In light of a provision in a collective bargaining agreement that required that employees get first crack at new work and the deference courts give to arbitrators’ decisions, the Fifth Circuit agreed with the district court that an employer’s challenge to an arbitration award should be dismissed. Although the contractual provision provided two exceptions permitting subcontracting by the employer, the appeals court found that those exceptions required judgment calls, and that the arbitrator’s exercise of discretion did not conflict with the CBA (Delek Refining Limited v. Local 202, United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, June 1, 2018, Costa, G.).
Reactor replacement. In 2012, the employer and union entered into the CBA covering the company’s refinery employees. That same year, the employer decided to replace the primary chemical reactor at the plant. The project required a complete shutdown of the unit and took approximately four weeks to complete. Instead of using its employees, the employer hired contract workers to replace the reactor. It did assign some employees to the project. Eight maintenance employees served as “contract coordinators,” while other employees performed more limited tasks. According to the employer, replacement of the reactor required specialized work that the employees were not certified to perform.
The union filed a grievance arguing that the employer violated the CBA by using contract workers instead of maintenance employees and that in doing so, it deprived the employees of overtime pay. A contractual provision provided that “Unless necessitated by extreme economic, safety or environmental reasons, the Company shall offer any maintenance operations, environmental or material handling work to Bargaining Unit employees prior to utilizing contractors to perform such work, providing such use of Bargaining Unit employees does not result in excessive overtime.”
Union grievance. The grievance was referred to an arbitrator. After a one-day hearing, the arbitrator sustained the union’s grievance in a written opinion. According to the arbitrator, the disputed provision was clear and the parties had a long standing past practice on assigning work to bargaining unit maintenance employees prior to hiring subcontractors. Thus, the arbitrator awarded overtime pay to the maintenance employees who were not assigned to the project.
In response to a motion for clarification, the arbitrator stated that his decision applied to both the preparation and replacement phases of the project. However, the arbitrator recited only an abbreviated version of the provision and did not include the caveats at both the beginning (unless necessitated by extreme economic, safety or environmental reasons) and end (does not result in excessive overtime) of that provision. The employer latched onto the abbreviated quotation, and sought further clarification, asserting that the arbitrator had misread the provision. The arbitrator rejected the employer’s request for reconsideration.
Judicial review. Thereafter, the employer took its fight to federal court. In response, the union sought compliance with the arbitration award and attorneys’ fees. Both parties moved for summary judgment. The district court agreed with a magistrate’s recommendation and denied the employer’s motion, and confirmed the arbitration award and awarded the union attorneys’ fees.
The Fifth Circuit evaluated the employer’s allegation that the district court erred in upholding the arbitral award. The appeals court observed that it has repeatedly upheld pro-union awards when the CBA was ambiguous or silent about a company’s contracting rights. In this instance; however, the CBA contained a provision prohibiting the use of contract workers until employees have been given an opportunity to perform the work.
The provision contained two exceptions under which the employer could overcome the ban on hiring contract workers: if there were certain “extreme” circumstances, or if doing so would result in “excessive” overtime. However, the appeals court pointed out that “extreme” and “excessive” both connote situations outside the ordinary. Because considerable discretion will be involved in determining whether one of these exceptional situations exists, the appeals court declared that it is difficult to see how an arbitrator’s assessment of what it “extreme” or “excessive” can amount to the direct conflict with the CBA that is necessary for a judicial override.
Clarification process. Moreover, the appeals court concluded that nothing in the clarification process would lead it to vacate the award. After the omission of the exceptions prompted the employer to seek reconsideration, on the ground that the arbitrator ignored them, the arbitrator disagreed and explained that the employer’s view of the “excessive overtime” language threatened to override the presumption that bargaining unit employees would get first priority on work.
Here, the appeals court found the arbitrator’s position that the employer’s expansive view of the overtime provision would render the general ban on contracting meaningless was reasonable. If almost any overtime is “excessive,” then the right the union bargained for was essentially worthless. The arbitrator was empowered to draw the line between routine and excessive overtime. Concluding that the exceptions to the contracting ban required judgment calls, the appeals court determined that the arbitrator’s exercise of discretion did not conflict with the CBA. The judgment of the district court was affirmed.
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