By Frank Guido, General Counsel
POAM and its satellite organizations, COAM, TPOAM, and FAOM, represent thousands of public employees throughout Michigan. We have more than 400 different collective bargaining agreements in place with various public employers at the city, county, township, and village levels. More than 99% of those collective bargaining agreements contain arbitration as the dispute resolution forum for a breach of contract, whether disciplinary or non-disciplinary in origin. Even in those circumstances where disciplinary matters may be resolved administratively, such as through an Act 78 Civil Service Commission process, an election of remedies typically exists allowing either arbitration or the administrative process to be utilized.
The historic value of arbitration as a dispute resolution mechanism, which avoids costly and time-consuming litigation, is rarely questioned. There are many reasons why arbitration has, for POAM and other unions, become a valued mechanism for resolving disputes. Unlike litigation in court, arbitration is, by its very nature, intended to be an informal process, unfettered by the technical rules of evidence. Arbitration does not require the presence of legal counsel as representative to a party. Arbitration also avoids protracted litigation features such as discovery involving depositions and interrogatories. In addition, arbitration procedures generally limit the review of a decision, creating a very narrow doorway to the court.
The United States Supreme Court, in the landmark Steelworkers Trilogy of cases, established the Federal standard of review of an arbitration award, which was later adopted by the Michigan Supreme Court in Kaleva-Norman- Dickson School District No. 6 v Kaleva-Norman-Dickson Teachers Association, 393 Mich 583 (1975). That standard was succinctly described in Ferndale Education Association v School District for the City of Ferndale, 167 Mich App 637 (1976), wherein the court stated:
Questions concerning the scope of judicial review of arbitrability and the awards made by arbitrators in labor disputes have been almost a plague on both state and federal courts for years, but the eminently proper attitude that we have taken is one of ‘hands-off.’ The party that ends up holding the short end of an arbitrator’s award may try desperately to fit the facts within the narrow doorway to the courts, but the judicial policy is clear. In the Steelworkers Trilogy, the United States Supreme Court held that the merits of either the grievance or the arbitration award are irrelevant when a federal court is asked to enforce an arbitration agreement or award thereunder. Judicial review is limited to whether the award ‘draws its essence’ from the contract, whether the award was within the authority conferred upon the arbitrator by the collective bargaining agreement. Once substantive arbitrability is determined… judicial review effectively ceases. The fact that an arbitrator’s interpretation of a contract is wrong is irrelevant.
The court went on to state:
The scope of judicial review of a labor arbitration award is narrow and the reviewing court must not substitute its judgment for that of the arbitrator in questions of contract interpretation.
With regard to the value of arbitration in the labor-management arena, the Michigan Supreme Court, in Port Huron Area School District v Port Huron Education Association, 426 Mich 143 (1986), reiterated:
It is well settled that arbitration is a favored means of resolving labor disputes and that courts refrain from reviewing the merits of an arbitration award when considering its enforcement. To that extent, judicial review of an arbitrator’s decision is very limited; the court may not review an arbitrator’s factual findings or decision on the merits.
The United States Supreme Court expressed the policy of judicial deference in the context of labor arbitration in the celebrated Steelworkers Trilogy…
The legal basis underlying this policy of judicial deference is grounded in contract: the contractual agreement to arbitrate and to accept the arbitral decision as ‘final and binding.’
From the moment a grievance is filed, it typically proceeds through a contractually agreed-to sequence of steps governed by time limits, established mutually by the parties. When those steps are exhausted and a determination is made that a grievance is worthy of arbitration, the Union files an appropriate petition with either the American Arbitration Association, Federal Mediation, and Conciliation Service, or the Michigan Employment Relations Commission. The parties may also make a selection of an arbitrator on an ad hoc basis. Upon selection of an arbitrator, either through an agreed-to procedure of mutually striking names or ranking a list of names provided by one of the agencies, the parties, in conjunction with the arbitrator, select a hearing date. Depending on the arbitrator’s schedule, a hearing usually occurs within a three to six-month window after the appointment of the arbitrator.
At this point, the arbitration process is already more effective and expeditious when compared to litigation. In a court proceeding, after filing of litigation, court rules require or allow a number of responsive pleadings and extensive investigatory procedures. Answers must be filed, pre-trial conferences held, discovery is allowed (including depositions and interrogatories), dispositive motions are then filed, final pre-trial conferences, trial briefs, then the trial itself is held, with a decision being rendered at some point in time, generally after the conclusion of the trial. There is little question that arbitration provides a more time-friendly process for both labor and management in the resolution of disputes.
The value of arbitration, when compared to litigation, has for years remained unquestioned because respect has existed, on the part of both management and labor, that at the conclusion of an arbitration case the judgment of the arbitrator is “final and binding,” hence, the doorway to appellate review of an arbitration decision is extremely limited, with the prohibition on a court substituting its judgment for that of the arbitrator.
Fast forward to the end of the first decade of the new century and the respect from management has eroded by what appears to be a concerted effort amongst various public employers (represented by a handful, if not just two particular law firms). There seems to be a mission to destroy the value of arbitration through several meritless and costly tactics, including the refusal to comply with arbitration awards which leads to enforcement actions being filed in court, as well as petitions being filed seeking to vacate the decision of arbitrators.
In the southeast portion of Michigan, known as the tri-County area, arbitration remains alive and well, with the respect it has always enjoyed from both management and labor. Arbitrators are selected, hearings are held, awards are issued and the parties comply. The parties recognize the decision is final and binding. There may be decisions which neither management nor labor like, but the parties recognize that this is the process we have agreed to for the benefit of all and that we will abide by the decisions rendered. If an individual is ordered reinstated to work or a monetary award is issued due to a breach of contract, employers comply. Likewise, if the Union does not prevail in a case, be it disciplinary in nature or a breach of contract involving monetary matters, the case is done because we have agreed to accept the decision of the arbitrator is final and binding. Once we leave the tri-county area, however, the picture becomes distinctly different. In the past five years, POAM has been involved in more than 30 post-arbitration proceedings, including enforcement actions in court because of an employer’s non-compliance with an arbitration award or, conversely, defending against an action filed in court by an employer seeking to vacate an arbitration award.
