Opinion ID: 492689
Heading Depth: 2
Heading Rank: 1

Heading: Paragraph 3 Draws its Essence from the Agreement

Text: 13 Section 5.07 of the collective bargaining agreement, which provides that overtime shall be assigned according to seniority, does not expressly state any remedy for violations of its terms. The arbitrator found no other provision in the collective bargaining agreement regarding the appropriate remedy for a violation of section 5.07. This court in Miller Brewing Co. v. Brewery Workers Local Union No. 9, 739 F.2d 1159 (7th Cir.1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 912, 83 L.Ed.2d 926 (1985), addressed the appropriate role of a reviewing court in determining whether an arbitral remedy that is not explicitly set forth in the collective bargaining agreement draws its essence from that agreement. We noted: 14 Collective bargaining agreements often say little or nothing about the arbitrator's remedial powers; yet it cannot be that he has none; and since he derives all his powers from the agreement, the agreement must implicitly grant him remedial powers when there is no explicit grant.... This clearly is the Supreme Court's view. 15 Id. at 1163 (citations omitted). A court must first look to the collective bargaining agreement for any textual guide to the exercise of the arbitrator's remedial powers. The court may not disturb the arbitrator's remedy if that remedy can be fairly implied by a provision of the collective bargaining agreement. Id. at 1164. If there is no textual guide, however, the court must then consider whether it is at all plausible to suppose that the remedy [the arbitrator] devised was within the contemplation of the parties and hence implicitly authorized by the agreement. Only if [the court] think[s] it clearly was not may [the court] reverse the arbitrator's decision. 2 Id. 16 We cannot find any textual guide for the arbitrator's remedy in this case. Hillshire contends that because section 5.07 of the collective bargaining agreement provides that the Company must offer overtime opportunities to employees in the order of their seniority, the agreement obviously contemplates that some remedy be available to employees affected by a violation of the provision. The makeup work remedy awarded in paragraph 3, according to Hillshire, would give aggrieved employees the benefit of their bargain and therefore is fairly implied from section 5.07. 17 Section 5.07 does appear to contemplate some form of remedy, but we cannot agree that it provides a textual guide for the type of remedy that the arbitrator devised. Section 5.07 simply does not provide any clue regarding the nature of the remedy that should be imposed. We cannot tell from section 5.07 whether the arbitrator was exercising remedial powers implicitly conferred on him by the agreement or simply devising what he thought, without reference to the agreement or anything fairly implied in it, would be an equitable remedy. Miller Brewing, 739 F.2d at 1164. 18 Although we do not believe that section 5.07 provides a textual guide for the makeup work remedy, it is plausible to suppose that the makeup work remedy was within the contemplation of the parties and thus implicitly authorized by the agreement. We certainly cannot say that the remedy clearly was not within the contemplation of the parties. It is at this juncture that we disagree with the decision of the district court. The district court held that it is  'almost unimaginable' that the remedy devised was within the contemplation of the parties during negotiation[s]. (quoting Miller Brewing, 739 F.2d at 1164). In support of this conclusion, the district court reasoned that: 19 By allowing the elimination of backpay as a remedy for any section 5.07 violations, the arbitrator has effectively destroyed any incentive for the Company to comply with that provision of the collective bargaining agreement. Remedying violations with makeup work, rather than backpay, permits the Company to assign overtime work without regard for seniority and without fear of true retribution. The worst that could result, from the Company's perspective, from a section 5.07 violation would be forcing the Company to offer an aggrieved employee the opportunity to perform make-up overtime work when such work was available. This type of remedy does little to discourage section 5.07 violations and would likely not have been approved by the Union had the issue been discussed in negotiations. 20 Hillshire Farm Co., 638 F.Supp. at 1157. 