Court Opinion

ID: 8950451
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:48:57.64421+00
Date Added: 2024-06-11T17:09:57.829043
License: Public Domain

COFFEY, Circuit Judge,
dissenting in part.
The Majority in upholding the arbitrator’s award of severance pay to all former employees of Chrysler Marine permits those employees who were reemployed by U.S. Marine to receive an unjustifiable windfall payment at Chrysler’s expense in spite of the fact that the rehired employees had received back pay for the one week the Hartford plant was closed. The Majority in effect has approved the arbitrator’s amendment to the collective bargaining agreement and completely ignored the specific terms of the agreement between the union and Chrysler which specifically stated that the arbitrator shall not “add, delete or modify any of the terms of this Agreement.” Further, the Majority, in enforcing the arbitrator’s award of severance pay to all former Chrysler employees regardless of whether they were rehired by U.S. Marine ignores the parties’ intention that severance pay, if it was ever to be awarded, by its very definition was only intended to serve the limited purpose of providing a transition allowance for employees terminated by Chrysler until they found new employment. Contrary to the intent of the parties, the arbitrator’s award provides all Chrysler employees with the windfall payment they shall now receive as a result of this court’s approval of the arbitrator’s award. Because the arbitrator awarded severance pay despite the fact that the collective bargaining agreement contains no provision regarding severance pay, the arbitrator’s award constitutes an amendment to the collective bargaining agreement contrary to the express terms of the agreement and has no basis in the record. Therefore, I dissent from that portion of the Majority opinion affirming the district court’s order and approving the arbitrator’s grant of a windfall payment in the form of severance pay to all Chrysler employees including those employees rehired by U.S. Marine.
*792Although this court’s review of an arbitration award is limited, that does not mean we are powerless to overturn awards that are clearly not intended by the parties to the collective bargaining agreement. As we explained in Young Radiator Company v. International Union UAW, 734 F.2d 321, 323 (7th Cir.1984):
“[A]n 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 many 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.”
(quoting United States of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960)) (footnote omitted). We further stated in Ethyl Corporation v. U.S. Steelworkers of America, 768 F.2d 180, 187 (7th Cir.1985):
“This is not to say that simply by making the right noises — noises of contract interpretation — an arbitrator can shield from judicial correction an outlandish disposition of a grievance. There are cases, such as our Young Radiator case cited earlier, where no hypothesis other than that the arbitrator was importing into the dispute his own ideas of industrial justice would be tenable, no matter what he said.”
See also, Hill v. Norfolk & Western Ry., 814 F.2d 1192 (7th Cir.1987). Here, the arbitrator superimposed a severance pay plan onto the collective bargaining agreement which did not provide for a severance pay plan itself and in so doing he added to the terms of the collective bargaining agreement contrary to the express language of the agreement. The agreement provided that
“The arbitrator shall have authority only to decide questions as to the meaning and application of the terms of this Agreement, and such arbitrator shall have no authority to change existing rate ranges, incentive base rates or duty work rates, for any labor grade or to add, delete or modify any of the terms of this Agreement.”
Article 3, sec. 302 (step 5) (emphasis added). The collective bargaining agreement itself fails to contain any reference to severance pay. The only reference to severance pay in the record is in the “letter of understanding” 1 that was made part of the collective bargaining agreement when Chrysler and the union were unable to reach an agreement concerning severance pay during negotiations in June of 1983. The “letter of understanding” provided merely that Chrysler would attempt to negotiate a severance pay plan should it close its Hartford or Beaver Dam plant. Thus, a careful reading of the collective bargaining agreement makes clear that Chrysler and the union had not agreed that severance pay would be provided if it “closed” its plants and that the intention of the parties at the time the collective bargaining agreement was accepted by Chrysler and the union in June of 1983 was only that Chrysler and the union would attempt to negotiate a severance pay plan should Chrysler “close” its plants. The arbitrator, disregarding the explicit terms of the agreement, claimed he premised his award of *793severance pay on the “letter of understanding” between Chrysler and the union. Since the letter of understanding provided only that Chrysler would attempt to negotiate a severance pay plan if it sold the Hartford and/or Beaver Dam plants, the arbitrator clearly exceeded the scope of his authority in imposing a severance pay plan that had been rejected by the parties during their negotiations in June of 1983, and again rejected by the union in December of 1983 even after Chrysler had offered to accept the severance pay plan the union had proposed in June of 1983. Thus the arbitrator read into the collective bargaining agreement a provision the parties themselves had clearly rejected during their negotiations concerning the agreement.
