Court Opinion

ID: 4712216
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:37:57.506465+00
Date Added: 2024-06-11T08:07:12.538212
License: Public Domain

Madsen, J.
(dissenting) — The majority opinion is con*225trary to established law from the United States Supreme Court and this court, which leads me to respectfully dissent.
The United States Supreme Court has held, and this court has recognized, that social security is not contractual in nature, and social security contributions do not give rise to any vested rights. For that reason, in a case similar to this one, this court acknowledged that social security does not constitute deferred compensation of a contractual nature unless the social security contributions are the subject of a contract independent of the unique federal statutory scheme of social insurance. Accordingly, this court held that if a collective bargaining agreement includes social security contributions within its agreed subjects, then social security falls within the general rule that a pension granted to a public employee is in the nature of deferred compensation for services rendered.
Therefore, unless social security and Medicare contributions in this case were covered by the parties’ collective bargaining contract, any resulting benefits would not be contractual in nature nor would they be deferred compensation. That would mean the employees in this case would not be contractually entitled to a refund of the employer’s share of social security and Medicare contributions or continuation of corresponding benefits. Alternatively, if these contributions were covered by the parties’ collective bargaining agreement, then this case must be dismissed because the Union did not exhaust its contractual remedies—it did not take this matter to arbitration as required under the collective bargaining agreement. Which of these two alternatives follows depends, necessarily, upon interpretation of the collective bargaining agreement—was social security a subject of the parties’ agreement? However, interpretation of the collective bargaining agreement is, by the express terms of the parties’ agreement as well as by general rules applying to arbitration provisions, solely within the arbitrator’s authority. Therefore, this court does not have jurisdiction to reach the merits of this case, and it should be dismissed.
*226I
At issue is whether members (the fire fighters) of the International Association of Firefighters, Local 1789 (the Union) are entitled to a refund of the contributions paid by their employer, Spokane Airports (the Airport), for social security and Medicare after the fire fighters opted out of the social security and Medicare program and, following the opt out, continuance of employer contributions toward a corresponding retirement program until the end of the period covered by the collective bargaining agreement.
At the time the fire fighters opted out of the federal social security system, their collective bargaining agreement with the Airport provided that “[grievances or disputes ... involving interpretation or application of [the agreement] shall be settled” through the grievance and arbitration procedures established by the agreement. Clerk’s Papers (CP) at 36. The Airport contends that the Union was required, prior to bringing this suit, to arbitrate. The majority holds that arbitration is not required. The majority relies on Bakenhus v. City of Seattle, 48 Wn.2d 695, 698, 296 P.2d 536 (1956), reasoning that social security and Medicare coverage constitute a “ ‘pension granted to a public employee’ ” that is “ ‘deferred compensation for services rendered.’ ” Majority at 218 (quoting Bakenhus, 48 Wn.2d at 698). Bakenhus held that government pension rights are contractual in nature and become vested8 when the employee begins public employment. The majority says that the Airport therefore has a duty to provide the fire fighters a corresponding benefit after the fire fighters opted out of the social security and Medicare plans. The majority says, though, that this obligation does not arise from the collective bargaining agreement, but instead is an inferred contractual obligation on the part of the employer that flows from the compensatory nature of the social security *227benefits in this employment relationship. Therefore, the majority reasons, the issue whether the employer’s contributions should be refunded to the fire fighters and corresponding benefits provided for the duration of the collective bargaining agreement is not a matter of interpretation or application of the collective bargaining agreement. The majority maintains that Bradford v. Data Processing Joint Board, 106 Wn.2d 368, 722 P.2d 95 (1986) is not to the contrary.
The majority’s analysis does not follow Bakenhus (and similar cases) and Bradford. It conflicts with the decisions in Flemming v. Nestor, 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960) and Caughey v. Employment Security Department, 81 Wn.2d 597, 503 P.2d 460 (1972) concerning the nature of social security. Finally, the majority does not follow the substantial body of state and federal decisional law concerning arbitration provisions in collective bargaining agreements.
