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NLRB defers to arbitrator (2-1)
May 27, 2005 by Ross Runkel at LawMemo
The NLRB's policy as to whether to defer to an arbitrator's award created a split among NLRB Members that illustrates the Republican-Democrat division on the Board. Two Republicans outvoted one Democrat.
The Board's deferral policy is designed to preserve Board resources and to encourage private resolution of disputes.
In Smurfit-Stone Container Corporation, 344 NLRB No. 82 (05/16/205) the employer and union had a collective agreement. The employer unilaterally changed the attendance policy. The union grieved under the agreement and also filed an unfair labor practice charge alleging a Section 8(a)(5) violation for refusal to bargain over a mandatory subject.
The arbitrator ruled that the employer had a right to change the attendance policy.
The question for the Board was whether to (a) defer to that award and dismiss the case or (b) not defer and decide the case on its statutory merits.
The majority placed a heavy burden on the General Counsel to prove that the Board should not defer, and found that burden not to be met.
Dissenting Member Liebman argued against deferral. In her view the arbitrator made a decision that the employer had an inherent right to unilaterally change the policy unless the contract affirmatively required bargaining with the union, which is the exact opposite of what Section 8(a)(5) requires. Thus, she would hold that the arbitrator's decision was "repugnant to the Act" and not subject to deferral.
The majority, although describing the award in somewhat disparaging terms, said it was up the General Counsel to prove that the theory of inherent management rights was the only way the award could be explained, and that burden was not met.
My view: If the arbitrator could have written the award to make it clear that the reasoning was not based on a theory that is the opposite of traditional 8(a)(5) reasoning, then there would be less reason for this case to go up to the full Board. Perhaps that was not possible here. In any event, arbitrators should keep in mind that a grievance might parallel an unfair labor practice proceeding, and they should write their awards accordingly. Just remember that if the Board defers to an arbitrator's award, then the parties will not get the benefit (or detriment) of a Board decision on the statutory merits.
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email did not create duty to arbitrate
May 24, 2005 by Ross Runkel at LawMemo
The company president sent an email to all employees, including Roderick Campbell, and attached a new policy containing an arbitration clause. When Campbell sued under the ADA, the company moved to compel arbitration. Motion denied. Campbell v. General Dynamics Government Systems Corp (1st Cir 05/23/2005).
The company's theory was simple. They sent an email with a new policy attached, and that was an offer which Campbell (an at-will employee) accepted by continuing to work. Presto, a contract, enforceable under the Federal Arbitration Act (FAA).
The 1st Circuit said this agreement could not be enforced as to Campbell's claim arising under the Americans with Disabilities Act (ADA).
The court assumed that the agreement would be enforceable under state law.
The ADA contains a dispute resolution provision, Section 513 (42 USC 12212):
Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, mediation, factfinding, minitrials, and arbitration, is encouraged to resolve disputes arising under this Act.
The focus became the statutory word "appropriate." The court found no general problem with the use of email, and even cited the E-Sign Act (15 USC 7001-7031). The problem was that the company typically did not use email to handle personnel matters, and had never before used email as means of creating a contractual term that was to become a condition of employment. In addition, the email message did not sufficiently bring home to Campbell that the attached policy contained an arbitration clause that would bind him if he kept working. In short, the email did not provide the employee with "minimally sufficient notice by signalling to a reasonable employee that the Policy was a contractual instrument whose terms would be deemed accepted upon continued employment."
My view: The court applied federal law here, although the language is "offer-and-acceptance," suggesting state law of contract formation. The federal law is ADA Section 513.
This is an intensely fact-driven case. It does not mean employers can't use email to form contracts (including contracts to arbitrate ADA cases) that will be enforceable under the Federal Arbitration Act. It means that the email (or whatever communication method is used) must contain enough of a "red flag" to put an employee on notice that the employer intends to change the contractual relationship.
For more discussion, see Michael Fox's comments at Jottings By An Employer's Lawyer.
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NASD rules preempt state ethics rules for arbitrators
May 23, 2005 by Ross Runkel at LawMemo
The California Supreme Court says the National Association of Securities Dealers (NASD) rules preempt California's "Ethics Standards For Neutral Arbitrators in Contractual Arbitration," and all of the California ethics rules are preempted. Jevne v. Superior Court (California 05/23/2005).
