Some Interesting Arbitration Agreement Legal Issues

 There have been a few interesting arbitration decisions this year.  One is from the Supreme Court and the other from the Sixth Circuit. Both of them rejected the employer's arguments.  

While the Federal Arbitration Act, 9 U.S.C. §1 et seq.  gives federal courts the power to decide disputes over arbitration, the Supreme Court had previously ruled that the FAA does not create federal question jurisdiction.  Accordingly, federal courts – as courts of limited jurisdiction -- must examine and "look through" to the underlying complaint to find federal question or diversity jurisdiction before entertaining petitions to compel arbitration under §4.   In this case, the employee brought federal and state discrimination claims and sought to vacate an adverse arbitration award through state court.  Badgerow v. Walters, No. 20-1143 (3-31-22).  The employer, citing federal question jurisdiction, removed the case to federal court.  Federal courts have the power under §§ 9 and 10 to vacate and confirm arbitration awards.  However, the Court held that the “look-through” authority to find the underlying federal question (or diversity) only applied to petitions brought under §4 and not to petitions to vacate or confirm brought under §§ 9 or 10.   Unlike §§9 and 10, Section 4 specifically explains that petitions may be filed with the federal court which would have jurisdiction “save for [the arbitration] agreement.”  Sections 9 and 10 merely refer to filing the petition in the federal court where the award was made; they do not specifically refer to the question of jurisdiction.  The omission of a reference to jurisdiction in §§9 and 10 was deemed deliberate by Congress.   Moreover, because arbitration awards are creatures of contract and settlement agreements of disputes over federal law are also regular contracts, they are generally creatures of only state law, not the federal law which was implicated by the underlying dispute.   Therefore, an issue over a regular contract dispute does not create a federal question necessary to support federal court jurisdiction over petitions to vacate or confirm under the FAA. 

·     The Sixth Circuit held that the arbitration agreements of the individual employee class plaintiffs – which explicitly applied to ERISA claims -- did not apply to an ERISA plan on whose behalf the employees brought an ERISA breach of fiduciary duty action against the employer.  Hawkins v. Cintas Corp., No. 21-3156 (6^th Cir. 4-27-22).  The plaintiffs alleged that the employer had breached its fiduciary duty to the Plan by failing to include passively-managed fund options in the Plan and charging the Plan excessive fees. “Section 502(a)(2) suits are ‘brought in a representative capacity on behalf of the plan as a whole.’”  The Court distinguished the arbitration clause which covered only “claims” and not the plaintiffs’ “rights” to bring a fiduciary duty claim on behalf of the ERISA Plan. “Had Plaintiffs brought a claim under § 503(a)(1)(B), or a claim that should have been brought under that section, then it might be the kind of individual claim subject to arbitration under an individual participant’s employment agreement.” Further, the Court refused to impute to the Plan the employer’s agreement to arbitrate. There was no evidence that the Plan itself had agreed to arbitrate its claims or to permit the plaintiffs to agree on its behalf.  “In the absence of a sufficient manifestation of the Plan’s consent to arbitrate these claims, we hold that the Plan has not consented to arbitration.”

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Refuses Employee Claim for Age Discrimination and to Award Attorneys Fees to Prevailing FMLA Plaintiff

This morning, the Sixth Circuit issued a few employment decisions that may be of interest to employers and employees.  In the first case, the Court rejected the plaintiff’s age discrimination claim where she had been fired for insubordination.   Pelcha v. MW Bancorp, Inc.,  No. 20-3511 (6^th Cir. 1-12-21, amended 2-19-21).  The Court reiterated that the Supreme Court has held the ADEA does not permit mixed-motive cases, unlike Title VII.  Further, her evidence of stray remarks by the Bank’s president about an employee who was 40 years older than her were too vague and unrelated to her situation to constitute direct evidence that she had been fired because of her age.    In the second case, the plaintiff physician was denied prevailing party attorney fees in his FMLA claim by the arbitrator because he had failed to educate the arbitrator that the statute prevailed over contrary language in the arbitration clause and because he failed to submit any definitive evidence of the fees he was claiming.

In the first case, the plaintiff teller was fired by her long time banking employer for insubordination for refusing to submit a written request for time off until the day before her day off even though such requests were due a month in advance.  She argued that this was pretext for age discrimination.  The district court granted summary judgment to the employer and she appealed.

