Arbitration Law Memo  January, 2014
LawMemo
First in Employment Law

*** Arbitration - Individual contracts ***

*** Arbitration - Collective bargaining agreements ***

*** Arbitration - Individual contracts ***

9th - Court adopted a rebuttable presumption that an order compelling arbitration, but not explicitly dismissing the underlying claims, stayed the action.

MediVas LLC v. Marubeni Corporation (9th Cir 01/27/2014)
http://case.lawmemo.com/9/medivas.pdf

In a non-employment arbitration case, the 9th Circuit addressed whether an order compelling arbitration was appealable when the trial court neither explicitly dismissed nor explicitly stayed the action. The 9th Circuit held that such an order implicitly stayed the action and thus was not "a final decision with respect to an arbitration" under the Federal Arbitration Act. The court also adopted a rebuttable presumption that an order compelling arbitration but not explicitly dismissing the underlying claims stayed the action as to those claims pending the completion of the arbitration. Thus, the court dismissed the appeal for lack of jurisdiction.

MD - Denial of petition to compel arbitration was not immediately appealable because it did not terminate the proceedings (6-1).

American Bank Holdings v. Kavanagh (Maryland 12/30/2013)
http://case.lawmemo.com/md/abh.pdf

Kavanagh sued the employer for payment of funds due under the employment agreement, related to a loss reserve fund. The trial court denied the employer's motion to compel arbitration. The Maryland Court of Special Appeals affirmed. The Maryland Court of Appeals affirmed. The issue was whether the denial of a motion to compel arbitration constituted a final judgment under section 12-301 (of the Courts and Judicial Proceedings Article, Maryland Code) if a substantively equivalent petition could have been filed as a separate and independent action under section 3-207. The court concluded that the denial of the employer's petition to compel arbitration filed in an existing action, (in this case, an employee's breach of contract action), was not immediately appealable as a final judgment, because that denial did not put the parties out of court by terminating the proceedings. The court noted that the employer could have initiated a separate proceeding to compel arbitration in which a denial of that order would be immediately appealable because it terminated the proceeding.

Dissent:

The dissent argued that virtually all states that had adopted the Uniform Arbitration Act granted immediate appeal of denial of petitions to compel arbitration and the Maryland Legislature likewise did so, whether filed in a pending proceeding or an independent action.

NY - Motion to compel arbitration and stay sexual harassment and negligent hiring and supervision action was properly granted.

Morales v. American Apparel Inc (New York App Div 01/15/2014)
http://case.lawmemo.com/ny/morales.htm

Morales sued the former employer alleging sexual harassment and negligent hiring and supervision and petitioned the court for a related CPLR article 75 proceeding to stay arbitration. The trial court granted the employer's and individual's motions to compel arbitration and to stay proceedings. The New York Appellate Division affirmed, stating the subject arbitration agreement was valid, the parties complied with its terms, and the claims sought to be arbitrated were not time-barred under State law.

OH - Banks were not obligated to arbitrate dispute where they were not members of FINRA and did not sign Form U-4, which contained the arbitration provision.

Fifth Third Bank v. Rowlette (Ohio Ct App 12/30/2013)
http://case.lawmemo.com/oh/fifththirdbank.pdf

The plaintiffs, banks, sued former employee Rowlette, a registered securities representative, for breach of contract (with non-compete provisions) regarding stock and stock options, and Rowlette and his new employer for tortious interference with contract and unfair competition. The trial court denied Rowlette's and the new employer's motions to compel arbitration. The Ohio Court of Appeals affirmed. The issue was whether the former banks could be compelled to arbitrate the dispute under the Financial Industry Regulatory Authority (FINRA) Code. The court found that that the banks were not members of FINRA nor signatories to Rowlette's Form U-4, which contained the arbitration provision. The court concluded the banks were not obligated to arbitrate the claims in this case under the FINRA Code or the provisions of Rowlette's Form U-4.

WA - Resignation did not preclude recovery for sales commissions under procuring cause doctrine.

Miller v. Pal M Wolff Co (Washington Ct App 01/16/2014)
http://case.lawmemo.com/wa/miller.pdf

Miller, a concrete sales representative, sued the employer for unpaid commissions after he resigned. The arbitrator awarded Miller wage damages, but denied attorney fees. Miller pursued a trial de novo and won slightly less wage damages, but was awarded attorney fees. The Washington Court of Appeals affirmed. The issue was whether Miller was entitled to damages under the procuring doctrine; when a party procured a purchaser to whom a sale was made, he was entitled to a commission if he was the procuring cause of a sale. The court held that Miller's resignation was not a precluding factor for recovery under the procuring cause doctrine. The court found that the trial court properly awarded damages based on the parties prior practices. The court affirmed the attorney fee award based on Miller's improvement in position after trial - the attorney fee award was much larger than the wage damage award.

*** Arbitration - Collective bargaining agreements ***

7th - Appealing grievance to arbitral forum pursuant to the Railway Labor Act did not preclude suit for violation of the Federal Railroad Safety Act.

