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Title: District 9, Local 8248 and Jacobs Industrial Maintenance
Date: June 20, 2003
Arbitrator: Lynn Wagner
Citation: 2004 NAC 133

IN THE MATTER OF:

District 9, LoCAL 8248,
UNITED STEELWORKERS OF AMERICA,

                        Claimant,

vs.

JACOBS INDUSTRIAL MAINTENANCE CO.,

                        Respondent.

                                                                        /

AWARD OF ARBITRATOR

This arbitration arises out of a grievance filed by District #9, LOCAL #8248, UNITED STEELWORKERS OF AMERICA (hereinafter “Union”) against JACOBS INDUSTRIAL MAINTENANCE CO. (hereinafter “Company”) on or about July 9, 2001, alleging the Company breached Section 20 of the collective bargaining agreement (hereafter “Contract”) by failing to give approximately 100 painters, tank cleaners and hydroblasters (hereafter “affected employees”) five (5) days written notice of their impending layoff and not paying them three (3) days pay in the absence of such notice.  The Company denied the grievance, the parties exhausted all steps of the grievance procedure and an arbitration hearing was held on June 6, 2003 in Christiansted, St. Croix, U.S. Virgin Islands.

ISSUE

The parties stipulated to the following issue:

1.  Whether the Company breached Section 20 of the Complaint when it did not pay each of the affected employees three (3) days pay after they were laid off.

RELEVANT CONTRACT PROVISIONS

The relevant Contract provisions are as follows:

SECTION 1.0.  The Union, having been designated the exclusive Collective Bargaining Representative of the Employees of the Company (as defined in Section 2 below), the Company recognizes the Union as such exclusive representative.  Accordingly, the Union makes this Agreement in the capacity as the exclusive Collective Bargaining Representative of such Employees….

 

SECTION 9.0.  This Article provides the procedure for the timely consideration of grievances over the interpretation and application of this Agreement….

 

SECTION 9.1, STEP 4(C).  The decision of the Arbitrator shall be final and binding to both parties….

 

SECTION 9.1, STEP 4(e).  The Arbitrator shall not have the jurisdiction to alter, amend or modify the provisions of this Agreement.…

 

SECTION 20.  Any employee who is to be laid off by the Company shall receive five (5) days written notice before such layoff.  In the event the Company fails to provide said notice, the employee shall be paid three (3) days pay at the employee’s regular rate of pay, limited to one such ‘3-day pay’ within any nine month period….

ARBITRABILITY

The parties agree that the Arbitrator has jurisdiction to decide the Grievance.

FINDINGS OF FACT

For many years, the Company performed painting, tank cleaning and hydroblasting work at a refinery on St. Croix pursuant to a contract with HOVENZA.  HOVENZA notified the Company on June 1, 2001 that it had decided to have such work performed by the Triangle Company (hereafter “Triangle”), effective July 2, 2001.

HOVENZA desired a seamless transition, with no gap in the performance of the work between the end of the Company’s contract and the beginning of Triangle’s.  In order to accomplish this objective, Triangle committed to hire all of the affected employees, effective July 2, 2001, in their same positions with their same wages and benefits.  All the affected employees would remain employed by the Company until Friday, June 29, 2001 and become employees of Triangle the following Monday, July 2, 2001 (except for a few weekend workers, who would remain employed by the Company until July 2, 2001).  From the perspective of the affected employees, their work and pay would remain unchanged.  The only difference would be the name of the employer appearing on their paychecks and identification badges.

In order to allow sufficient time for the seamless transition, the Company decided to give notice to the Union immediately.  It did this by a letter to the Union’s Sub-District Director dated June 1, 2001, stating:

HOVENZA has notified Jacobs, IMC of its intent to award the following maintenance work, currently being performed by Jacobs IMC to another contractor effective July 2, 2001:

·        Painting
·        Tank Cleaning
·        Hydroblasting

HOVENZA has requested that Jacobs IMC assist in a smooth transition of work to the new Cotractor and it is Jacobs IMC’s intention to do so.

