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Arbitration Law Memo - July 2019
LawMemo - First in Employment Law

*** Arbitration – Individual contracts ***

*** Arbitration – Collective bargaining agreements ***

*** Arbitration – Individual contracts ***

5th - District court, not arbitrator, must rule on procedural unconscionability challenge to enforceability of arbitration agreement.

Bowles v. OneMain Financial (5th Cir 06/19/2019)

The 5th Circuit reversed the district court's order compelling arbitration of Bowles' federal age discrimination claims pursuant to an arbitration agreement. The 5th Circuit held the district court erred in referring Bowles' procedural unconscionability challenge to the arbitrator. The district court should have ruled on that objection because it goes to contract formation under state law.

WA - Pizza parlor's arbitration provision is procedurally and substantively unconscionable.

Burnett v. Pagliacci Pizza (Washington 06/17/2019)

The Court of Appeals affirmed the denial of the employer's motion to compel arbitration of Burnett's wage claims pursuant to an arbitration provision set forth in an employee policy manual given to Burnett at a new hire orientation. The court held the arbitration provision is procedurally unconscionable because Burnett was not given a reasonable opportunity to understand its terms and is substantively unconscionable because it requires employees to invoke an internal conciliation procedure before initiating arbitration.

NJ - Trial court required to consider whether class action wage claims are exempt from arbitration under FAA interstate commerce exemption.

Colon v. Strategic Delivery Solutions (New Jersey App Div 06/04/2019)

The Appellate Division vacated a trial court order mandating individual binding arbitration of Colon's class action wage claims against the employer freight broker / forwarder. The court remanded for the trial court to consider whether the employees, who worked as truck drivers, were engaged in interstate commerce and exempt from arbitration under the FAA.

AL - Arbitrator's interpretation of arbitration agreement to allow class arbitration survives narrow scope of review.

Alabama Psychiatric Svcs v. Lazenby (Alabama 06/21/2019)

The state Supreme Court affirmed the trial court's denial of the employer's motion to vacate an arbitrator's decision that employee arbitration agreements allow class arbitration of wage claims. The court held the arbitrator's lengthy and detailed analysis survived its narrow scope of review, which was limited to whether the arbitrator "even arguably" interpreted the arbitration agreement.

WV - Employer established prima facie burden that employee electronically signed arbitration agreement; employee failed to produce sufficient evidence in response.

Employee Resource Group v. Collins (West Virginia 06/03/2019)

Collins sued the employer for wrongful discharge, retaliation, violation of the Kentucky Civil Rights Act, and other claims. The trial court denied the employer's motion to enforce arbitration. The West Virginia Supreme Court of Appeals reversed.

The determinative issue before the court was whether the trial court erred in refusing to enforce the Arbitration Agreement based on its determination that the agreement was not signed by Collins. The employer claimed that the trial court erred in finding Collins's name was "prestamped" rather than digitally signed on the Arbitration Agreement and that employer could not conclusively produce a signed agreement.

The court found that the unrefuted evidence before the trial court was that the only way the digital signature appeared on the document was for Collins to have entered her password that she created into the portal that was emailed to her – a password that she testified she would not have shared with anyone else. Significantly, the court found that the signature complied with Kentucky's Uniform Electronic Transaction Act. Consequently, the employer did produce a signed Arbitration Agreement and met their prima facie burden; it was Collins who failed to produce sufficient evidence to overcome it. The trial court should have referred the case to arbitration and erred when it failed to do so.

CO - Assertion of equitable estoppel to compel arbitration by nonsignatory of arbitration provision required showing of detrimental reliance.

Santich v. VCG Holding (Colorado 06/24/2019)

The Colorado Supreme Court accepted jurisdiction over the following certified question from the United States District Court for the District of Colorado:

"What elements must be established by a nonsignatory to an arbitration agreement in order for the doctrine of equitable estoppel to apply and thereby require a signatory to an arbitration agreement to arbitrate claims brought against a nonsignatory?"

