Wednesday, June 20, 2018
Arbitrator Properly Added Language to Collective Bargaining Agreement
Majority Says Action Was Necessary to Avoid Result Not Intended by the Parties
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals ruled yesterday that an arbitrator in a case arising from a collective bargaining agreement was free to add to or change the language of the agreement, even though the agreement contained an explicit no-add provision.
District Judge Robert W. Gettleman of the District of Illinois, sitting by designation, wrote the opinion, in which Circuit Judge Richard A. Paez joined. Circuit Judge Sandra S. Ikuta dissented.
The dispute was between a copper mining and processing company and its employees’ labor union. The collective bargaining agreement required arbitration, but had explicit language stating that the arbitrator was not allowed to add to, detract from, or alter the terms of the agreement.
In resolving the parties’ dispute over an annual copper price bonus, the arbitrator did just that.
As Ikuta’s dissent explains, the arbitrator was forced to add language to the explicit agreement in order to resolve a mistaken understanding between the parties.
The majority opinion saw nothing wrong with this in upholding the district court’s affirmance of the arbitrator’s award.
As the majority saw it, the no-add provision was not violated. The clause itself concerned the eligibility of new employees to sign up for the company’s pension plan.
The dispute arose because a new agreement barring new employees from enrolling in the pension plan also prevented those employees from receiving the lucrative copper price bonus that the company paid out every year.
According to the opinion, neither party had intended this result. The majority held that the arbitrator was not actually adding anything to the agreement itself, but was instead modifying that language of the contract to accurately represent the agreement the parties had really made.
“Applying ordinary principles of contract law, the arbitrator concluded that the proper remedy for the parties’ mutual mistake was to reform the BLA to make it reflect the terms the parties actually agreed upon.”
Arbitrator States Bargain
The majority’s decision hinged on what the opinion describes as an extremely limited scope of review for arbitration awards in the labor context. It states,
“The context of collective bargaining warrants this extremely limited scope of review because the parties have agreed to have their disputes decided by an arbitrator chosen by them.”
Gettleman quoted extensively from the Ninth Circuit Court of Appeals’ 1989 opinion in Stead Motors of Walnut Creek v. Auto Machinists Lodge No. 1173, explaining,
“Consequently, ’[t]he labor arbitrator is the person the parties designate to fill in the gaps; for the vast array of circumstances they have not considered or reduced to writing, the arbitrator will state the parties’ bargain.’” He continued,
“He is “‘their joint alter ego for the purpose of striking whatever supplementary bargain is necessary’ to handle matters omitted from the agreement.”...Because of this role, the arbitrator ‘cannot “misinterpret” a collective bargaining agreement,’...and ‘even if we were convinced that the arbitrator misread the contract or erred in interpreting it, such a conviction would not be a permissible ground for vacating the award.’”
Ikuta dissented from the majority on the ground that the arbitrator had clearly exceeded the authority given to him by the collective bargaining agreement when he added language in spite of the no-add provision.
“In reviewing an arbitral award, we are likewise bound by express limitations on an arbitrator’s authority. A court may not enforce an arbitration award if it does not ‘draw its essence from the collective bargaining agreement.’...Because the arbitrator here ignored the essence of the agreement by violating an express and explicit restriction on his power, the award must be vacated.”
Waiver of Challenge
Although the majority opinion did agree with the district court on the arbitrator’s award being proper, they rejected the lower court’s ruling that the employer had preserved its objection to the arbitrator’s jurisdiction.
Despite arguing that the arbitrator lacked authority to hear the dispute and make an award, the employer submitted to the arbitration from the beginning. By doing so, the opinion reasons, it lost its ability to later raise the objection.
The opinion pointed out that, had the employer reserved the objection from the beginning of arbitration, or simply refused to arbitrate and forced the union to bring a motion to compel arbitration, the objection would have been preserved. It did neither, however, and so lost the objection.
The case is ASARCO v. United Steel, Paper and Forest, 16-16363.
It was argued in Pasadena by Rex S. Heinke of the Los Angeles branch of Akin Gump Strauss Hauer & Feld for the employer and Michael D. Weiner of the Los Angeles branch of Gilbert & Sackman for the union.
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