No Extra Severance for Laid-Off Penske Workers

CHICAGO (CN) - Penske workers laid off after the company lost its transportation services contract with the Indianapolis Star newspaper cannot seek more severance pay, the 7th Circuit ruled.

From 1999 to 2009, Penske Logistics provided transportation services to the local paper. When the end of the contract approached, the Star put the work up for bids. Penske lost. Because the Star was its only customer, Penske announced that it would be discontinuing its business in the area.

Representatives of the Chauffeurs, Teamsters, Warehousemen and Helpers Local Union 135 met with Penske to arrange severance terms. Penske offered union members extended recall rights, preferential treatment should they apply to Penske subsidiaries, payment for unused vacation and holiday time, assistance with preparing resumes and securing letters of recommendation, and one week's wages as severance pay.

Five employees filed suit, unhappy with their severance package. The workers filed a "hybrid breach-of-contract/duty-of-fair-representation" claim under the Labor-Management Relations Act, arguing both that Penske violated the terms of the union's collective bargaining agreement and that the union failed to bargain hard enough. Both Penske and the union were named as defendants.

But U.S. District Judge Richard Young granted summary judgment against the workers.

"The CBA did not promise any severance benefits should Penske Logistics lose its business with the Star and lay off its work force," according to a summary by the 7th Circuit. "Thus the first requirement of a hybrid action is missing, and the district court granted summary for the defendants."

The three-judge appellate panel was even less sympathetic, disagreeing that Penske workers deserved more generous severance pay

Though a provision in the Star-Penske contract provided that the newspaper would reimburse severance costs should Penske lose its business with the paper, there is a jurisdictional problem with the argument.

Because none of the plaintiffs asserted an individual claim for more than $75,000, the court lacks diversity jurisdiction. Furthermore, the National Labor Relations Board alone can bring claims against the union for failure to bargain in good faith.

"As far as we can see, plaintiffs did not take their grievance to the general counsel, and the board certainly has no issued a decision finding that either the union or Penske Logistics failed to bargain in good faith," Chief Judge Frank Easterbrook wrote for the court.

The appeals court affirmed Young's judgment about the hybrid contract/duty-of-fair-representation claim and instructed the District Court to dismiss the remaining claims for lack of subject matter jurisdiction.

The plaintiffs were Beverly Copeland, Michael Houchin, Marc Ancelet, Tim Simpson, and Ron Turk. They were represented by Indiana attorney Michael Kendall.

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