Legal Challenges to Arbitration Awards.

• Author: Spero, Donald J.
• Position: Part 2

Part I of this article discussed the considerations that are taken into account where there is a contention of a flawed award in a proceeding governed by the Federal Arbitration Act (FAA, 9 U.S.C. [section][section]1-14). In this part, I explore factors that are considered when the enforcement of an award is claimed to violate public policy. In addition, I review the authority of the arbitrator in a proceeding governed by the Taft Hartley Act. Finally, I discuss suggestions for counsel who question the foundations of an unfavorable award.

Challenges to Awards Based on the Argument that Enforcement Would Violate Public Policy

In W.R. Grace and Company v. Local Union 759, International Union of the United Rubber, Cork, Linoleum and Plastic Workers of America, 461 U.S. 757 (1983), the Court declined to nullify an award that upheld two employees' grievances for back pay. The employer admittedly laid them off in violation of the employees' rights under a collective bargaining agreement. The employer based the right to lay them off on a conciliation agreement the employer had entered into with the EEOC. The conciliation agreement provided that in the event of layoffs, the company would maintain the existing proportion of women in the bargaining unit. (1) The Court found that the company had entered into conflicting contractual commitments, both of which were binding on it. (2) Enforcing the employer's commitment to the union did not violate public policy as it merely required the payment of money. (3) It did not violate either of the company's inconsistent commitments.

The Court stated:

If the contract as interpreted by [Arbitrator] Barrett violates some explicit public policy, we are obliged to refrain from enforcing it. Hurd v. Hodge, 334 U.S. at 35. (4) Such a public policy, however, must be well defined and dominant, and is to be ascertained 'by reference to the laws and legal precedents and not from general considerations of supposed public interests.' Muschany v. United States, (5) 324 U.S. 49, 66 (1945). (6) The grievant in United Paperworkers International Union, AFL-CIO v. Misco, Inc, 484 U.S. 29 (1987), was discharged for violation of the employer's rule prohibiting bringing controlled substances, in this case marijuana, on the company premises. The arbitrator ordered the grievant reinstated with back pay based on his finding that the company failed to prove the grievant possessed marijuana in the workplace. The Supreme Court reversed the appellate court ruling, which had affirmed the district court's order vacating the arbitration award. The Court rejected the employer's argument that reinstating the grievant to his safety sensitive job operating machinery would violate public policy. The Court, citing Muschany v. United States, 324 U.S. 49, 66 (1945), observed that "such a public policy must be ascertained by reference to the laws and legal precedents and not from general considerations of supposed policy interests" and that the legal precedents must be shown to establish a "well defined and dominant" policy. (7) The Court ruled that no precedents were shown establishing a "policy against the operation of dangerous machinery while under the influence of drugs." (8)

The case of Eastern Associated Coal Company v. United Mineworkers of America, Dist. 17, 531 U.S. 57 (2000), involved an employer's contesting an arbitration award reinstating to employment one of its truck drivers who had twice tested positive for marijuana. The award had several conditions, including that the employee be given a 30-day unpaid suspension, that the employee continue to participate in a substance abuse program and that he sign a letter of resignation to take effect if he tested positive within the next five years. Affirming the lower courts' upholding the award, the Court found that the Department of Treasury regulations, which included a requirement for employers of safety-sensitive drivers to provide employees who tested positive to pass a return-to-duty drug test before resuming duties, did not create a public policy barring reinstatement to a safety-sensitive position under the terms of the award.

W.R. Grace, Misco, and Eastern Associated Coal were all cases involving unions and presumably not covered by the FAA. Accordingly, Hall Street would not limit violation of public policy as a basis to deny enforcement of an award in cases such as those.

Challenges to Arbitration Awards Conducted Under the Authority of [section]301 of The Labor Management Relations Act of 1947

In Textile Workers Unions of America v. Lincoln Mills of Alabama, 353 U.S. 448 (1957), the Court established that agreements to arbitrate labor disputes are valid and enforceable under 29 U.S.C. [section]185(a) ([section]301 of the Taft Hartley Act). The Court stated that "[p]lainly the agreement to arbitrate grievance disputes is the quid pro quo for an agreement not to strike." (9)

* Limits on Courts' Authority to Vacate or Modify Arbitration Awards --Section 301 (a) and (b) provide as follows:

(a) Venue, amount

Any labor organization which represents employees in an industry affecting commerce as defined in this chapter and any employer whose activities affect commerce as defined in this chapter shall be bound by the acts of its agents. Any such labor organization may sue or be sued as an entity and on behalf of the employees whom it represents in the courts of the United States. Any money judgment against a labor organization in a district court of the United States shall be enforceable only against the organization as an entity and against its assets, and shall not be enforceable against any individual member or his assets.

(b) Responsibility for acts of agent; entity for purposes of suit; enforcement of money judgments

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties...