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Timothy J. Snider

tjsnider@nlrg.com

May 17, 2010
Attorney Name, Esquire1
AddressRe:

MI/Labor Law/Arbitration/Retirement Pay

File: 33-xxxxx-019

Your File:

Candyland

Dear Name:
We have no access to Frank Elkouri & Edna Asper Elkouri, How Arbitration Works,
through Westlaw, and it is unavailable at the law school. Accordingly, I have cited othersecondary sources and some additional case authority directed to the arbitrator's authority
specifically.
Please advise if I may be of further service.
Very truly yours,

Timothy J. Snider
Senior Attorney
TJS:cfb
Enclosure1

Names, addresses, and other identifying information have been redacted toprotect privacy.

ARBITRATION PROCEEDING
IN RE:The Lollipop Guild Local 12345,
Grievant,
City of Candyland, MI,
Respondent.
_______________________________________________NOW COMES the Respondent, the City of Candyland, MI ("the City"), throughcounsel, and submits this Memorandum in Opposition to Grievance.

SUMMARY OF DISPUTE
For 30 years or more, the Lollipop Guild Local 12345 ("the Guild") has represented
the workers in the City's Department of Public Works, comprising the collective bargaining
unit. The collective bargaining agreement ("the CBA") of the parties throughout that period
has contained a provision substantially equivalent, if not identical, to the following provisionin the current CBA:
9.7

SICK LEAVE PAY ON RETIREMENT: An employee, uponretirement, shall be entitled to be paid for one-half of unused sick leaveor to the employee's beneficiary of record at the time of death except
the maximum of pay shall be for thirty (30) days.

(CBA eff. July 1, 2008 ¶ 9.7.)
The current CBA was executed on or about Date, 2009. At no time during thenegotiation of the CBA was ¶ 9.7 made the subject of bargaining by either side. For about
30 years, this provision had been interpreted by both parties as requiring that employees

1would be paid one-half of their unused sick leave, with the maximum payout limited to 30
days. Employee Marcus Munchkin, a member of the bargaining unit, retired on Date, 2009,at a time when the ink on the CBA was hardly dry. He was paid by the City the maximum
pay of 30 sick leave days in accordance with the CBA.
The Guild, however, objected to the amount of the City's payment to Mr. Munchkinof his accrued sick leave pay and took the position for the first time that Mr. Munchkin wasentitled to receive the full one-half of his unused sick leave, without regard to the 30 days'
unused leave limit. The Guild had never taken this new position during the negotiations
leading to the execution of the current CBA. Furthermore, the Guild had never taken thisposition previously with respect to any other members of the collective bargaining unit who
had retired prior to the retirement of Mr. Munchkin. The issue is whether the Guild's new
position should be sustained in arbitration, although it was denied during the grievanceproceeding.

ARGUMENTI.

INTERPRETATION OF THE TERMS OF THE CBA IS
WITHIN THE AUTHORITY AND COMPETENCE OF
THE ARBITRATOR.
This case requires the arbitrator to interpret the terms of the CBA, a charge which iswithin the arbitrator's competence. "It is well established that arbitrators are charged not onlywith deciding factual disputes but also with interpreting the collective bargaining agreement."
Salary Policy Employee Panel v Tenn Valley Auth, 731 F2d 325, 332 (CA 6, 1984). It is the2obligation of the arbitrator to ratify the actions of an employer if those actions are authorized
by the CBA. "[The arbitrator] sits to interpret the contract and cannot hold invalid action by
an employer which conforms to the provisions of the contract." Wright-Austin Co v Int'l
Union, UAW, 422 F Supp 1364, 1370 (ED Mich, 1976).
Here, that is all the City is asking the arbitrator to do. The essence of the arbitration
process is to interpret and apply the terms of the CBA, particularly where, as here, the CBA
is ambiguous.
With regard to whether the arbitrator's award otherwise drew its"essence" from the CBA, in the present case, the terms of the agreement were
ambiguous . . . . Under our precedent, "[i]t is a well-recognized principle that,except where expressly limited by a labor agreement, an arbitrator may
consider and rely upon extrinsic evidence, including negotiating andcontractual history of the parties, evidence of past practices, and the common
law of the shop, when interpreting ambiguous provisions." Champion Boxed
Beef Co. v Local No. 7 United Food & Commercial Workers Int'l Union, 24
F.3d 86, 88-89 (10th Cir. 1994). Indeed, the very nature of the arbitrator's rolein settling disputes under collective bargaining agreements is to examine suchpractices. [Local No. 7 United Food & Comm'l Workers Int'l Union v King
Soopers, Inc., 222 F3d 1223, 1228 (CA 10, 2000).]

II.

