Sixth Circuit refuses to vacate award finding subcontracted drivers and temporary employees were "one in the same" under language in a cba

Faced with a need for additional drivers, Economy Linen and Towel Service of Zanesville entered into a service agreement with ProDrivers for that Company to provide certified drivers on a contract basis. The Union representing Economy's drivers (Teamsters Local 637) filed a grievance challenging that action. The Unions asserted that the ProDrivers were being compensated at a rate higher than full time drivers in violation of the cba. The Company denied the grievance, asserting that it had contracted the work to ProDrivers as allowed by the cba, and it had no knowledge or control over how much ProDrivers paid its drivers. The dispute was unresolved in the grievance procedure and was ultimately submitted to Arbitrator Lawrence Roberts for decision.

In his award, Arbitrator Roberts saw the dispute as being resolved by the "unambiguous language" of the agreement, specifically the definition of temporary "on call" employees.

Sustaining the grievance, the Arbitrator rejected the Company's reliance on its contractual right to subcontract. He found controlling the contractual provision that "In no event will a temporary or part time employee be hired at or given a higher rate than a full time employee." He noted that while the term "full time employee" was defined in the cba, "[t]here is no language found within the same Agreement specifically defining either a temporary or part-time employee in a similar context."

 Concerning the Employer's right to subcontract, he found that right "unimpeded until one reaches the Hours of Work and Overtime provision." There temporary ("on-call") employees were defined as "individuals who are on call to work when regular full-time employees are not available to work or to augment the work force in peak periods." Arbitrator Roberts found this language "precisely defined" the ProDrivers in  this case. He concluded:

The Parties clearly agreed to allow subcontracting, however, failed to specifically draw a distinction between a subcontracted employee and a temporary employee. The negotiators could have easily done so. However, the absence of any language in that regard makes it clear, at the face value of the Agreement, that a subcontract and a temporary employee are in fact, one in the same. And Article 6.08 is unambiguous, in that, it even leads off with the phrase "in no event." And in my view, that particular phraseology is definitive and without exception.

The Arbitrator also found that, while not necessary to his conclusion, the evidence suggested that Economy and ProDrivers were joint employers.

In line with his conclusion, the Arbitrator ordered the Company to pay to unit employees the difference between their hourly rate and the twenty dollar per hour rate paid to the contract drivers.

Economy sought unsuccessfully in the District Court  to vacate the award. (here) The Court found no basis to set aside the award. There was no allegation fraud and no claim that the issue wasn't properly before the arbitrator. Contrary to the Company's claim that the Arbitrator ignored the "unqualified" right to subcontract, the Court concluded that whether or not "correct," the Arbitrator's award was simply an interpretation of the relationship between the management rights provision and the temporary employee language. It found that, at its core, the Company's claim was simply a disagreement with the Arbitrator's interpretation of the Agreement.

The Company appealed, and the Sixth Circuit affirmed. Economy Linen and Towel Service, Inc. v. Teamsters Local 637. It noted the lenient standard of review of arbitration awards and, like the District Court, found that the award simply interpreted the interplay between several provisions of the Agreement. The Company's claim was simply one of "interpretive error" and was beyond the reach of the Court's review.

Concurring, Judge Batchelder wrote:

I write separately to say that I concur only because I am bound by law to do so. See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 529 (2019) ("We have held that a court may not rule on the potential merits of the underlying claim that is assigned by contract to an arbitrator, even if [the arbitrator's decision] appears to the court to be frivolous." (quotation marks omitted)).

At best, in my view, the arbitrator's interpretation of the provisions of the CBA at issue here is not totally implausible. That it is clearly wrong is not enough.

Note: Several days after this decision, a different panel of the Sixth Circuit reversed a decision confirming an award of Arbitrator Michael Long, finding that the Arbitrator's remedy for a claimed change in retirees' health care benefits didn't "construe the contract" but improperly relied on a plan other than the one set forth in the cba. The dissenting judge observed  "This case illustrates the difficulty of according appropriate deference to an arbitrator's decision. It is easy enough to say that we must affirm an arbitrator's decision so long as it was not "so untethered from the agreement that it casts doubt on whether he was engaged in interpretation." ... Perhaps it is sometimes less easy to apply this standard, but apply it we must. Unfortunately the majority did not do so here. Rather, it substitutes its judgment where the arbitrator's ought to remain." International Union, United Automobile, Aerospace and Agricultural Implement Workers of America v. TRW Automotive U.S. LLC.

Terminating a past practice

Arbitrator Paul Glendon has found that the City of Toledo breached its agreement with the Toledo Police Patrolman's Association when it unilaterally prohibited officers from engaging in outside employment at any establishment primarily in the business of dispensing alcohol.

