Opinion ID: 471813
Heading Depth: 1
Heading Rank: 2

Heading: Arbitrator's Decision--Drawing Its Essence From the Labor Agreement

Text: 39 Conceding that the collective bargaining agreement authorized an arbitrator to resolve disputed interpretations of the bargained for agreements, the Company contends that the Arbitrator ignored the plain terms of the agreement by applying an equitable estoppel theory. As a consequence, he required it to pay 370 weeks of guaranteed benefits to two separate groups of twenty-five senior voluntaries. The Union responds that the Arbitrator based his decision upon a reasonable interpretation of the agreements. 40 Prior to the Fund's depletion, the Company had paid Group B voluntaries 230 hours of guaranteed SUB benefits, totaling $39,059.45. After the Arbitrator's initial award, the Company paid Group B the remaining 70 hours guaranteed benefits, totaling $11,530.30. The Company then concluded that it had satisfied its obligation to provide 300 weeks of guaranteed benefits. The Arbitrator held that equitable estoppel must apply in this case because Group B employees did not know at the time that they opted for voluntary layoff that depletion of the Fund would not result in accrual of an additional 300 weeks of Company guaranteed benefits. Not only was the Company obligated to ensure that Group B employees received a total of 300 weeks of guaranteed benefits from the Trust Fund and Company sources, but due to lack of notice of the administration of benefits upon depletion of the Fund, the Company was held estopped from charging the 70 hours of benefits paid to Group B against the 300 hours owed to employees in Group C. 41 Courts are required to refrain from reviewing the merits of an arbitrator's award due to the strong policy favoring arbitration as a means of resolving labor disputes. An award may, however, be reviewed to determine whether the arbitrator exceeded the limits of his contractual authority: 42 When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies. There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. Nevertheless, an arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from any sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award. 43 United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960) (emphasis added); see also W.R. Grace & Co. v. Local Union 759, International Union of United Rubber, Cork, Linoleum & Plaster Workers of America, 461 U.S. 757, 765-66, 103 S.Ct. 2177, 2183, 76 L.Ed.2d 298 (1983). An award fails to derive its essence from the agreement when (1) an award conflicts with express terms of the collective bargaining agreement, see, e.g., Grand Rapids Die Casting Corp. v. Local Union No. 159, U.A.W., 684 F.2d 413 (6th Cir.1982); (2) an award imposes additional requirements that are not expressly provided in the agreement, see, e.g., Sears, Roebuck & Co. v. Teamsters Local Union No. 243, 683 F.2d 154 (6th Cir.1982), cert. denied, 460 U.S. 1023, 103 S.Ct. 1274, 75 L.Ed.2d 495 (1983); (3) an award is without rational support or cannot be rationally derived from the terms of the agreement, see, e.g., Timken Co. v. United Steelworkers of America, 482 F.2d 1012 (6th Cir.1973); and (4) an award is based on general considerations of fairness and equity instead of the precise terms of the agreement, see, e.g., Local 342, United Auto Workers v. T.R.W., Inc., 402 F.2d 727 (6th Cir.1968), cert. denied, 395 U.S. 910, 89 S.Ct. 1742, 23 L.Ed.2d 223 (1969). The Company claims that the Arbitrator's rulings on estoppel and the 300-week minimum fell within all four enumerated grounds. 44 The portion of the Arbitrator's decision that the Company was responsible to pay 300 weeks of guaranteed benefits is reasonable and does draw its essence from the agreements. The second aspect of his decision that concluded that senior employees who had elected voluntary layoff status prior to the arbitral decision were unaware that they would receive only part or no guaranteed benefits, falls within a different category. Because of perceived inequity to voluntaries, the Arbitrator decided that the Company was estopped from charging the 70 hours of benefits it paid to Group B employees against the total 300 hours owed. The Arbitrator imposed a notice requirement, quoting an arbitration treatise for the proposition that estoppel can arise 'where one party, with actual or constructive knowledge of his rights, stands by and offers no protest with respect to the conduct of the other, thereby reasonably inducing the latter to believe that his conduct is fully concurred in....'  Arbitrator's Opinion and Award, No. 90 at 13-14 (Lipson, A.) (March 23, 1983) (quoting Elkouri & Elkouri, How Arbitration Works at 349 (1973)). Determining that fairness dictated such estoppel, the Arbitrator therefore required the Company to pay 370 weeks of guaranteed benefits rather than the 300 weeks specified in the agreements. 45 The notice and estoppel aspects of the arbitral decision impermissibly modified the parties' agreements by imposition of a requirement that senior employees be fully apprised of the Trust Fund's stability prior to taking voluntary layoff status. The Arbitrator disregarded the agreements' express terms by treating the 300 week period as the minimum rather than maximum guaranteed period of benefits for which the Company is accountable. 46 The principal authority upon which the Union relies in support of the Arbitrator involve determinations of procedural due process inferred from just cause for discharge. That authority recognized that a law of the shop had clearly developed so that certain phrases in collective bargaining agreements had become terms of art, permitting an arbitrator considerable discretion in delineating the substantive and procedural requirements. See, e.g., Super Tire Engineering v. Teamsters Local Union No. 676, 721 F.2d 121 (3d Cir.1983), cert. denied, --- U.S. ---, 105 S.Ct. 83, 83 L.Ed.2d 31 (1984); Anaconda Co. v. International Association of Machinists & Aerospace Workers, District Lodge 27, 693 F.2d 35 (6th Cir.1982); Chauffers, Teamsters & Helpers, Local 878 v. Coca-Cola Bottling Co., 613 F.2d 716 (8th Cir.), cert. denied, 446 U.S. 988, 100 S.Ct. 2975, 64 L.Ed.2d 847 (1980). Here, however, the Arbitrator reached his estoppel conclusion without reliance upon any custom or practice in the industry, but inferred the notice requirement from his own notions of fairness. The Arbitrator's application of equitable principles contravened the express terms of the collective bargaining agreement. By imposing an estoppel upon the Company, the Arbitrator ignored the plain terms of the agreement that provided for a maximum of 300 weeks of guaranteed benefits. Such interpretation exceeded the Arbitrator's contractual authority. See supra note 4. Since this portion of the Arbitrator's award does not draw its essence from the agreement and instead imposes the Arbitrator's own brand of industrial justice, we vacate this portion of the award. 47 Accordingly, we AFFIRM the arbitrator's decision to the extent that the Company was obligated to pay 300 weeks of guaranteed benefits pursuant to the SUB Plan. However, we VACATE and REVERSE that part of the award insofar as it amended the agreement to include a notice requirement. The Company may charge the 70 weeks of benefits already paid against its total 300 week obligation. 48 Each party will bear its own costs of appeal.