Bakenhus and similar cases do not support the majority’s proposition that in this case the contractual nature of public employees’ retirement rights flows from the compensatory nature of social security. In Bakenhus, the public employee’s pension was established by state statutes. Each of the cases cited in Bakenhus for the proposition that the obligation to pay a public employee’s pension is an obligation that is contractual in nature involved an obligation arising from state pension statutes. See Benedict v. Bd. of Police Pension Fund Comm’rs, 35 Wn.2d 465, 214 P.2d 171 (1950); Luellen v. City of Aberdeen, 20 Wn.2d 594, 148 P.2d 849 (1944), overruled on other grounds by Stenberg v. Pac. Power & Light Co., 104 Wn.2d 710, 709 P.2d 793 (1985); Ayers v. City of Tacoma, 6 Wn.2d 545, 108 P.2d 348 (1940). The same is true of two of the cases cited by the majority. See Horowitz v. Dep’t of Ret. Sys., 96 Wn.2d 468, 635 P.2d 1078 (1981); Eisenbacher v. City of Tacoma, 53 Wn.2d 280, 333 P.2d 642 (1958). In Wilder v. Wilder, 85 Wn.2d 364, 534 P.2d 1355 (1975), also cited by the majority, a federal military pension was at issue. In Frank v. Day’s, Inc., 13 *228Wn. App. 401, 535 P.2d 479 (1975), cited by the majority for the proposition that the Bakenhus rule is not limited to public employment, a retirement trust contract was voluntarily established by the employer. In addition, cases cited in International Ass’n of Firefighters, Local No. 2088 v. City of Tukwila, 22 Wn. App. 683, 591 P.2d 475 (1979), relied on by the majority, involve public pension statutes, pensions arising from private collective bargaining agreements, and voluntary employer plans. City of Tukwila, 22 Wn. App. at 687-88 (citing Bakenhus, 48 Wn.2d at 698; Dorward v. ILWU—PMA Pension Plan, 75 Wn.2d 478, 482-83, 452 P.2d 258 (1969) (private collective bargaining agreement); Frank, 13 Wn. App. at 405 (citing Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wn.2d 911, 468 P.2d 666 (1970) (employer voluntarily contracted with insurer to provide pension plan for employees); DeRevere v. DeRevere, 5 Wn. App. 741, 491 P.2d 249 (1971) (employer-established noncontributory retirement plan))).
In each case, the employer’s “contractual” obligation to pay a pension arose because of pension statutes or an actual contract establishing pension rights. In none of the cases did a contractual obligation arise solely because benefits were characterized as compensatory. Thus, Bakenhus and similar cases do not support the majority’s conclusion that based upon the compensatory nature of social security the Airport had a contractual obligation to refund the employer contributions and continue comparable retirement funding payments. In short, there must be something that can be characterized as the “contract” source of the obligation.9
United States Supreme Court precedent is clear that social security is not such a source; it is not contractual in nature:
The Social Security system may be accurately described as a form of social insurance, enacted pursuant to Congress’ power *229to “spend money in aid of the ‘general welfare,’ ” Helvering v. Davis, [301 U.S. 619,] 640[, 57 S. Ct. 904, 81 L. Ed. 2d 1307 (1937)], whereby persons gainfully employed, and those who employ them, are taxed to permit the payment of benefits to the retired and disabled, and their dependents. Plainly the expectation is that many members of the present productive work force will in turn become beneficiaries rather than supporters of the program. But each worker’s benefits, though flowing from the contributions he [or she] made to the national economy while actively employed, are not dependent on the degree to which he [or she] was called upon to support the system by taxation. It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.
Flemming, 363 U.S. at 609-10; see also Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 52, 106 S. Ct. 2390, 91 L. Ed. 2d 35 (1986) (Social Security Act creates no contractual rights); Hisquierdo v. Hisquierdo, 439 U.S. 572, 575, 99 S. Ct. 802, 59 L. Ed. 2d 1 (1979) (“[l]ike Social Security,” railroad retirement benefits are not contractual), superseded on other grounds by statute as noted in Martin v. Martin, 385 Pa. Super. 554, 561 A.2d 1231 (1989); Richardson v. Belcher, 404 U.S. 78, 80, 92 S. Ct. 254, 30 L. Ed. 2d 231 (1971) (“The fact that social security benefits are financed in part by taxes on an employee’s wages does not in itself limit the power of Congress to fix the levels of benefits under the Act. . . [n]or does an expectation of public benefits confer a contractual right to receive the expected amounts.”).
The social security system is quite unlike the statutory and other pension plans that come under the Bakenhus rule. As this court said in Bakenhus, 48 Wn.2d at 701, the Legislature may not modify a public employee’s pension rights prior to his or her retirement except for modifications “for the purpose of keeping the pension system flexible and maintaining its integrity.” And, because the rights are contractual in nature, if changes are made that are detrimental to the employee, some corresponding benefit must *230be provided. Bakenhus, 48 Wn.2d at 703; see also Wilder, 85 Wn.2d at 367; Eisenbacher, 53 Wn.2d at 283-84. In contrast, the Social Security Act has, since its enactment, contained an express reservation by Congress of “ ‘[t]he right to alter, amend, or repeal any provision’ of the Act.” Flemming, 363 U.S. at 611 (quoting § 1104, 49 Stat. 648, 42 U.S.C. § 1304). Congress has considerable freedom to alter the social security system.