In a misclassification of exotic dancers as independent contractors, the club-owner defendants successfully compelled arbitration and the corporate-parent, not a signatory to the arbitration agreement, sought to do the same. The issue was whether the corporate-parent had to establish the reliance element for the application of equitable estoppel. The court disavowed Meister v. Stout, COA 60, 353 P3d 916, Colorado Court of Appeals' endorsement of a special estoppel rule predicated upon the interconnectivity of claims and actions taken in concert by signatories and nonsignatories to an arbitration agreement, requiring no showing of detrimental reliance to assert estoppel. In keeping with long-standing Colorado law, an equitable estoppel argument raised by a nonsignatory to a contract who sought to enforce an arbitration provision must be supported by all four traditionally defined elements of equitable estoppel, including detrimental reliance.

8th - Arbitration agreement providing for AAA rules, but silent on whether AAA must also administer the arbitration, was not appealable in this case.

Webb v. Farmers of North America (8th Cir 05/31/2019)

Webb sued his former employer for breach of his employment contract. The trial court granted the employer's motion to compel arbitration and stayed the proceeding. The arbitration clause stated that that the American Arbitration Association (AAA) rules will govern the arbitration. The parties agreed to that general statement, but disagreed whether the AAA must also administer the arbitration. The employer filed this interlocutory appeal arguing the AAA rules, as applied to through its contract with Webb, mandated the AAA administer this arbitration. The 8th Circuit determined it lacked jurisdiction over the appeal.

The court noted that when a trial court entered a stay instead of a dismissal, as here, that order was not appealable (9 USC Section 16(a)(3) Final Decision). The trial court did not deny a petition to arbitrate (9 USC Section 16(a)(1)(B) Denial of Petition to Arbitrate). The court declined to apply the collateral order doctrine – if the employer was dissatisfied with the final result of arbitration and an order confirming that award by the trial court, it would at that time have an appropriate remedy to seek review on appeal through 9 USC Section 16(a)(3) – the trial court's order confirming an arbitration award was reviewable on appeal.

NY - Arbitrator lacked authority to award back pay for time employee spent on interim suspension.

Czerwinski v. NY Dept of Corrections (New York App Div 06/06/2019)

The Appellate Division vacated that portion of an arbitration decision awarding Czerwinski back  pay for time she spent on interim suspension. The court held the arbitrator exceeded his authority in awarding back pay because he failed to base his decision that the employer lacked probable cause to suspend Czerwinski on hearing evidence.

FL - Employer did not waive right to arbitration by participating in EEOC proceedings.

Ross Dress for Less v. Higgins (Florida Ct App 06/26/2019)

The Court of Appeal reversed a trial court order denying the employer's motion to compel arbitration of Higgins' discrimination claims. The court held Higgins' claims were within the scope of disputes covered by the arbitration agreement and that the employer did not waive its right to arbitration by participating in the EEOC process preceding Higgins' lawsuit.

*** Arbitration – Collective bargaining agreements ***

OR - Public employer's refusal to arbitrate grievance is an unfair labor practice.

Amalgamated Transit Union v. TriMet (Oregon Ct App 06/26/2019)

The Oregon Court of Appeals affirmed the Employment Relations Board's (ERB's) finding that TriMet, a public mass transit agency, committed an unfair labor practice by refusing to arbitrate a union's grievance concerning a decision to enter into contracts with nonunion shuttlebus operators. TriMet receives federal grant funds which it passes on to nonprofit shuttlebus operators. When TriMet contracted with a non-union operator, the union filed a grievance, but TriMet refused to process or arbitrate that grievance.

The union claimed a violation of the collective bargaining agreement's provision which says that "all vehicles run on the lines of the District shall be run by Operators [i.e., union members]," and argued that TriMet was required to arbitrate that claim. TriMet argued that the collective bargaining agreement did not apply at all because it was merely passing along federal funds and was not entering into an employer-employee relationship. The court pointed out that the collective agreement "broadly requires TriMet to arbitrate with ATU on 'all grievances relating to any alleged violation of any provision of this Agreement.'" Finding this language unambiguous, the court upheld ERB's finding of an unfair labor practice. ERB did not err in excluding extrinsic evidence because it was not pertinent to the scope of the arbitration provision. Although ERB erroneously suggested in dicta that the "positive-assurance test" applied to its analysis, the unambiguous contract language was the actual ground for its decision.

