Summary
In Watertown, the New York Court of Appeals scrutinized two-decades of jurisprudence concerning the "presumptions relating to arbitrability in the public sector [and] the respective roles of courts and arbitrators.
Summary of this case from Camden Bd. of Educ. v. AlexanderOpinion
Argued February 17, 1999
Decided April 1, 1999
Terrence F. Nieman, for appellant.
Dennis G. O'Hara, for respondent.
Terrence F. Nieman, for appellant.
Craig M. Atlas, for respondent.
The questions of law common to the two appeals before us involve public sector arbitration under the Taylor Law. In each appeal the ultimate question is whether the claimed grievance is arbitrable, but the cases raise broader concerns that involve presumptions relating to arbitrability in the public sector, the respective roles of courts and arbitrators, and an examination of this Court's decision in Matter of Acting Supt. of Schools of Liverpool Cent. School Dist. [United Liverpool Faculty Assn.] ( 42 N.Y.2d 509).
The Watertown Dispute
In this litigation the Watertown City School District and the Watertown Education Association are opponents. The Association is the collective bargaining representative of teachers and other employees in the District. The parties entered into a collective bargaining agreement (CBA) that defined various terms and conditions of employment. It contained provisions relating to health insurance benefits that included the District's choice of insurance carriers and the percentage breakdown of premium costs allocable to the parties.
Shortly before the CBA went into effect, the District, along with other school districts (including Indian River, the district involved in the companion appeal), entered into a Municipal Cooperation Agreement to provide health insurance benefits for employees of participating districts. The insurance was provided through the Jefferson-Lewis Health Plan, an entity managed by a Board of Trustees comprised of the chief executive officers of the Plan participants, including the Watertown City School District and the Indian River Central School District. Subsequently, owing to financial considerations, the Plan raised the employees' co-payment cap. The Association filed a grievance alleging, in essence, that this change constituted an impermissible, unilateral reduction in employee benefits and a violation of the District's obligations under the CBA. After the District denied the grievance, the Association made a demand for arbitration, which the District then sought to stay, claiming that the dispute was not covered by the CBA. The Association cross-moved to compel arbitration.
The CBA contained a broad arbitration clause which provided that "any alleged violation of this Agreement, or any dispute with respect to its meaning or application" was arbitrable. Notwithstanding this language, Supreme Court ruled in favor of the District, granted its application for a stay, and denied the Association's cross-application to compel arbitration, holding that the parties had not agreed to arbitrate the dispute at issue. The Appellate Division affirmed, for reasons stated in the decision at Supreme Court.
The Indian River Dispute
This dispute is identical to Watertown. The parties are the School District and the Indian River Education Association (by its President). They entered into a CBA which contained a broad arbitration clause identical to the one in Watertown. The Indian River School District acquired health insurance coverage for its members under the same Municipal Cooperation Agreement as inWatertown. The Indian River CBA also contained a clause setting the percentage breakdown for health insurance premiums allocable to the parties. The case followed a procedural history similar toWatertown. Following the District's denial of the Association's grievance when the Plan raised the employees' co-payment, the Association sought arbitration, the District resisted it, and Supreme Court, in an order issued the same day as in Watertown, ruled with the District. It granted the District's application for a stay, and in language similar to its holding in Watertown, denied the Association's cross-application to compel arbitration. Supreme Court noted that in light of its decision it need not consider whether the Association failed to comply with a condition precedent to arbitration. The Appellate Division affirmed, without opinion, citing Watertown.
We reverse both Appellate Division orders and direct that both cases proceed to arbitration.
The Taylor Law
Based on their status as employee organizations and public employers (Civil Service Law § 201,[6]), both parties couch their arguments in the context of the Taylor Law (Civil Service Law art 14).
