Petitioner corporation entered into a collective-bargaining agreement with respondent Union which contained a provision for severance pay on termination of the employment of certain employees. The agreement, which specified that any grievance arising between the parties was subject to binding arbitration, was to remain in effect until its expiration date and thereafter until execution of a new agreement or the existing agreement was terminated by either party upon seven days' written notice. While contract changes were being negotiated after the contract's expiration date, respondent on August 20, 1973, gave notice of cancellation, and the contract terminated August 27. Negotiations nevertheless continued but ended on August 31, when petitioner, threatened with a strike, informed respondent that it was closing its plant effective that day. Plant operations ceased shortly thereafter. Petitioner paid accrued wages, but rejected respondent's demand for severance pay under the collective-bargaining agreement and declined to arbitrate the claim therefor on the ground that its obligation to do so terminated with the collective-bargaining agreement. Respondent then brought this action in District Court to compel petitioner, inter alia, to arbitrate the severance-pay issue. The District Court granted petitioner's motion for summary judgment, holding that the employees' right to severance pay expired with respondent's voluntary termination of the agreement; that consequently there was no longer a severance-pay issue to arbitrate; and that, in any event, the duty to arbitrate ended with the contract. The Court of Appeals reversed, concluding that the parties' arbitration duties under the contract survived its termination with respect to claims arising by reason of the agreement. Held: Respondent's claim for severance pay under the expired contract is subject to resolution under the contract's arbitration terms. Pp. 248-255.
BURGER, C. J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 255.
Allan L. Bioff argued the cause for petitioner. With him on the brief was Leonard Singer.
Ronald Rosenberg argued the cause for respondent. With him on the brief were Henry Kaiser, Eugene Gressman, George B. Driesen, Jerry Anker, and Gerhard P. Van Arkel.
MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.
This case raises the question of whether a party to a collective-bargaining contract may be required to arbitrate a contractual dispute over severance pay pursuant to the arbitration clause of that agreement even though the dispute, although governed by the contract, arises after its termination. Only the issue of arbitrability is before us.
In 1970, petitioner Nolde Brothers, Inc., entered into a collective-bargaining agreement with respondent Local No. [430 U.S. 243, 245] 358, of the Bakery & Confectionery Workers Union, AFL-CIO, covering petitioner's Norfolk, Va., bakery employees. Under the contract, "any grievance" arising between the parties was subject to binding arbitration. 1 In addition, the contract contained a provision which provided for severance pay on termination of employment for all employees having three or more years of active service. 2 Vacation rights were [430 U.S. 243, 246] also granted employees by the agreement; 3 like severance pay, these rights were geared to an employee's length of service and the amount of his earnings. By its terms, the contract was to remain in effect until July 21, 1973, and thereafter, until such time as either a new agreement was executed between the parties, or the existing agreement was terminated upon seven days' written notice by either party. [430 U.S. 243, 247]
In May 1973, the parties resumed bargaining after the Union advised Nolde, pursuant to 8 (d) of the National Labor Relations Act, 29 U.S.C. 158 (d) (1970 ed., and Supp. V), of its desire to negotiate certain changes in the existing agreement. These negotiations continued without resolution up to, and beyond, the July 21 contract expiration date. On August 20, the Union served the requisite seven days' written notice of its decision to cancel the existing contract. The Union's termination of the contract became effective August 27, 1973.
Despite the contract's cancellation, negotiations continued. They ended, however, on August 31, when Nolde, faced by a threatened strike after the Union had rejected its latest proposal, informed the Union of its decision to close permanently its Norfolk bakery, effective that day. Operations at the plant ceased shortly after midnight on August 31. Nolde then paid employees their accrued wages and accrued vacation pay under the canceled contract; in addition, wages were paid for work performed during the interim between the contract's termination on August 27 and the bakery's closing four days later. However, the company rejected the Union's demand for the severance pay called for in the collective-bargaining agreement. It also declined to arbitrate the severance-pay claim on the ground that its contractual obligation to arbitrate disputes terminated with the collective-bargaining agreement.
