Sunday, March 27, 2016

"No-add" language in cba doesn't prevent arbitrator from modifying contract

Can an arbitrator rewrite a contract to reflect the original intent of the parties despite language prohibiting the arbitrator from adding to or modifying the agreement? Arbitrator Michael Rapport said yes, and the District Court in Arizona has now confirmed that award. 

The cba between Asarco and the Steelworkers called for the payment of a Copper Price Bonus to unit employees on a quarterly basis, computed relative to the current price of copper. The agreement limited eligibility to employees accruing credit under the pension plan at the end of the calendar quarter.

In negotiation for a successor contract in 2011, the Company proposed that new employees would not be covered by the pension plan. It was undisputed, however, that there was no discussion of the impact of that proposal on the eligibility of new employees for the Copper Price Bonus or the link between pension eligibility and  eligibility for the bonus plan. The new agreement, with the Company's language on elimination of pension eligibility for new employees, was ultimately agreed to by the Union and ratified by the members.

After agreement was reached, one of the Company's HR representatives asked the Company's Director of Labor Relations about the impact of the pension language on bonus eligibility, explaining that as he read the language new employees were no longer eligible. The Director responded that "we have an issue here" and that this was new information for him. It was also undisputed that for several months after the new agreement became effective new employees were told that they would be eligible for the bonus.

As the time for payment arrived, the Company notified  the Union that it would not be paying the bonus to new employees. It maintained that the express language of the agreement rendered ineligible new employees not participating in the pension plan. The Union grieved the Company's decision and the dispute was submitted to Arbitrator Rappaport for resolution.

The Arbitrator issued an award upholding the grievance. He noted that while no contract language supported the Union's position, the doctrine of mutual mistake applied and warranted reformation of the contract. He found that neither party anticipated the impact of the elimination of pension eligibility on eligibility for the bonus payment. He rejected the Company's argument that language in the cba that withheld from the arbitrator "jurisdiction or authority to add to, detract from or alter in any way the provisions of [the] Agreement" prevented him from reaching such a conclusion. He observed:

What all this means is that the ultimate issue in this case is whether the Union met its heavy burden of showing that there was a mutual mistake made by the parties in negotiating and adopting the July 1, 2011 MOA. In situations of that kind, it has been recognized by numerous, but not all, arbitrators and other authorities that in the interests of justice and fairness, the arbitrator can rewrite a contract to correct what appears to be an obvious mutual mistake.

Accordingly the Arbitrator modified the cba to explicitly include eligibility of new employees for the Copper Price Bonus.

Asarco sought to set aside Arbitrator Rapport's award, arguing that he had exceeded his authority and that he had ignored the "no-add" provision of the cba. The Court summarized Asarco's claim:

 ASARCO argues that the Arbitrator exceeded the express jurisdiction and authority granted to him by the parties and dispensed his own brand of industrial justice by issuing an award that fails to draw its essence from the BLA [Basic Labor Agreement]  because it expressly violates the BLA. ... Citing United Food & Comm'l Workers Union, Local 1119, AFL-CIO v. United Markets, Inc.784 F.2d 1413, 1415 (9th Cir. 1986), ASARCO contends that if "the arbitrator's interpretation [of the collective bargaining agreement] violates the terms of the agreement, the court cannot enforce the award." (Doc. 1 at 11.) According to ASARCO, the award must be vacated because the Arbitrator added a new five-line term to the BLA, despite the BLA's express language stating that the Arbitrator did not have authority to vary the terms of the agreement.

Rejecting this claim, the District Court concluded :

The Court finds that the "no-add" provision did not close the door on the Arbitrator's authority to fashion relief when the undisputed facts revealed mutual mistake by the parties. The Arbitrator's reformation of the collective bargaining agreement only corrected the defect in the written document so that it reflected the true terms of the parties' agreement. The Arbitrator did not exceed his authority by applying ordinary principles of mutual mistake and reformation in the context of the "no-add" provision of the BLA.

The Court accordingly denied Asarco's request to vacate the award and granted the Union's request that the award be confirmed. The Court's decision can be found here.

A similar resolution is discussed at Correcting mutual mistake is not the same as modifying the contract

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