In 1967 the State Legislature enacted the Taylor Law, which governs labor relations in the public sector. It deals with rights and relationships involved in public employment, such as organizing, collective bargaining, the prohibition of strikes by public employees and the creation of the Public Employment Relations Board. The Taylor Law contemplates two types of arbitration: compulsory and permissive. The former is found in Civil Service Law § 209 and involves what has been termed "interest arbitration." This deals, in essence, with terms and conditions of employment not previously agreed upon. Normally those disputed issues are settled by negotiation, but the Legislature provided that if an impasse occurs in collective negotiations involving public employees, the compulsory arbitration provisions of Civil Service Law § 209 come into play (see, City of New York v. Patrolmen's Benevolent Assn., 89 N.Y.2d 380, 386-387; Matter of City of Newburgh v. Newman, 69 N.Y.2d 166, 170-171; see generally, Anderson and Krouse, Interest Arbitration: The Alternative to the Strike, 56 Fordham L Rev 153 [1987]; Craver, The Judicial Enforcement of Public Sector Interest Arbitration, 21 B C L Rev 557 [1980]).
Officially, the Public Employees' Fair Employment Act (L 1967, ch 392), named after George W. Taylor of the University of Pennsylvania, whom Governor Nelson Rockefeller named to chair a committee on employee relations. The committee report, published in 1966, was the basis for the Taylor Law (see generally, Ronald Donovan, Administering the Taylor Law 24 [1988]).
In addition to imposing these obligations, the Taylor Law permits public sector parties to submit CBA grievances to arbitration (Civil Service Law § 204). This species of arbitration — grievance arbitration — is at issue in this case. The question whether a particular grievance is arbitrable under the Taylor Law has occupied the courts of this State in scores of cases over the last three decades (see also, Coleman, Grievance Arbitration in the Public Sector: Status, Issues and Problems, 17 J. Collective Negotiations 89 [1988]).
The Liverpool Two-Step Format
In 1977 this Court decided Matter of Acting Sup. of Schools of Liverpool Cent. School Dist. [United Liverpool Faculty Assn.] ( 42 N.Y.2d 509, supra), which established criteria for determining whether and when a particular public sector grievance is subject to arbitration.
The Liverpool protocol entails a two-step inquiry. Initially the Court must determine whether arbitration claims with respect to the particular subject matter are authorized by the terms of the Taylor Law. The second step involves "a determination of whether such authority was in fact exercised and whether the parties did agree by the terms of their particular arbitration clause to refer their differences in this specific area to arbitration" (Liverpool, supra, at 513). Succinctly, the test centers on two distinct inquiries as to the public parties' purported entry into the arbitral forum: may they do so and, if yes, did they do so.
Liverpool's First Step
The first ("may-they-do-so") step calls for an examination, by the court, of the subject matter of the dispute. Drawing on earlier decisions that discussed the lawfully permissible scope of arbitrability (see, Matter of Cohoes City School Dist. v. Cohoes Teachers Assn., 40 N.Y.2d 774;_Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers' Assn.], 37 N.Y.2d 614, 616-617), the Court in Liverpool pointed out that owing to public policy or to statutory or constitutional restrictions there are certain matters that are off-limits for arbitration. Although this inquiry deals with whether the parties may arbitrate, it typically involves an assertion by the public employer that it may not or should not lawfully submit itself to a particular grievance arbitration. The inquiry is less concerned with the wording of the parties' intent to arbitrate than with the lawfulness of that intent.
Commentators have described this concern as having been born of a number of factors, including a reluctance to deprive the government of what has been its ultimate decision-making prerogatives (see, Abrams, Symposium: Governance of Public Enterprises: The Power Issue in Public Sector Grievance Arbitration, 67 Minn L Rev 261, 271 [1982]) or to otherwise allow sovereign authority to be delegated away (see generally, Craver,The Judicial Enforcement of Public Sector Grievance Arbitration, 58 Tex L Rev 329, 338 [1980]; Hodges, Symposium on Labor Arbitration Thirty Years After the Steelworkers Trilogy: The Steelworkers Trilogy in the Public Sector, 66 Chi-Kent L Rev 631, 640 [1990]; NOTE: Developments in the Law — Public Employment, 97 Harv L Rev 1611, 1718-1726 [1984]; Annotation, Bargainable or Negotiable Issues in State Public Employment Labor Relations, 84 ALR3d 242; Annotation, Validity and Construction of Statutes or Ordinances Providing For Arbitration of Labor Disputes Involving Public Employees, 68 ALR3d 885, 928).