The Union then instituted this action in the District Court under 301 of the Labor Management Relations Act, 29 U.S.C. 185, seeking to compel Nolde to arbitrate the severance-pay issue, or in the alternative, judgment for the severance pay due. The District Court granted Nolde's motion for summary judgment on both issues. It held that the employees' right to severance pay expired with the Union's voluntary termination of the collective-bargaining contract and that, as a result, there was no longer any severance-pay [430 U.S. 243, 248] issue to arbitrate. It went on to note that even if the dispute had been otherwise arbitrable, the duty to arbitrate terminated with the contract that had created it. 382 F. Supp. 1354 (ED Va. 1974).
On appeal, the United States Court of Appeals for the Fourth Circuit reversed. 530 F.2d 548 (1975). It took the position that the District Court had approached the case from the wrong direction by determining that Nolde's severance-pay obligations had expired with the collective-bargaining agreement before determining whether Nolde's duty to arbitrate the claim survived the contract's termination. Turning to that latter question first, the Court of Appeals concluded that the parties' arbitration duties under the contract survived its termination with respect to claims arising by reason of the collective-bargaining agreement. Having thus determined that the severance-pay issue was one for the arbitrator, the Court of Appeals expressed no views on the merits of the dispute. We granted certiorari to review its determination that the severance-pay claim was arbitrable. 425 U.S. 970 (1976).
In arguing that Nolde's displaced employees were entitled to severance pay upon the closing of the Norfolk bakery, the Union maintained that the severance wages provided for in the collective-bargaining agreement were in the nature of "accrued" or "vested" rights, earned by employees during the term of the contract on essentially the same basis as vacation pay, but payable only upon termination of employment. In support of this claim, the Union noted that the severance-pay clause is found in the contract under an article entitled "Wages." The inclusion within that provision, it urged, was evidence that the parties considered severance pay as part of the employees' compensation for services performed during the life of the agreement. 4 In addition, the Union [430 U.S. 243, 249] pointed out that the severance-pay clause itself contained nothing to suggest that the employees' right to severance pay expired if the events triggering payment failed to occur during the life of the contract. Nolde, on the other hand, argued that since severance pay was a creation of the collective-bargaining agreement, its substantive obligation to provide such benefits terminated with the Union's unilateral cancellation of the contract.
As the parties' arguments demonstrate, both the Union's claim for severance pay and Nolde's refusal to pay the same are based on their differing perceptions of a provision of the expired collective-bargaining agreement. The parties may have intended, as Nolde maintained, that any substantive claim to severance pay must surface, if at all, during the contract's term. However, there is also "no reason why parties could not if they so chose agree to the accrual of rights during the term of an agreement and their realization after the agreement had expired." John Wiley & Sons v. Livingston, 376 U.S. 543, 555 (1964). 5 Of course, in determining the arbitrability of the dispute, the merits of the underlying claim for severance pay are not before us. However, it is clear that, whatever the outcome, the resolution of that claim hinges on the interpretation ultimately given the contract clause providing for severance pay. The dispute therefore, although arising after the expiration of the collective-bargaining contract, clearly arises under that contract.
There can be no doubt that a dispute over the meaning of the severance-pay clause during the life of the agreement [430 U.S. 243, 250] would have been subject to the mandatory grievance-arbitration procedures of the contract. Indeed, since the parties contracted to submit "all grievances" to arbitration, our determination that the Union was "making a claim which on its face is governed by the contract" would end the matter had the contract not been terminated prior to the closing of the plant. Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960). Here, however, Nolde maintains that a different rule must prevail because the event giving rise to the contractual dispute, i. e., the employees' severance upon the bakery's closing, did not occur until after the expiration of the collective-bargaining agreement.
Nolde contends that the duty to arbitrate, being strictly a creature of contract, must necessarily expire with the collective-bargaining contract that brought it into existence. Hence, it maintains that a court may not compel a party to submit any post-contract grievance to arbitration for the simple reason that no contractual duty to arbitrate survives the agreement's termination. Any other conclusion, Nolde argues, runs contrary to federal labor policy which prohibits the imposition of compulsory arbitration upon parties except when they are bound by an arbitration agreement. In so arguing, Nolde relies on numerous decisions of this Court which it claims establish that "arbitration is a matter of contract and [that] a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960); e. g., Gateway Coal Co. v. Mine Workers, 414 U.S. 368, 374 (1974); John Wiley & Sons v. Livingston, supra, at 547; Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241 (1962).