DC - Union timely filed unfair labor practice charge against Department of Defense Education Agency relating to its failure to comply with prior arbitration awards.

Federal Educ Assoc v. Federal Labor Relations (DC Cir 06/21/2019)

The D.C. Circuit reversed a decision by the Federal Labor Relations Authority that the Federal Education Association (Union), representing approximately 4,000 teachers in the Department of Defense Education Agency (Agency), untimely filed an unfair labor practice charge against the Agency. The Union alleged the Agency, which provides schools for children of service members stationed abroad, failed to comply with prior arbitration awards. The D.C. Circuit held the Union timely filed its unfair labor practice charge within 6 months of the Agency informing the arbitrator it would take no further steps to come into compliance with prior arbitration awards.

5th - No evidence the Allied Pilots Association violated duty of fair representation in arbitration regarding pilot seniority.

Horner v. American Airlines (5th Cir 06/13/2019)

The 5th Circuit affirmed summary judgment against Horner's claims seeking to vacate an arbitration award on the ground the Allied Pilots Association (APA) breached its duty of fair representation during an arbitration proceeding concerning the expiration of seniority preferences for TWA pilots. The court held there was no evidence the APA's conduct was arbitrary, discriminatory, or in bad faith so that it undermined the integrity of the arbitration process.

MI - Trial court did not err by granting summary disposition in favor of union members who called off work for illness or strike, the CBA required arbitration of this discharge.

Registered Nurses v. Hurley Medical Ctr (Michigan Ct App 06/04/2019)

The Registered Nurses, Registered Pharmacist union and union members Busby and Frank, who were discharged by the Medical Center for allegedly striking, filed grievances challenging the discharges and requested arbitration of the grievances pursuant to Article 36 of the collective bargaining agreement (CBA). The plaintiffs filed to compel arbitration. The trial court granted summary disposition in favor of plaintiffs on the basis that the CBA required arbitration of the issue. The Michigan Court of Appeals affirmed.

Article 36, titled "No Strike, No Lockout," provided in relevant Part:

The Employer shall have the right to discipline or discharge any Employee participating in such interferences, and the Organization agrees not to oppose such action. It is understood, however, that the Organization shall have recourse to the grievance procedure as to matters of fact in the alleged actions of such Employees.

Whether Busby or Frank were striking or were sick, as alleged in plaintiffs, was a matter of fact that must be resolved by the arbitrator pursuant Article 36 of the CBA. Although defendant may present to the arbitrator undisputed evidence that plaintiffs were engaged in a strike, the question of fact was for the arbitrator to decide. Moreover, any doubt regarding whether this question was arbitrable must be resolved in favor of arbitration. Therefore, the court determined the trial court did not err by granting summary disposition in favor of plaintiffs on the basis that the CBA required arbitration of this issue.

OH - Discipline was postponed until after the appeals process was completed.

Bd of Trustees v. Anderson Firefighters (Ohio Ct App 06/12/2019)

The public employer appealed the trial court's judgment denying its motion to vacate an arbitration award in favor of the union. The Ohio Court of Appeals affirmed.

Following the Court of Appeals review of the record, it found that the arbitrator's award involved interpretation of the collective bargaining agreement (CBA), drew its essence from the CBA, and did not conflict with any express terms of the CBA. Regardless of whether a contractual provision was considered ambiguous or silent, the court found that arbitrators could look to the conduct of the parties to see how they have interpreted the agreement. Here the arbitrator determined that the parties' conduct, both before and after the controlling CBA took effect, required postponing the implementation of discipline until after the appeals process was completed.

FL - Reinstated officer required to provide FDLE certificate prior to reinstatement because of two-year break in service; arbitration order silent on FDLE certification.

