The Remedies In Arbitration

In a decision out of San Joaquin County, California, Arbitrator Bonnie Bogue dealt with a wide range of issues concerning the remedies available in arbitration when an employee has been wrongfully discharged. The Arbitrator had already held that the County had no just cause to terminate the employee; what gave rise to a supplemental decision was a disagreement between the employer and the labor organization over the appropriate remedies.

The most important remedial issues were whether the employee was entitled to compensation for missed overtime, how missed health care benefits and pension contributions should be dealt with, whether the employee was entitled to missed leave accruals and holiday pay, whether the employee should be reimbursed for attorney fees, and what level of interest was appropriate on the back pay.

The Arbitrator began by finding the employee was entitled to compensation for missed overtime. The Arbitrator acknowledged that “finding a reasonably accurate measure of the amount of overtime a terminated employee would have worked, but for the termination, is often problematic. A remedy must not be speculative, but rather should be grounded on persuasive evidence of the amount of overtime the employee would have worked, but for the improper termination.”

The Arbitrator concluded that the evidence showed “a significant and consistent pattern of the employee taking overtime work, and her argument is persuasive that she would have worked more overtime than did her replacement because of her technical expertise and years of experience. The evidence supports the conclusion that she, at a minimum, would have worked 3.7 hours a month. The employee may have worked more overtime than that, given her consistent history of accepting overtime and working significantly more overtime than those under her supervision; however, estimating how much more overtime would have been available to her would require speculation that cannot be substantiated by the evidence.”

The Arbitrator then turned to the issue of health care benefits. The County had already restored the employee’s medical, dental, and vision benefits as though she never had a break in service. When she was reinstated and these benefits were restored, the County told the employee that she could submit any claims and expenses for medical, dental or vision expense she incurred during her absence from employment.

The Arbitrator found that the County had to do more: “Instead of a ‘retroactive restoration’ of benefits, the employee is entitled to a make-whole award reimbursing her for out-of-pocket medical, dental or vision expenses she had to pay, that would have been covered had she been covered by the County’s plan, and/or for her contribution or premiums paid, if any, to obtain medical, dental and vision insurance coverage during the period of her separation, including an employee’s contribution to any plan provided by her alternative employment.”

On the issue of pension benefits, the employee asked the Arbitrator to require the County to make retroactive contributions to the pension plan, but was unwilling to pay the mandated employee contribution. The Arbitrator was unwilling to go that far, finding that “requiring the employee to pay her own contribution is consistent with the law, and places her in the same position she would have been in had she not been terminated. Because the contribution goes into the pension plan to credit the employee’s account, the deduction from her backpay award for that purpose benefits her, and does not enrich the County.”

The Arbitrator then turned to the dispute over how to treat the employee’s leave accruals during the period of her discharge. The arbitrator ruled that the employee was entitled to “all vacation and sick leave accruals she would have earned but for her termination,” including paid holidays.

The Arbitrator rejected the employee’s request for attorney fees. The Arbitrator noted that the employee “elected to use an independent attorney rather than a union representative or an attorney provided by the union. The union has a duty under the law to fairly represent her in a grievance, representation that the union pays for and for which she would have incurred no expense.

“In labor arbitration, the common approach to attorneys’ fees is known as the ‘American Rule,’ under which each party bears its own attorneys’ fees. In lawsuits, an award of attorneys’ fees to the prevailing party is often part of the judgment. In contrast, in labor arbitration or civil service appeals, the American Rule is the norm; each party bears its own costs of representation, be it by in-house staff or by an outside consultant or attorney. The employee has offered no rationale for the award of attorneys’ fees as an exception to this long-established standard or the state statute incorporating that standard.”

On the question of interest, the Arbitrator concluded that “justification for an award of interest is that, during the period in which the employee was off the job due to her wrongful dismissal, she lost the opportunity to use the moneys she would have earned but for her termination. An award of interest serves to make her truly whole for the lost use of the earnings to which she was entitled.

“However, interest accrual is tolled for certain periods, for the following reasons. The delay of 25 months (so far) after the award in implementing the backpay remedy is extraordinary, in this Arbitrator’s 30-plus years of experience. A certain amount of delay may be reasonable and even necessary, to allow time to study the County’s calculations, to determine what evidence is needed to rebut those calculations, to study detailed payroll records, and to come up with alternate backpay calculations. Likewise, some delays can be attributed to time constraints owing to counsel’s workload (such as trials and trial preparation) or possibly personal circumstances that could have affected both the employee and her counsel’s ability to focus on this issue.

“But since neither the employee or her counsel has plead any exceptional circumstances, these two lengthy periods (one of 34 weeks and one of over 12 weeks) were unreasonably long, unnecessarily delaying the County’s ability to discharge its liabilities by issuing the employee the backpay to which she is entitled. The County’s liability in the form of interest must not be increased by extraordinary and unexplained delays caused by the employee and over which the County had no control. The County itself showed due diligence by responding in a timely manner to requests for documents, to requests for discussions, or to correspondence received from Appellant’s counsel.”

County of San Joaquin, 130 LA 697 (Bogue, 2012).