Thus, as this court said in Bradford, 106 Wn.2d at 374-75, there is no contractual relationship between the federal government and the individual employees covered by social security. Indeed, this court has expressly held that social security benefits do not fall within the Bakenhus rule that “payments under government pension plans are a form of deferred compensation for past services rendered to the employer.” Caughey, 81 Wn.2d at 600. The court said that social security benefits are not a form of deferred compensation, but instead “constitute benefits under a unique federal social insurance program.” Id.
In light of the noncontractual nature of social security in and of itself, the court in Bradford realized that the Bakenhus rule would not apply, as Caughey held, unless there was a “contract” source of social security (as pension rights) independent of the social security laws. It is for this reason that the court’s discussion of the collective bargaining agreement in Bradford is so important. The court distinguished Caughey, concluding that the social security benefits in Bradford were contractual in nature because the City and County in the case “entered into a voluntary agreement with their employees, pursuant to their collective bargaining agreement, whereby the City and County agreed to contract with the federal government... to obtain coverage under the federal social security act.” Bradford, 106 Wn.2d at 375 (emphasis added) (citations omitted). The court therefore concluded that “where the relationship involved is between the State and its employees, and participation in the social security program is pursuant to a collective bargaining agreement, the right created is contractual.” Id.
*231The majority incorrectly states that this dissent reads Bradford as saying that social security payments do not fall within the Bakenhus rule unless they are the subject of an express term in the collective bargaining agreement. As the foregoing shows, this dissent does not read Bradford as the majority asserts. Bradford does correctly recognize that social security is not contractual, and that in order for the Bakenhus rule to apply, there must be an independent contract source of the obligation to contribute to social security. The relevant question is not whether there is an express or implied or inferred contract term giving rise to the obligation, but whether there is such a contract term at all. That depends upon whether there is a contract in which the term, express or implied or inferred, exists.10 Unfortunately, the majority never identifies a contract source for the inferred contractual obligation it imposes in this case.
The majority also incorrectly states that Bradford’s reference to the collective bargaining agreement is simply a comment on the facts. The court was clearly not just commenting on the facts, but was answering the respondent’s argument based upon Flemming and Caughey that social security benefits are noncontractual in nature. Bradford, at 374-75.* 11
*232The rule from these cases is clear—unless social security coverage was an agreed part of the parties’ collective bargaining agreement, it is not contractual in nature and it does not come within the Bakenhus rule. Aside from the collective bargaining agreement, there is no other “contract” source of rights that could have converted noncontractual social security benefits into benefits that are “contractual” in nature.
II
As noted, the collective bargaining agreement contains an arbitration provision that explicitly states that interpretation and application of the agreements’ provisions are matters that are subject to arbitration. For this reason, as well as well-settled principles applicable to arbitrability, the issue in this case is subject to arbitration.
Initially, it must be remembered that “[a]greements to arbitrate are valid and will be enforced by the courts.” Tombs v. N.W. Airlines, 83 Wn.2d 157, 160, 516 P.2d 1028 (1973). As this court has noted:
“It is the evaluation and conclusion of the arbitrator, and not those of the courts, that the parties have promised to abide by. There is no reason why, in the face of their solemn agreement, the parties should be given an alternative of invoking time consuming and costly machinery of the courts in lieu of the relative expedience of an arbitration proceeding.”
83 Wn.2d at 161 (quoting Hanford Guards Union of Am., Local 21 v. Gen. Elec. Co., 57 Wn.2d 491, 498, 358 P.2d 307 (1961)).