Despite the unambiguous language in the agreement that the arbitrator “shall not add, delete or modify any of the terms of this Agreement” and the conspicuous absence of any severance pay provision in the agreement, the Majority approves the arbitrator’s award of severance pay for 223 rehired employees. In so doing, the Majority approves the arbitrator’s grasping at straws for some means to justify and support his award which directly contravenes the terms of the collective bargaining agreement prohibiting the arbitrator from “adding to or modifying” the agreement. The collective bargaining agreement itself makes no mention of an obligation on Chrysler’s part to provide severance pay. The union turned down Chrysler’s offer of severance pay in December of 1983 after Chrysler notified the union of its intent to sell the Hartford plant. The collective bargaining agreement provided that:
“The arbitrator shall have authority only to decide questions as to the meaning and application of the terms of this Agreement, and such arbitrator shall have no authority to change existing rate ranges, incentive base rates or duty work rates, for any labor grade or to add, delete or modify any of the terms of this Agreement.”
Contrary to the express language and intent of the parties to the collective bargaining agreement, the arbitrator amended the agreement with the imposition of a severance pay plan on Chrysler covering all Chrysler’s employees including those 223 employees who were gainfully reemployed within one week of the sale of the Hartford plant. The arbitrator attempted to justify his action in amending the contract claiming that his implicit remedial powers authorized him to impose his own predilection of a severance pay plan on Chrysler since Chrysler failed to provide the union with six months notice of its intent to sell the Hartford plant. Although an arbitrator may fashion a remedy for breach of a collective bargaining agreement, this court has made it clear that any such remedy must of necessity be based on the intentions of the parties to the collective bargaining agreement and not on the arbitrator’s “personal notion of justice.” As we noted in Miller Brewing v. Brewery Workers Local Union No. 9, 739 F.2d 1159, 1164 (7th Cir.1984), an arbitrator may in limited situations exercise remedial powers not expressly granted in the collective bargaining agreement but that does not mean a reviewing court can never determine “whether an arbitrator when he formulates a particular remedy is interpreting his implied remedial authority or implementing some personal notion of justice.”
Implying a promise to provide severance pay when the “letter of understanding” between Chrysler and the union fails to set forth any such promise and pledges only to negotiate in the future a severance pay plan surpasses all latitude we should grant to arbitrators. Indeed, the record makes clear that the arbitrator was inventing a severance pay clause rather than construing the collective bargaining agreement, and thus the severance pay plan he imposed on Chrysler reflected only the arbitrator’s “personal notion of justice.” The arbitrator failed to acknowledge that Chrysler had attempted to protect its employees during the negotiations with U.S. Marine concerning the sale of the plant. Chrysler, in the interest of its employees, made it a condition precedent to the sale of its Hartford plant, that U.S. Marine continue to operate the Hartford plant for one year after the sale. Further, Chrysler at*794tempted to negotiate with the union after it had notified the union in December-1983 of its intent to sell the Hartford plant, offering to accept the severance pay plan proposed by the union but rejected by Chrysler immediately prior to the parties’ acceptance of. the collective bargaining agreement in June of 1983. The arbitrator without any basis in the record assumed, despite our previous order of January 9, 1984, to the contrary (unpublished decision in case no. 84-1006), that had Chrysler provided the union with six months’ notice of its intent to sell the Hartford plant, the union could have somehow impeded or threatened the proposed sale of the plant. According to the arbitrator, since Chrysler stood to lose some $25 million if the sale to U.S. Marine was not consummated (as this court noted in its order of January 9, 1984), by threatening to stop the sale the union could have forced Chrysler to accept whatever severance pay plan the union determined appropriate. The arbitrator stated:
“that had such negotiations [between Chrysler and the union concerning severance pay] occurred prior to the effectuation of the sale in question, the Union would have been in an advantageous bargaining position, since the Company would probably have sought its acquiescence to a waiver of the six months’ notice requirement which would have enabled it to meet the purchaser’s demands with respect to the timing of the transaction. Based upon these considerations, it is the undersigned’s opinion that the Union would in all likelihood have been able to negotiate a severance pay plan which provided benefits comparable with the more generous of such plans in existence at that time in comparable employee-union relationships.”