Reed v. NSR (7th Cir 01/14/2014)
http://case.lawmemo.com/7/reed.pdf

Reed grieved his discharge to an arbitral board pursuant to the Railway Labor Act (RLA). Reed also sued the employer for violation of the Federal Railroad Safety Act (FRSA) alleging discriminatory discharge for reporting a work-related injury. The arbitral board found in favor of Reed and ordered reinstatement without pay. The trial court denied the employer's motion for summary judgment based on the FRSA election-of-remedies provision. The 7th Circuit affirmed on different grounds. The FRSA election-of-remedies provision provides that an employee may not seek protection under both this provision and another provision of law for the same allegedly unlawful act of the railroad carrier. The court observed that Reed did not "seek protection" under the arbitral forum mandated by the RLA, rather Reed sought protection under the terms of his collective bargaining agreement (CBA). The court concluded that the plain meaning of the election-of-remedies provision established that Reed was not precluded from obtaining relief under the FRSA because he appealed his grievance to the arbitral forum.

8th - Arbitrator's award of reinstating a lab technician without back pay drew its essence from the CBA.

BIVI v. UFCW (8th Cir 01/14/2014)
http://case.lawmemo.com/8/bivi.pdf

The arbitrator ordered the union employee reinstated without back pay, finding that discharge for violation of the plant's rules was not "just cause." The trial court granted summary judgment for the union, on behalf of the employee. The 8th Circuit affirmed. The employee, a lab technician, was discharged for pre-filling reports. The employee said the forms were corrected if the actual measurements varied. The court found, inter alia, that the arbitrator's decision was a straightforward balancing of the management rights and just cause provisions and thus drew its essence from the collective bargaining agreement (CBA).

DC - The FLRA's adoption of two inconsistent interpretations of "appropriate arrangements" in collective bargaining provisions is arbitrary and capricious.

Dept of the Treasury v. FLRA (DC Cir 01/03/2014)
http://case.lawmemo.com/dc/treasury1.pdf

Section 7106(b)(3) of the Federal Service Labor Management Relations Statute (FSLMRS) provided that collective bargaining agreements reached between federal agencies and employees' bargaining representatives could contain provisions that, although interfered with certain managerial prerogatives, constituted appropriate arrangements for employees adversely affected by the exercise of such management rights (5 USC Section 7106(b)(3)). The Federal Labor Relations Authority adopted two different tests: (1) for cases where the union sought review by the FLRA of an agency decision of non-negotiability of a union's bargaining proposal - the "excessively interfered" test applied; and (2) when an agency head rejected a provision in the agreement between the agency's bargaining representative and the union, the union could appeal to the FLRA and the "abrogation" test applied. Also, when a provision was imposed on the agency through arbitration, the agency could appeal to the FLRA and the "abrogation" test applied.

The "excessively interfered" test was defined as excessively interfering with management rights and the "abrogation" test "precluded the agency from exercising a management right." The DC Circuit found that the same provision if declared nonnegotiable during bargaining would be reviewed by the "excessively interfered" test and if the agency head rejected a bargained for provision, the "abrogation" test applied; and the result could vary depending on the test applied for the very same provision. The court concluded that because the FLRA set forth two inconsistent interpretations of the very same statutory term,  it acted arbitrarily and capriciously.

CA - Merit system school district had no statutory right to reduce classified employees work week in lieu of a layoff for lack of funds under the CBA.

Anaheim Union High Sch Dist v. AFSCME (California Ct App 01/03/2014)
http://case.lawmemo.com/ca/anaheim.pdf

The school district employer petitioned to vacate an arbitration award favorable to the union, on behalf of the employees. The trial court confirmed the arbitration award. The California Court of Appeal affirmed. The union grieved that the employer unilaterally reduced the employees work hours in violation of the collective bargaining agreement (CBA). The issue was whether the employer had the right under a mandatory, nonnegotiable section of the Education Code (sections 45308 and 45117) to reduce a classified employee's work year in lieu of a layoff for lack of funds, without complying with the CBA. The court found sections 45308 and 11745, by their terms, applied to an actual layoff of classified workers, not to a reduction in work year in lieu of layoff. While Education Code section 45101, subdivision (g) provided for a reduction in hours, the court explained section 45101 did not apply to the employer because it was a merit system school district. The court concluded the employer had no statutory right and must comply with the CBA.

HI - The Hawaii Court of Appeals does not have appellate jurisdiction over trial court's order that only denies a motion to vacate an arbitration award.

In the Matter of UPW v. County of Maui (Hawaii Ct App 01/22/2014)
http://case.lawmemo.com/hi/unitedpublicworkers2.pdf

The Hawaii Court of Appeals, in an unpublished decision, held that it does not have appellate jurisdiction over a trial court's order denying the union's motion to vacate an arbitration award because the order is not an appealable final order or judgment under Hawaii Revised Statutes (HRS) Section 628A-28 (Supp. 2012) or HRS Section 641-1.

MA - Teacher's unlicensed status alone does not automatically eliminate his rights, including his right to file a grievance and request an unpaid leave of absence.

