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Overruling District Court, Second Circuit Affirms Individual Employees Are Bound By Arbitration Award Prosecuted By Their Union

By Paul Salvatore, Joshua Fox & Jacob P. Tucker on July 31, 2020
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On July 29, 2020, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) handed down what amounts to a significant win for the collectively-bargained dispute-resolution process set forth in the agreement between ABM Industry Groups, LLC (“ABM”) and its Union, the International Union of Operating Engineers, Local 30 (“Local 30” or the “Union”)—and similar ones in agreements throughout the country.  In a per curiam decision, the Court reinforced a Union’s authority as an agent for its members to administer the collective bargaining agreement (“CBA”), prosecute grievances and settle cases, which bind the Union’s members despite the fact that the individual employees are not signatory to the CBAs under which they are working.

Factual Background

The appeal stems from ABM’s contract to provide building maintenance and janitorial services for a commercial office building in Tarrytown, New York.   ABM’s contractors at the site were represented by Local 30.  ABM and Local 30 were parties to a CBA in effect through the end of 2017.  In March 2017, a new owner purchased the Tarrytown property and notified ABM that it would not retain the Local 30-represented workers.  ABM paid those workers termination pay and accrued leave pursuant to the CBA.  However, without ABM’s knowledge, the new owner then rehired some of the Local 30 workers.

Local 30 later filed a grievance claiming that ABM had not paid full accrued vacation pay to two of the rehired employees.  When ABM discovered these employees had been rehired, it demanded the return of termination and accrued leave pay it had previously provided them.  Local 30 countered that ABM actually owed the employees money and the matter proceeded to arbitration.  On October 12, 2018, the arbitrator concluded that the two rehired employees were not entitled to termination pay and directed them to repay ABM as a remedy.

ABM subsequently sought to enforce the arbitrator’s award by moving to confirm the award in the Southern District of New York.  The district court declined to do so, vacating in part the arbitrator’s award, arguing that the two rehired employees were not signatories to the underlying CBA between ABM and Local 30, and thus had no basis to be bound by the agreement.  ABM appealed to the Second Circuit.

Second Circuit Reverses the Lower Court and Confirms the Arbitration Award

The district court held “that a union can[not] bind its members to make payments ordered by an arbitrator under an arbitration agreement to which they were not signatories, following a process in which they did not participate.”  The Second Circuit disagreed fundamentally with this conclusion, finding that under agency principles and federal labor law precedent both employees were bound by the arbitration award—after all, the employees’ Union was signatory to the CBA, the employees initiated the grievance through the Union, and the Union followed the grievance procedure set forth in the CBA to the letter.  Thus, the arbitrator did not exceed her authority in ordering the remedy she saw fit.

Takeaways

The Second Circuit reinforced an axiomatic principle in labor relations that under most CBAs, the Union—as the sole collective bargaining representative for the covered employees—is typically vested with the exclusive authority to commence a grievance against the employer on behalf of its members.  When the Union does so, the employees represented by the Union are bound by the resulting arbitration award.  A ruling to the contrary would have upended decades of jurisprudence and created unenviable volatility in labor-management relations, ostensibly entitling individual grievants a second bite at the apple in federal court.

This decision reinforces the important role unions play in representing their members in the grievance-arbitration process, one where—as the Second Circuit noted—individual employees have little recourse to move to challenge once final, unless the employee can show the union violated its duty to fairly represent the employees and/or if the employee can otherwise demonstrate fraud, deceit or that the grievance was a “sham.”  The absence of any such assertions by the employees in this case proved fatal to their challenge, underscoring the deference courts give to labor arbitrators in adjudicating private disputes and rendering awards, and unions in representing their members during the grievance process.

Photo of Paul Salvatore Paul Salvatore

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors, senior executives and general counsel in such areas as labor-management relations, major litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

Paul negotiates major collective bargaining…

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors, senior executives and general counsel in such areas as labor-management relations, major litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

Paul negotiates major collective bargaining agreements in several industries, including real estate and construction. In 2015, he represented the NYC real estate industry’s multi-employer organization, The Realty Advisory Board on Labor Relations (RAB), in its $8 billion collective bargaining agreements with SEIU Local 32BJ. Paul also represented the Cement League, a multiemployer group of NYC area superstructure contractors, in halting an illegal strike by the Carpenters Union and negotiating a significant new collective bargaining agreement. He previously negotiated, on behalf of The Related Companies with 18 New York City construction unions, a landmark project labor agreement (PLA) for Hudson Yards on Manhattan’s West Side, the largest private real estate development in U.S. history.

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Photo of Joshua Fox Joshua Fox

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several…

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several Major League Baseball Clubs in all aspects of the salary arbitration process, including the Miami Marlins, Boston Red Sox, Los Angeles Dodgers, Kansas City Royals, San Francisco Giants, Tampa Bay Rays and Toronto Blue Jays. In particular, Josh successfully represented the Miami Marlins in their case against All-Star Catcher J.T. Realmuto, which was a significant club victory in salary arbitration. Josh also represents Major League Baseball and its clubs in ongoing litigation brought by current and former minor league players who allege minimum wage and overtime violations. Josh participated on the team that successfully defended Major League Baseball in a wage-and-hour lawsuit brought by a former volunteer for the 2013 All-Star FanFest, who alleged minimum wage violations under federal and state law. The lawsuit was dismissed by the federal district court, and was affirmed by the U.S. Court of Appeals for the Second Circuit.

Josh also has extensive experience representing professional sports leagues and teams in grievance arbitration proceedings, including playing a vital role in all aspects of the grievance challenging the suspension for use of performance-enhancing drugs of then-New York Yankees third baseman Alex Rodriguez. Josh also has counseled NHL Clubs and served on the trial teams for grievances alleging violations of the collective bargaining agreement, including cases involving use of performance-enhancing substances, domestic violence issues, and supplementary discipline for on-ice conduct. He has played a key role in representing professional sports leagues in all aspects of their collective bargaining negotiations with players and officials, including the Major League Baseball, National Hockey League, the National Football League, Major League Soccer, the Professional Referee Organization, and the National Basketball Association,.

In addition, Josh has extensive experience representing clients in the performing arts industry, including the New York City Ballet, New York City Opera, Big Apple Circus, among many others, in collective bargaining negotiations with performers and musicians, the administration of their collective bargaining agreements, and in grievance arbitrations.

Josh also represents a diverse range of clients, including real estate developers and contractors, pipe line contractors, hospitals, hotels, manufacturers and public employers, in collective bargaining, counseling on general employment matters and proceedings before the National Labor Relations Board, New York State Public Employment Relations Board and arbitrators.

Josh has also recently served as an adjunct professor at Cornell University’s School of Industrial Labor Relations for the past two years, teaching a course regarding Major League Baseball salary arbitration.

Prior to joining Proskauer, Josh worked for a year and a half at the National Hockey League, where he was involved in all labor and employment matters, including preparations for collective bargaining, grievance arbitration, contract drafting and reviewing and employment counseling. Josh also interned in the labor relations department of Major League Baseball and at Region 2 of the National Labor Relations Board. He was a member of the Brooklyn Law Review and the Appellate Moot Court Honor Society and served as president of the Brooklyn Entertainment and Sports Law Society.

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Photo of Jacob P. Tucker Jacob P. Tucker

Jacob Tucker is an associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration and Employment Counseling & Training Groups.

Read more about Jacob P. TuckerEmail
  • Posted in:
    Employment & Labor
  • Blog:
    Labor Relations Update
  • Organization:
    Proskauer Rose LLP
  • Article: View Original Source

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