§ 29.2 Arbitration

• Library: ADR in Oregon (OSBar) (2019 Ed.)

§ 29.2 ARBITRATION

§ 29.2-1 Special Role of Arbitration in Labor History

The predominant method of enforcing modem private-sector collective-bargaining agreements is through binding arbitration. The primacy of arbitration was neither preordained nor a complete historical accident. A short review of the history of labor arbitration provides some perspective for understanding the special role of arbitration in collective bargaining. See § 29.2-1(a) (fostering the bargaining relationship), § 29.2-1(b) (the rise of arbitration), § 29.2-1(c) (the Steelworkers Trilogy), § 29.2-1(d) (arbitration and injunctive relief if strikes occur), § 29.2-1(e) (injunctive relief to maintain the status quo pending arbitration), § 29.2-1(f) (duty of fair representation).

§ 29.2-1(a) Fostering the Bargaining Relationship

Before any consideration could be given to enforcing private-sector collective-bargaining agreements, early efforts went to protecting and formalizing the collective-bargaining relationship. The Norris-LaGuardia Act (see 29 USC §§ 101-115), enacted in 1932, placed severe limitations on the federal courts' ability to intervene in labor-management disputes. Congress recognized the hostility of federal courts to the use of economic coercion by labor unions and moved to protect the integrity of the bargaining relationship. Passage of the Wagner Act (see 29 USC §§ 151-169) in 1935 established the duty of an employer to bargain with the union that represented the majority of the employees. It was not until 1941, in the case of H.J. Heinz Co. v. N.L.R.B., 311 US 514, 525-26, 61 S Ct 320, 85 L Ed 309 (1941), that the United States Supreme Court held that an employer's failure to reduce its collective-bargaining agreement to writing could in and of itself be evidence of lack of bargaining in good faith and thereby a violation of the NLRA. Although the Heinz decision mandated a written agreement, it provided no indication of how to enforce that agreement. Economic self-help (i.e., strikes or lockouts) remained the most popular means of enforcing collective-bargaining agreements.

In the 1939 case of N.L.R.B. v. Sands Mfg. Co., 306 US 332, 59 S Ct 508, 83 L Ed 682 (1939), the Court implicitly placed some limitations on this self-help remedy. In the Sands case, the union struck when it disagreed with management's interpretation of a contract provision. In retaliation, management discharged all the strikers. The Court agreed with management's contract interpretation and upheld the discharges. The Court implicitly recognized the authority of the National Labor Relations Board (NLRB) to review a dispute and to provide legal protection to a party whose interpretation of the contract was correct. Although the Sands decision did not outlaw economic self-help, it increased the stakes by withdrawing any form of protection for the loser in the economic arena.

As an alternative to economic self-help, the courts remained available as a forum for resolving disputes concerning collective-bargaining agreements. Neither labor nor management, however, found the courts particularly useful forums. From labor's perspective, the courts' hostility to unions that motivated passage of the Norris-LaGuardia Act continued to make the courts an inhospitable forum. Management also found that enforcement in the courts was unsatisfactory, not only due to the restrictions of the Norris-LaGuardia Act and similar acts passed in many states, but also due to the procedural difficulties of enforcing personal-service contracts and collecting damages against unincorporated union associations.

§ 29.2-1(b) The Rise of Arbitration

It seems natural in the context of the hostility of the courts and the high cost of economic warfare that arbitration was recognized as a useful, quick, and satisfactory method of resolving private-sector labor disputes. Numerous obstacles had to be overcome, however, before arbitration was to become an effective remedy. One glaring problem was the fact that an agreement to arbitrate future disputes was not enforceable at common law, and few state statutes permitted the enforcement of this arbitration obligation. The original Federal Arbitration Act (FAA) (see Pub L 68-401, 43 Stat 883), enacted in 1925, contained an exemption for contracts of employment, and other language, that a number of courts interpreted as excluding collective-bargaining agreements from the FAA's coverage.

NOTE: More contemporary decisions have limited the exclusion to agreements covering employees engaged in the transportation industry. See, e.g., Int'l Bhd. of Elec. Workers, Local #111 v. Pub. Serv. Co. of Colorado, 773 F3d 1100, 1105-06 (10th Cir 2014); Circuit City Stores, Inc. v. Adams, 532 US 105, 121 S Ct 1302, 149 L Ed 2d 234 (2001).

Even in a contract that contained an arbitration clause, the strike remained a common method of resolving disputes between the parties when one side refused to go forward with arbitration.