This case was between a brokerage and a customer, and will have an impact on employee-employer arbitrations conducted by the NASD.
California and the NASD both have rules requiring disclosures by neutral arbitrators, and California's are more extensive and complex. Both California and the NASD have rules under which arbitrators can be disqualified.
The NASD rules were specifically approved by the Securities Exchange Commission, which gave them the force of federal law and ultimately the power of the federal government to preempt state law.
The court identified four types of possible preemption: (1) where the federal statute expressly preempts (not here), (2) where the federal statute occupies a whole field of law (not here), (3) where it is actually impossible to comply with both federal and state law requirements (not here), and (4) where the state law could prevent or impair accomplishment of the purposes and objectives of the federal law (Bingo, that's it).
The logic: NASD is regulated by the Securities Exchange Commission (SEC), which is created by the Securities Exchange Act (SEA). SEA's objectives: fair dealing and investor protection. All NASD rules are reviewed and approved by the SEC, so they have the force of law. SEC's opinion is that California's rules have three negative effects on NASD arbitrations: (1) increased administrative costs, (2) reduction of the number of available arbitrators (because many are unwilling to comply), and (3) reduction of nationwide uniformity of NASD arbitrations.
Other California ethics rules could not be severed, said the court, so the whole works was preempted.
My view: We got the same result from the 9th Circuit in Credit Suisse v. Grunwald (9th Cir 03/01/2005), although the reasoning was a little different. [See blog]
Now the question is whether there is any possibility that the outcome will be different for employment arbitrations conducted by NASD. It seems the outcome would be the same.
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No appellate jurisdiction on order to arbitrate
May 22, 2005 by Ross Runkel at LawMemo
Sometimes a federal district court can make things so complex that a circuit court cannot review an order to arbitrate. So it was in Machinists Local 2121 v. Goodrich Corp (5th Cir 05/18/2005).
The union sued to compel arbitration of a dispute over retiree benefits in a collective bargaining agreement. The trial court granted partial summary judgment for the union; the 5th Circuit held that it lacked jurisdiction to review the trial court's order to arbitrate. The union actually made three claims: for (a) specific performance of the health care portion of the agreement, (b) specific performance of the arbitration clause, and (c) a declaration of rights under the agreement.
The 5th Circuit raised the question of its appellate jurisdiction on its own motion, and held that it lacked jurisdiction. (1) The trial court's order was not an appealable final order because it granted only part of the relief sought by the union. The trial court declined to address the declaratory judgment issue, closed the case administratively (the equivalent of a stay), and expressly retained jurisdiction. (2) The trial court stayed the case and ordered arbitration, and that is not an interlocutory injunction, and is not appealable under 28 USC 1292(a)(1). (3) The circuit court did not have appellate jurisdiction on the theory that the trial court wholly lacked jurisdiction. The employer argued that the union lacked standing under Labor Management Relations Act Section 301 because a union is limited to suing on behalf of "employees" and retirees are not employees. Without deciding that issue, the 5th Circuit ruled that the union had Section 301 standing because 52 retirees expressly authorized the union to represent them.
My view: I never heard of a case where a union can sue under Section 301 on behalf non-employees simply because the non-employees granted the union that authority. It would have been better for the 5th Circuit to address the issue of whether a union can sue under Section 301 on behalf of retirees.
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Circuit City Stores avoids sanctions
May 19, 2005 by Ross Runkel at LawMemo
Circuit City's latest appeal in Ingle v. Circuit City Stores (9th Cir 05/18/2005) was frivolous, but was not motivated by bad faith, so the 9th Circuit did not impose sanctions.
In the first appeal [here] the 9th Circuit ruled that the employer's arbitration agreement was unconscionable under California law, and therefore not enforceable.
Later, the 9th Circuit decided EEOC v. Luce, Forward, Hamilton & Scripps (9th Cir 2003) reversing the circuit's previous refusal to enforce agreements to arbitrate Title VII cases.
For some reason, Circuit City thought Luce, Forward changed the landscape, so they again asked for an order to arbitrate, again the trial court denied it, and again Circuit City appealed.
