Opinion
No. 2244 C.D. 2011
12-21-2012
Township of Hempfield, Appellant v. Teamsters Local Union No. 30
BEFORE: HONORABLE ROBERT SIMPSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE SIMPSON
The Township of Hempfield (Township) appeals from an order of the Court of Common Pleas of Westmoreland County (trial court), which declined to vacate a grievance arbitration award requiring Township to provide continuing health insurance benefits to a retiree's dependent child. Specifically, Township contends the arbitrator exceeded his jurisdiction by redefining the issue Teamsters Local Union No. 30 (Union) grieved, and rewriting the parties' 2004-2014 collective bargaining agreement (CBA) rather than drawing the essence of his decision from it.
The Honorable Gary P. Caruso presided.
I. Background
The facts of this case are as follows. In 2003, Township adopted Resolution No. 2003-36 (Resolution), clarifying the criteria for dependent health care coverage for active and retired employees under its then current collective bargaining agreement with Union. The Resolution was amended after an arbitration to be consistent with the offered health insurance plan language. The Township did not adopt the amended Resolution. Thereafter, Township and Union signed the current CBA. The CBA does not incorporate or include the language of the Resolution.
The Resolution is titled: A Resolution Clarifying and Establishing the Requirements for Dependent Coverage for Employees (Active or Retired) of the Township of Hempfield Who Are Receiving or Will Receive Health Care Benefits Pursuant to the Hempfield Township Health Care Plan. Reproduced Record (R.R.) at 112a. In the Resolution, Township acknowledged it provided active and retired union and non-union employees coverage for dependent children even though Township believed the CBA does not require such benefit for retired employees. Id. The Resolution then sets forth criteria for determining whether a child is eligible for health insurance coverage (i.e., age, school status). R.R. at 113a. The Resolution further states it is not to be construed as granting a new benefit. R.R. at 114a.
In 2010, William Watterson (Grievant) sought to retire from Township. In preparing to retire, he inquired about his dependent daughter's entitlement to continuing health insurance benefits. In turn, the Union shop steward spoke to Township referring in part to the Resolution. Moreover, Union informed Township it believed Grievant's daughter was eligible for benefits under the criteria stated in the Resolution.
In response, Township informed Grievant his daughter was not entitled to benefits. Specifically, Township explained the Resolution did not grant a benefit to all retired employees' children, but set forth the rules for dependent coverage for those who may be eligible under the CBA. Township further explained the CBA does not provide for continued health care insurance coverage to the dependents of retirees. To that end, Township asserted the current CBA's continued health insurance coverage is limited to the retired employee and spouse.
Furthermore, Township asserted the CBA does not incorporate the Resolution, and Township never adopted the amended Resolution. Thus, Grievant's daughter cannot grieve entitlement to the benefits described in the Resolution.
In response, Union filed a grievance on Grievant's behalf. Specifically, Union filed the following:
[Union] hereby files this grievance as outlined by the existing labor agreement grievance procedure. Said grievance is in response to the Township's written correspondence to Union employee, [Grievant], dated October 12, 2010. This correspondence states the Township's opinion/position with regard to [Grievant's] desire to seek retirement from the Township and to maintain health care coverage for a dependent daughter while [she is] a full time student. It is the Union's contention that the Township's position as outlined in said correspondence is in direct violation of [Resolution]. It should, additionally, be noted that a grievance, dated January 19, 2004, resulted in an amended version of [Resolution] that was presented to the Union by the Township to resolve aforementioned grievance. The Township's position with regard to [Grievant] also contradicts this amended version.Reproduced Record (R.R.) at 71a.
Based on this grievance, Union requested the following adjustment:
That the [Township] honor the language of [Resolution] and, likewise, any additional language of the amended version as it was negotiated and agreed upon in response to a Union grievance of January 19, 2001. This language clearly states that coverage continues for a dependent child of an employee (active or retired) if certain criteria are met. With regard to [Grievant], that his dependent daughter remain on the Township's health care plan for as long as the outlined criteria continues to be satisfied and, likewise, any other Union member/retiree who may be affected by similar circumstances.
Id.
In response, Township reinforced its earlier position. Ultimately, Union appealed to arbitration, and a hearing ensued.
At the arbitration hearing, Union presented the testimony of its shop steward and Grievant. Township presented the testimony of its manager, solicitor, and an actuary.
