amend this agreement. A copy of the proposed changes in the conditions shall be given to the other party not later than thirty (30) days after the date of notification to reopen the agreement. In the event no such notices are given, this agreement shall be deemed to be renewed from year to year, subject to sixty (60) days' written notice prior to April 30 of each year in the future of a desire to terminate or amend this agreement.’

In our view, these provisions clearly indicate that the parties have by their agreement consented to arbitrate the very type of grievance that has arisen by virtue of the compulsory retirement of these employees, and that the arbitrator's finding thereon was correct.

In arriving at this conclusion, we have in mind the rule that every reasonable intendment must be indulged in to give effect to arbitration proceedings (Pacific Vegetable Oil Corp. v. C. S. T., Ltd., 1946, 29 Cal.2d 228, 233, 174 P.2d 441), and that the question of arbitrability is a matter of interpretation of the collective bargaining agreement. Local 205, etc. v. General Electric Company, 1 Cir., 1956, 233 F.2d 85, 101; Priest v. General Electric Company, D.C.1958, 178 F.Supp. 514, 515.

It is not necessary that there be specific provision in a collective bargaining agreement to subject the dispute between the parties to arbitration, so long as it can be gathered from the terms of the agreement that the matter is within its gamut. See O'Malley v. Petroleum Maintenance Co., 1957, 48 Cal.2d 107, 111, 308 P.2d 9; Cuneo Eastern Press, Inc., of Pa. v. Bookbinders & B. W. U., D.C.1959, 176 F.Supp. 956; and Grunwald-Marx, Inc. v. Los Angeles Joint Board, 1959, 52 Cal.2d 568, 589–590, 343 P.2d 23.

Hale's asserts that its action is entirely proper and that similar retirements have been sustained by the courts. It argues that there is nothing to arbitrate, because (1) the contract was silent about retirement, (2) Hale's San Jose store had been operating under a retirement policy for several years before the execution of the present agreement, and, (3) this retirement policy was well-known to the union and was enforced without objection on its part. Hale's relies upon the case of American Stores Company v. Johnston, D.C.1959, 171 F.Supp. 275. In that case the matter of retirement was not mentioned in the agreement. However, the court found that the employer had a retirement policy which was uniform and of long standing, and well known to the union. Under these circumstances, the court upheld the action of the employer in retiring certain of its employees upon the ground that the union and the employer must have entered into their collective bargaining agreement with this established policy in mind, and hence the agreement was to be considered and interpreted in the light thereof. See also United States Steel Corporation v. Nichols, 6 Cir., 1956, 229 F.2d 396, 56 A.L.R.2d 980. These cases are not authority here for the unarguable reason that our record is devoid of any evidence that would establish a uniform and long (or for any length of time) accepted retirement policy at Hale's San Jose store prior to the date of the agreement.

It appears to us to logically follow from our interpretation of the collective bargaining agreement that Hale's action under the guise of retirement for age amounted to an unwarranted discharge under the said agreement, and since the discharges were objected to, a controversy subject to arbitration arose. As the court in the Nichols case, supra at page 402, observed: ‘The Company would not be justified in ‘discharging’ an employee under a so-called retirement policy if the alleged retirement policy was actually non-existent, or was discriminatorily enforced in order to effect what was actually a discharge under the guise of retirement, or was in substance merely a subterfuge to avoid its contractual obligation against discharge. United Protective Workers of America v. Ford Motor Co., 7 Cir., 194 F.2d 997, 1003.'

The other contention made by Hale's is that the collective bargaining contract had lapsed and the arbitrator had no power to make his award. The contract provided that it would be in effect until April 30, 1958, and would be automatically renewed from year to year, unless written notice was given by either party of a desire to alter, amend or terminate the agreement within 60 days of the above noted date, with any proposed changes to be given the other party within 30 days of April 30th. On February 26, 1958, the union notified the company that it wished to alter the contract, and on March 25, 1958, it submitted its proposals. The parties to a collective bargaining agreement may provide for termination of the contract upon notification within a fixed period of time (Flores v. Barman, 1955, 130 Cal.App.2d 282, 279 P.2d 81), and where it is shown that the required notice has been given in accordance with the agreement, it is effective to terminate the contract. Montaldo v. Hires Bottling Co., 1953, 59 Cal.App.2d 642, 650, 139 P.2d 666. We do not find any evidence that would indicate the parties continued to operate under the contract. True, the union continued to represent the employees, but that does not affect the agreement with the company, which had lapsed. Nor is the fact that the company agreed to arbitrate the question significant. All rights that accrued to the employees under the collective bargaining agreement during its term and that were arbitrable thereunder, could be awarded to them by the arbitrator even though the period of the agreement had ended. The collective bargaining agreement The collective bargaining agreement expired on April 30, 1958, so the arbitration provision no longer operated as to matters which occurred subsequent thereto. Publicists Local 818, etc. v. National Screen Service Corp., 1960, 183 Cal.App.2d 491, 7 Cal.Rptr. 238.

Two of the five employees involved were compulsorily retired prior to April 30th, namely, Wallace Murray in January 1958, and Julia McCutchen in March 1958. The remedy under the award as to them was reinstatement and back pay, subject to certain adjustments from termination to date of award. Hale's contends the arbitrator had no power to award any pay beyond April 30, 1958. This question has not been passed upon in California, but the issue was recently before the Supreme Court of the United States, in the case of United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424. In that case certain employees had been discharged and the union contended the discharges violated the collective bargaining agreement, and arbitration was ordered. Pending the arbitration, the agreement expired. The company contended that the expiration barred reinstatement and any pay beyond the expiration date. The award granted reinstatement with back pay, subject to certain deductions, from the date of the award. The Supreme Court upheld the arbitrator's action and made this observation:

‘When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies. There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. * * *’

The remaining three employees were compulsorily retired after April 30, 1958, namely, Lola Grose in May 1958, Trela Carraher in June 1958, and Elizabeth Palmer in February 1959. Since the agreement had expired before their retirement, a controversy as to their ‘discharge’ did not arise under the contract. Publicists Local 818, etc. v. National Screen Service Corp., supra, 183 Cal.App.2d at page 495, 7 Cal.Rptr. at page 243. Therefore, the arbitrator exceeded his powers in the award as to these employees, and as to them it nust be vacated. Bierlein v. Johnson, 1946, 73 Cal.App.2d 728, 733, 166 P.2d 644; Drake v. Stein, 1953, 116 Cal.App.2d 779, 254 P.2d 613; William B. Logan & Associates v. Monogram Precision Industries, 1960, 184 Cal.App.2d 12, 7 Cal.Rptr. 212.

The judgment confirming the award as to Wallace Murray and Julia McCutchen is affirmed. As to Lola Grose, Trela Carraher and Elizabeth Palmer, it is reversed.


KAUFMAN, P. J., and DRAPER, J., concur. Hearing granted; McCOMB, J., not participating.