Sunday, June 26, 2016

Recent Developments-Contract interpretation

Covenant of Good Faith and Fair Dealing

The cba between The Western Sugar Cooperative and the Teamsters creates two categories of employees. Employees who work at least 1680 hours within a twelve months period are classified as "year round employees." Employees failing to meet that threshold are categorized as "seasonal" employees. The cba provides greater employment security for year round employees. No provision of the cba explicitly limits the company's ability to lay off seasonal employees. When Western Sugar laid off two seasonal employees to prevent them from attaining the number of hours necessary for them to become year round employees the Teamsters filed a grievance. The dispute was submitted to Arbitrator Frederick Kessler for resolution. Arbitrator Kessler upheld the grievance. (His award can be found here) He concluded that the company's actions in laying off the employees specifically for the purpose of making them ineligible to become year round employees violated the implied "covenant of good faith and fair dealing." He observed:

If this practice is upheld, it makes meaningless the provisions of the Labor Agreement, which describes the process, which the parties agreed, an employee could attain year-round status. Arbitration cannot sanction an interpretation which makes a provision meaningless. Such an interpretation destroys or injures the right of the other party to receive the fruits of the contract.

Western Sugar sought to vacate the award, but the District Court refused to do so. The Court found that the Arbitrator was acting within his authority in interpreting the cba. Western Sugar Cooperative v. Teamsters Local 190. Rejecting the company's contrary claim, the Court noted:

Neither party disputes ... that the subject matter of the grievance was properly before the arbitrator, or that he had the authority to render a decision on the grievance. Instead, Western Sugar disputes the reasoning upon which the grievance was decided. This is, in essence, not a question of whether the arbitrator exceeded his boundaries but whether he correctly interpreted the CBA.

Western Sugar argues that there is no express provision in the CBA that could have supported the result found by the arbitrator and provides excerpts of testimony from the arbitration in support of its argument. But so far as the arbitrator's decision concerns construction of the contract, "the courts have no business overruling him because their interpretation of the contract is different from his." Enterprise Wheel & Car Corp.,363 U.S. at 599.

The Court concluded that the Arbitrator's reliance on implied terms was within his authority to interpret and apply the cba.

NLRB's refusal to defer to arbitrator's award overturned

The DC Circuit has refused to enforce a decision of the NLRB rejecting an arbitrator's award and finding that Verizon committed an unfair labor practice by telling employees to remove informational picket signs from their vehicles. Verizon New England v. NLRB  The cba waived employees' right to picket during the contract term. When a labor dispute arose prior to expiration of the cba, employees visibly displayed pro-union signs in cars parked on Verizon property and lined up so passers-by would see the signs. An arbitrator ultimately concluded that this activity was "picketing" prohibited by the language of the cba. Despite the arbitrator's award,  the NLRB General Counsel issued a complaint. The ALJ found that the arbitrator's decision was not "palpably wrong" and was entitled to deference. On Verizon's exceptions, the Board rejected the arbitrator's conclusion, finding it "clearly repugnant" and refused to defer.

The Board determined that the language of the cba did not constitute a clear and unmistakable waiver. Reviewing the contract language, the Board concluded that "the contractual provisions cited by the Respondent and considered by the arbitration panel neither address nor reasonably encompass employees' display of signs in their personal vehicles...."

In rejecting the Board's analysis, the Court concluded 

To state the obvious, the fact that the Board might read a contract term differently than the arbitrator read it does not suffice to make an arbitration decision "palpably wrong." Rather, as the Board has previously stated, its highly deferential standard of review "recognizes that the parties have accepted the possibility that an arbitrator might decide a particular set of facts differently than would the Board. This possibility, however, is one which the parties have voluntarily assumed through collective bargaining."

The Court found that the arbitration panel's decision was susceptible to an interpretation consistent with the Act and was not a "palpably wrong" interpretation of the cba. Accordingly it found the Board's contrary conclusion unreasonable and denied enforcement. 

The Board's decision in this case predated its newer, less deferential standard of review announced in Babcock & Wilcox Construction Co. 361 N.L.R.B No.132

Erosion of the bargaining unit

Arbitrator James Lundberg issued an award in a dispute between ExxonMobil and Steelworkers Local11-470. Following the retirement of a bargaining unit janitor at the company's Billings, Montana facility, ExxonMobil contracted the word formerly performed by the employee to an outside janitorial service. The Union grieved the decision, claiming that the company's actions violated a cba provision stating:

 "The Company will not erode the bargaining unit by job reduction through transferring work customarily performed by classifications covered by this Agreement to employees excluded from the bargaining unit in Article II of this Agreement."

In its defense, the Company relied on language, more recently added to the cba, that stated:

"This agreement shall not limit the right of the Company to contract out work so long as such contracting does not cause a layoff of employees covered by this agreement."

The Company maintained that the erosion of the bargaining unit language was intended to deal with the transfer of work from bargaining unit employees to salaried employees. It claimed that the later negotiated contracting language was clear and unambiguous and allowed the company to contract the work in issue since no employees was laid off as a result. The Union relied on a 1978 award under a predecessor contract which it alleged did not limit the erosion language in the manner the company claimed.

Rejecting the company's position, Arbitrator Lundberg noted that the 1978 award, as well as an award addressing the interrelationship between the two cba provisions had never been modified in negotiations. He concluded:

While the Employer clearly disagrees with the interpretation of the bargaining unit erosion language made in 1978, the parties have not bargained any change in the provision. Moreover, the negotiations have repeatedly stalled over elimination of the In-Plant Janitor position. The Company can demonstrate that the cost of maintaining the position is greater than using a contractor but either the Union is not asking for a quid pro quo or the Employer is not offering something in return. Instead, the parties continue to approach the issue indirectly. By not coming to terms with the underlying issues in negotiations the parties have repeatedly needed up in arbitration. In this situation, the work of the In-Plant Janitor should continue to be filled by a bargaining unit employee, until such time as the parties are able to resolve the dispute through negotiations. 

The Company sought to vacate the award arguing, inter alia, that the Arbitrator improperly relied on earlier arbitration awards, and had improperly modified the cba by changing the meaning of the erosion language from transfer of work to other Company employees to transfer to third party, non employee contractors.

The Court rejected this effort, concluding

... Arbitrator Lundberg looked at and at least arguably construed and applied the Agreement. That he also considered the parties' past practice, informed by and reflected in previous arbitration awards construing the same bargaining unit erosion provision as that contained in the 2012 Agreement, was not error and did not render his Award one that did not derive its essence from the Agreement. Thus, it cannot reasonably be argued that Arbitrator Lundberg simply dispensed his own brand of industrial justice.

The Court's opinion can be found here.

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