 

Jacobs IMC appreciates the hard work and effort of its employees in these areas.  We wish these men and women well in their future endeavors.

Shortly thereafter, the Company instructed the supervisors of the affected employees to meet with them, give each a copy of the June 1, 2001 letter and advise them their employment by the Company would end on or about Friday, June 29, 2001.  The supervisors met with the tank cleaners on June 11, 2001 and with the painters and hydroblasters on June 13, 2001.  No evidence was presented as to whether the supervisors actually distributed copies of the June 1, 2001 letter to the affected employees or advised them their active employment by the Company would end on or about June 29, 2001.

On June 14, 2001, the Company’s Transition Manager met with the affected employees for the purpose of explaining the procedure under which they would be hired by Triangle to become its employees on Monday, July 2, 2001.  No evidence was presented as to what the Transition Manager actually told the employees at the meeting.

During this same period, 20-30 of the affected employees visited the Company’s two human resource offices (one inside and one outside the plant) each day to ask questions about the transition.  Copies of the June 1, 2001 letter to the Union were posted at each of the offices.  No evidence was presented that any of the affected employees read the posted letters.

Between June 19 and 22, 2001, all of the affected employees completed the paperwork necessary to become employees of Triangle as of July 2, 2001, and were issued Triangle employee identification badges by HOVENZA’s security department.  Thus, as of June 22, 2001, at the latest, all the affected employees were aware their active employment with the Company would end on June 29, 2001 for most, and July 2, 2001 for a few who would work over the weekend, and they would start work for Triangle on July 2, 2001 in their same positions with their same wages and benefits.

At the conclusion of their shifts on Friday, June 29, 2001, the affected employees’ employment with the Company came to an end, (except for the few weekend coverage employees, who worked for the Company until July 2, 2001).  On July 2, 2001, all of the affected employees began working for Triangle in their same positions with their same wages and benefits.  The seamless transition had been accomplished.

A week later, on July 9, 2001, the Union submitted the Grievance, alleging the Company breached Section 20 of the Contract by allegedly failing to give each affected employee five (5) days written notice he or she was going to be laid off on June 29, 2001, or in the case of the weekend workers, July 2, 2001, and not paying each three (3) days pay in lieu of such notice.  The Company denied the Grievance and, after exhaustion of the grievance procedure, the case eventually came before the Arbitrator.

ARGUMENTS OF THE PARTIES

By the Union.  The Union contends the Company did not comply with the five (5) days written notice requirement of Section 20 by sending it the letter of June 1, 2001, because the language of that provision clearly and unambiguously states the notice shall be given to any “employee” to be laid off.  According to the Union, the Company could only comply with Section 20 by giving such notice to each affected employee individually.  The Union argues that Section 9.1, Step 4(e), which provides an arbitrator shall not alter, amend or modify the provisions of the Contract, requires the Arbitrator to apply such language literally.

Alternatively, the Union contends that, if Section 20 is construed to mean delivery of the June 1, 2001 letter to the Union was delivery to all affected employees, the content of the letter did not meet the requirement of Section 20 that an affected employee receive notice of “layoff”.  The Union argues Section 20 clearly and unequivocally requires the written notice use the word “layoff” and, because Section 9.1, Step 4(e) compels the Arbitrator to apply that language literally, the Company’s letter of June 1, 2001, which does not use the word “layoff”, does not meet the contract’s requirements.

In response to the Company’s contention that the three (3) days pay provision of Section 20 was not intended to apply to a seamless transition situation in which an affected employee would not suffer any economic harm due to the end of his active employment by the Company, the Union contends the purpose of that provision was not to compensate an affected employee for economic harm resulting from inadequate notice of impending unemployment due to a layoff, but to impose a penalty to deter the Company from ignoring the five (5) day written notice requirement.

