Arbitration:History, Theory, Rationale, Legal

Status

Definitions• Arbitration– A procedure under which a neutral third party or

some other neutral body or entity resolves a dispute• Commercial Arbitration

– Used to resolve commercial disputes• Employment Arbitration

– Resolves individual employment disputes» Individual employment contracts» Corporate policies

– Statutory Disputes• Labor Arbitration

Labor Arbitration

• Two Types– Interest or Contract Arbitration• Resolves disputes over the terms and conditions of

employment to be included in a collective bargaining agreement

– Rights or Grievance Arbitration• Resolves disputes over the interpretation of an existing

collective bargaining agreement

Other Labor Dispute Resolution Procedures

• Negotiation– Public and private sectors

• Mediation– Public and private sectors– May be mandated

• Fact-Finding– Public sector

Digression:Alternative Dispute Resolution

(ADR)• Usually discussed in the context of

employment disputes• Any method of resolving an employment

dispute that does not use the legal system (administrative agencies and courts)– Mediation– Arbitration

History in the U.S.• 1871– Pennsylvania anthracite mine dispute settled by a

judge after both parties agreed to submit dispute to him and be bound by his decision

– Issues• Worker interference with production• Owner discharge of workers

• 1874– Ohio coal dispute, owners refused to abide by

decision

History in the U.S. (cont.)• 1886– Southwestern railroad refused to submit to arbitration

of strike– 1894

• Congress of Industrial Conciliation and Arbitration– Reps from labor, management and government– Interest in promoting industrial peace

– 1902-03• United States Strike Commission appointed by President T.

Roosevelt issued an award than ended a five-month anthracite strike

• Put in place an arbitration system that continues, in modified form, today

History in the U.S. (continued)• Railroads

– Arbitration Act of 1888• Passed after rail strikes in early 1880’s

– Voluntary submission to arbitration– Presidential investigation

• Invoked in 1894 for rail car manufacturing strike– Erdman Act of 1898

– 1898-1905 – did not work because employers refused to abide by award– 1906-13 – disputes settled without strikes because of growing strength of

railroad brotherhoods

– Newlands Act of 1913• Enacted when parties disagreed over composition of Erdman boards• Worked until 1918 when unions refused to submit 8-hour demands to

arbitration

History in the U.S. (cont.)• Railway Labor Act– 1926 enactment– 1934 amendment– Arbitration provisions• National Railroad Adjustment Board to resolve

grievances• National Mediation Board addresses disputes over the

terms and conditions in a collective bargaining agreement

History (cont.)

• Printing Industry– Arbitration of wage dispute between publishers

and Typographical Union in 1901– Local Boards with appeal to a national board

• Apparel Industry – Protocol of Peace in NYC cloak and suit industry in

1910• Board of Grievances and Board of Arbitration• Ended in 1916 with a strike in NYC

History (cont.)

• Apparel Industry (cont.)– Other branches and cities copied it– Led to other models later on

• Hart, Schaffner, Marx Board of Arbitration in Chicago in 1911

• Millinery industry in New York in 1915• Hosiery in the lat 1920’s

– Mediation model

• Entertainment (amusement) industry in 1920’s– Actors’ Equity– Director’s Guild

History (cont.)

• Government– U.S. Department of Labor created Conciliation

Service in 1913• Mediation• Arbitrator selection

– Two unsuccessful labor-management conferences during WWI

Modern CB System

• Wagner Act– Agreements needed interpretation • Arbitration to resolve disputes• In 1941, 62% of 1200 agreements in conciliation service

file included arbitration to settle disputes over the interpretation of the contract

– GM and UAW created the Office of the Umpire• (permanent)

Summary through 1941

• Arbitration an acceptable, if not a frequent manner of resolving labor disputes– In some industries

• Until Wagner Act and modern U.S CB system, primarily to resolve disputes over wages and the outcome of bargaining

• After Wagner Act, to resolve disputes over existing TCE

World War II and Development of Modern Labor Arbitration

• Wartime labor relations– Tripartite (labor, management, public) War Labor

Board (WLB)– Wage and price controls• Subject to approval by government

– Strike substitutes• During negotiations wage controls• During contract – grievance procedures

