Just When You Thought Arbitration Was a Good Thing, or Some Ways to Avoid Irrational and Irreversible Arbitration Results.

On October 29, 1999, the Tenth Circuit Court of Appeals published an opinion that demonstrates why selection of an arbitrator and proper drafting of employment policies and agreements are so very important for employers. In the case of Kennecott Utah Copper Corporation vs. Becker, the Court explained in no uncertain terms just how powerful an arbitrator in employment cases can be, and just how little an appellate court can do to remedy the havoc an arbitrator run amuck can cause.

Facts

The dispute at the core of the Court’s opinion arose from the termination of a union employee that tested positive for marijuana after the employee was involved in a one vehicle roll-over accident involving the employer’s fully loaded ten wheel dump truck. The employer’s Collective Bargaining Agreement (“CBA”) provided that “no employee shall be disciplined or discharged without just cause.” There was no definition of “just cause” in the CBA. The employer’s Drug and Alcohol Abuse Policy (“Policy”) permitted drug testing of any employee who “may have contributed to an accident involving a fatality, bodily injury, or damaged property,” and required compliance with the Policy as a condition of employment. The Policy further explained that the Company would take disciplinary action, up to and including termination, against any employee who violates this Policy, and that “working while under the influence of drugs or alcohol or not being free from the presence of drugs” and any positive drug test, are both violations of the Policy.

It is from the arbitrator’s interpretation of this seemingly clear and simple language that this employer-employee dispute takes an unexpected and irreversible turn.

Immediately after the accident the offending employee was tested for drugs. The results were positive and confirmed the presence of marijuana at a level above the maximum allowed under the Policy. At the hearing to determine appropriate disciplinary action, the employee claimed his exposure to marijuana was limited to a couple of puffs five to six weeks prior to the accident. This account was contrary to the test results, and because the test results exceeded the maximum allowable limit set in the Policy, the employee was terminated. The employee filed a grievance under the CBA, and the matter was submitted to arbitration.

At the arbitration, the employee recanted his earlier statement and testified that he had used marijuana two days prior to the accident There was no evidence, however, that the marijuana had any effect on or relationship to the accident. Additionally, evidence was presented that the drug test used by the employer would detect drugs that had been ingested as much as a week to ten days prior to the test, and that marijuana would only be active in a person’s system for three to eight hours. After hearing this evidence, and finding no definition of “just cause” in the CBA, the arbitrator concluded that there was insufficient evidence to justify termination of the employee, though the employer was justified in requiring a drug test. The arbitrator reasoned that the “just cause” language in the CBA requires more than the mere presence of drugs or a positive drug test in order to discipline, much less terminate, an employee. There being no evidence of on the job impairment, possession, or use by the employee, the arbitrator concluded that the sole reason for the termination was the positive drug test. According to the arbitrator, a failed drug test, standing alone, was not the “just cause” required under the CBA as a prerequisite to discipline or termination. Accordingly, the arbitrator ordered reinstatement but denied back pay because of the employee’s dishonesty.

The employer appealed the arbitrator’s decision, arguing that he failed to follow the plain language of the CBA and the Policy, relying instead upon his own personal bias. To illustrate this point the employer cited portions of the arbitrator’s decision wherein the arbitrator relied upon his “beliefs” rather than the language of the CBA and the Policy. The employer argued that the language of the Policy regarding discipline, i.e. “intends to take disciplinary action, up to and including termination” and “[c]ompliance with this Policy is a condition of employment,” when taken together with the language that defines Policy violations, i.e. “working while under the influence of drugs or alcohol or not being free from the presence of drugs” and “any positive drug test,” clearly reflect the intent of the parties that a positive drug test is sufficient grounds for termination of employment. Neither the district court nor the Court of Appeals was persuaded, as both courts upheld the arbitrator’s decision. The reason these courts upheld the arbitrator’s decision should be instructive to employers in conducting their affairs.

The Court’s Analysis and Decision

In approaching the appeal, the Tenth Circuit first addressed the limits placed by the United States Supreme Court upon its review of employment related arbitration awards. It explained that appellate courts have very little discretion when reviewing arbitrator awards in employment related cases. The Supreme Court has said that “as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a reviewing court is convinced he committed serious error does not suffice to overturn his decision.” In addition, the arbitrator’s findings of fact are beyond the review of an appellate court. Only where the arbitrator ignores the plain language of the contract in reaching his decision, or where the award violates some explicit and specific statement of public policy, can the appellate court step in to modify the award. Even then, the Supreme Court has limited the materials an appellate court may consider in determining whether an arbitration award is based upon the essence of the employment agreements. Only the award itself may be considered. The court may not consider the words used in the arbitrator’s opinion to influence its decision as to whether the award is consistent with the language of the employment agreements or a violation of public policy.

