Is a supervisor's error sufficient to establish a binding past practice?

Two recent arbitration awards on grievances brought by AFSCME Council 65 address this question.

Addressing a dispute concerning a claim for pay for travel time, Arbitrator Thomas Gallagher has rejected the Union's grievance and their claim that the employer (Allina Hospitals and Clinics)  breached an established past practice when it refused to pay travel time to two bargaining unit
employees.

 Those employees, like others at the Employer's Faribault Clinic, were occasionally required to report for the day to the employer's training facility, located approximately fifty miles away from the clinic at which they normally worked. The parties stipulated that "for many years" employees were paid for the time they spent traveling to and from the training facility and that vouchers were submitted to the employees' immediate supervisor for approval and were routinely approved.

In May of 2011, an eleven year employee of the employer, assumed the position of Clinic Manager at Faribault. In April of 2012 she became aware of the practice of payment for the travel time and ceased approving the payments. She did so because "the practice was contrary to Allina's travel time policy ...the practice had occurred because of the error of the immediate supervisors responsible for approving wage-claim vouchers, and ... none of the other Allina clinics followed the practice." The Union pursued a grievance to Arbitration and on January 12, 2014 Arbitrator Thomas Gallagher issued a decision.

The Arbitrator rejected the Union's claim that the prior payments had established a binding past practice. He noted that past practice is traditionally used to show a mutually accepted definition of ambiguous contract language,  to demonstrate an agreement to change a clear contract provision or to establish an agreement to add an entirely new provision to the contract. With regard to the latter two uses, Arbitrator Gallagher observed: 

       the evidence must show that the parties reached an agreement  to give the practice at issue binding, contractual effect in the future. To do so, evidence must show that the practice is unequivocal, clearly enunciated and acted upon, readily ascertained over a reasonable  time and accepted by both parties. As stated in Control Data Corp., 69 LA 665, 669 (Hatcher 1971), a practice "to be enforceable, must be supported by the mutual agreement of the parties. Its binding quality is due not to the fact that it is a past practice, but rather to the agreement on which it is based." In other words, a practice can rise to the level of a contractual obligation only if both parties show that they accept it as such. There must be evidence that the party to be bound by the practice intends to be bound by it in the future.

The Arbitrator concluded that while the evidence showed that the immediate supervisors had authority to approve the vouchers, "they did not have the authority to enter into a binding contractual obligation on behalf of the Employer that would supersede the travel time policy." Rejecting the Union's similar argument under the FLSA, Arbitrator Gallagher concluded that a "custom and practice" could not be based on the error of supervisors who had no authority to create policy.

In an earlier arbitration involving the Union and Greenway School District No. 316, Arbitrator David Paull also addressed the past practice question. Faced with somewhat similar arguments (involving a change in the method of calculating overtime), Arbitrator David Paull concluded that, while the contract was silent on the matter, the School District's 30 year practice of including all paid time in the calculation of overtime was a binding past practice. The District maintained that it had only recently discovered the practice, and claimed that it had been the product of a mistake or unapproved behavior. Arbitrator Paull noted that the denial of knowledge of the practice on the part of the superintendents was insufficient to overcome evidence of a "clear, unequivocal and consistent practice." He held:

        The concept that there can be no mutuality without actual knowledge is, at first glance, both a reasonable and attractive one. Mr. Adams and Ms. Jorgenson are both relatively new to District administration. Their reaction to the discovery of the practice, and their desire to make immediate changes, is completely understandable.
       However, "mutuality," not "knowledge" is what is required by this analysis. In this case, the length of time over which this practice has existed is sufficient to establish its mutual acceptance by both sides. The cases teach that mutually acceptability can be demonstrated, even in the absence of knowledge on the part of recent administrators, based on well established mutually accepted prior custom. Superintendent Adams and Ms. Jorgenson may not have been aware of the practice. But the mutual acceptability of the custom is implied based on the evidence.

Accordingly he sustained the grievance and ordered the affected employees made whole for their losses.

Arbitrator Gallagher's award can be found here.  Arbitrator Paull's here.