If we analyze the arbitrator’s decision in light of our previous orders in this case, it is clear that the arbitrator erroneously concluded that despite the absence of any obligation in the terms of the collective bargaining agreement (or the “letter of understanding”) to agree to a severance pay plan, Chrysler would have been forced by the union to accept any severance pay plan proffered by the union. But the arbitrator’s belief that the union would have been in a superior bargaining positioh had Chrysler complied with the notice provision and negotiated with the union is without support in the record and ignores our previous order refusing to enjoin the sale of the Hartford plant. As this court stated in its orders of January 9, 1984 and May 31, 1984:
“At the time the district court entered the preliminary injunction, the Union was not threatened with irreparable harm and, clearly, the balance of hardships weighed in Chrysler’s rather than the Union’s favor. Accordingly, we hold that the four prong test set forth in Panoramic was not satisfied and thus, the district court abused its discretion in entering the preliminary injunction in the first instance.”
May 31,1984 Order. Thus, the union was without any legal authority to stop or impede Chrysler’s proposed sale of the Hartford plant and the arbitrator’s decision completely disregards our previous orders in this case. Furthermore, the union’s bargaining position was substantially inferior at the time Chrysler announced its intent to sell the Hartford plant than it was the previous summer (June 1983) when the parties were negotiating the collective bargaining agreement, since under the terms of the collective bargaining agreement, the union was prohibited from striking or taking any other action that would slow down production, etc. at the plant.2 The arbitrator’s position is untenable because from this record I am convinced that the union’s bargaining position reached its peak in June of 1983 six months prior to Chrysler’s announcement that it intended to sell the plants at Hartford and Beaver Dam, when the parties were negotiating the collective bargaining agreement, at which time the union could have struck Chrysler upon the expiration of the previous collective bar*795gaining agreement. Even though the record is clear that even at the height of its bargaining power in June of 1983, the union was unable to “force” Chrysler to accept a severance pay plan as Chrysler refused to accept the union proposals concerning severance pay despite the authority of the union to strike Chrysler at that time. The arbitrator took it upon himself to impose a severance pay plan on Chrysler that the union was unable to obtain through collective bargaining, and that the union had in fact rejected in December of 1983 after Chrysler offered the union the very severance pay plan the union itself proposed during negotiations in June of 1983. I fail to understand how the Majority can conclude that the arbitrator’s award is based on anything other than “some personal notion of justice” and thus, is not entitled to enforcement since it “fails to draw its essence from the terms of the collective bargaining agreement.” The imposition of the severance pay plan is contrary to the explicit language in the collective bargaining agreement stating that the arbitrator shall not “add, delete or modify any of the terms of this Agreement.” As we explained in our order of January 9, 1984, Chrysler’s employees would be the real losers if the proposed sale was not consummated:
“Union members would also be harmed if the sale of assets is not completed because they assuredly would have no employment at the Beaver Dam and Hartford plants once Chrysler closed. On the other hand, if Chrysler completes the sale of assets on January 9, 1984, Bayliner has agreed to keep the Beaver Dam plant open for at least two months and the Hartford plant open for at least one year. In light of the fact that Bayliner has agreed to consider hiring all the union members presently employed at Chrysler’s Beaver Dam and Hartford plants, thereby providing them with wages and benefits virtually identical to that they now receive, union members will have a probability of continued employment in the Beaver Dam and Hartford plants. This is so, despite the fact that the collective bargaining agreement between Chrysler and the Union contains no successor clause, entitling union members to be rehired upon Chrysler’s sale of assets.”