In the 22 years following Liverpool, however, this Court has overwhelmingly rejected contentions by public employers that particular issues fall outside the scope of permissible grievance arbitration (e.g., Matter of Committee of Interns Residents [Dinkins], 86 N.Y.2d 478, 483-484 [City's malpractice insurance coverage obligation]; Matter of Board of Educ. [Connetquot Teachers Assn.], 60 N.Y.2d 840 [right of teachers' association to use of office space in school building]; Board of Educ. v. Glaubman, 53 N.Y.2d 781 [employee's right to be rehired on basis of seniority]; Matter of United Liverpool Faculty Assn. v. Board of Educ., 52 N.Y.2d 1038 [evaluation of teacher]; Matter of Franklin Cent. School [Franklin Teachers Assn.], 51 N.Y.2d 348 [grievance of nonteaching employee under teachers' collective bargaining agreement]; Board of Educ. v. Barni, 49 N.Y.2d 311 [violation of disciplinary provisions as to probationary teacher];Board of Educ. v. Patchogue-Medford Congress of Teachers, 48 N.Y.2d 812 [denial of sabbatical leave or summer study grants]; Matter of Wyandanch Union Free School Dist. v. Wyandanch Teachers Assn., 48 N.Y.2d 669 [school board's failure to submit change in educational policy to advisory professional council; and whether certain duties were properly imposed upon teachers]; Matter of Triborough Bridge Tunnel Auth. [District Council No. 37], 44 N.Y.2d 676 [compensation for peace officer relating to off-duty arrest];Matter of South Colonie Cent. School Dist. v. Longo, 43 N.Y.2d 136 [dispute involving no-reprisal clause in agreement]).
This is not to say that the concept of public policy (or statutory or constitutional) restrictions on public sector arbitration are extinct. To be sure, there are instances in which arbitration has been prohibited (e.g., Matter of Blackburne [Governor's Off. of Empl. Relations], 87 N.Y.2d 660 [termination of state agency employee for violation of Hatch Act]; Honeoye Falls-Lima Cent. School Dist. v. Honeoye Falls-Lima Educ. Assn., 49 N.Y.2d 732 [seniority dispute involving adequate academic standards];Board of Educ. v. Areman, 41 N.Y.2d 527 [Board accessibility to teachers' personnel files]; Matter of Cohoes City School Dist. v. Cohoes Teachers Assn., 40 N.Y.2d 774 [tenure decisions], supra; see also, Matter of Sprinzen [Nomberg], 46 N.Y.2d 623, 630 [cataloging non-arbitrable issues as a matter of public policy, including punitive damage awards, claims concerning insolvent insurance companies, usury determinations, and antitrust issues])._Moreover, our courts have vacated arbitral awards or portions thereof as having been against public policy (see, Matter of Cohoes City School District Teachers Assn., 40 N.Y.2d 774 [tenure decision],supra).
In all, however, the decisional law reflects the reality of greatly increased public sector arbitration, and its acceptance, compatible with the government's public policy concerns (see generally, Matter of Professional, Clerical, Tech. Empls. Assn. [Buffalo Bd. of Educ.], 90 N.Y.2d 364; Coleman,Grievance Arbitration in the Public Sector: Status, Issues and Problems, 17 J. Collective Negotiations 89 [1988], supra).
Liverpool's Second Step
If the first step is scaled, and the subject matter declared lawfully fit for arbitration, the Liverpool protocol next calls for a determination as to whether the parties agreed to arbitrate the grievance. The second ("did-they-do-so") step invokes the sort of conventional judicial analysis that is influenced by the wording of the CBA. Descending from the higher reaches of public policy, this step typically turns on drafting skills and language entirely within the control of the parties.
