Employer Did Not Consent to Arbitration of Discharge Despite Arguing Arbitrability and Merits: Fifth Circuit | Practical Law

Employer Did Not Consent to Arbitration of Discharge Despite Arguing Arbitrability and Merits: Fifth Circuit | Practical Law

In ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers International Union, the US Court of Appeals for the Fifth Circuit considered a dispute over whether an employer and a union agreed to permit the arbitrator to decide what issues were arbitrable. The Fifth Circuit affirmed the district court's determination that the union, as the party contending that the employer agreed to submit the arbitrability question to the arbitrator, failed to show that the employer clearly and unmistakably agreed to authorize the arbitrator to decide that issue.

Employer Did Not Consent to Arbitration of Discharge Despite Arguing Arbitrability and Merits: Fifth Circuit

by Practical Law Labor & Employment
Published on 11 Feb 2014 • USA (National/Federal)
In ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers International Union, the US Court of Appeals for the Fifth Circuit considered a dispute over whether an employer and a union agreed to permit the arbitrator to decide what issues were arbitrable. The Fifth Circuit affirmed the district court's determination that the union, as the party contending that the employer agreed to submit the arbitrability question to the arbitrator, failed to show that the employer clearly and unmistakably agreed to authorize the arbitrator to decide that issue.
On January 30, 2014 in ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers International Union, the US Court of Appeals for the Fifth Circuit considered a dispute over whether an employer and a union agreed to permit an arbitrator to decide what issues were arbitrable surrounding an employee's discharge for a failed drug test. The Fifth Circuit affirmed a federal district court's determination that the union, as the party contending that the employer agreed to submit the arbitrability question to the arbitrator, failed to show that the employer clearly and unmistakably agreed to authorize the arbitrator to decide that issue. (12-31225, (5th Cir. Jan. 30, 2014).)

Background

A refinery employee, whom the Steelworkers represented, failed a random drug test. ConocoPhillips (Conoco) terminated his employment under a company policy requiring termination of employees who fail drug tests. The collective bargaining agreement (CBA) between Conoco and the union provides for arbitration of grievances, but states that:
Discharge for a confirmed positive test under the substance abuse policy shall not be subject to grievance or arbitration. However, relative to such discharge the union continues to maintain the right to grieve and arbitrate issues around the integrity of the chain of custody.
Despite the language in this CBA provision, the union filed a grievance and sought arbitration alleging the discharge was unjust. Conoco, consistent with the CBA's language, agreed to arbitrate about only the integrity of the chain of custody for the drug test.
At the arbitration hearing, Conoco asserted that because the employee was discharged for substance abuse, the only issue to be arbitrated was the "the integrity of the chain of custody." The union asserted that the issue for arbitration was whether the discharge was just. The arbitrator declared that he would decide whether the merits of the discharge were arbitrable and would permit evidence and arguments on the merits, because he might reach them. Conoco did not expressly object to the arbitrator's statements about the issues he would decide.
During the arbitration hearing:
  • Conoco presented its case focusing primarily on "the integrity of the chain of custody" of the drug test evidence.
  • The union presented its case on the "chain of custody" and the merits of the discharge.
  • Conoco repeatedly objected to the union offering and the arbitrator receiving evidence for issues beyond the chain of custody, asserting that those issues were not arbitrable under the CBA.
  • Conoco logged a continuing objection to evidence beyond the chain of custody issue because they went to issues beyond what the CBA permitted to be arbitrated and nothing besides the chain of custody issue was properly before the arbitrator.
During the hearing and in post-hearing briefs, Conoco raised arguments:
  • To dissuade the arbitrator from deciding whether the merits of the discharge were arbitrable.
  • That the grievance should be denied, if the arbitrator considered its merits.
Nevertheless, the arbitrator:
  • Found that:
    • he had authority to consider whether the merits of the discharge were arbitrable;
    • the merits of the discharge were arbitrable; and
    • the employee's discharge was unjust.
  • Issued an award sustaining the union's grievance.
Conoco petitioned a federal district court to vacate the arbitration award. The parties filed cross-motions for summary judgment. Conoco contested the arbitrator's determination that the merits of the discharge were arbitrable, arguing that it never:
  • Consented to arbitrate a discharge for a positive drug test.
  • Agreed to allow the arbitrator to decide on the arbitrability of the discharge's merits.
The union argued that Conoco implicitly agreed to submit the question of arbitrability to the arbitrator and was therefore bound by the arbitrator's:
  • Determination that the dispute was arbitrable.
  • Subsequent award in favor of the union.
The district court:
  • Granted Conoco's motion.
  • Held that "there was no clear and unmistakable agreement" to submit the question of arbitrability to the arbitrator himself.
  • Held that the merits of the discharge were not arbitrable.
  • Vacated the arbitration and its award.
The union appealed to the Fifth Circuit.