During World War II, when the National War Labor Board was given the authority to resolve labor disputes, arbitration became a commonly used tool. It was not uncommon for the National War Labor Board to order arbitration as a means of resolving labor disputes, while also ordering the union not to engage in any strike activity pending resolution of arbitration. When the National War Labor Board expired, however, enforcement of arbitration agreements was once again left to the vagaries of state law.

It was not until Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 US 448, 450-51, 77 S Ct 912, 1 L Ed 2d 972 (1957), that section 301 of the LMRA (29 USC § 185) was finally recognized as giving the federal courts the power to enforce arbitration clauses in collective-bargaining agreements. Although the Lincoln Mills decision acknowledged that the federal courts have authority to enforce arbitration agreements, it gave the courts little guidance on how to approach the question of arbitrability. In fact, an approach popular at that time, known as the Cutler-Hammer Doctrine, gave the courts a broad role in interpreting the duty to arbitrate. In Int'l Ass'n of Machinists Dist. No. 15, Local No. 402 v. Cutler-Hammer, Inc., 271 AD 917, 67 NYS2d 317, aff'd without opinion, 297 NY 519, 74 NE2d 464 (App Div 1947), the court adopted the posture that the court must examine the reasonableness of the parties' positions and refuse arbitration if the position asserted by one of the parties was not reasonable. Under the guise of deciding the reasonableness of the positions of the parties, the courts simply were deciding the dispute between the parties.

§ 29.2-1(c) The Steelworkers Trilogy

In three cases, commonly known as the Steelworkers Trilogy, issued on the same date in 1960, the United States Supreme Court established the primacy of modern-day labor arbitration. These cases dramatically curtailed use of the federal courts as a forum of first resort for litigating disputes arising under collective-bargaining agreements, and established arbitration as the favored forum for enforcing provisions of labor contracts.

In the first decision of the Steelworkers Trilogy, United Steel-workers of Am. v. Am. Mfg. Co., 363 US 564, 80 S Ct 1343, 4 L Ed 2d 1403 (1960), the Court rejected the Cutler-Hammer Doctrine (see § 29.2-1(b)), and held that in determining whether a question is arbitrable, the court should not look to the merits of the dispute. The Court noted that "the processing of even frivolous claims may have some therapeutic value." United Steelworkers of Am., 363 US at 568.

In the second case, United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 US 574, 80 S Ct 1347, 4 L Ed 2d 1409 (1960), the Court held that, in contrast to commercial contracts, arbitration of labor disputes should be favored and that the court would order a matter to arbitration if under any plausible interpretation of the contract the arbitrator would have authority to decide the substantive question. The Warrior case established a presumption in favor of arbitrability, unless it could be said with "positive assurance" that a subject is excluded from arbitration. Warrior & Gulf Nav. Co., 363 US at 589.

In the third decision, United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 US 593, 597, 80 S Ct 1358, 4 L Ed 2d 1424 (1960), the Court held that the federal court's role in reviewing arbitration awards is extremely limited and that an arbitrator's decision should be upheld as long as the award "draws its essence" from the contract.

The courts have also applied the presumption of arbitrability to disputes over which the NLRB may have concurrent jurisdiction. For example, notwithstanding the NLRB's jurisdictional dispute-resolution process under section 10(k) of the NLRA (29 USC § 160(k)), the Supreme Court has enforced agreements that require arbitration to resolve work-assignment disputes. Carey v. Westinghouse Elec. Corp., 375 US 261, 84 S Ct 401, 11 L Ed 2d 320 (1964). However, the NLRB's jurisdiction may still be invoked, and a determination by the arbitrator that conflicts with the NLRB's determination would be preempted. Carey, 375 US at 270-72.

§ 29.2-1(d) Arbitration and Injunctive Relief If Strikes Occur

Having established in the Steelworkers Trilogy (see § 29.2-1(c)) that arbitration is the favored forum for settling labor disputes, the United States Supreme Court then moved to protect the arbitration remedy from the imposition of economic coercion by the parties. In Local 174, Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v. Lucas Flour Co., 369 US 95, 104-06, 82 S Ct 571, 7 L Ed 2d 593 (1962), the Court held that a no-strike provision is implied in a collective-bargaining agreement when the issue in dispute is subject to the arbitration clause of the parties' collective-bargaining agreement. The Court pointed out that it would not extend this doctrine beyond the scope of the arbitration clause, but would support an award of damages for breach of contract...