– Imposed on parties by WLB

Arbitration and WLB• WLB required parties to include grievance and

arbitration procedures in collective agreements as a means of avoiding strikes over disputes regarding contract interpretation– Encouraged development of arbitration techniques– Made distinction between

• Interests (writing a contract)• Rights (interpreting an existing contract)

– Established a cadre of arbitrators

Grievance Arbitration• A substitute for industrial conflict over

disputes regarding the interpretation of existing collective agreements

• Final and binding• Contracts for a fixed term• The stakes for any individual grievance usually

not that great• A voluntary process incorporated into

collective bargaining agreements

What Did Arbitration Do?

• It resolved the dispute through a voluntary procedure – No work stoppage– Production continued– “throw it over the wall”

Labor Arbitration Infrastructure• Appointing Agencies– American Arbitration Association, www.adr.org– Federal Mediation and Conciliation Service,

http://www.fmcs.gov/internet/– State Agencies

• Michigan – Bureau of Employment Relations, http://www.michigan.gov/dleg/0,1607,7-154-10576_17485---,00.html

• Maintain – Arbitrator lists or rosters– Rules for Cases

How Voluntary?• Section 301(a) of LMRA. "Suits for violation of

contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties."

Textile Workers Union v. Lincoln Mills (1957)

• Section 301 may be used to create a federal arbitration law– It is not simply a provision that permits federal

courts to decide cases under other laws

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Steelworkers v. American Mfg., 363 U.S. 564, 46 LRRM 2414 (1960);

Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 46 LRRM 2416 (1960)

• Courts must not determine the merits of a grievance – to be done by arbitrator (per parties’ agreement)– courts may not go beyond “arbitrability” by deciding on merits– one question for court: is this a dispute over a matter that the

parties have agreed to arbitrate? (is the case arbitrable?; see AT&T Technologies v. Comm. Workers, U.S. Supreme Court, 1986)• What did the parties agree to arbitrate?

– resolve doubts in favor of arbitrability• Is it absolutely clear that this is a matter that the parties have agreed

will not be subject to the grievance procedure and arbitrated? If not, must arbitrate.

– In general, matters of arbitrability left to the arbitrator by voluntary action of parties

Grievance arbitration is always voluntary

• There is no law that requires the private sector parties to – Include grievance procedure in their collective bargaining

agreement– Arbitrate a grievance.

• Statutory Policy, Section 203 (d) of LMRA– “Final adjustment by a method agreed upon by the parties

is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement.”

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Compare Commercial and Labor Arbitration

• Commercial Arbitration– a substitute for litigation– associated with a

breakdown of a relationship

• Labor Arbitration– a substitute for a strike

or a lockout– part of a CB process– implies the relationship

is working

• Part of a “continuing relationship”

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Concept of a Collective Agreement

• Creates a governance system– “system of industrial self-government”– “ a generalized code to cover a myriad of cases

which the draftsmen cannot anticipate”

• More than a system of rights and obligations

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Enterprise Wheel and Car., 363 U.S. 593, 46 LRRM 2423 (1960)

• Courts have a narrow scope of review of arbitration awards– did the arbitrator interpret and apply the collective agreement?– award must draw its “essence” from the agreement

• Ambiguity does not warrant vacating an award– arbitrators have no authority to provide reasons for their

awards– ambiguity may necessitate a remand

Paperworkers v. Misco, 484 U.S. 29, 126 LRRM 2313 (1987)

• Courts not authorized to reconsider the merits of an arbitration award– parties’ bargained for arbitrator’s judgment and remedy (even if it is “wrong”)– decision must be based on the CBA– pref. for private resolution of labor disputes (Sec. 203)– affirmation of Enterprise Wheel & Car

• Public Policy Issues– awards against public policy may be vacated

– “public policy” must be based on legal precedents and decisions – no “general considerations of supposed public interest”

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Collyer Insulated Wire , 192 NLRB 837, 77 LRRM 1931 (1971)• Board does not abandon its statutory authority by

deferring to grievance procedure and arbitration where– dispute arises from contract– there is machinery in contract to resolve dispute

