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Gain Control of Arbitrations at the Bargaining Table

December 19, 1999
Related Topics: Labor Relations, Featured Article
Union employees have ameasure of job security. Under most union contracts, they cannot be discharged“without just cause.”

By way of contrast, theemployer can fire a non-union employee (who does not have a protectiveemployment contract) at the drop of a hat as long as non-discrimination andother applicable laws are obeyed.

Complicating matters forunionized employers is that, under most labor contacts, a third party, anarbitrator, sits in judgment to determine whether the employer’s dischargedecision was truly for just cause. Not only do unionized employers not have afree hand in discharge matters, their decisions can be overruled by anarbitrator.

Arbitrators overrulecountless employer discharge decisions. They rule against the employers onprocedural grounds, because the employer was compassionate and didn’t dischargean earlier employee who engaged in similar conduct or, as many employersbelieve with considerable justification, arbitrators substitute their judgmentfor the employer’s because they think discharge is too harsh a sanction.

Additionally, no arbitratorwill stay in the arbitration business very long if he/she rules for one side oranother too frequently.

This basic principle ofarbitrator survival manifests itself particularly in discharge cases. Thearbitrator will reduce the employee’s suspension or reinstate the employeewithout back pay. Arbitrators who reduce the employer’s discharge decision to asuspension probably think they are pleasing both sides and enhancing theirchances of being selected again.

The bottom line, however, isthat employers end up winning only half of all discharge cases assuming thatthe all-too-frequent arbitral awards reducing a discharge to a reinstatementwithout back pay are correctly counted as employer losses.

There is a solutionavailable to employers who are losing too many discharge and otherarbitrations. Add a clause to your labor contract limiting the arbitrator’sreview power. Provide in your contract, for example, that an arbitrator cannotmodify or overturn the employer’s discharge (or discipline) decision unless theemployer’s decision “constituted a clear abuse of discretion and was notsupported by any rational basis.”

With such language in yourcontract, your discharge decisions would be sustained unless the union showsthey were arbitrary or capricious.

That is a much moredifficult task than simply showing the absence of just cause. Any demonstrablereason would suffice under this heightened review standard. Employers not onlywill win many more cases under this standard but many more will be settledprior to arbitration since the union realizes the procedural mountain it mustnow surmount before an arbitrator is not worth the effort and/or resources.

This clause is legal. In Dayton Newspapers, 26 AMR Para. 36015(November 20, 1998), NLRB Associate General Counsel Barry J. Kearney, for theBoard’s Division of Advice, directed the Board’s Ninth Regional Office todismiss a charge filed by a union. That union charge attacked an employer’scontract proposal permitting arbitrators to overturn discharge decisions onlywhere the employer’s “just cause” determinations constituted an abuse ofdiscretion and had no rational basis.

The union argued thisproposed contract language deprived their members of “meaningful arbitration”over employer discharge decisions and effectively excluded the union fromparticipation in the arbitration process.

The union relied principallyupon San Isabel Electric Services,225 NLRB 1073 (1976). The employer in that case made two proposals. It proposedthat discipline under its safety and work rules would only be subject toarbitration if that discipline was arbitrary or discriminatory and that thearbitrator could not substitute his/her discretion for that of the employerwhen reviewing such discipline decisions.

However, the employer alsoproposed a contract clause giving it the unilateral discretion to determine allsafety and work rules. The Board held these two proposals combined deprived theunion of meaningful arbitration over the employer’s unilateral decisions as towork and safety rules and possible violations of those rules.

The limitations on the 1976 San Isabel decision become apparent fromthe Board’s contrary 1989 decision in CommercialCandy Vending Division, 254 NLRB 908 (1989). In that case, theAdministrative Law Judge faulted the employer for insisting upon a “broad”management rights clause. The Board reversed because the exercise of thosemanagement rights was still subject to the contract’s grievance procedure.

In Dayton Newspapers, the employer also proposed an extensivemanagement rights clause. However, that clause still limited possible employer unilateralactions because among the many enumerated management rights were the right todischarge “for proper cause” and the right to publish and enforce “reasonable”work rules. As in Commercial Candy,this management rights language saved the day.

Against that importantcontractual backdrop, the employer’s other proposal, that an arbitrator couldneither modify nor overturn an employer discipline decision unless thatdecision “constituted a clear abuse of discretion and was not supported by anyrational basis,” was only lawful hard bargaining and not unlawful surfacebargaining.

Associate General CounselKearney concluded both employer proposals will “provide the union with a rolein representing employees regarding discipline and discharge through grievancearbitration.” As in Commercial Candy,the union retained the “opportunity to grieve and arbitrate disputes.”

The union’s chances ofwinning many arbitrations practically disappears because it must nowdemonstrate the employer abused its discretion in determining it had “propercause” for a discharge. Nevertheless, the union remains a participant, even ifan unhappy one, in the arbitration process with a narrowed opportunity toattack and challenge employer discharge decisions.

Two caveats deserve mention.First, the Dayton Newspapers decisionsimply means no unfair labor practice charge issued in that case. The Boarditself could reach a contrary conclusion when the issue is presented to it.

In the interim, AssociateGeneral Counsel Kearney’s determination means the Board’s regional offices willnot issue complaints against employers based on such contract proposals in theabsence of other employer contract. Second, the employer must still convince aunion to agree to this language during contact negotiations.

Unions will fight thislanguage to the death because they realize it effectively removes them from thearbitration process except as repeated losers. In this case, Dayton Newspaperssimply insisted on this language to impasse with the intent of implementing itafter impasse.

Even then, it neither tookaction to implement its proposal nor enforced the new language in any waypending the Division of Advice’s determination. Staying its hand preserved thepristine legal issue, which was then decided in its favor. Every employer witha union contract can now take advantage of this ruling and position itself towin many more discharge arbitrations.

Copyright © 1999 Nixon Peabody LLP. All rightsreserved.

The information contained in this article is intended to provide usefulinformation on the topic covered, but should not be construed as legal adviceor a legal opinion.

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