State courts have jurisdiction over employer-labor disputes, but that jurisdiction must be exercised in accord with substantive principles of federal labor law. Retail Store Employees Local 631 v. Totem Sales, Inc., 20 Wn. App. 278, *233281, 579 P.2d 1019 (1978). Agreements to arbitrate public sector management-labor disputes are governed by the rules set forth in the “Steelworkers’ Trilogy.” Peninsula Sch. Dist. No. 401 v. Pub. Sch. Employees, 130 Wn.2d 401, 413, 924 P.2d 13 (1996); see United Steelworkers v. Am. Mfg. Co., 363 U.S. 564, 80 S. Ct. 1343, 80 S. Ct. 1363, 4 L. Ed. 2d 1403, 4 L. Ed. 2d 1432 (1960); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S. Ct. 1347, 80 S. Ct. 1363, 4 L. Ed. 2d 1409, 4 L. Ed. 2d 1432 (1960); United Steelworkers v. Enter. Wheel & Car Corp., 363 U.S. 593, 80 S. Ct. 1358, 80 S. Ct. 1363, 4 L. Ed. 2d 1424, 4 L. Ed. 2d 1432 (1960). Under these decisions, the court must decide whether the parties have agreed to arbitrate a particular dispute. However, in making this determination, the court cannot decide the merits of the controversy; instead, the court must determine whether, on its face, a claim is covered by the arbitration provision. Am. Mfg., 363 U.S. at 568. “[C]ourts . . . have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.” Id. (footnote omitted); accord Peninsula Sch. Dist., 130 Wn.2d at 413; Meat Cutters Local No. 494 v. Rosauer’s Super Mkts., Inc., 29 Wn. App. 150, 154, 627 P.2d 1330 (1981). A court must not “become entangled in the construction of the substantive provisions of a labor agreement, even through the back door of interpreting the arbitration clause, when the alternative is to utilize the services of an arbitrator.” Warrior, 363 U.S. at 585; accord Council of City & County Employees v. Spokane County, 32 Wn. App. 422, 427, 647 P.2d 1058 (1982).
Doubts must be resolved in favor of coverage, and if there is any interpretation of the contract that encompasses the disputed claim, arbitration must follow. Warrior, 363 U.S. at 582-83; Peninsula Sch. Dist., 130 Wn.2d at 413-14; Int'l Bhd. of Elec. Workers Local Union 483 v. City of Tacoma, 20 Wn. App. 435, 437, 582 P.2d 522 (1978). There is a strong presumption in favor of arbitrability. Peninsula Sch. Dist., *234130 Wn.2d at 414; Olympia Police Guild v. City of Olympia, 60 Wn. App. 556, 560, 805 P.2d 245 (1991) (citing Warrior, 363 U.S. at 581). All disputes are presumed to fall with the arbitration provision unless negated expressly or by clear implication. Peninsula Sch. Dist., 130 Wn.2d at 414; Klickitat County v. Beck, 104 Wn. App. 453, 462, 16 P.3d 692 (2001); Council of County & City Employess, 32 Wn. App. at 424-25. “Apart from matters that the parties specifically exclude, all of the questions on which the parties disagree must. . . come within the scope of the grievance and arbitration provisions of the collective [bargaining] agreement.” Warrior, 363 U.S. at 581 (emphasis added); accord Peninsula Sch. Dist., 130 Wn.2d at 415.12
Here, the dispute about refund of social security and Medicare contributions and continuation of corresponding benefits is subject to arbitration. The parties’ arbitration provision requires arbitration of disputes involving the interpretation or application of the collective bargaining agreement. The parties have not expressly or by clear implication excluded the issue regarding social security benefits from their collective bargaining agreement, and the Union has not rebutted the presumption of arbitrability. Moreover, whether the agreement encompasses social security is a matter that requires interpretation of the agreement. Enter. Wheel & Car Corp., 363 U.S. at 599 (question of interpretation of a collective bargaining agreement is for the arbitrator); see, e.g., Local Union No. 77, Int'l Bhd. of Elec. Workers v. Pub. Util. Dist. No. 1, 40 Wn. App. 61, 64, 696 P.2d 1264 (1985) (a court’s inquiry is at an end if the complaint on its face calls for ah interpretation of the agreement; where the need for contract interpretation *235cannot be characterized as “patently baseless,” dispute falls within the scope of the parties’ labor agreement) (quoting, among other opinions, Hanford Guards Union of Am., Local 21, 57 Wn.2d at 494, 498); Shoreline Sch. Dist. No. 412 v. Shoreline Ass’n of Educ. Office Employees, 29 Wn. App. 956, 961, 631 P.2d 996, 639 P.2d 765 (1981) (question whether shortened work week was an arbitratable issue because it required interpretation of the parties’ collective bargaining agreement). There are provisions related to wages and compensation in the parties’ collective bargaining agreement that might be susceptible to an interpretation that social security is within the parties’ agreement. Further, there may be a question whether social security is within the bargaining agreement in light of past practices and bargaining history. “The labor arbitrator’s source of law is not confined to the express provisions of the contract, as the industrial common law—the practices of the industry and the shop—is equally a part of the collective bargaining agreement although not expressed in it.” Warrior, 363 U.S. at 581-82; see, e.g., Meat Cutters Local No. 494, 29 Wn. App. at 159 (“interpretation” was express subject of arbitration provision; question whether employer’s change in appearance standards was improper in light of past history and bargaining practices required interpretation of the labor agreement and was thus subject to arbitration).
