Successfully Proving That Union Breached its Duty of Fair Representation is No Easy Job

By: Denise Dessel

St. John's Law Student

American Bankruptcy Institute Law Review Staff

A union has "exclusive statutory authority" to represent its members.[1] In exercising its exclusive right, a union has a duty to fairly represent its members.[2]  The duty of fair representation is breached when a union's conduct is found to be arbitrary, discriminatory or in bad faith.[3] In Demetris v. Local 514, Transport Workers Union of America, senior union members (the "Retirees") were not explicitly informed by their union that they would not receive a share of equity they would have otherwise been entitled to if they took advantage of the new bargaining agreement’s “Early Separation” program.[5]  The Retirees brought suit against their union alleging breach of the duty of fair representation.[5]  The Ninth Circuit held that the union did not breach its duty of fair representation because its conduct was not arbitrary, discriminatory or done in bad faith.[6]  

American Airlines ("American") filed a petition for relief under Chapter 11 of the Bankruptcy Code and as part of its reorganization, American negotiated the collective bargaining agreement with the Transport Workers Union of America, AFL-CIO ("TWU").[7]  The new agreement allowed TWU a 4.8% total stake of American's equity to be distributed among the union members.[8]  TWU and American also agreed upon an "Early Separation" program that allowed senior TWU members to voluntarily leave American in exchange for lump sum cash payments in addition to severance pay, unused vacation pay and an additional two-weeks' compensation.[9]  The negotiated agreement awarded a share of equity to members employed at American but excluded members who took advantage of the "Early Separation" Program from receiving their otherwise entitled equity.[10]

First, as to the arbitrary claim, the Retirees argued that it was wholly irrational for the union to withhold the bulk of the equity from the members who participated in the "Early Separation" program.[11] The Ninth Circuit held that the union's conduct was not arbitrary because TWU went through a lengthy decision-making process when negotiating the agreement and the Retirees were entitled to substantial Early Separation payments.[12] Second, as to the discrimination claim, the retirees argued that they were discriminated against because of their lack of political power in upcoming elections compared to other members.[13] The Ninth Circuit found that the evidence did not show that the union representatives inflicted any type of animus towards the retirees.[14]  Finally, as to the bad faith claim, the retirees argued that TWU intentionally delayed closing the equity distribution plan until the deadline for choosing whether to participate in the "Early Separation" program.[15] The Ninth Circuit held that TWU's conduct was not done in bad faith because TWU disclosed the risks of taking advantage of the “Early Separation” program in the letter sent to its members and specifically stated that the equity distribution was undetermined at that point.[16]

The National Labor Relations Act established that a union is the sole representative for all employees within its bargaining unit.[17]  At first glance, the Ninth Circuit seems to apply greater weight to the union's rights than the employee's individual rights. However, the Ninth Circuit makes sure to acknowledge that when employers file for bankruptcy, it creates unique challenges for unions to be able to negotiate bargaining agreements fairly for all of the members.[18] The Ninth Circuit acknowledges that unions have no obligation to treat all members the same, especially when there is an employer bankruptcy.[19]