Here, too, in the vast majority of post-Liverpool cases, this Court has determined that the public sector parties had, by the broad arbitration clause language of the collective bargaining contracts, agreed to arbitrate the particular grievances involved (e.g., Matter of Committee of Interns Residents [Dinkins], 86 N.Y.2d 478, supra; Matter of Board of Educ. v. Connetquot Teachers Assoc., 60 N.Y.2d 840, 841, supra; Board of Educ. v. Glaubman, 53 N.Y.2d 781, supra; Matter of Franklin Cent. School [Franklin Teachers Assn.], 51 N.Y.2d 348, supra; Board of Educ. v. Barni, 49 N.Y.2d 311, supra; Matter of Wyandanch Union Free School Dist. v. Wyandanch Teachers Assn., 48 N.Y.2d 669, supra; Matter of Board of Educ. v. Roosevelt Teachers Assn., 47 N.Y.2d 748; Triborough Bridge Tunnel Auth. [District Council No. 37], 44 N.Y.2d 676, supra; but see, Matter of South Colonie Cent. School Dist. [South Colonie Teachers Assn.], 46 N.Y.2d 521, 525).
This case catalog is revealing. It not only speaks to the litigational aftermath of the two Liverpool steps, but also sheds light on an additional theme in Liverpool, notably, the approach in evaluating the intention of the parties with regard to public sector arbitration.
Liverpool and Presumptions Regarding Arbitrability
In 1960, 17 years before Liverpool, the United States Supreme Court decided United Steelworkers of Am. v. Warrior Gulf Nav. Co. ( 363 U.S. 574 ) — a case that involved private sector parties and a Federal statute — in which it adopted a "presumption of arbitrability." The Supreme Court observed that the Federal Labor Management Relations Act ( 29 U.S.C. § 141 et seq.) was imbued with a congressional policy in favor of arbitration to resolve labor disputes and that courts should interpret arbitration clauses accordingly, "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage" (Steelworkers, supra, at 582-583). This has been a consistent theme in Federal labor law cases (see, e.g., ATT Technologies v. Communications Workers of Am., 475 U.S. 643; but see, Wright v. Universal Maritime Serv. Corp., 525 U.S. 70, 119 S Ct 391 ).
This case was part of what came to be known as theSteelworkers trilogy, the other two cases being United Steelworkers of Am. v. Enterprise Wheel and Car Corp. ( 363 U.S. 593) and United Steelworkers of Am. v. American Mfg. Co. ( 363 U.S. 564).
In pre-Liverpool cases that involved the application of Federal law, this Court applied the Steelworkers "presumption of arbitrability" (e.g., Matter of Howard Co. v. Daley, 27 N.Y.2d 285;Matter of Fitzgerald [General Elec. Co.], 19 N.Y.2d 325). Emphasizing, however, the relatively brief acquaintance that the State had with Taylor Law grievance arbitration, and lacking an adequate, reassuring experience, the Court, in Liverpool, expressed hesitancy over the prospect of prematurely expanding the arbitral portals in public sector cases.
In Liverpool the Court emphasized that arbitration did "not yet carry the same historical or general appearance" or "demonstration of efficacy" in the public sector as it did in the private sector (Liverpool, supra, at 513). In the absence of unequivocal agreement to the contrary, it was to be taken that a public employer, being charged with nondelegable responsibilities, did not intend to arbitrate grievances (Liverpool, supra, at 513-514).
That was 1977, and it epitomized a wait-and-see attitude. We have waited, and we have seen. Arbitration in the public arena is no longer unfamiliar or unaccepted. It is a reality, and it is widespread.
The enormous growth in the use of collective bargaining agreements has generated vast experience in drafting arbitration clauses. Public sector parties may now use phrases that have been litigated into familiarity. They are free to negotiate language that will define disputes in areas of the broadest permissible scope. Parties are likewise free to negotiate exclusions, and to word arbitration clauses with sufficient clarity for a court to be able to tell, on a threshold determination, whether they intended a permissible subject or type of dispute to be arbitrable or not.
Liverpool did not expressly create a "presumption"against public sector arbitrability. To the extent, however, that one may be implied or fairly so characterized, an anti-arbitrational presumption is no longer justified either in law, or in the public sector labor environment. The lengthy chronicle of this Court's cases after Liverpool proclaims as much, as does the huge increase of public sector arbitration over the last quarter century.
Liverpool's approach calls for a two-step analysis necessary in public sector arbitrations which, by its nature involves concerns of public policy not at issue in Steelworkers. We will stay with the Liverpool format because it has been workable for over two decades, with results that have largely comported with the Steelworkers presumption with respect to CBA interpretation. We will preserve the two-step Liverpool analysis for judicial threshold consideration, free of any presumptions.
