Can an arbitrator disregard a last chance agreement?

Deciding what it describes as a case involving "unusual labor arbitration issues," the Eighth Circuit  overturns a district court and substantially confirms an arbitrator's award.

Grievant was employed by Associated Electric Cooperative, Inc. After being selected for a random drug test, grievant informed the Company that the test would show a positive result. He explained that he had smoked marijuana with family members while on leave to attend his brother's funeral. Grievant declined union representation, signed a standard form last chance agreement, and was suspended to undergo drug dependency treatment. When the test results were returned a little more than a week later, however, they were negative. Nevertheless, the Company kept grievant on the last chance agreement and continued his suspension and treatment. During his treatment grievant tested positive on two occasions and the Company terminated his employment prior to his return to work.

The Union (IBEW Local No. 53) grieved the termination and submitted the dispute to arbitration. The arbitrator upheld the grievance. He determined that the lca was "unconscionable" since the initial negative drug test established grievant had not broken any work rule, and that the continuation of the suspension after learning of the negative results was "indefensible."  He ordered the Company to reinstate grievant with back pay.

The Company sought to set side the award, and, in a decision discussed here, the district court determined that the arbitrator had exceeded his authority by disregarding the last chance agreement. The Union appealed, and the Eighth Circuit has reversed.

The Circuit court described the issue before it as:

 When an employer and employee enter into a last chance agreement ("LCA") enforcing the employer's drug policy without the union's participation, the employer subsequently invokes the LCA provision mandating discharge in the event of a violation, and the union claims this discipline was contrary to the "just cause" limitation in the grievance and arbitration provisions of the collective bargaining agreement ("CBA"), what is the appropriate standard of review (i) for the arbitrator, and (ii) for this court in reviewing the arbitrator's award?

While observing that it agreed with the district court's determination that the last chance agreement was not unconscionable when initially entered into, the Court concluded that the district court erred by reading the Court's previous decision in Coca-Cola Bottling Co. v. Teamsters Local No. 688 too broadly. In the Coca-Cola case, the court overturned an arbitrator who had disregarded a last chance agreement entered into between the company and union in resolution of a grievance. Here, however, the Union was not a party to the agreement and the lca itself was premised on the "mutual mistake" that grievant had violated the drug policy. In reviewing the instant grievance, the arbitrator "correctly focused" his decision on the just cause issue. According to the Court:

This focus did not permit the arbitrator to ignore the LCA, but it did mean he was not contractually bound to apply the LCA's mandatory termination clause if the evidence persuaded him there was not just cause to do so.

Noting the narrow scope of review, the Court concluded that the arbitrator decision on the termination was within his authority and his award should be confirmed.

The concurring opinion agreed that the award should be confirmed, but would not reach as far as it believed the majority had in determining that the absence of the union's participation in the lca rendered it unenforceable. 

The Court's opinion in Associated Electric Cooperative, Inc. v. International Brotherhood of Electrical Workers, Local No. 53, can be found here.