Outcome

The Fifth Circuit affirmed the district court's determinations. The court noted that:
  • The party contending that another party agreed to authorize an arbitrator to decide what issues were arbitrable must demonstrate "clearly and unmistakably" that the parties agreed the arbitrator could decide that issue (Gen. Motors Corp. v. Pamela Equities Corp., 146 F.3d 242 (5th Cir. 1998)).
  • The "clear and unmistakable" evidence standard applies regardless of whether the parties entered into a pre-dispute arbitration contract (Pamela Equities).
  • The Supreme Court in First Options of Chicago, Inc. v. Kaplan held that:
    • a clear willingness to arbitrate about what issues are arbitrable is a willingness to be effectively bound by the arbitrator's decision on arbitrability;
    • where contracts and parties are silent or ambiguous about whether an arbitrator has authority to determine whether issues are arbitrable, there is no support for the contention that the parties were willing to be effectively bound by the arbitrator's determinations of arbitrability. In this circumstance, courts should decide what matters were arbitrable; and
    • a party's decision to argue to the arbitrator that matters are not arbitrable under the governing agreement does not show a clear and unmistakable intent to authorize the arbitrator to decide what is arbitrable.
    (514 U.S. 938 (1995).)
The court found that:
  • The CBA did not authorize the arbitrator to determine what disputes between the parties were arbitrable.
  • Conoco participated in the arbitration because the chain of custody issue was arbitrable.
  • Conoco consistently objected to the jurisdiction of the arbitrator to decide any issue besides the integrity of the chain of custody for the drug test.
  • During the arbitration hearing and in post-hearing briefs, Conoco's arguments were at most ambiguous about whether the arbitrator had authority to decide whether the merits of the discharge were arbitrable. In particular, Conoco did not clearly and unmistakably agree that the arbitrator had the power to decide if the merits of the discharge were arbitrable under the CBA by:
    • appearing at the arbitration and recognizing the arbitrator's authority to hear the grievance, generally;
    • arguing to the arbitrator that the merits of this discharge were not arbitrable;
    • arguing to the arbitrator that the discharge was just; or
    • failing to expressly object to the arbitrator's indications that he would determine whether the merits of the discharge were arbitrable or that he might decide the merits.
In light of these findings, the court held that the union failed to prove that Conoco "clearly and unmistakably" intended to be bound by the arbitrator's decision on the arbitrability of the discharge's merits or the decision on the merits.
The court rejected the union's assertions that Conoco acquiesced to the arbitrator resolving whether the discharge's merits were arbitrable and his decision on the merits. It characterized the argument as an attempt to flip the First Options evidentiary burden on its head.
Finally, the Fifth Circuit distinguished cases from the US Court of Appeals for the Fourth and Sixth Circuits that the union relied on when arguing that Conoco could clearly and unmistakably consent to have the arbitrator decide arbitrability through acquiescence (see Rock-Tenn Company v. United Paperworkers International Union AFL-CIO, 184 F.3d 330 (4th Cir. 1999) and Cleveland Electric Illuminating Company v. Utility Workers Union of America, 440 F.3d 809 (6th Cir. 2006). The Fifth Circuit found that these two cases, both of which rely on the failure of the parties to actively object to the arbitrator's jurisdiction to decide arbitrability while arguing about arbitrability to the arbitrator, were easily distinguishable because:
  • Conoco's attorney repeatedly objected to the arbitrator's authority to decide matters beyond the chain of custody, albeit without expressly stating it did not authorize the arbitrator to decide what was arbitrable.
  • The two cases conflicted with First Options, which held that the objecting party need not make an affirmative showing that it does not wish to be bound by the arbitrator's determinations of what issues are arbitrable.

Practical Implications

Employers that object to the jurisdiction of an arbitrator to decide whether an issue is arbitrable should consistently, throughout the proceedings, object to the jurisdiction of the arbitrator to prevent a finding that they clearly and unmistakably agreed to let the arbitrator determine this issue. Counsel may consider reminding the arbitrator and the opposing party of its position about the arbitrator's authority to determine what is arbitrable before making arguments going to the arbitrability or the merits of an issue.
This decision highlights that when a contract, CBA or otherwise, does not address whether an issue is arbitrable or who has authority to determine if an issue is arbitrable, circuits may differ in determining what conduct creates or negates “clear and unmistakable consent” that an arbitrator decide what is arbitrable.