Last Chance Agreements Must Involve Union to be Binding in Labor Arbitration: Eighth Circuit | Practical Law

Last Chance Agreements Must Involve Union to be Binding in Labor Arbitration: Eighth Circuit | Practical Law

In Associated Electric Cooperative, Inc. v. International Brotherhood of Electrical Workers, Local No. 53, the US Court of Appeals for the Eighth Circuit held that last chance agreements (LCA) are binding in arbitration only when they involve the union and resolve pending disciplinary proceedings governed by the grievance and arbitration provisions of the applicable collective bargaining agreement (CBA).

Last Chance Agreements Must Involve Union to be Binding in Labor Arbitration: Eighth Circuit

by Practical Law Labor & Employment
Published on 20 May 2014 • USA (National/Federal)
In Associated Electric Cooperative, Inc. v. International Brotherhood of Electrical Workers, Local No. 53, the US Court of Appeals for the Eighth Circuit held that last chance agreements (LCA) are binding in arbitration only when they involve the union and resolve pending disciplinary proceedings governed by the grievance and arbitration provisions of the applicable collective bargaining agreement (CBA).
On May 14, 2014, in Associated Electric Cooperative, Inc. v. International Brotherhood of Electrical Workers, Local No. 53, the US Court of Appeals for the Eighth Circuit held that last chance agreements (LCA) are binding in arbitration only when they involve the union and resolve pending disciplinary proceedings governed by the grievance and arbitration provisions of the applicable collective bargaining agreement (CBA) (12-3712, (8th Cir. May 14, 2014)).

Background

Associated Electric Cooperative, Inc. (AECI) (a power plant operator) and the union were parties to a five-year CBA covering certain AECI employees.
In April 2011, AECI gave its employees random drug tests consistent with its agreement with the union. Leo Johnson, a 28-year employee, provided his sample but then informed the plant manager that he would test positive because he had recently smoked marijuana. AECI offered Johnson union representation for the disciplinary proceeding but Johnson declined and signed AECI's standard LCA. AECI then suspended him without pay.
A week later, AECI told Johnson that his drug test results did not reveal evidence of marijuana. However, Johnson remained on suspension, and continued the chemical dependency treatment prescribed under the LCA. In June 2011, Johnson was cleared to return to work, but failed his return-to-work drug screen. AECI terminated him for violating the LCA.
The union and Johnson filed a grievance which AECI denied, stating that Johnson's violation of the LCA necessitated terminating him. The union submitted the dispute to arbitration.
The arbitrator sustained the grievance in full and ordered AECI to reinstate Johnson with back pay, finding that:
  • The LCA did not provide AECI just cause to terminate Johnson.
  • The LCA was unconscionable because Johnson had not broken any work rules. Johnson's negative drug test result disproved that he reported to work while under the influence.
  • Continuing Johnson's suspension after learning he had passed the drug test was indefensible.
  • AECI fired Johnson for taking the wrong prescription medication without first considering his explanation that he had mistakenly taken a family member's similar medication.
  • Johnson had a long and mostly positive tenure with AECI.
AECI petitioned a federal district court to vacate the arbitrator's award. The union counterpetitioned to enforce the award. The district court granted AECI's motion and vacated the award, finding that the LCA superseded the CBA and therefore, when the arbitrator ignored the clear and unambiguous terms of the LCA, he "imposed his personal standards of industrial justice" (Coca-Cola Bottling Co. of St. Louis v. Teamsters Local Union No. 688, 959 F.2d 1438 (8th Cir. 1992)).
The union appealed to the Eighth Circuit.

Outcome

The Eighth Circuit reversed the judgment of the district court and remanded the case to the district court with directions to enter final judgment enforcing the arbitrator's award.
The Eighth Circuit found that:
  • The district court's disagreement with the arbitrator's finding that the LCA was unconscionable was understandable because the CBA's Management Rights clause unambiguously confirmed AECI's right to:
    • adopt plant rules, such as a drug policy with random drug testing; and
    • discipline employees, including entering into LCAs at its discretion.
  • The district court read the Eighth Circuit's decision in Coca-Cola Bottling too broadly. In Coca-Cola Bottling, the bargaining that resulted in an LCA involved the union and resolved pending disciplinary proceedings governed by the grievance and arbitration provisions of the applicable CBAs. In this case however, the LCA was the result of a mutual mistake, not the result of pending disciplinary proceedings. Johnson, not the union, agreed to the LCA. The only relevant agreement between the union and AECI was the CBA. Therefore, the Eighth Circuit concluded that Coca-Cola Bottling was distinguishable, and directed that the arbitrator's award be enforced.
  • The CBA requires "just cause" to discipline or discharge an employee, but it does not define that term. Therefore, the arbitrator must define and apply that term. The arbitrator's decision to uphold the union's grievance should be enforced, as it was within the arbitrator's just cause discretion to conclude that Johnson did not fall within the remedial terms of the LCA.
Judge Colloton concurred in part and dissented in part, noting that:
  • The arbitrator's decision should be upheld. The issue of the LCA's unconscionability and its validity should be decided by an arbitrator, and not by the court.
  • In commercial arbitration, it is established precedent that a challenge to the validity of an agreement (other than an agreement to arbitrate) is a matter for the arbitrator and not for the court, unless the parties can show that they clearly intended to withhold the issue of validity from arbitration.
  • Although the Federal Arbitration Act (FAA) does not directly apply this precedent to labor arbitration, federal courts will often look to the FAA for guidance in labor arbitration cases.
  • The arbitrator permissibly looked beyond the mandatory termination clause of the LCA to consider whether there was just cause for Johnson's discharge. The arbitrator's decision that there was no just cause for termination must be upheld, and the arbitrator's award should be confirmed.

Practical Implications

Employers should be cautious when negotiating an LCA directly with unionized employees without the union's involvement. This case suggests that LCAs will not supersede a CBA and attending just cause requirements, unless the LCA involved the union and resolved the pending disciplinary proceedings under the grievance and arbitration provisions of the applicable CBA.