October 26, 2020

A court will not confirm an arbitration award where it is in explicit conflict with law, rule or regulation and the relevant policy concerns

In this proceeding brought pursuant to CPLR Article 75 to modify an arbitration award the Nassau Healthcare Corporation [Employer] appealed that portion of an arbitration award that ordered the Employer to reinstate three Petitioners* [Employees] to their former positions while the Employee's cross-appealed that part of the arbitration award providing for reinstatement without back pay.

The genesis of this action was the Employees being terminated by the Employer based upon an incident that occurred during which the Employees allegedly ignored approximately nine minutes of visual and audible alarms signaling that a ventilator-dependent resident was in respiratory distress.

Pursuant to the collective bargaining agreement, the Employees' collective bargaining representative filed a grievance challenging these terminations and the matter ultimately proceeded to arbitration. The Employees elected not to testify at the hearing.**

Following the hearing, the arbitrator issued an award finding that Employer did not sustain its burden of proving that the blaring alarm of the central alarm system throughout the unit, which signaled a respiratory emergency, was triggered. However, because of the employees' failure to testify at the hearing, the arbitrator drew an adverse inference against them on the factual issue of whether the beeping alarm coming from the ventilator machine in the patient's room itself, which did not necessarily signal an emergency, was audible to them at the nursing station.

The arbitrator ruled that the Employees should be reinstated to their former positions, but directed that they be reinstated without back pay. Supreme Court confirmed the arbitration award and the Employer appealed.

The Appellate Division granted the Employer's motion to vacate the arbitration and dismissed the Employee's cross-appeal seeking back-pay as academic. The court also awarded "one bill of costs" to the Employer, payable by the Employees.

The Appellate Division, citing Matter of New York State Correctional Officers & Police Benevolent Assn. v State of New York, 94 NY2d 321, and Matter of Banegas v GEICO Ins. Co., 167 AD3d 873, pointed out that an arbitration award may be vacated if it violates strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on an arbitrator's power.

Considering the public policy exception, the Appellate Division commented that "a court may vacate an arbitral award where strong and well-defined policy considerations embodied in constitutional, statutory or common law prohibits a particular matter from being decided or certain relief from being granted by an arbitrator" and the focus of the analysis [in making that determination] is on the award itself." Quoting from New York State Correctional Officers and  Police Benevolent Assn. v State of New York, 94 NY2d at 327, the Appellate Division held that a court may vacate an award on public policy grounds "where the final result creates an explicit conflict with other laws and their attendant policy concerns,.

Here, opined the Appellate Division, the record reflects that after the employees were indicted on felony charges, the Office of Medicaid Inspector General [OMIG] notified the employees that they were excluded "from participation in the New York State Medicaid program based on New York State regulations authorizing the immediate exclusion of a person who has been charged with committing an act which would be a felony under the laws of New York and which relates to or results from," among other things, "the furnishing of or billing for medical care, services or supplies."

Citing 18 NYCRR 515.5(c), the court said that "[a] person who is excluded from the program cannot be involved in any activity relating to furnishing medical care, services or supplies to recipients of medical assistance for which claims are submitted to the program, or relating to claiming or receiving payment for medical care, services or supplies during the period." Further, the regulations also preclude reimbursement for medical care, services, or supplies provided by an excluded person.

Clearly the final result of the arbitrator's award in this case, reinstating the Employees to their former positions, "creates an explicit conflict with the subject regulations and their attendant policy concerns." Accordingly, under the particular circumstances of this case, the Appellate Division concluded that Supreme Court should have granted the Employer's motion to vacate that portion of the award providing for the reinstatement of the Employees, thereby mooting their claims to back salary.

* The three Employees involved were two registered nurses and a nurse aide

** Subsequently the Employees were indicted on several misdemeanor and felony charges, including criminally negligent homicide..

The decision is posted on the Internet at http://www.nycourts.gov/reporter/3dseries/2020/2020_06777.htm

 

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