Within this framework, the court considered the positions taken by the employer on appeal. First, the court noted that it was prohibited from considering whether the arbitrator’s bias, as reflected in the language of his opinion, interfered with his interpretation of the employment agreements. Rather, the court was confined to evaluating whether the award itself, reinstatement of the employee after a positive drug test under circumstances where there was no evidence of drug impairment or use on the job or at the time of the accident, was contrary to the express language of the contract or a violation of some explicit public policy. In addressing this issue, the court noted that nowhere in the CBA or the Policy was “just cause” defined, and nowhere did the parties specify that the mere presence of drugs in an employee’s system constituted just cause for termination. With regard to the employer’s argument that the language in the Policy to the effect that the employer “intends to take disciplinary action, up to and including termination” and “compliance with this policy is a condition of employment,” was simply another way of stating that any drug use or presence is equivalent to just cause, the court concluded that such a position was simply a matter of interpretation. As to such interpretation, the court was forced to defer to the province of the arbitrator, so long as the arbitrator’s interpretation “was even arguably” based upon the language of the CBA and the Policy. The court concluded that the arbitrator was interpreting the Policy language in light of the employer’s right under the CBA to terminate only for just cause, and his interpretation of those documents as requiring on-the-job impairment as a prerequisite to a finding of “just cause,” was permissible under the CBA and the Policy.

What is to be learned from this case?

There can be little doubt that the employer in this case intended its Policy to preserve its right to terminate an employee that tested positive for drugs, even if on only one occasion. This is evidenced by language in the Policy to the effect that the employer “intends to take disciplinary action, up to and including termination” for violation of the Policy, that “[c]ompliance with this Policy is a condition of employment,” and that “working while under the influence of drugs or alcohol or not being free from the presence of drugs” and “any positive drug test,” each constitute violations of the Policy. Despite this apparently clear and explicit language, the arbitrator determined that without a definition of “just cause,” as used in the CBA, something more than “any positive drug test” or “the presence of drugs” was required to satisfy the “just cause” limitation on the employer’s right to terminate. How, then, could this seemingly irrational conclusion have been avoided? Given the severely limited discretion and breadth of review permitted appellate courts in reviewing employment related arbitration awards, it should be abundantly clear that employers must do a better job of drafting the agreements and policies that govern the employment relationship. Something as simple as a carefully prepared sentence in the Policy clarifying the meaning of “just cause” as used in the CBA, would have prevented the arbitrator’s conclusion in this case from falling within the gambit of any interpretation that is “even arguably consistent” with the terms of the agreement and policies. Therefore, lesson one is to be sure your policies are carefully drafted so as to specifically and explicitly express your intentions. If a single positive drug test is grounds for termination, the Policy should say so. Lesson two is to be sure that the language in different parts of your policy have been thoroughly coordinated with other parts, and that the policy language has been coordinated with the language of any other agreements that govern the relationship between you, the employer, and your employees. Doing so will prevent, or minimize, the ambiguity that opens the door to an arbitrator bent on an unreasonable or self-serving interpretation of the pertinent documents.

Next, this case illustrates the dangers of arbitration in employment related matters. The United States Supreme Court has severely curtailed the discretion an appellate court may exercise in addressing employment related arbitration awards. Therefore, prudence dictates that you give thoughtful consideration to whether and under what circumstances they are willing to submit employment related disputes to arbitration. This decision will undoubtedly be influenced by how comfortable you are that your policies and other employment related agreements are clear, specific, and unambiguous. In either event, the time and expense saved in avoiding litigation may be small consolation in the face of an irrational, yet irreversible, arbitration award. If you choose arbitration as the vehicle by which employment disputes are to be resolved, you must make every effort to carefully select the arbitrator that will be determine your fate.

This case offers clear direction for employers. You will do well to take heed of the lessons offered by the Tenth Circuit in this case, and arrange your affairs so as to prevent, or at least reduce, your exposure to irrational arbitration awards. As the law stands now, if you don’t, it is unlikely that any district or appellate court will be able to help.

Steven K. Metcalf