The total number of cases that have proceeded to arbitration during the same period was approximately 300. While the number of post-arbitration proceedings involves only 10% of the total cases, that amount is 500% higher than in the previous five-year period.
The underpinning of this trend is rooted in several causes. There have been a handful of law firms representing the vast majority of public employers outside of the tri-county area. Those firms, in my opinion, are providing poor legal advice to their clients (management) advising them to not comply with arbitration awards, or in the alternative, to file appeals to vacate awards. The motivation is not unclear, as the checkbook, in my opinion, rears its ugly head when improvident legal actions are filed. Combine that motivation with elected officials who, outside the more labor-savvy tricounty area, are (let us not say ignorant of labor law), perhaps naive as to labor matters, which leads to the current unfortunate trend.
Why is this trend disturbing? In nearly every case, POAM has prevailed in obtaining enforcement of the arbitration award or in successfully defending against the legal attempt to vacate the award. There is one case that is an exception to our success (which is now on appeal), however, that case is unique as it exposed a judge who blatantly disregarded legal standards and decided to impose his own judgment. Whether that decision was mere political grandstanding by the court or a true ignorance of the law is of no distinction in the eyes of the law, as we fully expect the Court of Appeals to undo the court’s misguided act. The fact remains that in my 26 plus years with POAM, in over 99% of the cases the public employer has met with no success in either refusing to comply with the arbitration award or in the attempt to vacate the award. Apparently, only the lawyers who gave the bad advice in the first place are achieving any “success.”
The disturbing trend is expanding, as more of the same poor legal advice (generally from the same law firms, in my opinion), has encouraged employers to cut off arbitration of grievances once a collective bargaining agreement expires. While the law recognizes that at the expiration of a contract arbitration may be discontinued by either party, the wisdom of such action on the part of a public employer is seriously questioned. The tactic is ineffective, especially in those law enforcement groups which have the right to compulsory arbitration. If the tactic is employed, the Union will raise the issue of retroactive application of the grievance arbitration procedure so that arbitration cases arising after the expiration of the agreement will ultimately be arbitrated.
POAM was successful in Ottawa County in obtaining retroactive application of arbitration of grievances which, unfortunately, led to the employer seeking to appeal the decision, which was rejected by the Circuit Court. In fact, Ottawa County is no stranger to the tactic, as it also cut off arbitration of grievances in an earlier round of compulsory arbitration, forcing POAM to raise the issue of retroactive application of the arbitration process. The compulsory arbitration panel chairperson, in that first case, rejected the issue on procedural, not substantive, grounds. Because of the procedural error (unlike grievance arbitration requiring final and binding adherence to arbitration awards), POAM sought review of the decision, whereupon the Court of Appeals agreed with POAM and after oral argument in the Supreme Court, the Justices also agreed that the compulsory arbitration chairperson had erred.
Employers fail to recognize that even if they cut off arbitration at the expiration of a contract, litigation remains viable for a claimed breach of contract. As a result, who benefits from the tactical decision to cut off arbitration? Once again, only the lawyers will benefit, as they will be representing the public employer if litigation is filed, resulting in more lengthy proceedings, leading to more extensive legal fees, which is one of the reasons arbitration exists in the first instance, to avoid higher costs. As a result, POAM will usually make the first attempt to obtain the retroactive application of the arbitration procedure, with reservation of the right to file litigation in the event arbitration is not available. The losers will be the public employer and citizens whose tax dollars are at stake since our membership is protected by cost control through the use of our experienced in-house staff of attorneys. What does the future hold for arbitration, given the concerted effort on the part of various public employers (through their legal counsel) to undercut its value? If the trend continues, the arbitration will likely become merely one, instead of the exclusive remedy to resolve disputes. No one wants litigation as the primary method of resolving a breach of contract claim, however, POAM and its satellite organizations are far better suited to take an aggressive role utilizing litigation than many governmental entities who claim to be financially strapped, yet who repeatedly make poor financial decisions (with the urging of legal counsel) that end up costing far more than if arbitration were utilized and respected. If arbitration is no longer the end of a dispute, with post-arbitration court proceedings being inevitable, why use arbitration? Our likely response will be to go on the offensive and start with litigation. Maybe then employers will realize that the added exposure in litigation to broader forms of damages and causes of action, such as tort and civil rights claims, is not the preferred way to do business.
Our advice to management may seem self-serving, but nonetheless, it will be given. That advice is, seriously question legal counsel as to the value and yes, the motives at hand, when it is recommended that arbitration be discontinued at the end of a contract. Question legal counsel when it is recommended that an arbitration award not be complied with. Question legal counsel when it is recommended that an action to vacate an arbitration award is sought. Recognize the exorbitant legal costs the public employer and the citizens who are your client constituents will incur with improvident tactics, which history has shown have little or no likelihood of success. Heed the words spoken by both the United States and Michigan Supreme Courts when you are told that the doorway to the court is very narrow and that the court may not review an arbitrator’s factual findings or decision on the merits, to the extent that the court should have the attitude of one of “hands-off.” Recognize further, Mr. Employer, that your reputation within the academy of arbitrators is damaged when you act improvidently and do not respect the fundamental purpose and benefit of arbitration.
Well, that’s my column for this edition of the LEJ, generally speaking.