Our prior decisions have indeed held that the arbitration duty is a creature of the collective-bargaining agreement and that a party cannot be compelled to arbitrate any matter in [430 U.S. 243, 251] the absence of a contractual obligation to do so. Adherence to these principles, however, does not require us to hold that termination of a collective-bargaining agreement automatically extinguishes a party's duty to arbitrate grievances arising under the contract. Carried to its logical conclusion that argument would preclude the entry of a post-contract arbitration order even when the dispute arose during the life of the contract but arbitration proceedings had not begun before termination. The same would be true if arbitration processes began but were not completed, during the contract's term. Yet it could not seriously be contended in either instance that the expiration of the contract would terminate the parties' contractual obligation to resolve such a dispute in an arbitral, rather than a judicial forum. See John Wiley & Sons, supra; Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960); Machine Workers v. Oxco Brush Div., 517 F.2d 239, 242-243 (CA6 1975); Procter & Gamble Ind. Union v. Procter & Gamble Mfg. Co., 312 F.2d 181, 186 (CA2 1962), cert. denied, 374 U.S. 830 (1963). Nolde concedes as much by limiting its claim of nonarbitrability to those disputes which clearly arise after the contract's expiration. Brief for Petitioner 22.
Our holding in John Wiley & Sons is instructive on this matter. There we held that a dispute over employees' rights to severance pay 6 under an expired collective-bargaining agreement was arbitrable even though there was no longer any contract between the parties. In their expired agreement, the parties had agreed to submit to arbitration:
The parties agreed to resolve all disputes by resort to the mandatory grievance-arbitration machinery established by their collective-bargaining agreement. The severance-pay dispute, as we have noted, would have been subject to resolution under those procedures had it arisen during the contract's term. However, even though the parties could have so provided, [430 U.S. 243, 253] there is nothing in the arbitration clause that expressly excludes from its operation a dispute which arises under the contract, but which is based on events that occur after its termination. The contract's silence, of course, does not establish the parties' intent to resolve post-termination grievances by arbitration. But in the absence of some contrary indication, there are strong reasons to conclude that the parties did not intend their arbitration duties to terminate automatically with the contract. Any other holding would permit the employer to cut off all arbitration of severance-pay claims by terminating an existing contract simultaneously with closing business operations.
By their contract the parties clearly expressed their preference for an arbitral, rather than a judicial, interpretation of their obligations under the collective-bargaining agreement. Their reasons for doing so, as well as the special role of arbitration in the employer-employee relationship, have long been recognized by this Court:
It is also noteworthy that the parties drafted their broad arbitration clause against a backdrop of well-established federal labor policy favoring arbitration as the means of resolving disputes over the meaning and effect of collective-bargaining agreements. Congress has expressly stated:
We therefore agree with the conclusion of the Court of Appeals that, on this record, the Union's claim for severance pay under the expired collective-bargaining agreement is subject to resolution under the arbitration provisions of that contract. 8
[ Footnote 2 ] ARTICLE IX
[ Footnote 3 ]
[ Footnote 4 ] The fact that the amount of severance pay to which an employee is [430 U.S. 243, 249] entitled under the collective-bargaining agreement varies according to the length of his employment and the amount of his salary also supports the Union's position that severance pay was nothing more than deferred compensation.
[ Footnote 5 ] The parties apparently viewed the vacation rights provided by Art. IV of the contract as vested in nature since after the bakery's closing, Nolde, upon the Union's request, paid its former employees all vacation pay which had accrued under the collective-bargaining agreement.
[ Footnote 6 ] The parties also disagreed over such matters as seniority rights, welfare security benefits, discharges and layoffs, and vacations. 376 U.S., at 554 n. 7.
[ Footnote 7 ] In W. W. Kimball Co., the Seventh Circuit found that a dispute over seniority rights under an expired collective-bargaining agreement was nonarbitrable. There the dispute did not arise, nor were arbitration proceedings or an action to compel the same instituted, during the life of the agreement. 333 F.2d, at 762-763.
[ Footnote 8 ] Certiorari was neither sought, nor granted, on the question of the arbitrator's authority to consider arbitrability following referral, and we express no view on that matter. Similarly, we need not speculate as to the arbitrability of post-termination contractual claims which, unlike the one presently before us, are not asserted within a reasonable time after the contract's expiration.