The plaintiff attempted to argue that she had proved age discrimination with direct evidence based on a few inflammatory statements that the Bank’s president made about another employee who was 40 years older than the plaintiff and that he wanted to hire younger tellers.  The Court disagreed.  “In reviewing direct evidence, we look for “evidence from the lips of the defendant proclaiming his or her . . . animus.”  . . .Inferences are not permitted.”

“Direct evidence is evidence that proves the existence of a fact without requiring any inferences” to be drawn.  . . . In other words, direct evidence is “smoking gun” evidence that “explains itself.”

                . . .

In determining the materiality of allegedly discriminatory statements, we consider four factors, none of which are dispositive: “(1) whether the statements were made by a decisionmaker . . . ; (2) whether the statements were related to the decision-making process; (3) whether the statements were more than merely vague, ambiguous or isolated remarks; and (4) whether they were made proximate in time to the act of termination.”

             . . . None of the statements were related to [the plaintiff]’s termination. In fact, they were not made in relation to any termination decision and were about an entirely different employee. Additionally, nothing in the record suggests that the statements were more than isolated remarks. Here, it appears as though these statements were only made once or twice to certain higher-level management employees.

                . . . Hiring younger tellers does not require the termination of older employees.

 . . ., in terms of timing, the comments in question come from late 2015 or early 2016, more than six months before her termination. We have previously suggested that time spans of six or seven months can be temporally distant.

That being said, such statements could be considered as circumstantial evidence to argue pretext if the plaintiff attempted to prove her case through burden shifting and to raise a “plausible inference of discrimination.”     Nonetheless, the Court found that the plaintiff failed to prove that the employer’s explanation for her termination – that she was insubordinate – was pretext for age discrimination.

First, the plaintiff could not prove that the explanation had no basis in fact.  She argued that she was not insubordinate because she had submitted a written request one day in advance and had obtained verbal approval a month in advance.  However, the Court pointed out that she had been required by her manager’s policy to submit the written request a month in advance and she had admittedly told her manager that she refused to do so because she disagreed with the policy.  She did not ultimately submit her written request until the day before her took time off.  Her “late completion of the form could not cure her original refusal to follow Sonderman’s directive.”

She also could not prove pretext with the isolated and sparse comments that the Bank president had made about another situation. Those comments “were not directed towards Pelcha, not directed towards anyone near Pelcha’s age, and not made in connection with any termination decision at all.”

She also could not show that her employer changed its explanation for her termination by also later documenting issues with her negative attitude and contribution to a negative work environment.  Prior decisions have held that “providing “additional, non-discriminatory reasons that do not conflict with the one stated at the time of discharge does not constitute shifting justifications”.

In addition, she could not show pretext by arguing that the employer failed to comply with its own progressive disciplinary policy.   The policy was clear of the typical steps in the process and clarified that some offenses would justify skipping some or all of the steps.  In conclusion, “an ‘employer may fire an employee for a good reason, a bad reason, a reason based on erroneous facts, or for no reason at all, as long as its action is not for a discriminatory reason.’”

Ultimately, she also could not satisfy the prima facie case because she could not prove that she was treated more harshly than another, younger employee because the fact that a younger co-worker may have neglected to turn in the form is not the same as insubordination in refusing to turn in the form. “Neglecting to complete a time off form and defiantly refusing to do so upon being asked by a superior are significantly different actions.”

In the second case, the Court denied the appeal of a physician who was denied in arbitration attorney’s fees as the prevailing party on his FMLA claim.  Gunasekera v. War Memorial Hospital, No. 20-1340 (6^th Cir. 1-12-21).   The physician asserted (correctly) that attorneys’ fees are awarded under the FMLA statute to prevailing plaintiffs.  However, the arbitrator reasoned that the arbitration agreement provided that each party would pay its own fees and, in any event, his attorney had failed to submit evidence of the attorneys’ fees accrued to that point during the hearing.    The Sixth Circuit found that a mere error of law by the arbitrator does not constitute the necessary manifest disregard of the law (if that standard even still applied) as required to overturn an arbitration award.  This was particularly true when the arbitration briefs failed to argue that the FMLA provision overrode the terms of the parties’ agreement.    More importantly, the physician failed to submit any evidence to the arbitrator of the amount of his fees. “In that brief, Dr. Gunasekera merely asserted that he was entitled to receive ‘all of his legal fees,’ which exceeded $35,000.”  Without concrete evidence upon which to base an award of a specific sum, the arbitration could not have erred in failing to award fees to a prevailing party under the FMLA.  