THE GUILD'S INTERPRETATION OF THE CONTRACT
IS UNREASONABLE AND CONTRARY TO THE
CONSTRUCTION PUT ON THE LANGUAGE BY THE
PARTIES.
The parties disagree on the interpretation of the phrase "except the maximum of pay

shall be for thirty (30) days." The City and the Guild consistently for 30 years have treatedthis phrase as meaning that in all cases of retirement, the retiree shall be paid for no morethan 30 days of sick leave, regardless of how much sick leave the retiree may have accrued3

at the time he retired. Without prior notice to the City during bargaining, the Guild now
takes the position that the quoted phrase modifies only the phrase "the employee's beneficiaryof record at the time of death." In other words, the employee, if he survives, is entitled to be
paid for all of his accrued sick leave time. Only if the employee dies after retirement but
before he receives his check is his beneficiary limited to receiving payment for no more than
30 days of the deceased retiree's accrued sick leave.2
The Guild apparently also argues that the beneficiary of an employee who dies before
he retires is entitled to receive the deceased employee's accrued sick leave, subject to the 30day limitation. The problem with that interpretation, of course, is that an employee who dieswhile working has not "retired." There is no vesting provision, so before an employee
qualifies to receive the retirement benefit, he must have "retired," not died while still
employed. See, e.g., MCL 38.20(3) ("If a retirant dies before receiving payment"); MCL
38.16(4) ("If a member becomes a retirant or dies, he or she ceases to be a member.");Clexton v City of Detroit, 179 Mich App 209; 445 NW2d 201 (1989) (former city employee,
who was entitled to deferred vested pension under city charter upon his resignation, was"retiree" entitled to hospitalization and medical insurance benefits under city council
resolution, though he was not "retirant" entitled to accumulated unused sick leave payout).
The practical effect of the Guild's interpretation of the language is that the retired
employee will always receive one-half of all his accrued sick leave unless he has the
misfortune of dying before he receives his check. Then his beneficiary would be limited to2

If he dies before he retires, then he has not "retired" at all. In this particular case, theCity tendered the retirement pay to the retired grievant, who is still alive.
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30 days' worth of accrued sick leave. The implausibility of the Guild's interpretation ispatent. The situations when this special case could arise will be extremely rare, so rare that
it is unreasonable to assume that the parties would even have provided for it.
The City's position is that all retirees are treated equally. No retiree is entitled toreceive payment of more than one-half of his accrued sick leave, to a maximum of 30 days.
In that rare case where the retiree qualifies for the payment but dies before he can receive it,
the entire payment is made to his beneficiary. The provision states no more than theobvious—if a retiree dies before he can be paid, then the payment should go to his
beneficiary. Whether the retiree lives or dies during that brief interval makes no differencein how much the retiree is qualified to receive. The reference to his "beneficiary" is in theprovision only to clarify to whom the payment should be made if it cannot be made to theretiree because of his death. Even accepting the Guild's "implied vesting" interpretation of
the contract, it will be rare that an employee dies before he retires. Even in that case, there
is no reason why a deceased employee should be treated differently from a surviving retiree.
To be sure, the language used by the parties is inartful, even ungrammatical. But that
does not necessarily mean that the language is ambiguous. As stated in Holmes v Holmes,
281 Mich App 575, 594; 760 NW2d 300, 311 (2008):
Under ordinary contract principles, if contractual language is clear,construction of the contract is a question of law for the court. If the contract
is subject to two reasonable interpretations, factual development is necessary
to determine the intent of the parties and summary disposition is therefore
inappropriate. If the contract, although inartfully worded or clumsily arranged,
fairly admits of but one interpretation, it is not ambiguous. The language of acontract should be given its ordinary and plain meaning. [Meagher v Wayne

5State Univ, 222 Mich App 700, 721-722; 565 NW2d 401 (1997) (citations
omitted).]It is axiomatic that "[i]n interpreting contracts capable of two different constructions,
we prefer a reasonable and fair construction over a less just and less reasonable
construction." Schroeder v Terra Energy, Ltd, 223 Mich App 176, 188; 565 NW2d 887, 894(1997). The City's interpretation would apply the 30-day limit in all cases and to all retirees.
The Guild's interpretation would restrict that 30-day limit to a tiny minority of cases, noneof which has ever occurred previously. In all cases of which the City has recollection, theretired employee's retirement pay has been augmented by one-half of the retiree's accrued
sick leave, not to exceed 30 days of accrued sick leave. The Guild's "special case" has neverarisen and probably never will occur.

The Guild's construction of the language isunreasonable, impractical, and unprecedented.
The City's construction of the clause is one which has been applied in practice foryears and without exception. The Guild's interpretation is one that has never been appliedor even suggested (until now). "Between two constructions, each probable or possible, one
making a contract reasonable and fair, as applied to the subject matter, and the other unjust
and unreasonable, the former is to be preferred." B Siegel Co v Codd, 183 Mich 145, 153;
149 NW 1015, 1018 (1914). Even to reach the Guild's interpretation of the provision
requires distorting the language out of all context and meaning. Moreover, it is wholly
unreasonable to suppose that the parties bargained and put into a contract a provision thatwould almost never apply.