MR. JUSTICE STEWART, with whom MR. JUSTICE REHNQUIST joins, dissenting.
When a dispute arises between two parties, that dispute is to be settled by the process of arbitration only if there is an [430 U.S. 243, 256] agreement between the parties that the dispute will be settled by that means. Yet the Court today says that a union-employer dispute must be settled by arbitration even though the dispute did not even arise until after the contract containing an agreement to arbitrate had been terminated by action of the Union, and the employer had closed its business. I think this conclusion is neither required by existing precedent nor based upon any realistic appraisal of the contracting parties' intent.
Our cases, to be sure, have established the importance of arbitration in resolving disputes arising under collective-bargaining agreements and in thereby maintaining peaceful labor relations. A collective-bargaining agreement erects a system of industrial self-government; grievance and arbitration provisions in such an agreement make that collective-bargaining process continuous: "Arbitration is the means of solving the unforeseeable by molding a system of private law for all the problems which may arise and to provide for their solution in a way which will generally accord with the variant needs and desires of the parties." Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 581 .
But the duty to arbitrate can arise only upon the parties' agreement to resolve their contractual differences in the arbitral forum. And the presumptive continuation of that duty even after the formal expiration of such an agreement can be justified only in terms of a web of assumptions about the continuing nature of the labor-management relationship and the importance of having available a method harmoniously to resolve differences arising in that relationship. See generally id., at 578.
Those assumptions are wholly inapplicable to this case. The closing of the bakery by the employer-petitioner necessarily meant that there was no continuing relationship to protect or preserve. Cf. John Wiley & Sons v. Livingston, 376 U.S. 543 ; Howard Johnson Co. v. Hotel Employees, [430 U.S. 243, 257] 417 U.S. 249 . And the Union's termination of the contract, thereby releasing it from its obligation not to strike, foreclosed any reason for implying a continuing duty on the part of the employer to arbitrate as a quid pro quo for the Union's offsetting, enforceable duty to negotiate rather than strike. See Boys Markets, Inc. v. Retail Clerks, 398 U.S. 235 .
Although for these reasons no continuing duty to arbitrate can be presumed in this case in the interest of maintaining industrial peace, it might nevertheless rationally be argued that the arbitration agreement was a term or condition of employment that the employer could not unilaterally change without first bargaining to impasse. See 29 U.S.C. 158 (a) (5). The trouble with that argument is that the National Labor Relations Board has rejected the notion that arbitration is a term or condition of employment that by operation of statute continues even after the contract embodying it has terminated. The Board, instead, has viewed arbitration as an obligation that arises solely out of contract, and is favored but not statutorily required as a dispute-resolving mechanism. See Hilton-Davis Chemical Co., 185 N. L. R. B. 241 (1970). See also Gateway Coal Co. v. Mine Workers, 414 U.S. 368 .
It is clear, therefore, that neither federal labor law nor the interest of maintaining industrial peace can serve to explain the Court's conclusion that the presumption of arbitrability extends to the facts of this case.
I realize that our decisions have broadly held that doubts as to arbitrability under an arbitration clause are to be resolved in favor of arbitrability. See Warrior & Gulf Nav. Co., supra. But those cases involved arbitration clauses that were undoubtedly in force at the time the dispute first arose, and arbitration was invoked to resolve issues arising during the continuing course of the employer-employee relationship. (See, e. g., Piano Workers v. W. W. Kimball Co., 379 U.S. 357 , where a dispute over the rights of employees to preferential hiring at a new plant commenced before the contract at [430 U.S. 243, 258] the old plant had expired.) The question here, by contrast, is whether the presumption of arbitrability survived even when the contract providing for arbitration had terminated and the rights in dispute, though claimed to arise under the contract, ripened only after the contract had expired and the employment relationship had terminated.
For the reasons I have expressed, I think there was no agreement to arbitrate this dispute. The Union had, of course, a clear cause of action under 301 of the Labor Management Relations Act to seek judicial redress against the employer for its failure to meet its severance-pay obligations to the employees. The Union did, in fact, bring just such a lawsuit in this case. If the Court of Appeals had addressed the merits of the litigation, as I believe it should have done, this controversy would have been settled long ago.
I respectfully dissent from the opinion and judgment of the Court. [430 U.S. 243, 259]