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney. 

Supreme Court: Arbitrator’s Decision Holds “However Good, Bad or Ugly”

This morning, a unanimous United States Supreme Court affirmed the denial of a motion to vacate an arbitration ruling that physicians could proceed in a class action arbitration challenging allegedly low payments by an insurance company under a fee-for-service contact that contained an arbitration clause.  Oxford Health Plans v. Sutter, No. 12-135 (6-10-13).  While this case is not an employment case, the ruling under the Federal Arbitration Act would apply equally in the employment context.   

The arbitrator ruled that the fee-for-service arbitration clause authorized class action arbitration.  Following that ruling – and while the arbitration was still pending, the Supreme Court ruled in  Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010), “that an arbitrator may employ class procedures only if the parties have authorized them” in the arbitration agreement.  Asked to reconsider his ruling, the arbitrator re-affirmed that the contact authorized class action arbitrations.  Unlike the Stolt-Nielsen case where the parties had stipulated that the contract did not contemplate class arbitrations and the arbitrator there had simply imposed his view of sound public policy and exceeded his contractual authority to merely interpret the contract, the arbitrator in Sutter limited his opinion to his legal interpretation of the contract.  Even if the Sutter arbitrator committed serious errors of law or fact, that is not a basis to vacate an arbitration ruling under the FAA.   “Only if ‘the arbitrator act[s] outside the scope of his contractually delegated authority’—issuing an award that ‘simply reflect[s] [his] own notions of [economic] justice’ rather than ‘draw[ing] its essence from the con­tract’—may a court overturn his determination.  . . .  So the sole question for us is whether the arbitra­tor (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.”  In other words, "[t]he arbitrator’s construction holds, however good, bad, or ugly.”  Otherwise, if courts could review the legal correctness of every arbitration decision, arbitration would cease to be a more expedient alternative to regular civil litigation.

 The  Court also indicated that it would have faced  

   a different issue if Oxford had argued below that the availability of class arbitration is a so-called “question of arbitrability.” Those questions—which “include certain gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy”—are presumptively for courts to decide.  . . .  A court may therefore review an arbitrator’s determination of such a matter de novo absent “clear[] and unmistakabl[e]” evidence that the parties wanted an arbitrator to resolve the dispute.  . . .  Stolt-Nielsen made clear that this Court has not yet decided whether the availability of class arbitration is a question of arbitrability. . . . . But this case gives us no opportunity to do so because Oxford agreed that the arbitrator should determine whether its con­tract with Sutter authorized class procedures.

The insurance company moved to compel arbitration after the physician filed his complaint in state court.  The court enforced the arbitration clause.  All the contract provides is that an arbitrator will decide the dispute.  Therefore, the parties cannot return to court merely because they disagree with the arbitrator.

Under §10(a)(4), the question for a judge is not whether the arbitrator construed the parties’ contract correctly, but whether he construed it at all. Because he did, and therefore did not “exceed his powers,” we cannot give Oxford the relief it wants.  

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Court of Appeals Affirms Vacation of Arbitrator Ruling Which Awarded Back Pay for Grievance That Had Not Been Filed

Last week, the Franklin County Court of Appeals affirmed the vacation of an arbitration award by the Franklin County Common Pleas Court involving the termination of a Reynoldsburg police officer.   Fraternal Order of Police Capital City Lodge No. 9 v. Reynoldsburg, 2013-Ohio-1057.   In that case, the grievant had traded shifts with a co-worker, but then forgot about it while playing cards.   As he was leaving (late) for work, he heard that his young son may have injured himself playing.  Realizing that he was going to be late to work, and before investigating what turned out to be a minor bump on the head, the grievant called off work on the basis that his son “had busted his head open” and impliedly required immediate medical attention.  He did not report to work after learning that it was only a minor injury.  He was terminated after a subsequent investigation reflected his lack of candor in producing a misleading return-to-work form from the office of his family medical provider.  The arbitrator upheld the termination, but awarded back pay to the grievant because of the manner of the employer’s investigation and preclusion of cross-examination during the pre-termination hearing about the use of subpoenas during the investigation.  The Court first held that there was no violation of the CBA alleged or proven by the City’s questionable use of subpoenas during its investigation.  Although it agreed that the City may have violated the bargaining agreement in limiting cross-examination during the pre-termination hearing, it still concluded that the arbitrator exceeded his authority by resolving that issue in the hearing on the termination.  Instead, the grievant should have filed a second grievance on that issue, but did not.

