Quick Hits – Arbitrability Issues

By John H Curley on May 13, 2018

Incorporation of AAA Rules gives arbitrator authority to decide question of arbitrability

The Second Circuit has rejected a hospital’s efforts to vacate an award of Arbitrator Daniel Brent, concluding that the dispute was properly subject to arbitration

The grievance involved a claim by the New York State Nurses Association that Southside Hospital had, for extended periods of time, required nurses to perform excessive non-nursing duties in violation of the cba. Arbitrator Brent upheld the grievance, finding, contrary to the position of the hospital, that the matter was properly before him. The Hospital had claimed that the matter should first have been addressed by the Committee on Nursing Practice provided for in the cba. Arbitrator Brent found that efforts to rectify the situation through the Committee had been unsuccessful and that the Union was “entitled to an impartial determination of the language of Article3.10” which provided that nurses “should not be required to perform non-nursing functions as a part of their assigned duties … “

The Hospital sought to vacate the award and the Union sought to confirm it. The District Court adopted the Report and Recommendations of the magistrate and confirmed the award (here). The Second Circuit has now affirmed, (here) finding that the cba‘s express incorporation of “the existing rules of the American Arbitration Association” empowered the Arbitrator to decide the issue of arbitrability and that “the arbitrator’s decision reflects a plainly reasonable application of the CBA, for reasons lucidly explained in the magistrate judge’s thorough January 26, 2017 report and recommendation, which the district court adopted in its entirety.”

Successor ordered to arbitrate claim that it failed hire employees allegedly terminated by predecessor

Business Resources and Security Services USA (“BRSS”) was a subcontractor performing security services at a site in Washington D.C. Preeminent Protective Services, Inc. took over the subcontract and, as required by the cba between BRSS and SEIU Local 32BJ, offered employment to the BRSS employees at the site and assumed the cba. The status of two BRSS employees, however, was the subject of dispute. Preeminent claimed the two employees had been dismissed by BRSS prior to the time it took over the subcontract. SEIU claimed that Preeminent had treated these two as having transferred and had begun paying them. The Union sought to arbitrate what it claimed was Preeminent’s termination of the two employees. Preeminent refused, and the Union brought an action to compel arbitration.

The District Court granted the Union’s request to compel arbitration. Service Employees International Union Local 32BJ v. Preeminent Protective Services, Inc. The Court determined:

In this case, Preeminent’s and the Union’s quarrel is not about whether the parties entered into a valid, enforceable contract, or whether the arbitration clause in the contract applies to the parties. Instead, Preeminent raises a threshold question of whether the officers were Preeminent employees, and posits that they were not because they were dismissed by BRSS, making the Union’s claim against Preeminent untenable. … The Union maintains that the officers were not dismissed by BRSS and that they were therefore Preeminent employees who were wrongly discharged by Preeminent…. Analysis of the principles summarized by the Supreme Court in AT&T Technologies counsel that the question is properly for the arbitrator to decide.

Noting that it was not predetermining the final decision, the Court analogized the case to one involving a dispute about whether an employee was probationary and therefore excluded from arbitration. In this case, the arbitrator could decide whether the employees had ever become Preeminent’s employees, and determine which entity had terminated them.

FLRA “reexamines” approach to procedural arbitrability review

In United States Smal Business Administration and American Federation of Government Employees Local 3841 the FLRA has “reexamined” its approach to handling challenges to an arbitrator’s ruling on procedural arbitrability issues. Pointing to its decision in Indep. Union of Pension Emps. for Democracy & Justice, the Authority noted that it had previously found that “essence” challenges to an arbitrator’s award provided no basis for finding an award deficient. In its SBA decision the Agency has now concluded that:

we now reexamine our precedent and hold that parties may directly challenge arbitrator’s procedural-arbitrability determinations on essence grounds. Consequently, we will no longer follow Agency decisions holding otherwise.

Applying the new standard to the case before it, the Agency determined that Arbitrator Barton Bloom’s decision that the grievance before him was procedurally arbitrable “conflicts with the plain wording of the parties agreement.” Accordingly it set aside Arbitrator Bloom’s award that while the Union had not complied with the fourteen-day the limit in the agreement to submit a form to FMCS, its grievance was nevertheless arbitrable because the Agency had waived the right to contest the timeliness of the submission by accepting and processing the form without objection, and failed to notify the Union that it had added the issue of timeliness to the FMCS form. Moreover, the Aritrator concluded that in any case, the grievance was procedurally arbitrable because the parties had a practice that allowed the Union not to strictly comply with time limits. Finding the Arbitrator’s decision contrary to the language of the cba, the Authority noted:

arbitrators may not look beyond a collective-bargaining agreement- to extraneous considerations such as past practice – to modify an agreement’s clear and unambiguous terms.