Finally, the majority’s reasoning necessarily leads to the conclusion that this case should go to arbitration, but the majority refuses to follow its own logic. The majority repeatedly characterizes the employer’s obligation as arising because of the “compensatory nature” of social security in this case. If the majority means that the social security benefits are compensatory in nature, then it is wrong under federal law. However, I doubt that the majority intends to flout federal law. On the other hand, if the majority means that the contributions to social security and Medicare are compensatory in nature, as it appears, then they are part of the fire fighters’ wage and benefit package. As such, they should fall within the collective bargaining agreement—a *236question clearly for the arbitrator under both state and federal law—and thus the majority’s characterization itself virtually requires that this matter be submitted to an arbitrator.
Conclusion
Social security is not, as a matter of federal law, contractual in nature. If, however, it is the subject of collective bargaining, it may be considered as deferred compensation for services rendered. And, if so, employees may be entitled to any refund of the employer’s share of social security and Medicare contributions after the employees opt out of the federal program, and to continuation of like contributions toward a retirement program for the duration of their collective bargaining agreement. Thus, the question here, whether the fire fighters are entitled to refunds and corresponding benefits for the rest of the period covered by their collective bargaining agreement, depends upon whether the parties contracted for social security coverage in that agreement. However, as a matter requiring interpretation of the collective bargaining agreement, the issue in this case is subject to the arbitration provision in the agreement. Therefore, the issue should have been submitted to arbitration; it is not properly the subject of a court action. For this reason, this case should be dismissed.
Johnson and Sanders, JJ., concur with Madsen, J.
After modification, further reconsideration denied July 18, 2002.

 “Vesting” in this context means “the contractual right to a pension substantially in accord with the statutes as they existed when the employee begins service.” Noah v. State, 112 Wn.2d 841, 845 n.1, 774 P.2d 516 (1989).

 Apparently the majority believes that some undefined contract obligation exists between the Airport and the fire fighters and that this obligation exists outside of the collective bargaining agreement. Simply citing an “employment relationship,” however, does not explain why the Airport has a contractual obligation to contribute to the social security system and Medicare.

 Interestingly, a careful reading of Bradford v. Data Processing Joint Board, 106 Wn.2d 368, 722 P.2d 95 (1986) does not disclose whether the term obligating the employer to contribute to social security was express or implied, though from the context one might infer it was express.

 The majority relies heavily on a Court of Appeals’ opinion, International Ass’n of Firefighters, Local No. 2088 v. City of Tukwila, 22 Wn. App. 683, 591 P.2d 475 (1979). It is unclear from that opinion whether social security was part of the parties’ collective bargaining agreement. The court there noted that a copy of the contract was not part of the record, id. at 687, and that the parties agreed that the agreement did not speak to either social security or private pension plans, id. at 688 n.2, but also observed that payments to social security “were properly considered compensatory during arbitration proceedings between the City and the Union in 1976” (the year that the fire fighters in the case opted out of the social security program), id. at 688. This court in Bradford, 106 Wn.2d at 372, said that in Tukwila the city “entered into an agreement with its employees obligating the City to contribute to the federal social security system on behalf of all its fire fighters.” Whether accurate or not, this factual recitation in Bradford shows that this court believed that Tukwila was consistent with its analysis in Bradford, i.e., that factually social security was a subject of the collective bargaining agreement. In any event, the question of arbitrability was not before the court in Tukwila. In *232light, of Flemming v. Nestor, 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960), Caughey v. Employment Security Department, 81 Wn.2d 597, 503 P.2d 460 (1972), and Bradford, to the extent that Tukwila can be read as the majority reads it, it should be disapproved.

 The presumption of arbitrability noted in the “Steelworkers’ Trilogy” stems from § 301 of the Labor Management Relations Act of 1947, 29 U.S.C. § 185. Wright v. Universal Mar. Serv. Corp., 525 U.S. 70, 77-78, 119 S. Ct. 391, 142 L. Ed. 2d 361 (1998). A presumption of arbitrability has also been found under the Federal Arbitration Act (FAA), 9 U.S.C. § 1. Wright, 525 U.S. at 78. (The Court recently held that the FAA applies to contracts of employment. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001)). A different standard applies where individual rights, such as claims under the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, are involved. See Wright, 525 U.S. at 78-79.