Court affirms arbitration award against two union members

Usually, when a claim goes to arbitration and the losing party asks the federal court to vacate that ruling, the appellant loses. Federal courts don't like to interfere with arbitrations. It is the parties who agree to arbitrate in the first place, and the whole point of arbitration is to keep the case out of court in the first place. So these appeals usually lose. Like this one, though it may seem unfair to the employees who are bound by the ruling.

The case is ABM Industry Groups, LLC v. International Union of Operating Engineers, issued on July 29. When Company 1 was sold to Company 2, the employees (who were also members of the union) learned they would not have jobs with Company 2. John Phillip and Eugene Clerkin were among those employees, so Company 1 gave them termination pay, accrued vacation and sick pay, pursuant to the union contract. But then Company 2 decided to hire Phillip and Clerkin. Company 1 then next demanded that these guys pay back the termination and accrued vacation pay, classified by Company 1 as "inadvertent wage overpayment." You can imagine how this demand went over with Phillip and Clerkin.

This dispute went to arbitration, and the arbitrator ruled that these guys had to repay Company 1 some of that money. Company 1 filed suit in federal court to confirm that award, and the union opposed that motion, arguing that the award was improper because it imposed obligations on Phillip and Clerkin, who were not parties to the arbitration; only the union was such a party.

The district court agreed with the union's position, but the Court of Appeals (Winter, Calabresi and Chin) reverses and holds that while the guys were not present at the hearing, they had manifested their intent to be represented by the union and to be bound by any arbitration award. 

Case law holds that "employees are bound by arbitration decisions and settlements of grievances by union representatives," even if the individual employees were not signatories to the agreement. Since the union contract states that the union was the exclusive bargaining agreement for Phillip and Clerkin, and correspondence in the course of this dispute confirms the union was representing their interests in the proceeding, the arbitrator's award is binding on these guys. I don't know who will have to pay out the arbitration award to Company 1, but under this ruling, that amount will be paid by someone. And they will not be happy about it.