PA Supreme Court Narrows Standard of Review for Arbitration Awards

In a recent decision, Westmoreland Intermediate Unit No. 7 v. Westmoreland Intermediate Unit No. 7 Classroom Assistants Education Support Personnel Association, PSEA/NEA, the Pennsylvania Supreme Court has altered the applicable standard of review for arbitration awards in collective bargaining settings.  This case may impact the decision-making process of public employers both in pursuing discharge proceedings and deciding whether to take appeals from unfavorable awards.

The facts of the case involve an aide employed by an Intermediate Unit to assist an emotional support classroom.  She had been employed for 23 years and had no prior discipline before the incident giving rise to her termination.  The aide reported to school one day, complained of feeling sick and informed the classroom teacher that she was going to call a substitute to finish the workday for her after she retrieved some materials from another classroom.  The aide left her classroom and did not return.  After some period of time, the aide was found in a locked restroom and responded to her name being called by moaning.  The school’s principal was unable to open the door, so she declared a state of emergency for the school, causing classroom doors to remain closed and student movement, including lunch and bathroom breaks, to be curtailed.  A 911 call was placed and the responding officers obtained entrance to the bathroom, where they found the aide unconscious before transporting her to a hospital.  The police discovered that she had a Fentanyl patch on her back which belonged to a friend and which caused an overdose leading to her condition.  The aide received probation without verdict, a type of suspended sentence for first-time offenders

The IU suspended the aide without pay and issued charges for her termination for reasons of immorality.  The union filed a grievance on her behalf, arguing there was no just cause for her termination.  Arbitration proceeded before Elliot Newman, who found that the aide’s behavior, while “foolish” and “irresponsible,” did not grossly offend community morals or rise to the level of “immorality.”  He concluded there was no just cause for dismissal, and reinstated the aide, without back pay and conditioned upon a one-year probationary period and the aide’s participation in drug and alcohol treatment programs. 

The IU appealed the award to the Court of Common Pleas.  Typically, courts review arbitration awards under the “essence test,”  which holds that if an arbitrator’s interpretation of the collective bargaining agreement can rationally be derived from the essence of the agreement, it should be affirmed.  One exception is the “core functions” test, which inquires into the core functions of a public entity and asks whether an arbitrator’s award deprives the employer of its ability to discharge one or more of those core functions. 

The Court of Common Pleas found that the aide’s conduct was of a kind which related to the IU’s discharge of its public function to provide education, and thus the arbitrator’s award impacting that core function was vacated.  The union appealed that decision to the Commonwealth Court, which affirmed the lower Court in a 2-1 decision.  The Commonwealth Court agreed that the aide’s conduct fell within a core function of the IU in educating children, and also found that Arbitrator Newman’s award did not satisfy the essence test because the aide’s conduct constituted immorality as defined under Section 1122 of the School Code.

The union appealed to the Pennsylvania Supreme Court, which agreed to review the case.  The union argued the essence test should have been the sole standard in reviewing the arbitration award, and that the core functions exception had been improperly applied.

In deciding the case, the Pennsylvania Supreme Court noted the role of arbitration in the Public Employee Relations Act is to ensure that labor disputes arising under a Collective Bargaining Agreement (CBA) are resolved by final binding arbitration.  As a result, judicial review of arbitration awards is very narrow to preserve the role of arbitration in resolving disagreements under CBAs.  However, the Court also noted the core function exception and the rationale for the exception.  The union asked the Court to discontinue applying the core functions test on the basis that it is inconsistent with the essence test and inapplicable in the public school context.  The IU contended that the core functions test was a necessary exception to ensure that CBAs could not be interpreted to violate public policy.

The Pennsylvania Supreme Court carved out a middle ground between the parties’ positions and replaced the core functions test with a different exception, by which an arbitrator’s award is subject to being vacated if it violates public policy:

[T]oday we reaffirm the two-prong essence test . . . .  We conclude, however, that the essence test should be subject to a narrow exception by which an arbitrator’s award will be vacated if it is violative of the public policy of the Commonwealth.  While the core functions exception . . . attempted to set forth such a standard, we find . . .[it] is insufficiently precise, and raises serious questions regarding the jurisdiction to utilize arbitration as well as concerns regarding the potentially limitless reach of the exception as stated.  Rather,  . . . we conclude that the federal public policy exception is appropriately applied to arbitrator’s awards arising under PERA as well.  We believe that such a public policy exception constitutes a reasonable accommodation of the sometimes competing goals of dispute resolution by final and binding arbitration and protection of the public weal [health] and is more consistent with our recent case law in this area.

The reason for the exception is that courts must not enforce contracts which are unlawful or in violation of public policy, which includes giving deference to an award which interprets a CBA involving a public entity in a manner which violates public policy.  In applying the public policy exception to the facts of the case at bar, the Supreme Court found that the arbitrator’s award satisfied the “essence test,” and that the aide’s unlawful use of the Fentanyl patch did not rise to the level of immorality.  However, the Court did not answer the question of whether the arbitrator’s award violated public policy, and for that purpose it remanded the case to the Court of Common Pleas to make a determination.  The Supreme Court offered some guidance that in making that decision, the Common Pleas Court should look at whether the award “contravenes a well-defined, dominant public policy that is ascertained by reference to the laws and legal precedents and not from mere general considerations of supposed public interests.”  As of the printing of this newsletter, there has been no reported decision regarding subsequent proceedings.

The Supreme Court’s decision will impact how public employers decide whether to take an appeal from an unfavorable arbitration award in personnel matters, as the Court has reaffirmed that the deferential “essence test” will apply in most circumstances, and the exception to when it applies is narrowed to only those arbitration awards which violate public policy as opposed to whether or not the award deprives the employer of its ability to discharge one of its core functions.

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