Second Circuit Limits Union Authority to Bind Former Employees to Later-Negotiated Arbitration Agreement

Unionized employers often rely on arbitration and alternate dispute resolution (ADR) provisions in collective bargaining agreements (CBAs) to create a consistent process for resolving workplace disputes and reduce litigation risk. A recent decision from the U.S. Court of Appeals for the Second Circuit, however, shows that those provisions may not always reach as far as employers expect. In 1199 SEIU United Healthcare Workers East v. PSC Community Services, the court held that former bargaining unit employees could not be required to arbitrate statutory wage claims under an ADR provision that was negotiated after they left employment. As a result, those former employees were allowed to continue pursuing their claims in court, despite an arbitration proceeding by the union and the employer that addressed similar allegations.

The court made it clear that an arbitration/ADR provision negotiated during collective bargaining may not bind individuals who left the bargaining unit before the provision was adopted.

What Happened?

The case arose from state wage and hour lawsuits filed by home health aides in New York who were also members of a union. New York state courts declined to compel arbitration of those claims. While those lawsuits were pending, and prior to the commencement of other lawsuits, the union and a group of employers with CBAs with the union, negotiated an ADR agreement creating a mandatory arbitration process for many wage and hour disputes. The union later pursued arbitration on behalf of more than 100,000 current and former workers.

The arbitrator ultimately found wage violations and ordered the creation of a fund valued at approximately $30 – $35 million. All workers were to be bound by the award issued, including former employees who were no longer in the bargaining unit. The district court confirmed the awards. Seventeen former employees appealed, arguing that they should not be bound by an arbitration provision that was negotiated after they had already left the bargaining unit and that they should be allowed to continue with their claims in court.

What Did the Court Decide?

The Second Circuit agreed. Unions do not automatically retain authority to negotiate away the rights of employees who have already left the bargaining unit. Absent evidence that former employees expressly or implicitly agreed to continued representation, a union generally may not bind them to a later-negotiated arbitration agreement. 

Because the employees in this case had already left their jobs when the arbitration provision was negotiated, the court found they were not required to arbitrate their claims and could continue litigating them in court.

The court also held that the parties had not “clearly and unmistakably” delegated questions of substantive arbitrability to the arbitrator. As a result, the court, rather than the arbitrator, was required to determine whether the former employees’ claims were subject to arbitration.

Why Does This Matter?

For many employers, arbitration provisions are intended to provide a single, predictable forum for resolving disputes and avoiding costly litigation. This decision highlights a potential limitation on that strategy. Even where a union and employer negotiate a broad arbitration provision, former employees may still be able to pursue claims in court if they left employment (or the bargaining unit) before the provision was adopted. 

The ruling is particularly significant for employers facing potential wage and hour, leave, or other statutory claims brought by former employees. Even where a union and employer negotiate broad dispute-resolution procedures, those provisions may not reach individuals who left the bargaining unit before the agreement was executed.

What Should Employers Do?

Employers should consider:

• Reviewing grievance, arbitration, and ADR provisions in existing CBAs to determine whether coverage extends to former employees.
• Evaluating whether proposed ADR language could leave former employees outside the scope of the agreement.
• Assessing whether current or anticipated litigation involves individuals who separated before relevant arbitration provisions became effective.
• Considering the impact of this decision during future collective bargaining negotiations involving dispute-resolution procedures.
• Confirm that all terms are contained in any agreement, including how to handle procedural issues, such as arbitrability.

Bottom Line

The Second Circuit’s decision underscores that a union’s authority to negotiate dispute-resolution procedures does not necessarily extend to former bargaining-unit employees. Absent evidence of consent, employees who left covered employment before adoption of an arbitration provision may retain the ability to pursue statutory claims in court. Employers should account for this limitation when evaluating existing CBA arbitration provisions and negotiating future agreements.