Labor & Employment Law Daily Wrap Up, ARBITRATION—3d Cir.: Labor contract did not require arbitration of health benefits dispute, says court, (Mar 24, 2026)

By Jason Albright, J.D.

Under the new contract’s merger clause, “any and all prior agreements, whether reduced to writing or not,” were “null and void and of no further force” unless identified and appended.

An IBEW local was not entitled to compel arbitration of a grievance alleging that a nuclear power plant operator failed to adjust its 2022 health care contributions by the percentage needed to satisfy a February 2022 arbitration award concerning the adjustment required by a prior labor contract, even though the new contract provided that a party may compel arbitration “of any matter relating to the interpretation of this Agreement,” the Third Circuit held. The new contract, which requires that the employer match any increases that it makes to its own health care plan each year, does not set a base rate of contributions or mandate a particular increase in payments, nothing in the record suggested that the employer increased funding for its own health care plan from 2021 to 2022, and the grievance rested “not on such an increase, but on the arbitration award,” the court found. Judge Smith dissented (International Brotherhood of Electrical Workers Local 29 v. Energy Harbor Nuclear Corp., No. 25-1066 (3d Cir. Mar. 23, 2026)).

Beaver Valley Power Station. Energy Harbor Nuclear Corporation, according to the court, owned and operated the Beaver Valley Power Station, a nuclear power plant in Pennsylvania. IBEW Local 29, in turn, represents roughly 400 of the plant’s employees. Before October 2021, the parties’ relationship was governed by both a labor contract and a set of framework agreements that “led Energy Harbor to operate the plant.”

2021 arbitration. In 2021, the parties had a benefits dispute and went to arbitration. Under the then-existing labor contract, the union could either choose Energy Harbor’s Flexible Benefits Plan or offer its own health care plan. If the union chose its own plan, Energy Harbor had to “contribute premium payments” to the union’s plan that were proportional to the premiums that it paid for its own plan. The contract mandated that Energy Harbor’s “monthly contributions [to the Union plan] … be increased by the same percentage as any increase incurred by [Energy Harbor’s] Health Care Plan from the previous year.”

Under the framework agreements, Energy Harbor also had to “provide [employees] the same [healthcare] benefits” that its predecessor company provided. And the union alleged that Energy Harbor violated these agreements by providing worse benefits than its predecessor.

February 2022 arbitration award. In February 2022, the arbitrator agreed. She found that, under the matching requirement, Energy Harbor should have raised its 2021 contributions by 6.7 percent rather than the 2.77 percent increase that it actually paid, and she ordered the company to pay the unions the difference. The arbitrator said nothing about 2022, and nothing in her order changed Energy Harbor’s health care plan.

New labor contract. Then, on October 1, 2021, Energy Harbor and the union signed a new labor contract. Three provisions, according to the court, are relevant.

First, as before, if the union chose to offer its own health care plan, Energy Harbor had to contribute premiums to it. And it again had to “increase[]” its contribution to the union plan “by the same percentage as any increase incurred by the Company’s Health Care Plan from the previous year.”

Second, the parties agreed to arbitrate disputes “as to the interpretation, application, or operation of any provision of” the labor contract, as well as “any matter relating to the interpretation of” the contract.

Third, under a merger clause, “any and all prior agreements, whether reduced to writing or not,” were “null and void and of no further force” unless identified and appended to the new labor contract. And neither the February 2022 arbitration award, which assessed Energy Harbor’s 2021 contributions, nor the framework agreements were identified or appended to the new contract.

2022 grievance. Later in 2022, the union believed Energy Harbor was still underpaying the contributions it owed the union health care plan. The union accordingly filed a grievance, alleging that “Energy Harbor failed to adjust the 2022 health care contributions by the percentage needed to satisfy the [February 2022] arbitration award.”

The union argued that, in setting its 2022 contribution amounts, Energy Harbor had failed to account for the 2021 benefits-payments increases awarded by the arbitrator. In turn, the union contended, the company owed higher contributions for 2022.

Employer’s refusal to arbitrate. Energy Harbor refused to arbitrate, asserting that the grievance related to the arbitration award and the framework agreements, not the new labor contract, so the new contract’s arbitration clause did not apply.

Suit to compel. Then the union filed suit in federal district court to compel Energy Harbor to arbitrate. Both sides moved for summary judgment.

Decision below and appeal. A magistrate judge recommended granting the union’s motion and denying Energy Harbor’s. She noted that the “broad” arbitration clause “provides that a party may compel arbitration ‘of any matter relating to the interpretation of this Agreement.’” She set aside Energy Harbor’s “extrinsic evidence … related to the reason for the Union’s demanded increase” because it “goes to the merits,” not arbitrability. Instead, she reasoned that because the grievance challenged Energy Harbor’s compliance with the contribution-increase provision (Art. VIII, ¶ C.2(a)), it implicated the arbitration clause. And because Energy Harbor had no “forceful evidence of a purpose to exclude the claim at issue,” the arbitration clause applied.

The district court adopted the magistrate judge’s recommendation, and Energy Harbor appealed to the Third Circuit.

Presumptively arbitrable. The appeals court initially found the dispute presumptively arbitrable because the arbitration clause is broad. The clause covers “any dispute or difference” regarding the “interpretation, application, or operation of any provision of this agreement,” and that language resembled another clause the Third Circuit found broad in a 1992 case.

Beyond clause’s scope. Notwithstanding the breadth of the arbitration clause, the grievance was “plainly beyond the arbitration clause’s scope,” according to the appeals court. Although the dispute was about how much Energy Harbor had to contribute toward the union’s health care plan, the new contract, in article Article VIII, did not set a base rate of contributions or mandate a particular increase in payments. It required only that Energy Harbor match any increases that it makes to its own health care plan each year. And nothing in the record suggested that Energy Harbor increased funding for its own health care plan from 2021 to 2022.

The dispute thus could not arise under Article VIII, according to the court, and “[i]n any event, the Union’s grievance rests not on such an increase, but on the arbitration award,” which was in turn “not an increase that Energy Harbor’s health care plan ‘incurred’ from 2021 to 2022.” That conclusion was bolstered, according to the Third Circuit, by the fact that “the arbitration award required compensation directly to the unions, leaving Energy Harbor’s health plan unchanged.”

“Any right that the Union claims flows only from that award, not from the collective-bargaining agreement,” concluded the appeals court. “The Union’s citation of the increase-matching provision is just window dressing.”

Dissent. In his dissent, Judge Smith argued that, flowing from the “strong” federal policy favoring the arbitration of labor disputes is the principle that, “even if it appears to the court to be frivolous, [a] union’s claim that [an] employer has violated [a] collective-bargaining agreement is to be decided, not by the court asked to order arbitration, but as the parties have agreed, by the arbitrator.” Here, the dissent noted, “the union seeks proper redress for a violation of an applicable CBA provision and thus its claim must be decided by an arbitrator.”

The case is No. 25-1066.

Judge: Bibas, S.

Attorneys: Amanda Bundick (Eberle & Bundick) for International Brotherhood of Electrical Workers, Local Union 29, AFL-CIO. Eric Baisden (Benesch Friedlander Coplan & Aronoff) for Energy Harbor Nuclear Corp.

Companies: International Brotherhood of Electrical Workers, Local Union 29, AFL-CIO; Energy Harbor Nuclear Corp.

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