It is not unusual for employees who are represented by a labor union nonetheless to file suit in state court for employment claims, such as wrongful termination, discrimination and so forth. In some limited cases these lawsuits can be subject to removal to federal court and preempted by federal labor law, which can be a useful tool in the right circumstances. In a recent case, however, the United States Court of Appeals for the Seventh Circuit (covering Illinois, Indiana and Wisconsin) restricted a bit further the cases in which preemption might apply in that Circuit and highlighted some of the risks of removal.
On August 7th, the Seventh Circuit held in Crosby v. Cooper B-Line, Inc. (No. 13-1054) that Section 301 of the Labor Management Relations Act did not preempt an employee’s claim that he was wrongfully discharged in retaliation for seeking workers’ compensation benefits. As a consequence, there was no federal subject-matter jurisdiction over the case. The Seventh Circuit therefore reversed the district court’s grant of summary judgment in favor of the employer and remanded the case to state court.
The Underlying Facts
In June 2010, a portion of the plaintiff’s middle finger was amputated as he was trying to remove pieces of metal from an item at work called a “master bundle.” The plaintiff had instructed a co-worker to kick the bundle in order to dislodge the pieces as he removed them. The plaintiff filed a claim for benefits under the Illinois Workers’ Compensation Act, and he returned to work in September 2010.
Upon the plaintiff’s return to work, the employer asked him to stop using the “kicking method.” When the plaintiff refused, the employer suspended him for three days without pay. The union filed a grievance on the plaintiff’s behalf. Almost immediately after the plaintiff returned from his suspension, he was accused of violating another safety rule. The employer convened a meeting with the plaintiff and the union to discuss the alleged safety violation.
During the meeting, the employer informed the union that the plaintiff would be fired. The union advised the plaintiff to ask the employer to label his discharge as a “permanent layoff with no recall rights” so that he could obtain unemployment benefits and a neutral job reference. The plaintiff did so, and the employer accepted on the condition that the plaintiff agree to dismiss the suspension grievance. The parties’ agreement was memorialized in a relatively barebones grievance settlement.
The plaintiff later filed suit against the employer in Illinois state court, alleging that the employer had discharged him in retaliation for his seeking workers’ compensation benefits. The employer removed the case to federal court, arguing that federal subject-matter jurisdiction existed because Section 301 of the LMRA preempted the plaintiff’s state law claim. The parties completed discovery, and the employer moved for summary judgment. The district court granted the motion, finding that the plaintiff’s retaliatory discharge claim failed on the merits. On appeal to the Seventh Circuit, the plaintiff contended for the first time that the district court lacked subject-matter jurisdiction and asked that the case be remanded to state court.
The Seventh Circuit’s Analysis
The Seventh Circuit first observed that objections to subject-matter jurisdiction are not subject to waiver and that the federal courts have an independent obligation at each stage of the proceedings to ensure that they have subject-matter jurisdiction over the dispute. The court also explained that a state law claim is preempted by Section 301 of the LMRA only when it is “inextricably intertwined” with consideration of the terms of a collective bargaining agreement. In other words, such a claim is only preempted when it requires interpretation of a CBA.
The court then explained that to prevail on a retaliatory discharge claim, the plaintiff had to show that the company discharged or threatened to discharge him and that its motive for doing so was to interfere with his exercise of his workers’ compensation rights. In the court’s opinion, the analysis of those elements did not require that the terms of the CBA or the grievance settlement be consulted. The court observed that the grievance settlement said nothing about why the plaintiff was discharged and that it also did not contain any provision that would have prevented the plaintiff from filing a retaliatory discharge claim.
Finding that without Section 301 preemption, there was no basis for federal subject-matter jurisdiction, the court concluded that the removal of the case to federal court had been improper. The court therefore remanded the case to state court, expressing “no view on the underlying merits” of the case.
The Seventh Circuit’s decision is a cautionary tale both with respect to drafting grievance settlements and with respect to removing cases to federal court on the basis of Section 301. In particular, wherever possible, the employer should include a settlement and release of the employee’s individual claims as part of the grievance settlement in a discharge case. Failing that, the employer should consider including language in the settlement agreement that will undercut a potential statutory claim by the employee (such as a retaliation or discrimination claim), and will strengthen the argument for Section 301 preemption. This language will vary based on the facts, collective bargaining agreement, and circumstances. Employers should always examine the possibility of removal and preemption in cases involving represented employees, but should also make sure that there is a solid basis for removal in order to avoid what occurred in this case and/or remand by the trial court following removal.