Fraternal Order of Police v. Miami (Florida Ct App 06/05/2019)

Rodriguez, police officer, was relieved of duty with pay in 2013 based on an Internal Affairs investigation whether his father and brother were involved in a homicide in 2007.  After Rodriguez was observed violating the terms of his relieved-duty status, he was issued a reprimand, and ultimately discharged. Under the Collective Bargaining Agreement (CBA) the case went to arbitration resulting in reinstatement. The Florida Department of Law Enforcement (FDLE) informed the City employer that Rodriguez's FDLE certification lapsed, requiring medical screening and drug test before return to active duty. Rodriguez refused to authorize release of his medical records, resulting in a reprimand and discharge for refusal to comply with the required toxicology screening. The union filed a motion to find the City in civil contempt for failing to comply with the Arbitration Order directing him to be reinstated. The trial court denied the motion for contempt. The Florida Court of Appeal affirmed.

The court first noted that the Arbitration Order said: "Mr. Rodriguez shall be reinstated forthwith to his position as a police officer with no loss of service credit for the purpose of determination of benefits to which he is entitled." The court observed that Rodriguez's City benefits were thus considered uninterrupted by his two year break in service, but the Arbitration Order said nothing about his FDLE certification. The record indicated that Rodriguez's FDLE certifications lapsed during his two-year break in service, and the City was unable to reinstate Rodriguez to active duty without FDLE approval. When Rodriguez refused to fulfill the toxicology requirement, the court found the City was within its rights to discharge him under the CBA. Finding no abuse of discretion, the court affirmed the trial court's order denying Rodriguez's motion to find the City in contempt of the Arbitration Order.

OH - Union not allowed to re-arbitrate termination of employee who refused to cooperate in investigation into coworker's possession of gun at work.

IUEO Local 20 v. City of Hamilton (Ohio Ct App 06/24/2019)

The Court of Appeals reversed an order compelling arbitration of the union's grievance related to the termination of an employee who refused to cooperate in an investigation into a coworker's possession of a gun at work. The matter had previously been arbitrated and appealed through the Court of Appeals, which established the employee's termination was proper. Accordingly, the court held the union was not entitled to re-arbitrate the issue.

OH - Trial court did not err in concluding the RC 3319 procedures governed discharge proceedings under the CBA, and such proceedings were time barred under the CBA.

Streetsboro EA v. Streetsboro Bd of Educ (Ohio Ct App 06/03/2019)

The union appealed from the trial court's judgment denying its petition to enforce its arbitration agreement with the School District. The Superintendent of the School District had concluded a Level III grievance was filed untimely.  The Ohio Court of Appeals held the trial court did not err in concluding the RC 3319 procedures governed discharge proceedings under the CBA. The court further held the trial court did not err in its determination that, even if the union's grievances were arbitrable, they were time barred, pursuant to Art. 19 of the CBA.

DC - Agency did not have a duty to bargain with union before changing overtime policy because previous policy was unlawful.

Federation of Govt Employees v. FLRA (DC Cir 06/11/2019)

The union petitioned for review of the Federal Labor Relations Authority's order setting aside the arbitrator's award as contrary to law; the arbitrator's award ruled in favor of the union requiring the agency to bargain with the union before changing the overtime policy. The DC Circuit agreed with the Authority that Immigration and Customs Enforcement (ICE) did not have a duty to bargain with the union before changing the overtime policy because ICE's previous policy was unlawful.

For over a decade ICE had excluded leave time from the calculation to determine overtime, which did not comply with the overtime policy. The union argued that the prohibition on excluding leave extended only to "hours" of leave, preserving an agency's discretion to exclude "days" of leave. The court determined the 1997 Guidance (instructing all federal agencies not to exclude leave time from the calculation of overtime) as using different units of time to convey only one concept: an agency should not exclude leave or other official time, whether measured in "hours" or "days."


Editor: Ross Runkel, Ross@LawMemo.com. Copyright 2019 by LawMemo, Inc., PO Box 9182, Portland, OR 97207, (503) 227-1500. We are sending Arbitration Law Memo monthly. To unsubscribe, reply to this email with the word "REMOVE" in the subject line.



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