• Furthers statutory policy of encouraging parties to resolve own disputes– Sec. 203(d) of LMRA

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Collyer (cont.)• Collyer criteria for pre-arbitral deferral (under what circumstances

will the Board defer a case to arbitration?)– non-repudiation of CBK– willingness to arbitrate/dispute must arbitrable– dispute must center on CBK

• Spielberg (1955)/Olin (1984) criteria for post-arbitral deference to award (what will the Board consider in deciding to defer to the arbitrator’s decision after it is issued?)– UFLP and contractual issues basically the same– UFLP issue presented to and considered by arbitrator– procedures fair and regular– all parties agreed to be bound– result not “clearly repugnant” to Act (Spielberg)/not “palpably wrong” (Olin)

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Collyer (cont.)• Scope of Deferral– 8(a)(5)/8(b)(3) cases

• Collyer• involves interpretation of parties’ rights

– 8(a)(3)/8(b)(1) cases• deferral - National Radio (1972)• no deferral - General American Transportation (1977)• deferral - United Technologies (1984)• Involves interpretation of individual rights

Interest Arbitration

• Widely used in the public sector as a strike substitute

• 23 states and DC use arbitration as a substitute for a strike to resolve public sector disputes over terms and conditions for at least some public employee groups

Private Sector

• Always voluntary– Basic steel industry

• Employee Free Choice Act

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Current Bill• Advocated by unions, opposed by employers– Employee Free Choice Act

• Certification without elections if a majority of employees sign authorization

• First contract mediation and arbitration• Priority handling to discharge cases

– EFCA Link

Opposition to Interest Arbitration• Employers generally do not want to cede

contract writing authority to arbitrators who are not responsible for the business– “Randel Johnson, vice president of labor policy for

the Chamber, said he thinks unions proposed an ‘outrageous’ bill in order to win a lesser compromise that would still be a big victory for labor. But he added, ‘any combination that still leaves the binding-arbitration in there would still be unacceptable to the business community.’“ Wall Street Journal, November 6, 2008.

Other Comments• “Congress should also protect the right of workers and

employers to bargain freely. Binding arbitration means that unaccountable and unknowledgeable government bureaucrats would impose employ ment contracts on newly organized companies. Workers would not have the option of voting down the contract, and companies would have no recourse if an arbitrator imposed uncompetitive terms that would drive it into bankruptcy. Congress should not let the government impose wage con trols throughout the economy.” Heritage Foundation, Heritage Foundation Weblink. See also EFCA Arbitration Comments

Basic Theory of Labor Arbitration and Arbitration in Collective Bargaining

• A substitute for the right to strike or lockout– Over grievances – rights/grievance arbitration– Over establishing TCE – interest/contract

arbitration

Factors in Acceptability/Success of Labor Arbitration in U.S.

• Neutrality– The system is fair

• Arbitrators chosen by parties

• Informal and relatively (compared to courts) inexpensive• Limitation in Scope

– Arbitrators limited to narrow issues and CBA interpretation– Minimal chance of “harm” to parties– “Functus Officio” – authority generally ends with issuance of award

• Finality– Scope of judicial review narrow

• Infrastructure– Appointing agencies – National Academy of Arbitrators– Rules

Employment Arbitration

• A substitute for litigation• Two important Supreme Court cases– Gilmer v. Interstate/Johnson Lane Corp. (1991)• An employee who signs an agreement to arbitrate an

claims arising out of employment may be required to arbitrate a claim of age discrimination– Agreement to arbitrate voluntary– No evidence that arbitration panel would have been biased or

incompetent to consider the ADEA claim– Nothing in ADEA precludes considering the statutory claim

through voluntary arbitration

Employment Arbitration (cont.)• Circuit City Stores v. Adams (2001)– FAA enforceability applies to most contracts of

employment• Federal Arbitration Act exclusion from coverage of

“contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” is limited to only such transportation workers

• Court relies on statutory construction rule of ejusdem generis: “[w]here general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.”