21 We disagree that the arbitrator's award effectively destroyed the Company's incentive to comply with section 5.07. The arbitrator was careful to ensure that the award provided a real remedy for aggrieved employees, requiring that Hillshire offer an aggrieved employee overtime work not, as the district court suggests, when overtime work is available, but rather only when overtime work is otherwise unavailable. The arbitrator held that [i]f the Company intends to remedy overtime violations by offering the aggrieved employes 3 overtime, that overtime work must be work that would not otherwise be performed on an overtime basis. In addition, the makeup work could not be scheduled so as to preclude the employe from working daily overtime to which the employe is entitled. Thus according to the terms of the arbitrator's decision, Hillshire must offer the aggrieved employee what is the equivalent of straight (i.e., nonovertime) work and pay for that work at an overtime rate. This encourages the Company to comply with section 5.07. 22 The Union in this appeal takes a slightly different tack than did the district court regarding the likelihood that the makeup work remedy will encourage the Company's compliance with section 5.07. The Union contends that it would never have agreed to the makeup work remedy if that issue had come up in negotiations, because the backpay remedy would provide more incentive for the Company to comply with section 5.07. In essence, the Union argues that the makeup work remedy is not a severe enough penalty to encourage the Company's compliance with section 5.07. This argument fails to recognize that the arbitrator was not only concerned with affording a meaningful remedy to aggrieved employees, but was also conscious of the need to avoid a punitive penalty. Arbitrator Gundermann noted: The basic purpose of any remedy is to place the employe in the position the employe would have been in if the violation had not occurred. A remedy is not intended to be punitive in nature, especially if the violation was the result of an error or mistake. This court and other arbitrators have recognized that arbitral remedies, with few exceptions, may not be punitive. See Miller Brewing Co., 739 F.2d at 1164; Sundstrand Corp., 47 Lab.Arb. (BNA) 284, 286 (1966) (Kelliher, Arb.) (noting that courts and arbitrators will not sanction punitive damages unless there is clear and precise language setting forth such an understanding in the Contract). In selecting the makeup work remedy, the arbitrator struck a balance between the employer's and the employees' interests. He reasoned: 23 By offering an employe wrongfully denied an overtime opportunity another opportunity to work overtime, the employe is being placed in the same approximate position the employe would have been in if the violation had not occurred. Conversely, to compensate the employe for the missed overtime opportunity would result in the employe being compensated for work not performed, thus penalizing the Company. This is an unduly harsh penalty for an honest mistake. In any event, offering an employe work at the overtime rate that would not otherwise have been performed as overtime is a penalty to the Company. 24 Other arbitrators have employed similar reasoning in arriving at the makeup work remedy. 4 See Liquid Carbonic Corp., 84 Lab.Arb. (BNA) 704, 707 (1985) (Richman, Arb.); General Foods Manufacturing Corp., 83 Lab.Arb. (BNA) 889, 893 (1984) (Williams, Arb.); Price Brothers Co., 76 Lab.Arb. (BNA) 10, 12 (1980) (Shanker, Arb.); Menasco Mfg. Co., 69 Lab.Arb. (BNA) 759, 762-63 (1977) (Bergeson, Arb.). Arbitrator Gundermann carefully tailored the decision to make aggrieved employees whole as well as to avoid a punitive remedy. It is plausible to suppose that this makeup work remedy was within the contemplation of the parties. 25 In further support of its conclusion that it was almost unimaginable that the parties would have contemplated a makeup work remedy, the district court declared that paragraph 3 was so broad as to encompass intentional violations of section 5.07, with the result that [p]aragraph 3 permits the preclusion of backpay as a remedy to all misscheduled overtime assignments. Such wide application of the remedy for section 5.07 violations is indeed 'unimaginable.'  Hillshire Farm Co., 638 F.Supp. at 1157. The Union argues, along similar lines, that the remedy allows the Company to act without good faith and also to harass senior employees out of favor with the management. 26 The district court and the Union have misread the arbitrator's award, however, because the arbitrator fashioned the award to limit it to inadvertent violations of section 5.07. The arbitrator found that [u]nder the facts of this case, the violation clearly was the result of an honest mistake; there was no intent to deprive the grievant of the forty-five minutes of overtime. He then held: 27 If the Union can establish that an overtime violation occurred as a result of an intent to violate the agreement, as opposed to an error or mistake, the Company should be compelled to compensate the aggrieved employe for the lost overtime opportunity. The Union cited only one instance where this occurred, thus presumably it is not a common occurrence. 