Participating in an arbitration

Participating in an arbitration
Elmira Heights CSD v Ed. Support Staff Asso., App Div 250 A.D.2d 983, Motion for leave to appeal denied, 92 N.Y.2d 807

What should a party to an arbitration do if it believes that the controversy to be submitted to the arbitrator is not arbitrable? As the Elmira Heights decision points out, such an objection must be raised by applying for a stay of arbitration or it is waived.

The issue arose after the Elmira Heights Central School District, which was paying the entire cost of its health insurance plan for employees and retirees, negotiated a provision in the Taylor Agreement between the parties, Section 16.1, requiring employees to pay a “percentage of the annual premium for their health insurance coverage.” In contrast, health insurance for employees who retired was covered in another section of the same agreement, Section 16.14. Section 16.14 made no provision for health insurance contributions to be paid by individuals upon their retirement.

In January 1995 the school board adopted a resolution requiring all employees to pay 10 percent of the cost of their health insurance. The superintendent advised all retirees that they, too, would be required to pay 10 percent of the cost of their health insurance. The retirees filed a contract grievance complaining that the imposition of such a payment violated the terms and conditions of Section 16.14.

Ultimately the matter was submitted for arbitration. The arbitrator first found that the grievance was arbitrable. In the arbitration that followed, the arbitrator concluded that the district had violated the agreement when it unilaterally imposed a “co-pay for the health care plan for its retirees.” The district was directed to refund any contributions for premiums made by retirees.

Next the district filed an Article 75 action to vacate the award. Supreme Court granted the district’s petition, finding that the arbitrator “exceeded his authority,” and that the award was contrary to law. The Association appealed the decision. At the Appellate Division the district argued that the retirees were neither members of the negotiating unit nor employees as defined in the collective bargaining agreement and thus the arbitrator exceed his authority in ordering it to refund the retirees’ contributions.

The Appellate Division said that what the district was really arguing was that “the arbitrator did not have the power to decide the question at issue and, therefore, there was nothing to arbitrate.” The court ruled that such an argument cannot be raised in a motion to vacate the arbitration award; it must be raised in a motion to stay the arbitration in the first instance.

As to whether or not the arbitrator exceeded his authority, the decision notes that an arbitrator exceeds his or her power “only if he or she gave a completely irrational construction to the provision in dispute and, in effect, made a new contract for the parties.”

Here, said the court, the agreement provides for employee contributions for health insurance but is silent with respect to such contributions by retirees. The arbitrator considered the parties’ past practice and concluded that the district “inappropriately required its retirees to contribute to the cost of their health care ... a determination ... [the arbitrator] was well within his right to make.”

Pointing out that the fact that a different construction might have been given to Section 16.14 does not mean that the arbitrator rendered a completely irrational interpretation and thereby crafted a new contract for the parties, the Appellate Division denied the district’s application to vacate the award.