School Committee v. Marshfield Education Assn (Massachusetts Ct App 01/28/2014)
http://case.lawmemo.com/ma/schoolcomm.htm

The school discharged O'Sullivan because he failed to renew his teaching license. The school contented that it could automatically end his employment by operation of law when his teaching license was not renewed by the Commissioner of Education (the commissioner) and because the commissioner denied the district superintendent's request for a waiver of the license requirement.  The school took no steps to discharge O'Sullivan in accordance with the terms of his teaching contract and the collective bargaining agreement (CBA). Nor did the school follow the teacher termination process set out in G.L. c 71, Section 42. The arbitrator determined that O'Sullivan's employment did not cease as a matter of law despite the lack of a license or waiver, and that he was still an employee and entitled to contractual rights, including the one-year unpaid leave of absence he requested. The trial court affirmed the arbitrator's award.

The Massachusetts Court of Appeals also affirmed the arbitrator's decision because O'Sullivan's unlicensed status alone did not automatically eliminate his rights, and that absent termination pursuant to Section 42, he retained certain collective bargaining rights, including the right to file a grievance and request an unpaid leave of absence. Thus, the court found that the arbitrator did not exceed her authority in deciding that O'Sullivan was entitled under the CBA to the one-year unpaid leave of absence to try to fulfill his licensing requirements because the decision was not contrary to law or in violation of public policy.

NY - Arbitrator did not exceed his authority by ruling in favor of the employer on sending an employee for an independent medical examination.

Matter of Sheriff Officers Assn v. Nassau County (New York App Div 01/08/2014)
http://case.lawmemo.com/ny/sheriff1.htm

The arbitrator ruled in favor of the employer on a grievance regarding sending an employee for an independent medical examination. The trial court granted the union's petition to vacate the award. The New York Appellate Division reversed, reinstating and confirming the award. The court found that the arbitrator had the authority to determine whether the employer's actions violated the collective bargaining agreement (CBA), and his determination of that issue did not exceed a specifically enumerated limitation on his power.

OH - Trial court's order refusing to quash subpoenas in their entirety and granting protective orders in an arbitration proceeding were not final appealable orders.

YSU v. YSU Assn of Classified Emps (Ohio Ct App 12/19/2013)
http://case.lawmemo.com/oh/ysu.pdf

The employer sought to quash subpoenas issued by the union and sought protective orders in trial court regarding arbitration. The trial court refused to quash the subpoenas in their entirety, but granted protective orders, which resulted in appeals to the Ohio Court of Appeals. The court determined that there was no appealable final order. Reading the final appealable order statute in pari materia with the pertinent arbitration statute, the court concluded that, where the trial court order merely foreshadowed issues that may or may not arise and was not a blanket denial of protection as to a topic, the order was not a final appealable order.

PA - Arbitrator did not have jurisdiction over teacher's dismissal.

Neshaminy Sch Dist v. Neshaminy Fed of Teachers (Pennsylvania Cmwlth Ct 01/09/2014)
http://case.lawmemo.com/pa/nsd.pdf

Teacher Buske appeared at the School Board hearing (section 1127 of the Public School Code) considering her dismissal for shoplifting and other charges. The School Board dismissed her. Buske appealed to the Secretary of Education challenging the notice provision of the School Board hearing. The Secretary of Education upheld Buske's dismissal and the notice. Buske did not appeal the decision. The union filed a grievance (section 1133 of the Public School Code) after the School Board's decision. The arbitrator denied the employer's motion to dismiss based on Buske's participation in the School Board's section 1127 hearing. The arbitrator ordered reinstatement. The trial court denied the School Board's petition to vacate. The Pennsylvania Commonwealth Court reversed. The court ruled "Had the Secretary's adjudication been appealed, this Court may have reversed the Secretary's order and held that the gratuitous information in the School District's hearing notice rendered it defective. The adjudication was not appealed, and it is binding. We are forced to conclude that the arbitrator erred in accepting jurisdiction over the grievance."

PA - Providing notice of court appearance for police officers through e-mail, computers, and cell phones did not amount to a change in the CBA (4-3).

Fraternal Order of Police v. City of Philadelphia (Pennsylvania Cmwlth Ct 01/02/2014)
http://case.lawmemo.com/pa/fop1.pdf

The arbitration panel in its 2011 award modified the notice requirement for appearance in court by police officers. The trial court denied the union's petition to vacate the 2011 award. The Pennsylvania Commonwealth Court affirmed. The court agreed with the trial court that review was under the narrow certiorari scope of review and that the panel did not exceed its authority and that it had jurisdiction to consider the implementation of the notice of court appearance provisions of the collective bargaining agreement (CBA). The court found that adding provisions of notice of court appearance through e-mail addresses, computers, or cell phones did not amount to a change in the CBA.

Dissent:

The dissent argued the interest panel lacked jurisdiction to altered a decades-old practice of personal (actual) notice of court appearances, the change was subject to mandatory bargaining; the majority erred in allowing the guise of implementing an interest arbitration award to act as a reopener of the notice provision of the CBA.

Employment Law Editor: Jennifer Jill Esmay, JD.
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