Thus, because the arbitrator’s award “demonstrates an infidelity to the plain restrictive terms of the contract” which expressly preclude the arbitrator from amending or adding to the collective bargaining agreement, I would deny enforcement of the award on these grounds alone.
However, the arbitrator’s award is not entitled to enforcement for another reason as well. Even assuming that the record somehow supported the imposition of a severance pay plan on Chrysler, the terms of the plan imposed by the arbitrator clearly conflict with and are beyond the intentions of the parties and again reflect “some personal notion of justice.” The severance pay plan imposed on Chrysler by the arbitrator requires Chrysler to compensate all of its employees regardless of whether the employee continued employment with U.S. Marine after Chrysler sold the Hartford plant. In effect, the award provides a windfall payment to the 223 Chrysler employees who were rehired by U.S. Marine (with better benefits than Chrysler had provided) and who lost only one week of work. I agree and Chrysler does not contest the arbitrator’s award of one weeks back pay to all 223 former Chrysler employees for the one week the Hartford plant remained closed during the transfer of ownership from Chrysler to U.S. Marine. Providing the rehired Chrysler employees with back pay is proper and reasonable, but to give those employees who continued their employment except for a one-week interruption for which they were compensated severance pay in addition to back pay is ludicrous and penalizes Chrysler for looking out for its employees’ best interests. Not only is it contrary to the very purpose of severance pay to provide the reemployed Chrysler workers with a windfall payment in addition to their wages not available to their unfortunate colleagues who lost their jobs completely, but such a result is contrary to the clearly expressed intentions of the parties concerning the purpose that *796severance pay was to serve. The union’s proposed severance pay plan, which was submitted during the negotiations involving the collective bargaining agreement in June of 1983, six months prior to Chrysler’s announcement that it would sell the Hartford (and Beaver Dam) plant, clearly stated in unambiguous terms that the purpose of severance pay was to “provide a sufficient transition allowance ... between the termination of employment at Chrysler ... and obtaining new employment”:
“2. It is recognized that the purpose of severance pay is to provide a sufficient transition allowance to cover a reasonable period of time between the termination of employment at Chrysler Outboard Corporation, and obtaining new employment for persons having through past service, fulfilled the qualifications herein set forth: ...”
As we stated in Miller Brewing:
“In these circumstances we must consider whether it is at all plausible to suppose that the remedy he devised was within the contemplation of the parties and hence implicitly authorized by the agreement.”
739 F.2d at 1164. Any severance pay plan, including the plan contemplated by the union (and Chrysler), is intended to serve the limited purpose of providing “a sufficient transition allowance ... between the termination of employment at Chrysler Outboard Corporation, and obtaining new em-ployment_” We explained in our January 9, 1984 order:
“If the sale is completed, the Union still has the opportunity to arbitrate severance pay under the collective bargaining agreement against a solvent Chrysler. If the arbitrator finds an award of severance pay to be proper in this instance, then every union member not hired by Bayliner will be entitled to such pay. The arbitrator’s award of severance pay will be in the form of monetary damages, easily calculable, and within the power of the panel to award. The Union simply cannot complain of irreparable harm if it is remitted to this remedy. Moreover, arbitration may be avoidable since Chrysler has offered to pay in settlement the severance pay proposed by the Union immediately prior to the time the labor contract was signed.”
