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August 23, 2012

Scope of arbitration

Scope of arbitration
Richfield Springs CSD v Allen, 270 A.D.2d 734

Changes in health insurance benefits may be initiated by a third party that actually provides the benefit. Does an employee organization have any right to challenge a unilateral change in the health insurance plan made by the "third party?"

This was the major issue in Richfield Springs, a case that essentially explores the issue of the scope of arbitration under a Taylor Law agreement.

The health insurance plan covering members of the Richfield Faculty Association was changed. The plan had been established under Sections 92-a and 119 of the General Municipal Law and was commonly referred to as the BOCES plan.

The Association's basic objection: there was a change of carriers responsible for administering the BOCES Plan's coverage for prescription drugs. The Association's basic concern: the coverage to be provided by the new carrier would be inferior to the coverage under the BOCES's existing plan.

The Association demanded that the former prescription drug insurance be continued and that unit members be given "reimbursement for any financial loss" that they incurred as a result of the change. To enforce its demand, the Association filed a grievance formally objecting to the change. Eventually Richfield Springs Faculty Association President Tracy Allen demanded that the Association's grievance be submitted to arbitration.

In response to the demand for arbitration, the Richfield Central School District asked for, and obtained, a stay of arbitration from a State Supreme Court judge. Its argument: the dispute was not subject to the arbitration clause of the Agreement. The Association appealed.

Initially the Association's motion to compel arbitration was granted by the Supreme Court but subsequently an amended order was issued staying arbitration based on the court's finding that the Taylor Law agreement did not bind the district to arbitrate disputes between the Association and a third party, here the "BOCES Plan" administrators.

The Appellate Division reversed. The court decided that the Association's grievance regarding the change in the carrier of the prescription drug plan covering its members is arbitrable after all.

The court¸ citing Liverpool Central School, 42 NY2d 509, explained that "[i]t is settled law that grievances arising under public sector parties' collective bargaining agreements are subject to arbitration where both arbitration of the subject in dispute is authorized by the Taylor Law (Civil Service Law Article 14) and the parties clearly agreed by the terms of their contractual arbitration clause to refer their differences in the specific disputed area to arbitration."

This view was amplified by the Court of Appeals in a subsequent ruling, Watertown Education Association, 93 NY2d 132.

Using a two-step analysis, the Appellate Division first applied the "Liverpool test" and concluded that contract arbitration clause in the contract covered "the subject the dispute." It then applied the Watertown test -- "did the parties in fact agree to arbitrate this particular grievance." It concluded that the parties had so agreed.

The court pointed to the fact that the Richfield Springs collective bargaining agreement "specifically included" a clause stating that prescription drug coverage was to be provided by "Prescription Card Services (PCS)." Further, said the court, "the Agreement expressly provided that "[a]ny change in [insurance] plan or carrier shall be by mutual agreement of the parties."

The Appellate Division said that since there is no dispute that the specified carrier of the prescription drug plan was changed from PCS to another provider without the Association's consent, this supported the claim of an "alleged violation" of the Agreement that the parties clearly and unequivocally agreed to arbitrate.

What about the district's argument that it was not compelled to arbitrate changes unilaterally initiated by a third party? The Appellate Division decided that this was irrelevant insofar as the parties to the collective bargaining agreement were concerned.

The decision indicates that the fact that the claimed reduction in employee health benefits may have been effected by a third party, here the BOCES Plan's Board of Directors, which was not a party to the collective bargaining agreement, rather than by the school district, does not determine whether or not the grievance is arbitrable.

The test applied by the Appellate Division: where the parties broadly agreed to arbitrate any alleged violation of their collective bargaining agreement or any dispute with respect to its meaning or application, and included language dealing specifically with health insurance benefits, a grievance concerning a claimed reduction in health insurance benefits is arbitrable.

Accordingly, the Appellate Division ruled that the Association's grievance was arbitrable and "the scope of the pertinent provisions of the Agreement and the merits of the grievance should be resolved by the arbitrator."

In another case involving the implementation of a contract arbitration procedure, Wayne Finger Lakes BOCES v Keller, decided by the Appellate Division, Fourth Department on February 16, 2000, the court granted Keller's motion to compel the arbitration of a contract dispute.

Keller, as president of the Wayne Finger Lakes BOCES Faculty Association, had submitted a grievance claiming that the BOCES's scheduling of a workday prior to Labor Day was in violation of an express provision in the collective bargaining agreement.
When the BOCES refused to submit the question to arbitration, Keller filed a petition to compel arbitration pursuant to Article 75 of the Civil Practice Law and Rules.

The Appellate Division pointed out the collective bargaining agreement in question defined an arbitrable grievance as "a claim by any member of the bargaining unit based on a violation of any of the specific and express provisions of this Agreement."

The court agreed with the Association that parties agreed "`by the terms of their particular arbitration clause to refer their differences in this specific area to arbitration.'"
However, there are other considerations that may preclude a unilateral change in a Taylor Law agreement from being submitted to arbitration.

Although not identified as an issue in the Richfield Springs case, as the Appellate Division, Second Department noted in Matter of Port Washington Union Free School Dist. v Port Washington Teachers Assn. (268 AD2d 523 [2000], appeal dismissed95 NY2d 790 [2000], lv denied 95 NY2d 761 [2000]), a statute, decisional law or public policy may preclude referring a Taylor Law contract dispute to arbitration.

In Port Washington, the parties agreed to include a specific "religious holiday" provision in a Taylor Law agreement. The clause allowed employees to be absent with pay to observe certain religious holidays without charging any leave accruals. The school district then refused to implement the provision, claiming that it was unconstitutional.

The Appellate Division agreed that the provision was unconstitutional and held that the school district's refusal to implement the contract clause was not subject to arbitration under the contract's grievance procedure.

The text of the decision is posted at:

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