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Had the Guild intended that its novel construction of the contract be applied
henceforward, it was incumbent upon it to so advise the City and to initiate bargaining overthat provision to attempt to persuade the City to agree with its position. Instead, the Guildseeks to achieve indirectly through the grievance procedure what it never could haveachieved through bargaining.

III.

THE GUILD'S INTERPRETATION OF THE CONTRACTIS INCONSISTENT WITH PRIOR PERFORMANCE BY
THE PARTIES.
One of the arbitrator's tools in ascertaining the meaning of a contract is to look at thepast practices of the parties.
Reliance upon past practice in the face of ambiguous provisions in acollective-bargaining agreement is not only permissible, but is an important
tool through which an arbitrator may discover the intent of the parties. Where
there is ambiguity, the arbitrator may attempt to discern the intent of theparties, and thus resolve a dispute over a contract interpretation, by considering
the actions of the parties as evidence of their interpretation of the terms of thecollective-bargaining agreement. [21 Summ Pa Jur 2d, Employment andLabor Relations, §12:76 (2009).]
Accord Holloway Constr Co v State, 44 Mich App 508, 533; 205 NW2d 575, 587 (1973)("When parties to a contract have given a practical interpretation to the provisions of that
contract, such an interpretation is entitled to consideration by the Court."). Here, for 30 ormore years, the parties have agreed or at least consented to the interpretation of the contract
urged by the City. Now, with no renegotiation of the contract and with no notice that its
position has changed, the Guild has adopted an interpretation of the contract's language thatis wholly at odds with the position it had taken previously. If the language were wholly7

unambiguous, then arguably the parties' construction by performance might be of lesssignificance. But how can it be said that the language here is entirely free from ambiguity?
In labor contracts in particular, courts place a strong emphasis on the practicalconstruction put on the contract by the parties. The Guild cannot simply reverse course
without bargaining for new contract language. Courts will not permit it.
[P]laintiff has offered evidence that in the past, when filling bargaining unit
vacancies in the Department, the relevant Hospital and Union representatives
interpreted Article 18 § 6(a) to mean that seniority was the threshold inquiry
and not seniority group. Twice before, when considering applications forvacancies, the person responsible for hiring, after consultation with the
Department's Union representative, hired supervisory personnel who had moreseniority than bargaining unit members who had applied. The hiring of those
supervisors was never grieved by the Union. It is significant that those
entrusted by the Hospital and the Union to interpret provisions relevant tohiring did so in a way contrary to the interpretation that defendants now urge.
[Casey v Lifespan Corp, 62 F Supp 2d 471, 481 (DRI, 1999).]
Accord 48B Am Jur 2d, Labor and Labor Relations, §2538 (2009) ("[A]n arbitrator may
consider and rely upon extrinsic evidence, including negotiating and contractual history of
the parties, evidence of past practices, and the common law of the shop, when interpreting
ambiguous provisions.").
Having created the dispute that gives rise to this grievance, the Guild, contrary to its
prior practice, has adopted a position that supports the grievance. In other words, the Guild'sinterpretation follows the grievance; the grievance does not follow the contract. See Bagsby
v Lewis Bros of Tenn, 820 F2d 799, 802 (CA 6, 1987) ("[W]e should hesitate to disagree with
the interpretation agreed upon by both parties to the Agreement—the Union and theCompany—at least where, as here, the Agreement is ambiguous on its face and the parties

8

acted on their interpretation before the issue became a subject of litigation."); NLRB v
Universal Servs, Inc & Assocs, 467 F2d 579, 585 (CA9, 1972) ("[A] practical interpretation
placed upon an agreement by the parties is often of dispositive importance in determining
their intent and the purposes of the obligation.").
The Guild's position in this grievance is not supportable. It is inconsistent with theposition that both the Guild and the City have adopted previously. For years the parties haveacted consistently with the City's interpretation of the contract, and the Guild has never filed
a grievance over any other employee similarly situated to Mr. Munchkin who has beentreated precisely as Mr. Munchkin has been treated in this case. The Guild's position is
novel, unprecedented, and without support in the language of the contract. This grievancearose scarcely more than 30 days after the CBA had been executed by the parties. If the
Guild had intended to change its position and revise ¶ 9.7, it could have done so duringbargaining. A change in employee compensation is precisely one of those issues that shouldbe the subject of bargaining.
Thus, and for all the foregoing reasons, the denial of the grievance should be affirmed.
Respectfully submitted,__________________________________
Attorney Name, Esquire
Address
Telephone:
Facsimile:
E-Mail:Counsel for the City of Candyland

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