In the field of labor relations, there exist some rare occurrences, things that happen so seldom that it seems as if they are impossible.  As we’ve previously discussed, one such “unicorn sighting” is the NLRB overturning an Administrative Law Judge’s credibility determinations.

Another event that falls in the category of “super rare” is a court invalidating an arbitration award.  Most labor practitioners know that arbitrators have a wide latitude to decide cases, frequently returning to work employees who have unquestionably engaged in misconduct and interpreting labor agreements.  The latitude given arbitrators is so high that it is often considered a waste of time and resources to challenge the award in court.  This is because the standard used by reviewing courts is whether the arbitration award “draws its essence” from the contract.  If the court determines the arbitrator relied upon the contract to make a decision then the inquiry is over.

But, as one court recently pointed out, “deference [to arbitration awards] is not unlimited.  If it were, it would by an oxymoron.”  In an end of year decision, the Third Circuit issued a rare rebuke of an arbitrator and affirmed a federal district court’s ruling vacating an arbitration decision.  The appeals court acknowledged that “[t]he bar may be low to uphold an arbitration award, but it still exists.”  Monongahela Valley Hospital Inc. v. United Steel Paper and Forestry Rubber Manufacturing Allied Industrial and Service Workers International Union AFL-CIO CLC, No. 19-2182 (3rd Cir. Dec. 30, 2019).

The case stemmed from a dispute over preference for selecting vacation days between a bargaining unit employee and her working supervisor, a non-bargaining unit employee at a hospital employer.  The labor agreement between the employer and the union contained a provision concerning the scheduling of vacation, which provided that: “Vacation will, so far as possible, be granted at times most desired by employees; but the final right to allow vacation periods, and the right to change vacation periods is exclusively reserved to the Hospital.”

The employer denied the bargaining unit employee’s vacation request because her working supervisor had requested that same week off and both could not be away at the same time.  The bargaining unit employee then filed a grievance alleging the requested vacation denial as a CBA violation.  The union’s assertion was that the agreement’s language should have granted the bargaining unit preference.

The arbitrator ruled that the employer violated the agreement.  In interpreting the scheduling of vacation provision of the agreement, the arbitrator reasoned that the employer’s “exclusivity in allocating vacations” was subordinate to the “so far as possible” language.  The arbitrator ruled the agreement prevented the employer from denying bargaining unit employees their desired vacation when no “operating need” existed.

The employer appealed.  Courts provide a “heavy degree of deference” to an arbitrator’s decision, but “that deference is not unlimited.”  Here, the appeals court, using  sharp language, declined to reinstate the arbitration award because (1) the award “manifestly disregard[ed] the plain language of the CBA,” and (2) the arbitrator “deviated far beyond the scope of his authority by force-feeding the ‘operating need’ requirement into the CBA.”

The court ruled that the arbitrator ignored the plain language of the contract.  The CBA gives the employer the “final” and “exclusive[ ]” right to deny bargaining unit employees their desired vacation.  The “so far as possible” language is a generalization that “cannot hold hostage” the explicit rights granted to the employer in the agreement.

The court also ruled that the arbitrator exceeded his authority by inserting the requirement that the employer establish “operating need” to not give a bargaining unit preference language that appears nowhere in the agreement.  Indeed, the court noted that the agreement’s grant of authority to the arbitrator contained the common limitation: the arbitrator has no authority to “add to, detract from or alter in anyway” the agreement.

The court stated that “an arbitrator’s authority sources from the CBA itself” and that the arbitrator “dispens[ed] his own brand of industrial justice” by inserting the “operating need” restriction.

This case is a good reminder of the importance of drafting labor agreement provisions in a manner that clearly define the authority of the employer.  While the parties’ agreement stated the employer would grant vacation preference “so far as possible,” the reservation of rights to the employer to make the “exclusive” decision ultimately won the day.

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