Arbitration awards must conform to “strong public policy”

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.

State's "sovereign immunity" defense waived when State moved lawsuit commenced in state court to a federal district court

State's "sovereign immunity" defense waived when State moved lawsuit commenced in state court to a federal district court

Estes v Wyoming Department of Transportation, 302 F3d 1200

Connie Estes, a driver's license examiner employed by the Wyoming Department of Transportation [WDOT], sued WDOT in Wyoming State Court. Estes alleged that WDOT violated Title I of the American with Disabilities Act [ADA] and Wyoming's workers' compensation law and, in addition, was in "breach of contract," when it dismissed her from her position.

WDOT deliberately moved Estes' lawsuit to federal court. In so doing, WDOT specifically stated that it was not waiving any of its rights to raise constitutional challenges to the district court's jurisdiction of it. In other words, WDOT attempted to move the case to federal district court while retaining it right to claim sovereign immunity under the Eleventh Amendment in that proceeding.

When WDOT later filed a motion for judgment, arguing the district court lacked jurisdiction because WDOT was entitled to sovereign immunity, it learned that its disclaimers in its earlier effort to "retain it sovereign immunity" notwithstanding its voluntarily moving the case to the federal court were ineffective.*

The Circuit Court, affirming the district court's decision, ruled that WDOT had waived its sovereign immunity with respect to Estes' ADA claim even if the only reason it removed the case to federal court was simply "to challenge the federal court's jurisdiction of the federal forum."

In contrast, the Circuit Court said that its holding with respect to WDOT in Estes' case does not affect the ability of a state to raise sovereign immunity when it is involuntarily brought into federal court and then raises an Eleventh Amendment defense. In the words of the Circuit Court:

It is only when a state removes a federal-law claim from state court to federal court that it "submits its rights for judicial determination" and unequivocally invokes the jurisdiction of the federal courts.

Accordingly, when WDOT removed the Estes case from state court to federal court, it "unambiguously invoked the jurisdiction of the federal court,” and thus waived any claim it might otherwise have to sovereign immunity under the Eleventh Amendment.

* WDOT also argued that Estes failed to exhaust state administrative remedies for her breach-of-contract claim.

Drafting disciplinary charges

Drafting disciplinary charges

Fella v County of Rockland, 297 AD2d 813

How important is it to draft disciplinary charges properly? According to the Appellate Division, even in situations where discipline may be warranted, the failure to word the charges and specifications properly may be fatal to the employer's attempt to discipline an employee.

Peter Fella, Rockland County's Commissioner of Hospitals, was suspended for 30 days without pay for allegedly violating the County's Equal Employment Opportunity Policy [EEOP].

According to the court's decision, following an investigation, the Rockland County Director of Employee Rights and Equity Compliance [Director] concluded that Fella had created a hostile work environment by promoting a person with whom he was then having a romantic relationship to a vacant assistant director of nursing position.

The Director held that the Commissioner's action violated the County's EEOP based on a finding that some employees said that they felt uncomfortable at work because Fella had this "romantic relationship" with a co-employee. This, according to the Director, created a hostile work environment and, as such, violated the EEOP. The County Executive adopted the Director's findings and suspended Fella for having created a hostile work environment in violation of the EEOP.

In its decision, the Appellate Division noted that the County's EEOP defined sexual harassment as "unwelcome sexual advances, requests for sexual favors, sexual demands or conduct of a sexual nature which `had the purpose or affect [sic] of unreasonably interfering with an [affected] person's work performance or creating an intimidating, hostile or offensive work environment.'" Citing DeCinto v Westchester County Medical Center, 807 F2d 304, the court explained that there is no sexual discrimination or harassment involved "where the conduct complained of by the employee involves an isolated act of preferential treatment of another employee due to a romantic, consensual relationship."

The Supreme Court judge commented that while Fella's decision to promote an individual with whom he was having a romantic relationship may constitute poor judgment, it did not constitute a violation of the County's EEOP - the alleged basis for bring the disciplinary action. As the County failed to establish any violation of its EEOP, the Supreme Court annulled the determination of the Rockland County Executive. The Appellate Division affirmed the ruling.

Of particular interest is the Supreme Court's noting that Fella's actions may have served as a basis for discipline, albeit based on other theories of alleged misconduct. While the Court concluded there was no violation of the EEOP and thus the County could not sustain the charges it filed against Fella, the decision suggests that Fella's behavior might constitute a legitimate basis for subjecting him to disciplinary action based on other specifications.

In other words, it is possible that had the County charged Fella with misconduct based on specifications other than violating the EEOP, the court might have allowed its disciplinary action against Fella to survive.

What might constitute such a charge and specification? Perhaps charging Fella with misconduct based on his alleged selection of a person for appointment to a position in the public service solely because of a personal relationship rather than making the selection on the basis of the Constitution's mandate that selection for appointment to the public service be based on "merit and fitness."

What lesson can be learned from Fella? While the charges and specifications filed against an employee should clearly apprise the individual the alleged "misconduct or incompetence" giving rise to the charge, the specifications should constitute acts or omissions that, if proven to have occurred, would support a finding that the employee was guilty of misconduct or incompetence. In any event, the employer should be certain that it is able to prove the allegations, whatever they may be, before initiating disciplinary action.

On the opposite end of the spectrum, where a disciplinary action has been "settled" and the penalty imposed includes placing the individual in "disciplinary probation status," the employer must make certain that in the event the employee is dismissed during this disciplinary probation period, the dismissal is based on the individual's failure to meet the specific requirements set out in the settlement agreement.

