Arbitration awards must conform to “strong public policy”
New York City Transit Authority v Transport Workers Union of America, Court of Appeals, 99 NY2d 1
Most Taylor Law agreements provide that the final step in a grievance procedure is binding arbitration. Article 75 of the Civil Practice Law and Rules is the vehicle used to challenge, or confirm, such an arbitration award. The statutory basis for vacating an arbitration award, however, is very limited. Article 75 provides that a court may vacate the arbitration award only if the court finds that the rights of the challenging party were prejudiced by:
1. Corruption, fraud or misconduct in the procuring of the award; or
2. The partiality of an arbitrator appointed as a neutral, except where the award was by confession; or
3. The arbitrator award exceeded his or her authority to decide the issue presented or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or
4. A failure to follow the procedure of Article 75 unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.
In addition to applying these statutory standards, courts have "judicially" vacated arbitration awards based on a finding that the award violates public policy.
In these consolidated appeals filed by the Transport Workers Union of America, the Court of Appeals explores the concept of the judicial vacating of arbitration awards based on a finding that the award violates public policy and explains the very limited basis upon which a court may vacate an arbitration award on public policy grounds.
The Rodriguez Decision
Rodriguez was a New York City Transit Authority [NYCTA] subway train operator for 16 years. During this 16-year period he had been twice disciplined and suspended for safety rule violations. On November 20, 1998, Rodriguez was involved in his third safety-related incident -- this one involving a collision between his train and another that resulted in a derailment because Rodriguez had not set a hand brake. NYCTA terminated Rodriguez from his position.
Some two weeks before this accident Rodriguez attended a refresher training course which taught the need to set the train's hand brake under the same circumstances.
Rodriguez grieved his dismissal. The arbitration panel, by a two-to-one vote, ruled that the penalty of dismissal was excessive given Rodriguez's long NYCTA service with only two prior "operational violations." Considering the record as a whole and "the parties [sic] progressive disciplinary policies," the arbitration panel reduced Rodriguez's penalty to time served without pay and a demotion for up to six months.
NYCTA filed an Article 75 petition seeking to vacate the award; the union cross-petitioned to confirm the award. Although Supreme Court ruled in the union's favor, the Appellate Division reversed that determination, vacating the panel's award reinstating Rodriguez [see 279 AD2d 474]. The Appellate Division's rationale for its ruling:
NYCTA had a statutory duty to operate the transit system for the safety of the public, and "[r]equiring the NYCTA to reinstate an employee who has been found to be a threat to public safety is contrary to public policy."
The Bright Decision
Leroy Bright was employed by the Manhattan and Bronx Surface Transit Operating Authority [MABSTOA], a NYCTA subsidiary, as a bus driver for over 20 years. On June 11, 1999, his bus struck and injured a pedestrian. He was immediately placed on leave without pay in contemplation of dismissal.
The Transport Workers Union filed a grievance pursuant to the contract disciplinary grievance procedure on Bright's behalf.
Although the arbitrator rejected Bright's exculpatory version of the accident and sustained the charge that he caused a preventable accident, the arbitrator declined to impose the "ultimate penalty" of dismissal. The arbitrator, instead, ordered MABSTOA to reinstate Bright without back pay and stated that this penalty was "to serve as a final warning" that a similar violation would put Bright at risk of termination.
Supreme Court vacated the arbitrator's award insofar as it reduced the sanction from dismissal to a suspension without pay, on the ground that the determination was contrary to the public policy embodied in Public Authorities Law Section 1204(15). The Appellate Division affirmed the lower court's determination [see 280 AD2d 677].
The Court of Appeals reversed both Appellate Division rulings, holding that:
Under our modern arbitration jurisprudence, judicial intervention on public policy grounds constitutes a narrow exception to the otherwise broad power of parties to agree to arbitrate all of the disputes arising out of their juridical relationships, and the correlative, expansive power of arbitrators to fashion fair determinations of the parties' rights and remedies.
The decision points out that the limited role of the public policy exception applies only in "cases in which public policy considerations, embodied in statute or decisional law prohibit, in an absolute sense, particular matters being decided or certain relief being granted by an arbitrator." In these two cases, the high court concluded that:
The public policy consideration invoked by the Authorities in the instant cases to vacate the arbitration awards manifestly fails to meet the strict standards for overturning such awards on public policy grounds that have been developed in the case law.
