In this appeal from a judgment by a Second Circuit Federal District Court a panel of the U.S. Circuit Court of Appeals, Second Circuit [Circuit Court] affirmed the judgment of the District Court's confirming an arbitration award against the Petitioner-Appellant [the Hospital]. The Hospital was a party to a collective bargaining agreement [Agreement] with the New York State Nurses Association [Union] representing registered nurses [RNs] employed by Hospital's Emergency Department [ED].
Under the Agreement, the Hospital’s failure to staff enough nurses on each shift constitutes a “Grid” violation. If this occurs, the Union may file a grievance and proceed to mediation, and then arbitration. The Agreement provides that arbitrators shall have the same remedial authority as an arbitrator under the collective bargaining agreement but "shall not have any power to add to or subtract from or otherwise amend this agreement", which Hospital referred to as the “zipper” clause.
This dispute arose when the Union filed a grievance alleging Grid violations by the Hospital. The Arbitrator subsequently found evidence that the Hospital had committed 143 Grid violations. Interpreting the Agreement to confer the arbitrator with broad remedial power, the Arbitrator awarded three additional vacation days to each full-time RN serving at the Emergency Department. Hospital filed a petition in a Federal District Court [FDC] seeking to vacate the arbitration award, contending that the Arbitrator exceeded his authority and violated public policy by issuing a punitive award.
The FDC denied the petition and granted the Union’s petition to confirm the award. Hospital appealed the FDC's ruling.
The Circuit Court said it reviews a FDC decision de novo on questions of law and for clear error on findings of fact, noting that Hospital first argued that the Arbitrator exceeded his authority under the Agreement.
In such cases, Circuit Court said “the arbitrator’s construction of the contract and assessment of the facts that are dispositive.” On review, "we ask 'whether the arbitrator’s award draws its essence from the collective bargaining agreement' [and] As long as the arbitrator was even arguably construing or applying the contract ... and did not ignore the plain language of the contract, the award should ordinarily be confirmed” [citations omitted].
Noting this appeal is controlled by the decision in an earlier case, Hospital v. Union, 180 F.4th 482, a case involved an arbitration of another Grid dispute between the same parties where the presiding arbitrator relied on a provision identical to Section 3.04(7) in the instant matter "to award nurses on under-staffed shifts in the Hospital’s CardioThoracic Intensive Care Unit a monetary remedy". In the earlier appeal the Circuit Court panel "rejected the Hospital’s argument that the arbitrator exceeded her authority", holding that the arbitrator "had “reasonably interpreted” the text to confer broad remedial power, and so she was “arguably construing or applying the contract.”
In the earlier appeal Hospital had also argued that the monetary remedy adjusted wages in violation of a specific provision setting nurses’ pay and a “zipper" clause that forbade arbitrators to amend the contract. The Panel in the instant appeal noted that in that earlier appeal the monetary award "did not permanently adjust wages . . . or derive a new contract term," but only provided a temporary remedy for the Hospital’s breach of contract which drew upon the Agreement itself, and concluded the award did not violate “the Agreement’s only limitation—the ‘zipper’ clause” in the earlier appeal.
Holding that the same held true in the instant appeal, Circuit Court ruled that the Arbitrator’s vacation award did not amend the contract by deriving a new term, and it was arguably construing the text of the agreement. Accordingly the Circuit Court said it "will not vacate the award for exceeding the arbitrator’s authority" in the instant appeal.
Turning to the Hospital claim that the Arbitrator's award of "additional vacation days" violated a public policy against punitive arbitration awards, Circuit Court said it had not decided whether a public policy forbids punitive arbitration awards, but “[b]efore considering whether such a public policy exists," the Circuit Court said it must first assess whether the Arbitrator’s monetary award was punitive to begin with.
To distinguish “compensatory” from “punitive” awards, the Circuit Court Panel said it “look[ed] to the Arbitrator’s subjective intent in issuing the award and the objective nature of the award” and held that "The Arbitrator satisfied the objective prong if he 'made specific factual findings regarding the nurses harms' and tailored the award to make the impacted nurses whole for the harm they suffered.”
The instant award, opined Circuit Court, was not punitive because “[c]ompensating a nurse for excessive workload is not a penalty or punitive award giving nurses additional pay.” Its objective structure is compensatory and the Arbitrator made detailed findings to identify 143 Grid violations which he found contributed to “excessive workload, unsafe working conditions, or burnout,” concluding that the parties had negotiated the Agreement to avoid precisely those harms, and because the harm was excessive workload, the Arbitrator concluded “the appropriate remedy is three vacation days for each full-time regular Allen ED RNs.”
Accordingly, Circuit Court held that the subjective and objective elements of the test were both satisfied and "even if there is a public policy against punitive arbitration awards, this award would not violate it".
After considering Hospital’s remaining arguments, the Circuit Court said it found them "to be without merit, and for the foregoing reasons", affirmed the judgment of the District Court.
* Judge Debra Ann Livingston, originally a member of the instant Circuit Court panel, did not participate in the consideration of this appeal. The two remaining members of the panel, who were in agreement, determined the matter.
Click HERE to access the Second Circuit's decision in the instant appeal.