By the Company.  The Company contends it complied with Section 20 by sending the Union its letter of June 1, 2001, because the Union was the authorized agent of the affected employees and notice to an authorized agent constitutes notice to its principals.  It points to the fact Section 20 does not expressly require written notice be given to each affected employee individually, but only that they “receive” such notice.

The Company also contends that, because Section 20 does not expressly state the notice must use the word “layoff”, it only requires the use of language a reasonable employee, standing in the shoes of an affected employee, would understand as meaning he or she was going to be laid off.  It argues that the language in its letter of June 1, 2001 clearly meets that requirement.

Alternatively, the Company contends that, even if Section 20 clearly and unequivocally requires five (5) days written notice in the typical situation under which an impending layoff might result in loss of employment and economic harm if an affected employee did not receive the required notice, it is ambiguous when applied to a seamless transition under which an affected employee will be employed immediately by the new contractor in his or her same position with the same wages and benefits; and it could not have been the intent of the parties, when they negotiated the provision, that it apply in such a situation.

According to the Company, the three (3) days pay provision was not intended to serve as a penalty for non-compliance with the notice requirement of Section 20, but as a liquidated damages provision to compensate an affected employee for any economic damages he or she might suffer due to inadequate notice of impending unemployment as a result of a layoff.

Finally, the Company contends that, because all of the affected employees actually knew their employment with the Company would end more than five (5) days in advance, or by June 22, 2001 at the latest, they are not entitled to three (3) days pay because they did not each receive a duplicative written notice.

DISCUSSION

While the ultimate issue is that stipulated by the parties – whether the Company breached Section 20 by failing to pay each affected employee three (3) days pay as a result of their layoffs, the answer to that issue depends on the determination of four sub-issues:  (i) whether five (5) days written notice must be given to an affected employee individually, or may be given to the Union as his or her exclusive bargaining agent; (ii) whether the written notice must use the word “layoff” or may use other words that reasonably would convey to an ordinary employee that he or she is going to be laid off; (iii) whether the three (3) days pay provision is applicable to a seamless transition under which an affected employee would not suffer a loss of employment, wages or benefits as a result of the end of his or her active employment by the Company; and (iv) whether an affected employee, who had actual notice of his or her impending layoff more than five (5) days in advance, is entitled to the three (3) days pay, because he or she did not receive the required written notice of that fact.

Under the ordinary rules of agency, written notice to the Union, as the exclusive agent of bargaining unit employees, constitutes written notice to the affected employees, as its principals.  See, e.g., Ford Motor Co., 1 LA 407, 410 (Shulman 1945)  The Union’s contention requires the Arbitrator to address whether the language of Section 20 changes the general rule and requires the written notice be given to each affected employee, individually.  Because the language of Section 20 does not specifically state the written notice must be delivered to each affected employee individually, it is ambiguous as applied to that issue.  When contract language is ambiguous, an arbitrator may consider external evidence and recognized rules of contract interpretation to determine the meaning intended by the parties.

Since neither party presented evidence on whether the Union and Company representatives who negotiated Section 20 intended to require the written notice be given to each affected employee individually, rather than to the Union, as their agent, nor of any past practice of the parties in applying it to previous layoffs, the Arbitrator must determine what their representatives would have intended had the question been before them when they first agreed upon Section 20.  See, Elkouri & Elkouri, How Arbitration Works, 5th Ed. 476.

It is reasonable to assume the Union and the Company negotiators were aware that Section 8(a)(5) of the National Labor Relations Act already required the Company to give the Union reasonable notice of changes in the terms and conditions of employment of bargaining unit employees, including notice of planned layoffs.  See NLRB v. Katz, 369 U.S. 736 (1962).  It is very unlikely, therefore, that they would have intended Section 20 to require only duplicative written notice to the Union.  For this reason, the Arbitrator finds Section 20 was intended to require the Company to give five (5) days written notice to each affected employee individually, in addition to the notice to the Union mandated by the National Labor Relations Act.

