Arbitrator Can’t Decide Case On New Theory Without Giving Parties A Chance To Respond

The Township of Montclair, New Jersey and the Montclair Policemen’s Benevolent Association (PBA) are parties to a collective bargaining agreement covering all officers employed by the Township below the rank of sergeant. Prior to 2010, vacancies in minimum staffing levels in the patrol division were filled by assigning available, off-duty patrol officers on an overtime basis. In 2010, the PBA filed a grievance challenging a change in the practice, alleging that the Township was using supervisors to perform bargaining unit work.

The PBA’s argument centered on Article XX of the contract, which provided that “practices which the employees covered by this contract enjoyed prior to this contract are retained by the employees, except as those rights, privileges and benefits are specifically abridged or modified by this contract.” The PBA also relied upon Article XXXII pertaining to overtime.

The Township contended that Article XX was specifically modified by Article IV, which reserved to it various management prerogatives, and by Article XXV, which empowered it to establish and change work schedules. The Township also asserted that the use of off-duty patrol officers in the past was not a “practice” under the CBA.

After the parties presented evidence and framed the issues for the Arbitrator, the Arbitrator ruled in favor of the PBA. However, the Arbitrator addressed none of the issues raised by the parties, and instead “determined that the threshold question” was: “Were the supervisors utilized by the Township recognized as members of the relevant bargaining unit, pursuant to the recognition clause set forth in Article I of the contract?” He then concluded that because supervisors are not part of the bargaining unit, “assignment of bargaining unit work to supervisors violates the contract.”

When the Township challenged the Arbitrator’s opinion in Court, a New Jersey appeals court overturned the opinion and remanded the case back to the Arbitrator for more proceedings. The difficulty, the Court found, was a “problem here as one of fundamental fairness to a party in arbitration. This is not a case where the Arbitrator generally considered the parties’ arguments in light of all the contract provisions. Rather, the Arbitrator utterly disregarded the arguments of both sides and decided the case on the basis of a provision that neither party cited, relied upon or even had notice was at issue. Such action constitutes a type of procedural misbehavior prejudicial to the rights of a party and is sufficient to warrant vacating the award.

“A proceeding which affects property rights and is accorded finality in the law must be conducted in accordance with the fundamental requirements of due process. Administrative due process is generally satisfied if ‘the parties had adequate notice, a chance to know opposing evidence, and the opportunity to present evidence and argument in response.’ Such standards apply, as well, to arbitration proceedings where the awards are accorded finality in the law.

“By predicating his ruling upon an issue that neither party raised nor had notice of, the Arbitrator effectively denied the parties the right to marshal evidence and be heard on the pivotal issue identified by the Arbitrator. Fundamental fairness requires, at the very least, notice of claim and the right to be heard.

“No matter how innocently conceived, the Arbitrator’s election to decide the case before him without reference to the issues of law raised by the parties, and upon an issue of law that neither side relied upon nor had the opportunity to address, deprived the Township of notice and an opportunity to be heard.”

By way of remedy, the Court vacated the arbitration award and remanded the matter to the Arbitrator. The Court noted that it was not precluding the Arbitrator from again considering Article I in an opinion and award, but directed the Arbitrator to confer with the parties about the need to present additional evidence, if any, that may affect any consideration of Article I, and allow the parties to present argument with respect to its applicability.

Township of Montclair v. Montclair PBA Local No. 53, 2012 WL 1836090 (N.J. Super. A.D. 2012).

Note: The Montclair case may not have come out the same way in another state. Appeals of arbitration decisions are a bit easier in New Jersey than elsewhere. Under the standards in many states, if the parties contract for a “final and binding” decision by an arbitrator, they’re stuck with the decision unless the arbitration award violates public policy.