28 The arbitrator thus clearly limited the award in paragraph 3 to violations stemming from honest mistakes. See also Menasco Mfg. Co., 69 Lab.Arb. (BNA) 759, 762 (1977) (Bergeson, Arb.) (noting that arbitrators award monetary damages rather than makeup overtime hours if management acted in bad faith in bypassing grievants for overtime work). It is plausible that the parties would have contemplated this type of remedy. 29 The Union contends that it would not have agreed to the remedy formulated by the arbitrator in paragraph 3 because the remedy interferes with the rights of more senior employees to work overtime when and where they desire. The Union cites the example of Ethyl Corp. v. United Steel Workers, 768 F.2d 180 (7th Cir.1985), cert. denied, 475 U.S. 1010, 106 S.Ct. 1184, 89 L.Ed.2d 300 (1986), in which this court enforced the arbitrator's determination that Ethyl Corporation could not deny vacation benefits to employees who had been discharged but had vested vacation rights. The Union argues that its members' rights to work when and where they desire are vested just as were the vacation rights of the discharged employees in Ethyl Corp. We are unpersuaded by the Union's reasoning. The decision in Ethyl Corp. involved complete divestment of vested vacation rights. This case is distinguishable, because Hillshire employees still may work overtime, and if they do not like the time or department in which work is available, they may decline that work and take chances on other work or simply not work overtime at all. 30 There is a more fundamental problem with the Union's argument. Section 5.07 does not guarantee employees the right to work overtime when and where they desire. It merely gives them the right to volunteer for overtime and, if overtime work is available, the right to be given overtime work in the order of their seniority. The allocation of overtime is management's exclusive right, except as limited by the collective bargaining agreement. F. Elkouri & E. Elkouri, How Arbitration Works 534 (4th ed. 1985). The limitations on management's rights expressed in section 5.07 relate to the employees' seniority, and not to employees' desires regarding where and when they want to work overtime. This is clearly illustrated in another provision of section 5.07, which states: If enough volunteers [to work overtime] cannot be found, the remaining work will be assigned to those department employees with the least seniority who are qualified by training and/or experience to perform the available work. (emphasis added). This provision affirms the Company's right to allocate overtime regardless of an employee's desire to work at a particular time or in a particular location. 31 Assuming arguendo that employees actually have such vested rights to work overtime when and where they desire, the arbitrator's decision does not undermine those rights. According to the terms of the arbitrator's decision, the makeup work must be overtime work that would not otherwise be performed on an overtime basis, it cannot be scheduled so as to preclude the employe from working daily overtime to which the employe is entitled, and, most important, the arbitrator contemplated that it would then be scheduled at a mutually acceptable time. Thus the rights of more senior employees to work overtime when and where they choose, if they indeed have such rights, are protected by the arbitrator's decision. 32 The Union argues that the arbitrator's ruling that Hillshire owed Tratz forty-five minutes of overtime backpay is inconsistent with the ruling that the Company could change its future practice and allow makeup work as a remedy. We find no such inconsistency. The arbitrator did not find that the backpay remedy was an implicit term of the collective bargaining agreement. Indeed, the arbitrator expressly found that [t]he collective bargaining agreement is silent regarding the appropriate remedy for a violation of section 5.07. The arbitrator found that Hillshire had a past practice of remedying violations of section 5.07 with backpay rather than makeup work. The overtime backpay award to Tratz was in accord with the Company's past practice, which was in force on the date of the misscheduled overtime. Because the arbitrator based the award to Tratz on past practice, the award did not undermine the arbitrator's additional ruling that makeup work is an appropriate remedy for future violations. The arbitrator ruled that Hillshire was not bound by its past practice of remedying violations with backpay because the conditions under which the past practice arose later changed. 5 There is ample support for this ruling in the decisions of other arbitrators. See Dravo Corp., 76 Lab.Arb. (BNA) 903, 908 (1981) (Duff, Arb.); Price Brothers Co., 76 Lab.Arb. (BNA) 10, 12 (1980) (Shanker, Arb.); TRW, Inc., 72 Lab.Arb. (BNA) 1047, 1050 (1979) (Whyte, Arb.); Mid-America Dairymen, Inc., 70 Lab.Arb. (BNA) 116, 121 (1978) (Fitzsimmons, Arb.). 33