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Michigan Court of Appeals Reverses Circuit Court Vacatur of Public Sector Labor Arbitration Award

“This article was first published in the Oakland County Legal News on May 28, 2024.” 

Introduction     

This article reviews Michigan Dep’t of State Police v Michigan State Police Troopers Ass’n, ___ Mich App ___, COA 363241 (December 28, 2023) (Judges Gleicher, Jansen, and Rick), app lv pdg. In Michigan Dep’t of State Police, the Court of Appeals reversed the Circuit Court vacatur of a public sector labor arbitration award.

Précis

Defendant Union appealed the Circuit Court’s order denying the Union’s motion to enforce a labor arbitration award and granting the Employer’s motion to vacate the award. The Court of Appeals reversed the Circuit Court and remanded the case for the entry of an order enforcing the award. The issue was whether the award complied with the terms of collective bargaining agreement (CBA) and whether the Circuit Court substituted its own judgment for that of the arbitrator by vacating the award. The CBA indicated the arbitrator had the authority to reinstate an employee, reduce the length of a suspension, and take any other action necessary to make the employee whole after a wrongful discharge or suspension. The CBA did not prohibit the arbitrator from reducing Grievant’s discipline from discharge to unpaid suspension. The CBA gave the arbitrator the power to determine whether the employee was discharged without just cause. The arbitrator concluded Grievant was discharged without good cause and determined that an unpaid suspension should be imposed. The Court of Appeals held that the Circuit Court erred by vacating the award.    

Factual Outline

Grievant was a Michigan State Police trooper. The events leading to her discharge occurred at a Union event. Grievant was intoxicated and allegedly “wedged her fingers into the anal crevice of a co-worker while he was walking next to his wife.” A surveillance video showed Grievant trying to grab his genitals and  striking a second male coworker in the genitals. Grievant also was recorded attempting to grab the anal crease and genitals of a third male co-employee. 

Criminal charges were brought against Grievant. In exchange for the dismissal of the CSC-IV counts, Grievant pleaded no contest to assault and battery. Grievant was sentenced to 30 days in jail. She was released after 21 days.

The Employer discharged Grievant. The arbitrator ruled there was no just cause for the discharge and reinstated Grievant with a suspension. 

The Union argued that the arbitrator had sole authority to determine whether there was just cause for discharging Grievant relying on the CBA language providing that “[t]he arbitrator shall have no authority except to pass upon … a claim of suspension, discharge, or demotion without just cause.” Emphasis added.

CBA Article 8, Part A, Section 1, stated: 

The Employer will utilize disciplinary action only for just cause toward employees who engage in violations of the Code of Conduct. It is the intention of the Employer to utilize discipline by progression, when appropriate. Emphasis added.

The Award stated:

Essentially, the dispute between the parties is over whether progressive discipline should have been applied rather than termination of employment. …

The key issue is whether under the totality of the circumstances the Employer had just cause for terminating [Grievant]’s employment. Determining just cause requires weighing a number of factors. A very significant factor, which is explicitly included in the parties’ contract, is a consideration of whether progressive discipline is appropriate. …

… The parties’ contract calls for progressive discipline when appropriate. It is my conclusion that progressive discipline is appropriate in this case.

The Employer asked the Circuit Court to vacate the award. The Union requested that the award by confirmed.  The Circuit Court vacated the award. The Union appealed to the Court of Appeals.

Court of Appeals decision

 The Court of Appeals indicated that a court in an award vacatur action may not substitute its judgment for that of the arbitrator. The court “may only decide whether the arbitrator’s award ‘draws its essence’ from the contract. If the arbitrator in granting the award did not disregard the terms of his employment and the scope of his authority as expressly circumscribed in the contract, judicial review effectively ceases.” Sheriff of Lenawee Co v Police Officers Labor Council, 239 Mich App 111, 118 (1999). 

The CBA had provisions discussing the arbitrator’s authority to review discipline and discharge cases. According to the Court of Appeals, “[t]hese provisions directly indicate that the arbitrator has the power to reinstate an employee, reduce the length of a suspension, and take any other action necessary to make an employee whole after wrongful termination or suspension.”

The Employer argued that the CBA limited the arbitrator’s authority to determining whether just cause existed for the discipline, “while leaving the actual method of discipline solely in the [employer]’s hands.”

The Court of Appeals disagreed with the Employer. The Court of Appeals indicated that under CBA Art. 9, Sec. 6:

The arbitrator shall have no authority except to pass upon alleged violations of the expressed written provisions of this Agreement, the unreasonableness or misapplication of a rule or regulation, that a work order was unreasonable and arbitrary or involves discrimination in application, or a claim of suspension, discharge, or demotion without just cause. [Italics in original.]