According to the Court’s opinion, the grievant’s superiors requested a medical excuse to justify his absence because of the number of sick days he had taken so far that year.  At that point, the grievant took his son to his family medical provider’s office, explained that his son was not seriously injured (and they agreed he did not require medical treatment), but asking for a medical statement to justify his calling off work the previous evening.   The medical assistant gave him an unsigned return-to-work form stating that his son had been receiving medical care for the last two days.  In the meantime, the Chief found out about the poker game and began a more thorough investigation, which involved the use of subpoenas issued by a magistrate in the Mayor’s Court concerning possible criminal charges.  The Grievant was never informed that he was under criminal investigation (as required by the CBA), but was ultimately accused of failing to call off work when he knew he would be late, calling off work without a valid excuse, failing to be truthful, and insubordination during the investigation.

The Safety Director held a pre-termination hearing on the charges, but precluded questions about the subpoenas that had been issued.  The Mayor then terminated the grievant.  In the subsequent arbitration, the grievant admitted that he had failed to report in advance that he would be late for work and that he lacked a good reason to be absent, but denied being untruthful.  The arbitrator, however, found that he was being untruthful when he attempted to mislead his superiors with a misleading medical excuse:

As oftentimes happens, an employee will compound what in the beginning is only a minor infraction or work rule violation. If the Grievant would have merely come to work late and explained his circumstances, his discipline, if any, would have been minor. Instead, as is often the case, the "cover-up" becomes worse than the original offense. Misrepresenting his son's condition by obtaining a false and misleading doctor's excuse in order to obtain an excused absence is much more serious than forgetting that there was a shift trade, reporting for work late after examining Tyler's' [sic] injury, or even failing to show up for work at all and accepting an unexcused absence.

Accordingly, the arbitrator sustained the discharge.

The FOP then challenged the City’s use of subpoenas to gather information and the Safety Director’s refusal to permit questioning at his pre-termination hearing about those subpoenas.  The bargaining agreement provided the grievant with the right and opportunity to confront and cross-examine his accusers.  Although the arbitrator refused to exclude the Grievant’s testimony introduced to rebut the evidence gathered by the City with the subpoenas, the arbitrator instead awarded backpay from the date of the termination to the date of the arbitration award as the remedy to the City’s violation of the CBA.

On appeal to the common pleas court, the City argued that the arbitrator exceeded his authority by awarding back pay for an issue not properly before him.  The FOP argued that the grievant should also be reinstated because the award violated public policy. The FOP also later argued that the award was procured by fraud because federal court civil action discovery revealed that the City claimed it had been conducting a criminal investigation of the grievant when the subpoenas were issued, but had denied that repeatedly during the arbitration hearing.

The parties agreed that the issue of whether the grievant had been fired for just cause was properly before the arbitrator.  Generally, procedural issues that grow out of such a dispute, such as the admissibility of evidence, is also properly before the arbitrator.

However, whether the arbitrator had the power to grant Blake a remedy for the City's improper use of subpoenas is a different matter. Generally, an arbitrator decides whether or not a violation of a collective bargaining agreement has occurred. After finding a violation, an arbitrator has the power to grant a remedy for that violation. Queen City Lodge No. 69 at syllabus. The FOP does not allege, and we have not identified, any provision of the CBA that the City violated through its misuse of its subpoena power. Consequently, to the extent that the arbitrator based his award to [the grievant] on the City's misuse of its subpoena powers, the award lacks rational support. The CBA does not give any ground or justification for the award. We thus conclude that the arbitrator exceeded his authority when he premised his award to [the grievant] on the City's collection of evidence through subpoenas that were improperly issued.

Nonetheless, the procedural issues during the pre-termination hearing – refusing to permit the FOP to question witnesses about the City’s investigation – arguably violated the CBA even if issuing the subpoenas did not.   The CBA also has a three-step procedure for filing and pursuing grievances (i.e., complaints about breaches of the CBA).   A dispute may only be submitted to arbitration after these three steps have been satisfied.

