Labor & Employment Law Daily Arbitrator’s decision on employee leave administration stands, but alleged NLRA violation is for NLRB to determine
Tuesday, July 14, 2020

Arbitrator’s decision on employee leave administration stands, but alleged NLRA violation is for NLRB to determine

By Georgia D. Koutouzos, J.D.

Jurisdiction to consider whether a statutory violation occurred rests initially with the NLRB and not the courts.

There was no basis for vacating an arbitrator’s conclusion that an employer’s decision to outsource the administration of FMLA leave requests violated the collective bargaining agreement with the union representing its employees, ruled the Eighth Circuit, reasoning that the arbitrator had acted within the scope of his authority because he had construed the CBA. Affirming a district court’s decision upholding the arbitrator’s ruling, the appeals court also agreed with the lower court that jurisdiction was lacking to consider the employer’s challenge to the arbitrator’s conclusion that the leave administration outsourcing violated the NLRA—a determination that must be made by the NLRB before appellate jurisdiction is proper (Exide Technologies v. International Brotherhood of Electrical Workers, Local No. 700, July 10, 2020, Kelly, J.).

Outside leave administrator. A battery recycling and manufacturing company with a unionized production and maintenance workforce notified those employees of its intention to begin processing requests for FMLA through an off-site third-party administrator rather than through its onsite human resources department. The parties’ collective bargaining agreement addressed FMLA leave administration, so the union filed a grievance arguing that the employer could not take the action without going through the collective bargaining process because it was “a major change in terms and conditions of employment.”

The employer denied the grievance on the basis that it had the right to “change insurance plan administrators and administration without negotiation,” to which the union responded by filing two unfair labor practice charges with the NLRB. The Board conditionally dismissed the claims as based on an alleged breach of the CBA that were subject to arbitration, but retained limited jurisdiction to decide whether the arbitrator ultimately reached a result that was repugnant to the NLRA.

Management rights clause. The parties then proceeded to arbitration, with the employer relying on the contract’s “Management Rights” clause (which gave the company “the full and exclusive control, direction and supervision of operations and the working forces,” and “the right … to contract out, subcontract work or exchange work [and] to determine … the processes, methods and procedures to be used”) to support its assertion that it could unilaterally change FMLA leave administrators without bargaining.

FMLA leave requests. For its part, the union relied on the CBA’s “Leaves of Absence” clause, which incorporated by reference the company’s FMLA policy document stating that FMLA leave requests are to be submitted to “the Human Resources Manager or their designated representative at the employee’s location.” The arbitrator ultimately sided with the union, concluding that the parties had expressly modified the CBA by incorporating the FMLA policies-and-procedures document, and that the employer’s new FMLA leave procedures violated the terms of that document. In addition, he concluded that the action was a material, substantial, and significant change in the employees’ terms and conditions of employment, in violation of § 8 of the NLRA.

CBA modification. The district court confirmed the arbitrator’s ruling on the alleged CBA modification, concluding that the ruling drew its essence from the parties’ labor agreement. The court decided that it lacked jurisdiction to review the arbitrator’s NLRA ruling, however, explaining that “[i]f a party is dissatisfied with an arbitrator’s decision and remedy on the § 8 claim, that party does not appeal to a United States District Court but moves the NLRB to reopen the deferred unfair labor practice charges so that the NLRB can consider the arbitrator’s findings and remedy.”

The employer appealed the district court’s decision, arguing that three aspects of the arbitrator’s decision exceeded his authority under the CBA’s arbitration clause: (1) he failed to consider relevant language because he did not discuss the CBA’s management-rights provision; (2) he effectively rewrote the CBA by deciding paragraph 154 of the CBA incorporated the employer’s entire “Human Resources Policies and Procedures” document; and (3) he failed to consider the employer’s past practice of using third-party administrators for its short- and long-term disability leave policies.

Arbitral deference. Disagreeing with all three of the employer’s arguments, the Eighth Circuit noted that the arbitrator had indeed considered the CBA’s Management Rights clause and had concluded that the provision did not specifically reference or identify leave administration as reserved solely to management. The arbitrator distinguished FMLA leave administration from other management functions on the basis that “[a]dministrative processing and evaluating employees’ requests for statutory leave under the FMLA is not core entrepreneurial activity as it does not change the scope, direction or nature of the enterprise,” and the court had no business in second-guessing that interpretation.

As for the arbitrator’s alleged rewriting of the CBA, the appeals court found that he had interpreted the CBA’s language and decided that the incorporated “FMLA Policy” was the entire policies-and-procedures document attached to the CBA. Thus, because the arbitrator had the authority to adopt one reasonable interpretation of the contract over the other, his interpretation could not be disturbed. Finally, the appeals court held that the arbitrator had considered the employer’s past practice in determining that, because the company’s FMLA leave procedures had been incorporated into the CBA but its short- and long-term disability leave procedures had not, “the conditions in the instant grievance are different from the conditions for the practice asserted by [the company].” Therefore, because the arbitrator was arguably construing or applying the contract and was acting within the scope of his authority, there was no basis for vacating the arbitrator’s finding that the employer had violated the CBA.

NLRA violation. Like the district court, the appeals court found that Section 301 of the LMRA did not provide the court with original jurisdiction to decide whether the employer had violated the NLRA—an issue assigned to the NLRB in the first instance. The employer’s recourse in that regard was to seek a reopening of the § 8 charge filed with the NLRB, which has retained jurisdiction to determine whether the arbitrator “reached a result … repugnant to the [NLRA].” If the parties remained unsatisfied after the Board issued its decision, they could petition for review of the agency’s decision in federal court.

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