As the 9th Circuit pointed out, again, the underlying agreement was unconscionable under the law of California. Luce, Forward dealt solely with a federal issue which had nothing to do with the state law issue at hand. Hence, the appeal was frivolous ("wholly without merit"). But, without evidence of any bad faith motivation, the court did not impose sanctions.
My view: Yes, the appeal was without merit. I'm left wondering why anybody thought Luce, Forward had any impact on the law of unconsionability in California.
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Boys Market injunction was too broad
May 16, 2005 by Ross Runkel at LawMemo
When a union goes on strike to protest an employer action that is subject to arbitration under a collective bargaining agreement, the employer can get a federal court to enjoin the strike. That is, provided that the employer is willing to go ahead and arbitrate the dispute. That's a Boys Market injunction.
So, when the International Union of Elevator Constructors went on strike against Otis Elevator Co to protest the company's use of cranes for certain work, the employer sued for an injunction.
The trial court found that the dispute was subject to arbitration, and enjoined the strike.
Then the trial court went further, (1) ordering the parties to use the AAA expedited arbitration rules instead of the rules that were provided for in the collective agreement, and (2) ordering the employer not to discipline employees who engaged in strike activity in violation of the no-strike clause in the agreement.
Whoa, said the 1st Circuit. It was perfectly proper to enjoin the strike, but the trial court had no authority to do all that other stuff. Otis Elevator Co v. International Union of Elevator Constructors (1st Cir 05/11/2005).
My view: A no-brainer. The trial court had authority to enjoin the strike, but no authority to roam about and impose a bunch of its own ideas about how the union and the employer should do things. The whole notion behind the Boys Market injunction is that the court is requiring the parties to do what they agreed to do. There is no authority in the federal courts to go beyond that.
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Modifiable agreement supported by consideration
May 16, 2005 by Ross Runkel at LawMemo
Lots of cases say arbitration agreements are not enforceable (for lack of consideration) when the employer retains the unilateral right to modify the arbitration rules. Courts often refer to these deals as "illusory promises," which are not promises at all, and therefore cannot be consideration for the employee's promise to arbitrate.
The agreement between La'Tia Holloman and Circuit City Stores allowed the employer to modify the arbitration rules on March 1 of any year upon giving 30 days written notice.
The fact that the employer had to give notice distinguished Holloman's case from the other cases. The employer's promise was not illusory, and there was consideration. Holloman v. Circuit City Stores (Maryland Ct App 05/05/2005).
My view: The contract-formation doctrine of "consideration" is a question of state law that is not preempted by the Federal Arbitration Act (FAA), so there can be different results from state-to-state. The Maryland case follows the analysis given in the Restatement of Contracts, and is probably the general rule (at least in cases not involving employment arbitration).
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Promise to arbitrate is consideration
May 08, 2005 by Ross Runkel at LawMemo
One way to prevent enforcement of an agreement to arbitrate is to show that the agreement lacked consideration. If no consideration, then no contract, then no arbitration requirement.
When Shedrick Payne sued his former employer, Kinko's moved to compel arbitration under an agreement Payne had signed. Payne argued there was no consideration, the trial court bought his argument and refused to compel him to arbitrate. According to the trial court, Kinko's gave no consideration in exchange for Payne's promise to arbitrate.
The Florida Court of Appeals reversed. The legal rule is simple. Kinko's agreement to submit to arbitration is sufficient consideration for Payne's agreement to submit to arbitration. Kinko's v. Payne (Florida Ct App 05/06/2005)
The court also trashed Payne's argument that he signed the agreement by mistake. Unless he was prevented from reading it or coerced into signing it, he's bound by what's in it.
My view: One of the state law doctrines that is not preempted by the Federal Arbitration Act (FAA) is the doctrine of consideration. Being state law, the rules vary from state to state. Florida has taken the modern view that "consideration" exists if one party has agreed to do something it otherwise had a legal right not to do. In this case, the right not to arbitrate. Other states sometimes make it more difficult to establish that consideration exists, often looking for some extra payment of money.
The doctrine of consideration historically developed as a means of sorting out enforceable agreements (business deals, mainly) from non-enforceable agreements (e.g. - promises to make gifts, social promises). Arbitration agreements are business deals. However, some courts use the doctrine of consideration as a method for refusing to enforce agreements that they don't like (that is, they don't like for some other reason).
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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