June 25, 2009Client Alert

Wisconsin Supreme Court Narrows Review of Arbitration Awards

On June 17, 2009, the Wisconsin Supreme Court, in the matter of Baldwin-Woodville Area School District v. West Central Education Association, 2009 WI 51, issued a case with important implications regarding deference to arbitration decisions, and the timeliness of grievances filed pursuant to collective bargaining agreements. Interestingly, six different entities filed amicus (friend of the court) briefs with the Supreme Court in the Baldwin-Woodville case. The facts in the case were simple. The school district improperly calculated the pay of a teacher (Christine Johnson). In August 2005, Ms. Johnson realized she was being underpaid. Shortly thereafter she submitted a form requesting adjustment of her pay. The district adjusted her pay prospectively, but did not adjust her pay retroactively. Ms. Johnson's union submitted a grievance, under a collective bargaining agreement, on June 26, 2006 – approximately 10 months after Ms. Johnson realized that she had been underpaid. The union was required to file a grievance on behalf of Ms. Johnson “within fifteen (15) days after the facts upon which the grievance is based first occur or become known..." Under a plain reading of the collective bargaining agreement, the grievance was untimely 16 days after an unspecified date in August 2005. The case went to arbitration, and the arbitrator held that the grievance was timely. The Court of Appeals disagreed, and dismissed the case, holding that the “arbitrator’s construction of the 15-day time limit for filing grievances was a perverse misconstruction because it was contrary to the collective bargaining agreement’s plain and unambiguous terms.” Baldwin-Woodville Area School District v. West Central Education Association, ¶ 12, No. 2008 AP 519, unpublished slip opinion (Wis. App. October 21, 2008).

The Wisconsin Supreme Court reversed. The Supreme Court deferred to the arbitrator’s decision that the grievance was timely.

Arbitration awards are subject to very limited review. Racine County v. International Association of Machinists and Aerospace Workers, 2008 WI 70, ¶ 11. Courts are required to uphold an arbitration award if there is “some reasonable foundation for the interpretation of the contract offered in the decision.” Lukowski v. Dankert, 187 Wis. 2d 142, 153 (1994). If the arbitration award disregards the law, or is illegal or in violation of strong public policy, the courts can overturn it. Racine County, 310 Wis. 2d 508, ¶ 11. If the arbitration award is not illegal, however, but simply interprets a contract, the Wisconsin Supreme Court held that it can only overturn an arbitration award “when there is no contractual language that would allow for the arbitrator’s construction…” Baldwin-Woodville, ¶ 23.

In Baldwin-Woodville, the arbitrator held that the date when “facts upon which the grievance is based first occur or first become known” was when the district denied Ms. Johnson’s request to reverse its decision, not when she learned that she was underpaid. There is quite a substantial body of case law holding that, for limitations period purposes, an event occurs when the underlying act occurs, and not when an employer denies a request for reconsideration. For example, see Delaware State College v. Ricks, 449 U.S. 250, 260, 101 S.Ct. 498 (1980) (“Pendency of a grievance, or some other method of collateral review of an employment decision, does not toll the running of the limitations period.”); Lever v. Northwestern Univ., 979 F.2d 552, 556 (7th Cir. 1992) (“an employer’s refusal to undo a discriminatory decision is not a fresh act of discrimination.”); Hilmes v. DILHR, 147 Wis. 2d 48, 52-53, 433 N.W.2d 251 (Ct. App. 1988) (statute of limitations period for filing of claim begins to run when the decision is communicated to the employee, not when the decision becomes effective); Hoefs v. Perlman-Rocque, Whitewater, (LIRC, 09/16/92) (“The employee’s attempts, through the employer’s internal post-termination procedures to regain his position did not toll the statute of limitations period.”) The arbitrator’s interpretation therefore stands in direct conflict with long-standing precedent from multiple jurisdictions. It is hard to see how the arbitrator’s award has a “reasonable foundation” in contract language.

The Baldwin-Woodville case highlights the very narrow scope of judicial review of arbitration awards. Courts are permitted to overturn arbitration awards where the arbitrator exceeds his/her power through “perverse misconstruction” of a collective bargaining agreement. Racine County, 310 Wis. 2d 508, ¶ 11. If the Baldwin-Woodville arbitrator’s interpretation of when the “facts upon which the grievance is based” first occurred or first became known is not a “perverse misconstruction” of the contract, then it is hard to imagine what would be.

Employers with current collective bargaining obligations should be aware that, while, in theory, it is possible to overturn an arbitration award based on perverse misconstruction of a contract, Wisconsin courts are unlikely to interpret the concept of “perverse misconstruction” the same way that employers (or others) would. Employers without collective bargaining arrangements (or without grievance arbitration agreements), as well as employers with existing grievance arbitration mechanisms subject to future bargaining, should be forewarned that almost no amount of clarity regarding timeliness of grievances (or other contract provisions, for that matter) is “too much” to fully mitigate the risk of misinterpretation by an arbitrator.

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