Perhaps the leading case illustrating this principle is Taylor v Cass, 505 NYS2d 929. Taylor, a Suffolk County employee won reinstatement with full back salary and benefits as a result of a court finding that he was improperly dismissed while serving his disciplinary probation.

It seems that under the terms and conditions of the six-month disciplinary probation period to which the parties had agreed, the County could terminate Taylor without any hearing if, in the opinion of his superior, Taylor's job performance was adversely affected by his being intoxicated while at work during his disciplinary probation period.

Taylor, while serving this probationary period, was terminated without a hearing for "failing to give a fair day's work" and "sleeping during scheduled working hours." The Appellate Division decided that Taylor's dismissal was improper because Taylor was not terminated for the sole reason specified in the disciplinary settlement: intoxication on the job.

Comptroller's audit focuses on school district's payroll and overtime practices

Comptroller's audit focuses on school district's payroll and overtime practices

Source: Office of the State Comptroller, Division of Local Government and School Accountability

The State Comptroller’s Division of Local Government and School Accountability audit report of the Webster Central School District explains that the thrust of its auditing of the District “… is to help school district officials manage their districts efficiently and effectively and, by so doing, provide accountability for tax dollars spent to support district operations.”

The focus of this audit was “to determine if District officials have established adequate controls over payroll and overtime pay to effectively protect District assets from loss or misuse for the period July 1, 2008 to November 16, 2010” and addressed the following related questions:

• Has the District established and implemented adequate internal controls to ensure that only appropriate and supported payroll payments are made?

• Has the District established and implemented adequate internal controls to effectively manage overtime, control costs and safeguard District assets?

Among the recommendations made:

1. The District should restructure its payroll process to avoid making any salary payments to employees in advance of services being rendered, in compliance with Education Law, State Education Department regulations and internal control best practices.

2. The District should ensure that it complies with all legal requirements when hiring retired public employees.

The Division’s report of its findings and recommendations are posted on the Internet at:

www.osc.state.ny.us/localgov/audits/schools/2011/webster.pdf

Administrative Law Judge recommends termination of employee found guilty of misconduct unrelated to official duties

Administrative Law Judge recommends termination of employee found guilty of misconduct unrelated to official duties

NYC Department of Sanitation v Ragone, OATH Index #1970/11

Pursuant to Mayoral Executive Order No. 16, the Department of Sanitation sought to terminate the employment of a worker who had been convicted of petit larceny.

The Order provides for the dismissal of any City employee convicted of a crime relating to their employment, which crime involves moral turpitude or bears upon their fitness to perform their duties.

OATH Administrative Law Judge Ingrid M. Addison found that Andrew Ragone had obtained a pension loan from the City. After cashing the check, he filed a sworn affidavit that he had not received it. NYCERS issued two supplemental checks, both of which Ragone cashed.

Judge Addison found that although the crime was not committed on Department property and did not concern Ragone’s work-related duties, the theft related to his status as a City worker because through that status, he obtained the loan and subsequent checks.

In the absence of compelling mitigating factors, Judge Addison recommended that Ragone be terminated.

Judge Addison’s decision is posted on the Internet at:

http://archive.citylaw.org/oath/11_Cases/11-1970.pdf

Employer liability for employee’s off-duty conduct

Employer liability for employee’s off-duty conduct

Donahue v Young, 298 AD2d 354

What liability does a municipality have when one of its firefighters assists in extinguishing fire - but not while on duty? According to the Donahue ruling, if the employee is not acting in the performance of his or her official duties, the employer does not have any liability for his or her action.

Ken Young, a New York City Firefighter, was off-duty, pursing personal business, when he spotted a car on fire while on the Van Wyck Expressway. Young stopped to assist. Apparently, as a result of Young's attempt to provide assistance, Walter Donahue sustained an injury and sued the City for damages.

The City argued that because Young was not on duty at the time, the City could not be held liable for the injury Donahue suffered. The Appellate Division agreed, stating that since Young acted voluntarily, "the doctrine of respondeat superior does not apply here." It ruled that the City could not be held vicariously liable for Young's actions.*

Although public employers may discipline an employee for off-duty conduct that negatively impacts upon the reputation or good name of the employer, it does not necessarily follow that an employer is responsible for its employees’ actions while they are off duty.

* The doctrine of “respondeat superior” expresses the concept that the employer is responsible for the actions of its employees in connection with their work 

Errors of law made in the course of arbitration

Errors of law made in the course of arbitration

Goldman v Architectural Iron Co., CA2, 306 F.3d 1214

From time to time, an arbitration award is challenged on the ground that the arbitrator applied the law incorrectly or did not properly consider the applicable law in making the award. Typically, the courts do not vacate an arbitration award merely because a party demonstrates the award is based on an "error of law."

Rather, as the Circuit Court held in DiRussa v Dean Witter Reynolds, Inc., 121 F.3d 818, an arbitration award may be vacated only if it exhibits a "manifest disregard of the law." What constitutes "manifest disregard of the law?"

In deciding the Goldman case, the Second Circuit said that "[g]iven the deference afforded arbitration decisions, this standard requires more than a mistake of law or a clear error in fact finding.” According to the Second Circuit:

Manifest disregard [of the law] can be established only where a governing legal principle is "well defined, explicit, and clearly applicable to the case," and where the arbitrator ignored it after it was brought to the arbitrator's attention in a way that assures that the arbitrator knew its controlling nature.

The Circuit Court cited New York Telephone Company v Communications Workers of America Local 1100, 256 F.3d 89, as authority for its ruling