The 223 Chrysler employees rehired by U.S. Marine were compensated for the week’s wages they lost when the Hartford plant was closed for one week by the arbitrator’s back pay award. There was, for these 223 employees, no “transition period” between their employment at Chrysler and their reemployment by U.S. Marine; thus, these employees were not entitled to any special “allowance” to tide them over between jobs. These employees received full compensation for the one week of lost wages in the form of back pay. Moreover, the limited purpose severance pay is intended to serve was acknowledged by this court in Sly v. P.R. Mallory & Company, 712 F.2d 1209, 1211 (7th Cir.1983). In Sly, the plaintiffs brought suit to recover severance pay they asserted was owing to them as a result of Mallory’s sale of its metallurgical division to CMW. The plaintiffs were terminated by Mallory as of the date the metallurgical division was sold but were reemployed by the new owner of the division, CMW. This court stated that:
“ ‘Severance pay is generally intended to tide an employee over while seeking a new job and should be considered an unemployment benefit.’ ”
Sly, 712 F.2d at 1211 (quoting district court). Indeed, a member of the Majority, (J. Fairchild sitting by designation on the Ninth Circuit) adopted this definition of severance pay in a decision he authored less than two years ago:
“the plan, read as a whole, anticipated the recipient of severance benefits to be without employment ... awarding benefits [to rehired employees] ... would result in a windfall to the employees
Jung v. FMC Corporation, 755 F.2d 708, 715 (9th Cir.1985) (Fairchild, J.) (emphasis added). Jung also quoted directly from Sly to explain that severance pay was intended to tide a terminated employee over until the employee found a new job. Jung, 755 F.2d at 713. Other courts have also recognized the limited purpose of an award *797of severance pay. See e.g., Pinto v. Zenith Radio Corp., 480 F.Supp. 361, 363 (N.D.Ill.1979) (employee not entitled to severance pay where he lost no work and could not establish that severance pay was intended to constitute a bonus for past work). Owens v. Press Pub. Co., 34 N.J.Super. 203, 111 A.2d 796, 799, 800 (N.J.Super.L.1955) (purpose of severance “is to carry an employee for an interim period after termination of employment ...”). See also Labor Relations Expediter 635 (BNA 1985) (severance pay is “normally intended to help tide the employee over a period of unemployment immediately following termination”). In Bruch v. Firestone Tire & Rubber Co., 640 F.Supp. 519, 525 (E.D.Pa.1986) the court in denying the plaintiff’s claim for severance pay stated:
“Although these two documents provide little guidance in defining the term ‘reduction in force,’ it is noteworthy that nothing in these documents suggests that a reduction in force would occur at the time of the sale of an operation as an ongoing business. General common usage of severance pay comports with the conclusion that termination pay would not be paid to employes who remain in the same job and continue to draw the same wage after the sale of a plant as an ongoing business. These employees suffered none of the hardships normally associated with a termination or reduction in force; they had no period of unemployment without income. Plaintiffs were immediately rehired by Occidental without missing a day of work.”
See also Davidson v. Firestone Tire & Rubber Co., No. 84-1215 Slip Op. at 5 (W.D.Tenn. April 21, 1986) [Available on WESTLAW-DCT datebase] (emphasis added):
“Just as an employee who is rehired no longer has a need for termination pay, an employee who never leaves his job when a Firestone division is sold as a going concern has no reasonable expectation of receiving termination payments. Put simply, the termination pay program was intended to help those employees defendant Firestone believed needed the help, and not to give windfalls to former employees who did not need the help.”
Furthermore, the union provided no evidence that a severance pay plan should amount to a handout to employees who did not permanently lose their jobs. Thus, the arbitrator’s award is without any basis in the record and therefore it is premised on nothing other than the arbitrator’s “personal notion of justice” which the arbitrator without authority decided to read into the collective bargaining agreement. It is also interesting to note that the arbitrator attempted to justify his decision to impose a severance pay plan on Chrysler on the basis of the prior June 1983 negotiations between the parties. According to the arbitrator, the June 1983 negotiations was evidence that the parties intended the “closing” of a plant to result in an agreement as to severance pay for Chrysler employees; however, the arbitrator selectively disregarded the evidence from those negotiations establishing that the union’s proposed severance pay plan would serve a limited purpose-providing a transition allowance between jobs for those Chrysler employees who were permanently terminated by the “closing” of a plant for the wages lost while seeking new employment. Since those Chrysler employees rehired by U.S. Marine were not forced to find new employment as a result of the sale of the Hartford plant, the clear intent of the parties as to whom, if anyone, was entitled to severance pay was evidenced by their prior negotiations concerning severance pay. Thus, the arbitrator’s severance pay plan imposed on the employer (Chrysler) fails to draw its essence from the collective bargaining agreement and therefore is not entitled to enforcement as it reflects nothing but the arbitrator’s “personal notion of justice.”