The parties' agreement prohibits any employee of the City from accepting employment that is adverse to or in conflict with the employee's employment. Notwithstanding this language, and for in excess of thirty years, officers had been allowed to work outside of (e.g. in parking lots, streets, etc).establishments primarily engaged in dispensing alcohol. The parties referred to this as "projecting." The City, without objection from the Union, did prohibit projecting at  businesses that were the subject of an investigation or prosecution for criminal or liquor license violations.  In March of 2014, however, the Chief issued a Notice prohibiting all such employment. The City maintained the Chief was simply exercising a management right in deciding that any outside employment at such an establishment was adverse to and in conflict with police employment.

In addressing the Union's grievance, Arbitrator Glendon concluded that the ability of officers to work outside of establishments primarily in the business of dispensing alcohol was an established past practice that the City could not unilaterally alter during the contract term. He agreed with the Union that the thirty year practice "met the usual criteria of duration, consistency and mutuality to be a binding past practice clarifying the meaning of the 'adverse to or in conflict with' standard."

 Arbitrator Glendon cautioned that his determination did not mean that the practice could never be terminated, but found that the City had failed to establish a basis for doing so. He noted:

The City could give notice at the end of the contract term that it no longer would recognize it under a successor agreement, thereby making it a subject for bargaining. To justify unilateral termination of the practice during the contract term, however, the City had the burden of proving that circumstances under which it was established and perpetuated no longer existed and that current circumstances are such that it is reasonable to believe any and all  projecting would be adverse to or in conflict with police employment. Absent clear, convincing evidence to that effect, the City's unilateral mid-term prohibition of all projecting would be an arbitrary, unjustified exercise of its "administrative responsibility" recognized in [the cba].

Accordingly he declared the Chief's March notice to be void ab initio and remanded the dispute to the parties for negotiation of the monetary remedy.

The Toledo Blade reports on the decision here, and links to Arbitrator Glendon's Award here.

Incorporation of statute into cba sufficient to trigger Penn Plaza

In its decision in 14 Penn Plaza v. Pyett, the Supreme Court held that a union may agree in a cba that an employee's statutory claims are subject exclusively to the contract's grievance procedure, and that the employee may not pursue the claim in court. Such an agreement, however, must be evidenced by clear and unmistakable language demonstrating such an intent.

 Subsequent cases interpreting Penn Plaza have held that general non discrimination language is insufficient to prevent an employee from pursuing litigation over a statutory claim. In Ibarra v. United Parcel Service the Fifth Circuit determined that for a cba to bar litigation, the cba must "at the very least, identify the specific statutes the agreement purports to incorporate or include an arbitration clause that explicitly refers to statutory claims." In its recent decision in Gilbert v. Donohoe, the Fifth Circuit has addressed a cba that it finds "falls between" the language discussed in Penn Plaza, and that in subsequent cases finding no waiver. 

Plaintiff Gilbert sought to litigate claims that the USPS had violated her rights under the FMLA, and the Rehabilitation Act. Reversing, in part, the District Court's decision, the Fifth Circuit has determined that the contract in issue precluded litigation of the Rehabilitation Act claims, but not the FMLA ones.

The contract provided for a dispute resolution procedure culminating in binding arbitration. Separately the cba provided "consistent with the other provisions of this Agreement, there shall be no unlawful discrimination against handicapped, as prohibited by the Rehabilitation Act." The contract also incorporated the Employee and Labor Relations Manual (ELM) which, according to its terms, "provides policies to comply with the [FMLA]."

Noting that the contract could be said to reference both statutes, the Court found the nature of the references distinct, resulting in differing results. 

...the ways in which the agreement identifies the respective statutes are distinct, and this difference guides our resolution of this case. Section 2.01(B) of the CBA specifically provides that it is incorporating into the agreement the prohibition of discrimination against handicapped employees contained in the Rehabilitation Act. It thus complies with the dicta of both Ibarra and Wright that the CBA “identify the specific statutes the agreement purports to incorporate.” 26 Combined with Article 15, this provision makes it clear and unmistakable that the Rehabilitation Act is part of the CBA and subject to the same grievance procedures. By contrast, the ELM only provides policies to comply with the FMLA. It does not purport to make the FMLA a part of the agreement. As our sister circuits have recognized, references to statutes that fall short of incorporation are insufficiently “clear and unmistakable” to bar access to federal court. 27 There is no reason to treat this reference any differently. Accordingly, we hold that, while the CBA requires Gilbert to pursue her Rehabilitation Act claims through the specified grievance and arbitration procedures, its references to the FMLA are not sufficiently clear and unmistakable to deprive the district court of subject matter jurisdiction over claims arising under that statute.