The narrowness of the public policy exception as applied to the arbitration process under collective bargaining agreements, said the court, is designed to ensure that courts will not intervene in this stage of the collective bargaining process in pursuit of their own policy views, or because they simply disagree with the arbitrator's weighing of the policy considerations.
Here, the court noted, the NYCTA and MABSTOA each entered into collective bargaining agreements that required the arbitration of disputes involving employee discipline. Thus statutory powers granted to NYCTA and MABSTOA under the Public Authorities Law may constitute a basis for vacating the awards only if the courts are able to conclude, "without engaging in any extended fact-finding or legal analysis" that the statute "prohibit[s], in an absolute sense, the particular matters to be decided or certain relief being granted."
Clearly the relevant statutes law did not bar NYCTA or MABSTOA from agreeing that the disciplining of employees for safety violations was to be subject to the contract grievance procedure, ultimately to be decided by an arbitrator. Having done so, said the court, an employer could not seek the vacating of an arbitration award by merely relying on a "general statutory authority."
There are some duties or responsibilities so important, however, that the courts will not permit the employer to delegate them or to bargain them away. For example, the courts have held that granting tenure to an educator is a non-delegable responsibility. Arbitrators may not alter duties and responsibilities vested by law in the agency and in such cases arbitration is forbidden, not because there are matters of public interest are involved, but because statutes require that tenure decisions be made by appointing authority.
The Court of Appeals noted that any analysis of whether an arbitration award violates public policy must begin with the actual terms of the award. In both Rodriguez's and Bright's situations, although the arbitration awards directed reinstatement of the employees, neither decision ignored the employer's safety concerns and the seriousness of the breaches of safety rules.
Rather, said the high court, the arbitration awards imposed significant financial sanctions in both cases: in Rodriguez's case, a forfeiture of approximately six weeks' pay and a six-month demotion, while Bright lost over four months' pay and was issued a warning that another offense would place him at risk of termination -- in effect, putting him on probation.
The essence of the ruling by the Court of Appeals appears to be as follows:
As the United States Supreme Court has framed the rationale for upholding the arbitration award when safety was the policy concern in an analogous case, because Public Authorities Law Section 1204(15) would not prohibit the parties to these collective bargaining agreements from having incorporated disciplinary standards providing for severe financial sanctions short of dismissal under the factual circumstances of these cases, the public policy embodied in that section is insufficient to justify overturning arbitration awards achieving the same results.
What could constitute a violation of public policy sufficient to meet the test established by the Court of Appeals? In Ford v CSEA, 94 AD2d 262, the Appellate Division's explanation in vacating an arbitration award on the grounds that it adversely affected a public policy would presumably meet the Court of Appeals' test.
The Ford case involved an employee of the New York State Department of Mental Hygiene who was charged and found guilty of misconduct -- having sexual relations with a patient. The penalty imposed by the arbitrator: a two month suspension without pay based on the arbitrator finding that the patient "consented" to the sexual act and that the physical abuse experienced by the patient was "minimal." In an Article 75 action to vacate the award, the agency head (Ford)asked the court to authorize the agency to dismiss the employee instead.
The Court said that the arbitrator "exceeded his powers and made an irrational award in violation of `a public policy which is beyond waiver' (by the State)." The Court indicated that "Any other result would ... defeat the very purpose for which the Mental Hygiene Law was enacted and the Office of Mental Hygiene created. No collective bargaining agreement to arbitrate can be allowed to destroy the very master it serves."
The Court noted that "mental patients are incapable of `consent' in (this) context ...." Further, the court said that "the determination of `physical abuse' ... cannot be passed off lightly with an adjective such as `minimal.'" It found such a characterization "appalling" and the arbitrator's refusal to impose the penalty of dismissal "plainly irrational".
As to vacating an arbitration award in situations involving the alleged violation of a negotiated agreement on the grounds that the award involved a "non-delegable duty," courts have ruled that the submission of an issue to an arbitrator does not allow the arbitrator to fashion a determination or remedy that violates public policy.
As the Court of Appeals said in Sweet Home CSD v Sweet Home Education Association, 58 NY2d 912, "the transfer or reassignment of teachers under Education Law Section 1711(5)(e) is a nondelegable duty of a school superintendent and a board of education which may not be surrendered through the collective bargaining process." Accordingly, an arbitrator may not provide a remedy involving the transfer or reassignment of educators that impairs that duty.