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Employer challenge to arbitration award ‘just another interpretative error’ beyond court’s reach

By Ronald Miller, J.D.

An employer’s challenge to an arbitrator’s award missed the mark in arguing that the arbitrator exceeded his authority in choosing between legitimate, but irreconcilable, readings of a CBA. The employer’s argument was simply another way of complaining that the arbitrator misinterpreted the contract—an “interpretative error” beyond the court’s reach.

An arbitrator’s decision in a dispute involving the payment of higher wages to temporary truck drivers than those of union-represented employees had “the hallmarks of interpretation” of the parties’ collective bargaining agreement, ruled the Sixth Circuit in affirming a district court’s affirmance of the arbitration award. As to the employer’s control over the temporary drivers, the appeals court saw no problem with the arbitrator looking to how the employer itself implemented its duties in determining whether the drivers constituted temporary employees under the contract. Additionally, the award of retroactive damages was not error since arbitrators have long had considerable “flexibility” when “formulating remedies.” Judge Batchelder filed a separate concurring opinion (Economy Linen and Towel Service, Inc. v. International Brotherhood of Teamsters, Teamsters Local Union 637, March 1, 2019, Sutton, J.).

The employer rents linens and apparel to healthcare facilities. In October 2015, it faced a shortfall of qualified truck drivers and subcontracted with another firm to provide necessary drivers. In response, the union representing its truck drivers filed a grievance on the ground that the new drivers earned a higher hourly rate than the union-represented employees. An arbitrator ruled in favor of the union. Thereafter, a district court affirmed the arbitration award.

Deferential review. Federal courts provide a deferential review of arbitration decisions. The courts ensure that the arbitrator (1) did not commit fraud or other dishonesty, (2) resolved a dispute fairly committed to arbitration, and (3) at least arguably construed the collective bargaining agreement. The courts may not overturn an arbitration decision on the ground that the arbitrator made mistakes, whether “serious” errors, or “improvident, even silly” mistakes. Because the parties bargained for an arbitrator’s interpretation of the contract, not a federal judge’s interpretation of it, that is generally what they will get. That is a lenient standard.

In this instance, the arbitrator’s decision passed muster. None of the three disqualifying factors applied. Neither party alleged fraud of any kind. Further, the arbitrator did not decide any issue outside of his authority. Rather, resolution of this appeal came down to whether the arbitrator arguably interpreted the contract.

Hallmarks of interpretation. In this case, the court found that the arbitrator’s award bears “the hallmarks of interpretation” of the parties’ CBA. He cited the relevant contract provisions, analyzed each of them, sets out the parties’ competing arguments, and ultimately adopted one interpretation at the end of his opinion.

Both sides to the dispute offered legitimate, if ultimately irreconcilable, readings of the CBA. As the union saw it, the contract required the employer to pay full-time employees as much as temporary employees. For the employer’s part, it argued that the contract allowed management to subcontract without any restrictions. In siding with the union, the arbitrator grounded his opinion in the words of the CBA.

Arbitrator’s authority. In challenging the arbitrator’s conclusion, the Sixth Circuit concluded that the employer missed the mark. The employer claimed that the arbitrator exceeded his authority when he concluded that its exclusive power to subcontract was limited by the language of another contractual provision. Which provision controlled? The court concluded was simply another way of complaining that the arbitrator misinterpreted the contract, just the kind of “interpretative error” beyond the court’s reach.

The employer further claimed that the arbitrator erred in examining its subcontracting agreement to determine whether it exercised “total control” over the subcontracted drivers. According to the employer, this was a mistake because the arbitrator incorrectly determined that it was a joint employer. However, the court saw no problem with looking to how the employer itself implemented its duties in determining whether the drivers constituted temporary employees under the contract.

Formulating remedies. Lastly, the employer claimed that the arbitrator erred by awarding retroactive damages. However, the court observed that arbitrators have long had considerable “flexibility” when “formulating remedies.” It noted that “[t]he draftsman may never have thought of what specific remedy should be awarded to me a particular contingency.”

As for the employer’s concern that a forward-looking award would modify the contract no less than the backward-looking damages award given by the arbitrator, that it not true, declared the court. The arbitrator’s decision left the parties with discretion to sort out what should happen going forward—after the employer ceased paying part-time employees more that full-time employees—while dealing with what had already happened in the only way that seemed feasible: damages.