Labor Arbitrator Authorized To Void Agreement Based On Mutual Mistake

MarijuanaThis week the Eighth Circuit confronted an interesting question: if a union member believed he failed a drug test, and therefore agreed his employer could terminate him if he tested positive again, can the arbitrator invalidate that agreement if the union member never actually failed the drug test? The appellate court answered yes, reversing the district court, in Assoc. Elec. Coop., Inc. v. IBEW, Local No. 53, 2014 WL 1910604 (8th Cir. May 14, 2014).

The employee’s story proves that sometimes being proactive is not wise. The employer conducted random drug testing. Its employee of 28 years informed management that he would test positive because he had recently smoked marijuana. In response, the employer and employee signed a last chance agreement (LCA), providing that if the employee was found under the influence or in possession of drugs again, he would be terminated. The employee was suspended without pay and had to immediately begin chemical dependency treatment. A week later, the employee found out that the random drug test did not reveal the presence of marijuana. Despite that, both parties treated the LCA as remaining in force. When a follow-up urine sample revealed the presence of a prescription drug that the employee had not been prescribed, the employer terminated him pursuant to the LCA.

The union submitted the dispute to arbitration under the parties’ Collective Bargaining Agreement (CBA). The arbitrator found the LCA was unconscionable because the initial drug test was negative. Therefore the termination lacked “just cause” under the CBA. The arbitrator awarded the employee back pay from the date of the random drug test.

The district court vacated the arbitrator’s award. It concluded that the arbitrator lacked authority to ignore the LCA.

The Eighth Circuit reversed. It held that LCAs are binding in arbitration only when they: 1) involve the union; and 2) resolve pending disciplinary proceedings governed by the CBA grievance process. In this case, the LCA did not involve the union and did not resolve any pending disciplinary proceeding. Therefore, the LCA did not supersede the CBA and its requirement of just cause for termination. The court noted that “it is customary and appropriate for arbitrators to pass upon claims for reformation for mutual mistake, often applying principles more liberal than judicial equity…” The Eighth Circuit found that the arbitrator was only authorized to award back pay from the date of termination, not the date of suspension, however, because only the termination was timely raised in arbitration. (That issue drew a dissenting opinion.)


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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