The Court therefore affirmed the dismissal of plaintiff's Rehabilitation Act claims, but reversed the dismissal of the claims under the FMLA.

Arbitration, Management Rights and Public Policy

 Lawrence, Mass. Firefighters, Local 146 grieved the actions of the City of Lawrence in laying off a  dispatcher while retaining a mechanic with lesser seniority. The City rejected the grievance, claiming that the layoff of the mechanic would create a safety issue. The dispute was submitted to arbitration, and the arbitrator determined the City had breached the collective bargaining agreement by deviating from its practice of laying off employees in inverse order of seniority.

 The City sought to vacate the award, arguing that management of the fire department rests with the Chief, and "that with this responsibility comes the inherent right to make decisions regarding policy and staffing." The City maintained that this responsibility was particularly important in divisions  like the fire department, whose purpose was public safety. It claimed that the arbitrator exceeded his authority and that the decision invaded the City's "nondelegable" managerial prerogatives and violated public policy by putting the public at a safety risk. The Superior Court rejected these positions and confirmed the award. The Appeals Court has now similarly rejected the City's arguments and affirmed the lower court. City of Lawrence v. Lawrence Firefighters, Local 146, IAFF.

 The Appeals Court held that:

 While the city is correct that a decision to lay off employees is a nondelagable managerial prerogative, ...it is clear that a public employer may negotiate to follow certain procedures when such a decision is implemented, and the question whether the employer has followed these procedures is a matter subject to arbitration. 

The Court also rejected the City's public policy argument, finding "no 'well-defined' or 'dominant' public policy in favor of fire departments retaining mechanics over other department employees."

In contrast, in a decision also issued in August, the Mass Supreme Judicial Court overturned an arbitrator's award finding the City of Boston in violation of a contractual provision restricting the transfer of certain union representatives between stations or assignments.  City of Boston v Boston Superior Officers Association. The Court concluded that  assignment and transfer of officers within the Boston police department "are non delegable statutory powers of the Boston police commissioner ... and, accordingly, ... the grievance arbitrator exceeded his authority in reversing the officer's transfer."

A similar issue has been raised in Alaska, where the State is seeking to set aside an award of Arbitrator Janet Gaunt finding the State violated its cba with the Alaska Correctional Officers by changing the schedules of certain correctional officers from an eighty four hour, 7 days on/ 7 days off  schedule to a five day/ forty two hour schedule.

Applying a "context rule" of contract interpretation, Arbitrator Gaunt found that the management rights provision of the cba was ambiguous. Looking to the parties past practice, the Arbitrator concluded that the State could not unilaterally change the schedule. She ordered the State to make whole employees impacted by the change and to restore the previous schedule.

 The State has filed a complaint to vacate the award. It alleges that the award violates public policy in that "the Alaska Constitution provides that criminal administration shall be based upon the need for protecting the public, and the Commissioner of the Department of Corrections has the statutory and contractual authority to protect the public by determining the hours of operation of correctional facilities and assigning the work shifts accordingly..." It also claims that the cost of compliance with the Arbitrator's order to restore the previous shifts "is so great as to result in an attempt to supersede the constitutional and statutory authority of the Commissioner of DOC and intrude on core management rights of the Commissioner to expend the public funds in accordance with the laws of the State."

The Alaska Correctional Officers Association links to Arbitrator Gaunt's award here and the State's complaint to vacate the award here.   

Impossibility of performance no defense to breach of contract

Arbitrator Paul Glendon has issued an award finding that the City of Taylor, Michigan breached its labor agreement with the Taylor Professional Firefighters Association, Local 1252. The agreement between the City and the Union contained a minimum staffing guarantee. The contract was scheduled to expire on June 30, 2011 but, pursuant to its terms, was continued in effect during negotiations for a successor agreement. On July 1, 2011 the City implemented layoffs of firefighters, reducing the staffing below the guaranteed minimum. The City justified its actions based on seriously declining economic conditions. The City contended that “the present financial crisis ….results in a legal justification for breach of the collective bargaining agreement.”

Arbitrator Glendon rejected the City’s position. In doing so he noted that the contract did anticipate layoffs in certain situations, but no exception was made to the minimum staffing guarantee. He also rejected the City’s claim that any breach was justified by the financial impossibility of performance, writing that “it would be an abuse of arbitral authority to countenance the City’s unilateral attempt to alter or modify the contract … notwithstanding any dicta by the Ohio Court of Appeals concerning the applicability of general contractual defenses to arbitration of disputes arising under a collective bargaining agreement.”

Finally, Glendon observed that, in any case,the City’s evidence failed to establish that the layoffs were a matter of unavoidable necessity.