We note that in Wright v. Universal Maritime Service Corp. ( 525 U.S. 70, 142 LEd 361 [1998], supra), the U.S. Supreme Court refused to apply the presumption of arbitrability in a case that involved the interpretation of a Federal statute.
Merits Considerations by The Courts
It is also clear that the merits of the grievance are not the courts' concern (Matter of Board of Educ. v. Watertown Educ. Assn., 74 N.Y.2d 912, 913; see, generally, Siegel, New York Practice, § 589, at 945 [2d ed]). Even an apparent weakness of the claimed grievance is not a factor in the court's threshold determination. It is the arbitrator who weighs the merits of the claim (see, Matter of Franklin Cent. School [Franklin Teachers Assn.], 51 N.Y.2d 348, 356, supra). CPLR 7501 explicitly provides: "In determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute." This was added by section 47 of chapter 532 of the Laws of 1963 for the purpose of abrogating what was left of the so-called "Cutler-Hammer" rule (Matter of International Assn. of Machinists [Cutler-Hammer, Inc.], 297 N.Y. 519), in which our courts had taken a more expansive view of the merits, in determining arbitrability.While some case records contain enough information for a court to make a penetrating analysis of the scope of the substantive provisions of the CBA, an undertaking of that kind is not the function of the court. A judicial inquiry of that sort would involve an inapt flirtation with the merits, or an inappropriate use of the judicial scalpel to split the hairs that mark the perimeters of the contractual provisions. History, legislation, and experience dictate that courts not revert to the business of merits inquiries of the kind that existed under theCutler-Hammer doctrine before the enactment of CPLR 7501.
The "Reasonable Relationship" Test
In the two cases before us, there is no dispute as to the first step. Both sides have recognized the subject matter as arbitrable. As for the second step, the courts below assessed the Associations' claims and ruled that they were not arbitrable. In both cases, and in the face of broad arbitration clauses, they addressed the nature of the dispute, and, acting as would an arbitrator, interpreted the scope of the substantive provision of the contract. They then found the grievances to be outside of the parties' agreement to arbitrate. This was error. A court confronted with a contest of this kind should merely determine whether there is a reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA. If there is none, the issue, as a matter of law, is not arbitrable. If there is, the court should rule the matter arbitrable, and the arbitrator will then make a more exacting interpretation of the precise scope of the substantive provisions of the CBA, and whether the subject matter of the dispute fits within them (see, Board of Educ. v. Barni, 49 N.Y.2d 311, supra; see also, Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 N.Y.2d 91, 95).
The parties in the cases before us chose to arbitrate any alleged violation of the CBA or any dispute with respect to its meaning or application. Given a clause of this breadth, and the presence of language dealing specifically with health insurance benefits, we determine that the reduction of benefits by increasing the employees' co-payments was an arbitrable issue. We reach this conclusion even though, as the District stresses, it was the Plan, a non-party, that reduced the benefits. The Districts assert that even though the Plan is governed by a Board of Trustees comprised of District CEOs, the Districts do not control the amount or type of health insurance benefits that the Plan provides. Whether this is so, and whether the District violated the CBA with regard to maintaining a certain level of benefits, is for the arbitrator (Matter of Deer Park Union Free School Dist. v. Deer Park Teachers Assn., 50 N.Y.2d 1011; Board of Educ. v. Barni, 49 N.Y.2d 311, supra; see also, Matter of American Bosch Arma Corp. [Stewart], 15 N.Y.2d 840).
We have considered Indian River Central School District's remaining argument in support of a stay of arbitration, and find it to be without merit.
Accordingly, in each proceeding, the order of the Appellate Division should be reversed, with costs, the petition to stay arbitration denied and the cross-application to compel arbitration granted.
Nos. 50 51: Order reversed, with costs, petition to stay arbitration denied and cross application to compel arbitration granted. Opinion by Judge Rosenblatt. Chief Judge Kaye and Judges Bellacosa, Smith, Levine, Ciparick and Wesley concur.