It is undisputed the Company did not send a copy of its letter of June 1, 2002 to each of the affected employees individually.  And, there is no evidence that copies of the letter were actually given to them at the supervisory meetings on June 11 and 13, 2001, nor that they actually read the copies of the letter posted in the two human resources offices.

Because the Company’s letter of June 1, 2001 was not given to each affected employee individually, as required by Section 20, there is no need for the Arbitrator to address whether Section 20 required use of the word “layoff”.

The finding that Section 20 requires written notice to each affected employee individually is not, however, dispositive of the Grievance because the Company contends that Section 20 does not apply at all to a seamless transition from employment by the Company to employment by a new contractor in the same position with the same wages and benefits; and, even if it did, the affected employees are not entitled to three (3) days pay, because they had more than five (5) days actual notice.

If Section 20 is clear and unambiguous as the Union contends, the Arbitrator must apply it literally, regardless of the fact that, under the seamless transition, none of the affected employees would suffer any economic loss by not receiving the required five (5) days written notice.  See, e.g., Sonoma-Marin Publishing Co., 83 LA 572, 516 (Griffin 1984); Clear Covers II Supply Co., 47 LA 272, 277 (Witney 1996).  The Arbitrator can only consider external evidence of the intention of the parties, or apply rules of contract construction, if the language of Section 20 is ambiguous as applied to such a situation.

Contract language which is clear and unequivocal when applied to one situation may be ambiguous and equivocal when applied to another.  As Justice Oliver Wendell Holmes stated in Yales v. Town Mfg. Co., 5 LA 753 (1946):

A word is not a crystal, transparent or unchangeable; it is the skin of a living thought and may vary greatly in color according to the circumstance and the time in which it is used.

If the facts of this case were different, and HOVENZA decided to cease performing the painting, tank cleaning and hydroblasting work altogether as of July 2, 2001, the Company was forced thereby to lay off the affected employees and, as a result, they would become unemployed, the language of Section 20 would clearly and unambiguously require the Company to give the five (5) days written notice of the impending layoff to the affected employees individually; and, if it did not, to pay each three (3) days pay.

But the facts in the instant case are fundamentally different.  Although the employment of affected employees by the Company would end on Friday, June 29, 2001, or Monday, July 2, 2001 for the few weekend workers, all of them would commence working for Triangle on Monday, July 2, 2001 in their same positions with their same wages and benefits.  As a result, none could suffer any economic harm due by not receiving five (5) days written notice.  The language of Section 20 is not clear and unambiguous when applied to such a seamless-transition layoff where no purpose would be served by such notice.

When faced with contract language which is ambiguous in its application to the situation before him, an arbitrator ordinarily attempts to discern the intention of the parties by examining the bargaining history of the provision, see Michigan Milk Producers Ass’n, 95 LA 1184, 1186-87 (Kanner 1990); Atlanta Wire Works, 93 LA 537, 540 (Williams 1989), or the past practice of the parties in applying it under the same or similar circumstances.  Elkouir & Elkouri, supra, at 648-651.

Here, neither party presented evidence of what the Union and Company representatives who negotiated Section 20 viewed as its purpose or whether they intended it to apply to such a seamless transition.  Although the Union called as a witness a member of its bargaining committee when Section 20 was first included in the Contract, his testimony was limited to the Union representatives’ intention.  But, to be relevant, bargaining history requires evidence of what both sides intended the agreed upon provision to mean.  Nor did either party present evidence of past instances in which the written notice requirement of Section 20 was applied to such a transition. See, e.g., Kaiser Permanente, 100 LA 119120 (Knowlton 1992).

