Labor & Employment Law Daily Maintenance company’s ‘bad faith’ attempt to hire nonunion workers rejected
Friday, December 18, 2020

Maintenance company’s ‘bad faith’ attempt to hire nonunion workers rejected

By Wayne D. Garris Jr., J.D.

The employer devised a scheme in which it would hire nonunion employees, fire them right before the end of their probationary period, and rehire them a few days later.

Denying a janitorial services provider’s petition to vacate an arbitration award, the Second Circuit held that the arbitrator did not exceed his authority when he found the employer hired temporary employees in violation of the governing collective bargaining agreement. The court rejected the employer’s argument that the arbitrator’s ruling on its use of “temporary employees” was too broad because the union challenged the use of “substitute employee” and the issues were substantially identical. The court held that a party that has “previously agreed to arbitrate a given dispute cannot frustrate the arbitration process simply by refusing to agree on the form of the issue to be submitted to arbitration” (A&A Maintenance Enterprise, Inc. v. Ramnarain, December 16, 2020, per curiam).

The employer is a provider of maintenance services to commercial real estate and educational institutions. The union represents the building service workers, groundskeepers, and mechanics at one of Long Island University’s campuses. In 2016, LIU contracted out the janitorial, mechanical, and groundskeeping work to the employer. Under the agreement, the employer became the employer of those workers and agreed to assume an existing CBA. After the CBA expired, the employer and the union engaged in negotiations and reached a successor agreement.

Nonunion workers. In the fall of 2017, union members noticed that there were several new, nonunion employees performing building service work on campus. A union representative asked the employer about the workers and it responded that they were substitute employees, hired pursuant to Article 5 of the CBA. Pursuant to Article 5, the employer could hire “substitute employees” defined as individuals “hired to fill in for employees who are out on disability or worker’s compensation or approved extended leaves.” However, the union determined that the number of substitute employees exceeded the number of union members out on disability, worker’s compensation, or leave.

Grievance. The union sent a written grievance to the employer alleging that it “violated the collective bargaining agreement through its failure to comply with the substitute employees article.” It asked the employer to reduce the number of new hires to comply with the provision. The parties were unable to resolve the dispute through the grievance process.

Arbitration. The union then submitted a written demand for arbitration stating that the employer violated the CBA “by improperly using ‘temporary employees,’… to perform bargaining unit work.” The parties submitted their dispute to binding arbitration. The union again framed the issue as whether the employer violated the CBA by hiring temporary employees to perform bargaining unit work.

At the hearing, the employer objected to the union’s framing of the issue, arguing that “temporary workers” was not defined in the CBA and is a broader term than “substitute workers.” The employer also argued that the arbitrator was confined to the issue proposed by the union in its original grievance, which mentioned only “substitute employees.” The employer also denied the arbitrator’s request that the parties grant him the authority to formulate the issue. The arbitrator reserved his decision the employer’s objection and proceeded to hear the case on the merits.

Arbitrator’s opinion. The arbitrator issued an opinion and award rejecting the employer’s formulation of the issue. The arbitrator found that “the Union’s demand for arbitration was consistent with the grievance filed by the Union” and “is arbitrable under the [CBA].” The arbitrator concluded that the employer violated the CBA by “utilizing non-union substitute/temporary and/or probationary employees to perform bargaining unit work.” Specifically, the arbitrator found that the employer hired nonunion temporary employees, discharged them within 90 days of employment, and rehired the same individuals after a short period of time to keep them under the probationary status permanently.

The arbitrator concluded that the employer relied on a bad-faith reading of the management rights and probationary clauses of the CBA in order to allow itself to hire temporary employees at will, displace bargaining unit jobs, pay less than the contractual hourly rate, and avoid payment of union dues. The arbitrator also issued a relief award of $1.7 million to the union.

District court proceedings. The employer filed suit in New York state court to vacate the arbitration award. The union removed the case to federal court and brought a cross-petition to confirm the arbitration award. The district court denied the employer’s petition to vacate the arbitration award and granted the union’s cross-petition to confirm the award.

Exceeded authority. On appeal, the employer argued that because the union’s original grievance mentioned only the substitute employee provision, the arbitrator exceeded his authority by considering other issues beyond substitute employees, such as temporary and probationary employees. The court dismissed this argument as a “red herring.” The substance of the union’s argument was that nonunion workers were improperly performing bargaining unit work, which implicated the use of temporary employees. Further, even though the grievance did not specifically use the terms “temporary employees” and “probationary employees,” it was based on facts that were fully known to the employer.

False statements. The court was also persuaded by the arbitrator’s finding that the union’s reference to the substitute employee provision in the grievance was due to the employer’s false statement that all of the new, nonunion workers were substitute employees. The court held that the employer could not restrict the arbitrator’s authority based on the employer’s misstatement.

No agreement on the statement of the issue. Nor was the court persuaded by the employer’s argument that the arbitrator exceeded his authority by ruling on a formulation of the issue to which the employer never consented. Relying on its holding in Socony Vacuum Tanker Men’s Ass’n v. Socony Mobile Oil Co., the court explained that a CBA provision that required the parties to agree on the statement of the issue “emasculat[ed] the arbitration clause” and merely required the parties to make “reasonable efforts” to reach an agreement. Here, the employer was in an even weaker position than the employer in Socony because the CBA between the employer and the union did not have a provision requiring the statement of the issue to be mutually agreed upon.

CBA interpretation. Next, the employer argued that the arbitrator exceeded hisauthority because the CBA does not mention the term “temporary employees” and states that disputes that do not involve…claimed violation of the stated terms” of the CBA are not grievable. The court acknowledged that the term “temporary employees” was not in the CBA but rejected the employer’s argument. The dispute arose because the employer attempted to hire nonunion temporary workers based on its “strained interpretation” of the probationary period, new employees, substitute workers, and management rights provisions of the CBA. Thus, the court concluded, the dispute involved the interpretation of the CBA.

Lastly, the court rejected the employer’s argument that the arbitrator ignored the management rights, new employee, and probationary period provisions of the CBA. The arbitrator addressed these provisions when he concluded that the employer overreached in its interpretation of the management rights clause and engaged in bad faith interpretation of other CBA provisions. Thus, the court affirmed the district court’s judgment for the union.

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