Category: Bad Faith Claims

Employee Fails to Prove That Union Acted Arbitrarily or in Bad Faith When Refusing to Arbitrate His Termination

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Recently, the United States District Court for the Eastern District of Pennsylvania ruled in favor of an employer’s motion for summary judgment denying Plaintiff’s hybrid claim for breach of contract/unfair representation. Smokowicz v, Graphic Packaging Int’l, Inc., 2018 U.S. Dist. LEXIS 94099 (E.D. Pa. 2018). Plaintiff Micheal D. Smokowicz (“Smokowicz”) brought claims for breach of contract against his former employer, Graphic Packaging International, Inc. (“Graphic”) for their alleged violation of § 301 of the Labor Management Relations Act; and a claim against his union for failure to provide fair representation under 29 U.S. C. § 159(a).  In order for a plaintiff to succeed on a § 301/fair representation claim, the plaintiff must prove both breach of contract and the union’s failure to provide fair representation. The Court determined that Smokowicz failed to prove that the Union breached its duty of fair representation; and thus, the Court was not required to rule on the employer’s alleged breach.

In this present matter, Smokowicz was involved in multiple incidents leading up his termination. Before Smokowicz’s termination, Graphic attempted to terminate him for violating the company’s anti-harassment and violence policy. In lieu of terminating Smokowicz, his union was able to negotiate a Last Chance Agreement which allowed for Smokowicz to return to his previous position under the condition that any future violation of the standard of conduct will be cause for termination. Three years following the Last Chance Agreement Smokowicz was terminated for mislabeling packages. In an attempt to resolve the issue, Smokowicz’s union attended numerous meetings with the Human Resources Department and supervisors at Graphic with the goal of allowing Smokowicz to return to work. After days of negotiating and pleading with Graphic, the Union informed Smokowicz that it believed that it could not prevail in arbitration and that it would not proceed any further with a grievance.

The Court ruled that in order for a claim that a union breached its duty of fair representation, the plaintiff must present evidence demonstrating that the union’s conduct was arbitrary, discriminatory, or in bad faith. Previous precedents have defined “arbitrary conduct” as being irrational and being without a rational basis or explanation. Further, mere ineptitude or negligence is not sufficient to establish conduct is “arbitrary.”  Under this standard, even if a more experienced representative would have used a different strategy or achieved a different result, the plaintiff cannot successfully claim that the union acted arbitrary.

The standard for bad faith is much more ambiguous, and findings of bad faith “require more than unsupported allegations.” The Third Circuit has held that a plaintiff must show that “the union and its representatives harbored animosity towards the employee; and . . . that animosity manifested itself as a material factor in the union’s handling of the employee’s grievance.” The plaintiff, when claiming bad faith, must present evidence in the record to support such allegations of animus and that the union’s animus towards the plaintiff manifested itself in the handling of the plaintiff’s employment grievance.

Even when viewing the facts in the most favorable light to Smokowicz, the Court determined that he was unable to demonstrate that the Union’s conduct was without a “rational basis or explanation,” or that the Union manifested any animosity towards Smokowicz. The Union had already successfully negotiated Smokowicz’s previous termination, and although it did not pursue a formal grievance regarding his second termination; the Union did not act in bad faith or breach its duty to provide fair representation.

At the Law Offices of Sidkoff, Pincus & Green our experienced Philadelphia employment lawyers handle many types of legal matters, including contract law. If you are interested in having a consultation with one of our Philadelphia business lawyers, please call us at 215-574-0600 or contact us online.

Pennsylvania Supreme Court Rules Proving Dishonest Purpose or Motive is Not Necessary to Prevail on Bad Faith Insurance Claims

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In a recent landmark decision, the Pennsylvania Supreme Court recognized that insurance policyholders do not need to demonstrate an insurance company’s dishonest purpose or motive to prevail on bad faith claims against their providers.

In Rancosky v. Washington National Insurance Company, No. 28 WAP 2016, 2017 WL 4296351 (Pa. 2017), the plaintiffs were husband and wife, Matthew and LeAnn Rancosky, who purchased a “cancer insurance policy” for Mrs. Rancosky as a supplement to her primary employer-based health insurance. To pay for this policy, Mrs. Rancosky’s employer automatically deducted bi-weekly payments from her paycheck. Most importantly, her policy contained a waiver-of-premium provision which excused premium payments if she became disabled due to cancer. During Mrs. Rancosky’s employment, she was diagnosed with ovarian cancer. She subsequently aimed to invoke the policy provision when she could no longer work due to disability resulting from her disease. After submitting a physician’s statement and waiver-of-premiums forms, Mrs. Rancosky believed her premiums had been waived and ceased making payments. Defendant later conducted a policy audit two years later and, upon discovery of the plaintiff’s ceased payments, deemed her policy to have lapsed. They subsequently denied her claim for further benefits. Mrs. Rancosky sought reconsideration of their decision alleging inconsistent filings and erroneous information stated by her physician.

Upon the provider’s denial of her request for reconsideration, Plaintiffs brought suit against Defendant for breach of contract and bad faith under the Pennsylvania bad faith statute, 42 Pa.C.S.§8371. To prevail on a claim under this statute in Pennsylvania, the policy holder must satisfy a two-part test, presenting clear and convincing evidence that: (1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis. The court in Rancosky ultimately ratified this test in its verdict, and ruled that policyholders no longer need to demonstrate an insurer’s motive of self-interest or ill-will to prevail on a bad faith claim. The court stated that this requirement creates an unduly high threshold for policyholders to meet and expanded the reach of the statute to provide greater opportunity for policyholders to prevail on their claims.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.