The Court of Appeals concluded that these portions of the CBA suggest that while the Employer may have authority to suspend or discharge employees, the arbitrator has the power to overturn such decisions if they are made without just cause. According to the Court of Appeals, nothing in the CBA suggests that an arbitrator is only authorized to determine whether just cause existed for the general discipline of an employee, rather than whether just cause existed for discharge. The arbitrator is empowered to determine whether a discharge was without just cause.

 According to the Court of Appeals, the Circuit Court overlooked that the CBA specifically gives the arbitrator the authority to determine whether a discharge was issued without just cause. Logically, if the discharge was without cause, the arbitrator would have the authority to determine, what, if any, discipline should be imposed.

The Employer argued that the award violated public policy. The Circuit Court did not address this issue. The Employer argued that the award was inconsistent with MCL 28.4 which provides that Michigan State Police Officers must be “of good moral character.” The Court of Appeals concluded that this argument lacked merit, indicating “[i]t would be a fairly large leap of logic for this Court to infer that what ultimately amounted to misdemeanant behavior caused by excessive drinking at an after-hours event with coworkers means that the grievant was not of good moral character.”  

Michigan Dep’t of State Police is consistent with the Trilogy 

In 1960, the United States Supreme Court issued the Steelworkers Trilogy concerning labor arbitration awards. Steelworkers v Enterprise Wheel Car Corp, 363 US 593 (1960), considered the role of the federal courts in enforcing awards. “The refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under” CBAs because the “federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards.” Id. at 596. 

Michigan Dep’t of State Police is consistent with Michigan case law

Lichon v Morse, 507 Mich 424 (2021), involved an employee manual agreement to arbitrate. Lichon stated, 

… in the context of [CBA]s, we [have] held that it was appropriate to apply United States Supreme Court precedent regarding the National Labor Relations Act (NLRA) … to contracts entered into under the state’s public employment relations act … . … This is not a rule we have adopted outside of the context of collective bargaining agreements, and we decline to do so now [in an employment arbitration case]. Id. at 467-468. 

Beck v Park West Galleries, Inc, 499 Mich 40 (2016), considered whether arbitration clauses in invoices applied to disputes arising from prior purchases when the invoices for prior purchases did not refer to arbitration. Beck held the arbitration clause contained in later invoices cannot be applied to disputes arising from prior sales. Beck recognized the policy favoring arbitration of disputes arising under CBAs but said this does not mean an arbitration agreement between parties outside of the collective bargaining context applies to any dispute arising out of any aspect of their relationship. Beck is an example of the Supreme Court treating an arbitration issue within the collective bargaining process differently from outside the collective bargaining process. 

In 36th Dist Ct v Mich Am Fed of State Co and Muni Employees, 493 Mich 879 (2012), the Supreme Court held MCR 3.106 does not preclude reinstatement and back pay where the CBA has a just cause standard for discharge. 

Kaleva–Norman–Dickson School District No 6 v Kaleva–Norman–Dickson School Teachers’ Ass’n, 393 Mich 583, 591 (1975), stated, 

The policy favoring arbitration of disputes arising under [CBA]s, as enunciated by the United States Supreme Court in the Steelworkers’ Trilogy, is appropriate for contracts entered into under the PERA.

Michigan Association of Police v Pontiac, 177 Mich App 752, 759-760 (1989), stated: 

It is accepted that an arbitrator, if not specifically limited by the terms of the collective bargaining agreement, is free to fashion a remedy which considers the relative faults of the parties. … .

Where the CBA is silent as to permissible remedies, an arbitrator does not add to the obligations contractually assumed by the parties by fashioning a remedy which is appropriate under the circumstances. Wayne Co Bd of Comm’rs v National Union of Police Officers, 75 Mich App 375, 381 (1977), lv den 401 Mich 817 (1977).

Michigan Dep’t of State Police consistent with arbitral authority

The Michigan Dep’t of State Police decision is consistent with the proposition that, “[a]bsent a specific provision establishing that violation of a provision [of the CBA] results in discharge, the arbitrator has broad leeway to determine whether the discipline imposed fits the charge of misconduct.” Farrell, “Due Process/Just Cause Issues,” References for Labor Arbitrators (American Arbitration Association, 2005), p. 32. Elkouri & Elkouri, How Arbitration Works (8th ed 2016), pp. 18-46 to 18-49. 

Conclusion

In conclusion, Michigan Dep’t of State Police is consistent with Michigan Supreme Court decisions, the language of the CBA, and general arbitral authority. 

                        author

Lee Hornberger

Lee Hornberger is a member of the National Academy of Arbitrators. He is former Chair of Alternative Dispute Resolution Section of State Bar of Michigan, Editor Emeritus of The Michigan Dispute Resolution Journal, former member of SBM Representative Assembly, former President of Grand Traverse-Leelanau-Antrim Bar Association, and former Chair of… MORE >

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