Here, the award to [the grievant] conflicts with the express terms of the CBA. The arbitrator effectively rewrote the CBA when he addressed a grievance that had not proceeded through steps one through three of the grievance procedure. As the CBA requires the exhaustion of that procedure before the initiation of arbitration, the arbitrator exceeded his authority by allowing [the grievant] and the FOP to bypass that procedure. See Portsmouth v. Fraternal Order of Police, Scioto Lodge 33, 4th Dist. No. 05CA3032, 2006-Ohio-4387, ¶ 25 (finding that the arbitrator exceeded his authority when he considered a grievance that the union member had not submitted to the pre-arbitration procedures required by the collective bargaining agreement).

Accordingly, because the issue of whether the Safety Director violated the CBA by restricting cross-examination during the pre-termination hearing had not been properly grieved before being submitted to the arbitrator, the arbitrator exceeded his powers in issuing a remedy on that basis.

The Court then rejected the FOP argument that the arbitration award violated public policy against sham subpoenas that arguably violated the Fourth Amendment.  The Court noted that the City did not utilize any of the evidence gathered by the subpoenas in the arbitration.  Instead, the FOP introduced copies of the subpoenas and gathered evidence to the arbitrator.

During his testimony before the arbitrator, [the grievant] admitted to two violations of the code of conduct underlying his discharge. The arbitrator found that those violations, alone, did not justify the termination of his employment. However, when considering those two violations in conjunction with the false and misleading doctor's excuse [the grievant] submitted to the City, the arbitrator concluded that discharge was an appropriate sanction. In determining that the doctor's excuse was false and misleading, the arbitrator relied on [the grievant’s] version of events and Blake's admissions that he knew his son was neither seriously injured nor under a doctor's care. The arbitrator also considered [the grievant’s] disciplinary record, which [he] verified during his arbitration testimony, and determined that he would not mitigate the sanction imposed. After reviewing the totality of the arbitrator's analysis, we conclude that the evidence adduced during [his] testimony, not the evidence obtained through the subpoenas, led the arbitrator to sustain [his] discharge.

Therefore, because the arbitrator relied only on the City’s properly gathered evidence and the grievant’s own testimony and disciplinary record, there was no basis to conclude that the decision to sustain the discharge was based on illegally obtained evidence.

The fact that the charges against the grievant were based on tainted evidence is not the same as the arbitration award being based on tainted evidence:

The charges, which were set forth in Suciu's pretermination written statement, were based on the tainted evidence. However, for a court to vacate an arbitrator's award, the award must result from a violation of public policy. Here, the award resulted from the arbitrator's determination that the circumstances, as related by [the grievant] himself, warranted [his] discharge.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Cannot Challenge Contractual Arbitration Result Without Reasoned Award

Last week, the Sixth Circuit affirmed the dismissal of a challenge to an arbitration award brought by an employee against his former employer. Murray v. Citigroup Global Mkts., Inc. No. 11-4355 (6^th  Cir. 1-10-13).   In that case, the employee had signed a forgivable loan and arbitration agreement with his former employer which made the loan due upon his early departure.    The employee filed suit in state court when his employer demanded repayment of $167,600.11 of the loan following his early separation from employment.  The employer removed the lawsuit to federal court and moved to compel arbitration.  Without issuing an opinion explaining the basis of its decision, the arbitration panel awarded the employer approximately $40,153 plus interest, but also awarded the employee $25,705.95 on his counterclaims.  The employee filed suit to vacate the arbitration award, but the Sixth Circuit affirmed dismissal of the appeal on the grounds that the employee could not show that the arbitration panel demonstrated manifest disregard of the law without a reasoned opinion reflecting the basis for its award.   

The procedural rules of the Financial Industry Regulatory Authority – which processed the demand for arbitration – permit the parties to request a reasoned award, but there was no evidence that the employee ever requested such an award.  Without knowing the reasoning for the decision of the arbitration panel, the Court had no basis to evaluate whether the arbitration panel had disregarded the law.