Because the arbitrator’s award imposing a severance pay plan on Chrysler which requires Chrysler to provide severance pay to all its former employees including those who were rehired by U.S. Marine after the sale of the Hartford plant is based on nothing other than the arbitrator’s “personal notions of justice” and because it does not *798draw its essence from the collective bargaining agreement, I dissent from that portion of the Majority opinion enforcing the award and providing the reemployed Chrysler workers with an “unjustified windfall.” The Majority’s unwarranted intercession on behalf of the union throws another financial curve ball at American industry which is currently struggling for survival against foreign competition-competition unhindered by the imposition of ridiculous severance pay awards in foreign countries such as that invented by the arbitrator in this case and accepted by the Majority at a cost of over $1.3 million to Chrysler. The function of the courts is to ensure that both sides-Labor and management, are treated fairly and equitably. Today, the court legislates a new purpose for severance pay and in so doing tightens the straightjacket on American industry. Although on the surface the Majority’s decision may appear as a victory for labor, both labor and management lose in the long run when courts needlessly approve arbitration awards penalizing employers-employers who, like Chrysler, often consider the best interests of their employees in the decision-making calculus. In the future, Chrysler and other employers will decline even to sit down and discuss a “letter of understanding” if a mere promise to negotiate can be transformed into a substantive promise as the arbitrator did in the instant case, for then a mere promise to notify the union of the possibility of a sale becomes a blank check for the future which the arbitrator may then use to impose terms on the parties that are clearly contrary to their intent. No sane employer will write such a blank check, and the result will be that bargains of this nature are off limits, and both labor and management alike will suffer. Non-union employers will obviously gain a competitive advantage because they will not be exposed to whimsical decisions of arbitrators. Clearly, a failure to enforce the limits of an arbitrator’s power where he manifestly abuses his power will lead people, in the future, to give less and less authority to arbitrators and to write fewer contracts of any kind. I cannot remain silent while another unwarranted arbitrator’s decision is approved by a court thus firing another economic projectile into the very heart of the competitiveness of another American industry struggling to keep afloat against unrestrained foreign competition. See Wangen v. Ford Motor Co., 97 Wis.2d 260, 327, 294 N.W.2d 437 (1980) (Coffey, J., dissenting) (criticizing imposition of punitive damages on manufacturer in products liability as magnifying American industry’s competitive disadvantage against foreign competition).

. The letter of understanding provided:
"During the term of the Labor Agreement which became effective July 1, 1983 between the Allied Industrial Workers of America, AFL-CIO and its Local 879 and Chrysler Outboard Corporation, it is the Company’s intent that in the event the Company should close all of its Hartford and/or Beaver Dam plants, the Company will provide the Union six (6) months advance notice of closing and will negotiate with the Union regarding a Severance Pay Plan.”
The arbitrator determined that the term "close” as used in the letter of understanding applied to the situation where Chrysler terminated its employees and they were reemployed by U.S. Marine one week later. On appeal, Chrysler does not contest the arbitrator’s decision concerning what the term "close” means in the letter of understanding. Chrysler’s Hartford, Wisconsin plant is the only plant that was "closed” because of the sale to U.S. Marine and the contested severance pay plan concerns only the Hartford plant's employees.

. Section 2.07 of the Collective Bargaining Agreement provided, "... The Union agrees that there will be no strikes, sitdowns, slowdowns, or work stoppage during the term of this Agreement."