It is not uncommon for arbitrators to be confronted with the task of interpreting and applying a contract provision to a situation not envisioned by the parties when they negotiated it, but falling within its general framework.  Under such circumstances, an arbitrator must try to “fill the gap” by determining what the Union and Company negotiators would have agree upon, within such framework, had the specific situation been before them.  See Elkouri and Elkouri, supra, at 473, 477.

In making such a determination, an arbitrator must give words their ordinary and popularly accepted meaning.  On the other hand, an arbitrator must discern the intention of the parties, not by a single phrase or word, but from the contract as a whole, on the assumption the parties would not intentionally include a provision inconsistent with the overall purpose of the contract.  See, e.g., Riley Stroker Corp., 7 LA 764, 767 (Platt 1947).

The general purpose of collective bargaining agreements is compensatory – to provide bargaining unit employees agreed upon wages, benefits and working conditions to compensate them for their labor.  The ordinary remedy for breach by an employer is to “make the grievant whole”, not to impose a financial penalty on the company.  To conclude the purpose of the three (3) day penalty provision of Section 20 serves as a penalty, as contended by the Union, would render it inconsistent with the overall purpose of the Contract, as well as the compensatory nature of the remedies ordinarily awarded by arbitrators for breach of collective bargaining agreements.

Such conclusion also follows from the rule of contract construction that, when faced with two interpretations of a provision, one which would render it unenforceable and one that would render it enforceable, an arbitrator should adopt the latter.  As a general rule, provisions imposing a penalty for breach of contract are unenforceable.  See, e.g., Fullford v. Rawls, 1986 WL 14675 (D.V.I. 1986); and National Bank v. Tropical Ventures, Inc., 358 F.Supp. 1203 (D.V.I. 1973).  Since an interpretation of Section 20 based on the Union’s position, that its purpose was to impose a penalty on the Company for failing to give the required notice, would make the three (3) days pay provision unenforceable, the Arbitrator must find its purpose as compensatory.

Given its compensatory purpose, it also would be unreasonable to conclude the Union and the Company representatives who negotiated the three (3) days pay provision of Section 20 would have intended it to apply to a seamless-transition layoff, under which an affected employee could not suffer any economic harm by failing to receive the five (5) days written notice.

Even assuming arguendo that Section 20 applied to such a seamless-transition layoff, the Arbitrator would, nevertheless, concluded the affected employees are not entitled to receive three (3) days pay, because each of them had more than five (5) days actual notice.  A party to a contract cannot recover damages for failure of the other party give contractually required notice of a future event of which he or she already had actual notice.  See, e.g., Government Guarantee Fund v. Hyatt Corp., 960 F.Supp. 931 (D.V.I. 1997); CF Lettsome v. Virgin Island Tax Ass’n, 1994 LW 660829 CD VI 1994).  With more than five (5) days actual notice that their employment by the Company would end on June 29, 2001, or July 2, 2001 in the case of the few weekend workers, due to completion of the paperwork to become Triangle employees and being issued Triangle employee identification badges between June 19 and 22, 2001, it was impossible for the affected employees to suffer any economic harm by not receiving duplicative five (5) days written notices under Section 20.

DECISION

Section 20 required the Company to give five (5) days written notice of the impending layoff to each of the affected employees individually.  The Company failed to give such notice to each of the affected employees, as required.

However, Section 20 does not apply to the seamless-transition layoff in the instant case, under which all the affected employees, whose active employment by the Company would end on either June 29, 2001 or July 2, 2001, would immediately be employed by Triangle in their same positions with their same salaries and benefits.

Even if Section 20 applied to such a seamless-transition layoff, the affected employees would not be entitled to receive three (3) days pay, as all of them had more than five (5) days actual notice as a result of completing the paperwork for their employment by Triangle and receiving their Triangle employee identification badges between June 19 and 22, 2001, more than the five (5) days before the end of their active employment by the Company.

AWARD

The Grievance is DENIED.

            ENTERED THIS 20th day of June, 2003.

                                                           
LYNN E. WAGNER, ESQ.
Arbitrator

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