Generally, the arbitration panel is not required to explain its decision. Ibid. In cases such as this one, where neither statute nor arbitration proceedings demand or produce a detailed explanation of how the arbitration panel reached its conclusion, we will not vacate an award for failure to provide such an explanation. See Green v. Ameritech Corp., 200 F.3d 967, 976 (6th Cir. 2000) (admonishing parties to an arbitration agreement to “clearly state in the agreement the degree of specificity required” if they wish for a detailed opinion at the end of the arbitration). As we have stated time and again, the absence of a reasoned award makes it all but impossible to determine whether the arbitration panel acted in manifest disregard of the law. See, e.g., Elec. Data Sys. Corp. v. Donelson, 473 F.3d 684, 691 (6th Cir. 2007); Dawahare, 210 F.3d at 690; Jaros, 70 F.3d at 421.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court: Arbitrator Exceeded Authority in Ignoring Parties’ Stipulation Removing Legal Issue from Consideration.

Today, the Summit County Court of Appeals vacated an arbitrator’s order reinstating a city health department employee who had been discharged for taking college classes when she was supposed to be on FMLA leave. City of Akron v. Civ. Serv. Personnel Assn., Inc., 2008-Ohio-4331. The court disagreed with the arbitrator’s rationale that the city’s pre-termination notice was constitutionally deficient because its focus seemed to announce a decision already made instead of giving her notice of her opportunity to present exculpatory evidence to preserve her employment. Instead, the court found that the arbitrator exceeded her authority by ignoring the parties' stipulation that the city had honored the employee's Loudermill rights by holding the pretermination hearing when the arbitrator ruled that the city had violated the employee's due process rights through a defective notice of termination.

According to the court’s decision, the employee “sought to attend college courses during regular working hours through the City’s “Academic Flexible Work Schedules” program, [but] withdrew her request to participate in the program . . . when management indicated that staffing shortages necessitated her working all of her regular hours. Instead, [the employee] submitted a request for Family Medical Leave Act (“FMLA”) leave time in order to care for her sick son. Health Department investigators later discovered [the employee] attending a college course during the hours that she had been approved to take her FMLA leave time.” Not surprisingly, “the City subsequently notified [the employee] that she was being recommended for discharge.” According to the City, a pretermination hearing was then held “consistent with Cleveland Bd. of Educ. v. Loudermill (1985), 470 U.S. 532. The City further claims that [the employee’s union] sent the City a “Loudermill Response” after the hearing” on October 20, 2006. The union also filed a grievance challenging the employee’s termination. The City says that it considered all of this information and then City “finally notified [the employee] on October 23, 2006 that she was in fact being discharged, effective October 24, 2006.” The union sought arbitration on October 31, 2006.

During the March 2007 arbitration hearing, the parties “entered two stipulations before the arbitrator: (1) that the matter was properly before the arbitrator for resolution, and (2) that [the employee] had been given a Loudermill hearing.” Notwithstanding these stipulations, the arbitrator reinstated the employee in May 2007 because she determined that the City “failed to comply with Loudermill and the due process protections afforded to [the employee] as a civil servant. The arbitrator reasoned that the City’s notice of discharge, issued on October 11, 2006, clearly informed [the employee] that she was “hereby discharged” even though it preceded any response from [the union]. Therefore, the arbitrator determined that the City never gave [the employee] a pretermination opportunity to respond to the charges against her and terminated her without just cause.” When the city filed an appeal to vacate the arbitration decision, the trial court confirmed the arbitration award on the grounds that the parties’ stipulation raised factual matters which could not be reversed on appeal.

On appeal, the city argued that the arbitrator ignored the parties’ stipulation that the city had honored the employee’s Loudermill rights and the Court agreed. “An arbitrator also exceeds her authority, however, when she misinterprets or exceeds the conditions of a stipulation. Moreover, “Loudermill [only] requires a ‘classified civil service employee’ to be given a pretermination disciplinary hearing. . . . [S]uch hearing need not be elaborate, but must afford the employee the opportunity to have an explanation of the employer’s charges and evidence against [her], and an opportunity to present [her] side of the story.” The Court determined that the parties’ Loudermill stipulation removed a legal issue from the arbitrator’s consideration and was not merely a factual stipulation which was beyond the court’s jurisdiction to review on appeal. “By wholly ignoring the stipulation, the arbitrator went beyond the scope of the issue presented to her and exceeded her authority,” which is a matter determined by the contract -- and stipulations – entered into by the parties (i.e., the employer and the union).

Insomniacs can read the decision in full at http://www.sconet.state.oh.us/rod/docs/pdf/9/2008/2008-ohio-4331.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.