Before the arbitrator, Union asserted that Township must provide continuing health insurance coverage to Grievant's daughter because the CBA requires Township to provide the same coverage to retirees as active employees. Therefore, because Township provides health insurance to active employees that includes coverage for dependents who are 25 years of age or younger and are full-time students, such benefit must be provided to retired employees.
With regard to the Resolution, Union asserted that the Resolution was amended pursuant to a prior grievance arbitration; therefore, the amended document has the effect of a settlement agreement. Furthermore, Union contended that the Resolution may be used as an admission by Township of its intent that under the CBA, retirees are entitled to continued dependent health insurance coverage.
Furthermore, Union asserted its prior grievances regarding continued dependent health insurance, which resulted in the dependents being deemed ineligible for continued benefits, are distinguishable. Specifically, Union argued that in those grievances, the dependents were deemed ineligible for failing to meet the Resolution's criteria, and not because they could not grieve entitlement to such a benefit under the CBA.
In response, Township asserted Union's grievance is not based on the CBA; therefore, the issue is not subject to arbitration. Specifically, Township asserted the arbitrator lacked jurisdiction to interpret the Resolution because it is not part of the CBA. Furthermore, Township argued there is no language in the CBA that could be construed to require it to pay for health care benefits for dependents of retirees. Thus, there is no need to look to parol evidence such as the Resolution, which predates the most recent CBA. Therefore, even if the issue was subject to arbitration, Township contends the CBA clearly limits continued health care benefits to only the retirees and spouses. Furthermore, even if the Resolution is considered, it was not intended to grant a benefit or apply to retired employees' dependents.
The arbitrator determined the issue before him was whether Township is required, "pursuant to the applicable provisions of the [CBA], to provide health care coverage to [Grievant's] daughter, who is [18] years old and is a full-time student at the University of Pittsburgh School of Pharmacy." Arb. Dec., 5/19/11, at 10.
Furthermore, the arbitrator determined the applicable sections of the CBA included:
ARTICLE XII
HEALTH AND WELFARE
A. The health and welfare benefits payable under the Agreement are reflected in Appendix B attached hereto and made a part hereof.
APPENDIX B
HEALTH AND WELFARE
[* * *]
5. Retires and their spouse shall be covered under the following Health & Welfare Provisions:
(a) If the employee has the combination of age and years of service that equals eighty (80) at the time of his/her retirement ..., then the employee shall be deemed an "Eligible Employee" for purposes of this paragraph. The Township, at its sole cost, shall pay 100% of the cost of health insurance, vision insurance and dental insurance coverage to an Eligible Employee and his/her spouse until age 65 under whatever health insurance plan (including prescription coverage) is afforded to then active employees, as changed from time to time. At age 65, the Township, at its sole cost, shall provide the Eligible Employee and his/her spouse with Medicare Supplement, vision insurance and dental insurance coverage under whatever health insurance plan (including prescription coverage) is afforded to then active employees, as changed from time to time. In the event of divorce, the spouse of an Eligible Employee
shall no longer be provided any health insurance coverage whatsoever by the Township.Id. (emphasis added).
Additionally, the arbitrator determined the Resolution was not part of the CBA. As such, the arbitrator stressed that it is the specific language of the CBA that he must consider. However, the arbitrator reasoned the Resolution could serve as an admission as to the mutual intent of the parties, if necessary.
In interpreting Appendix B of the CBA, the arbitrator determined the agreement unambiguously entitled Grievant to the same health insurance plan afforded to active employees. Furthermore, the arbitrator found Township provided active employees with a health insurance plan that included a dependent health insurance benefit. Therefore, without considering the Resolution, the arbitrator determined Grievant is entitled to a dependent health insurance benefit for his daughter. Township appealed.
Before the trial court, Township argued the arbitrator lacked jurisdiction to consider Union's grievance based on the wording of the grievance. Specifically, Township complained that Union did not refer to the CBA in its grievance but only addressed the language of the Resolution. As such, Township argued that the arbitrator, finding the Resolution was not part of the CBA, improperly redefined the grievance in order to assume jurisdiction over the dispute. Additionally, Township argued the arbitrator's award does not draw its essence from the terms of the CBA because the CBA limits continued health insurance coverage to eligible retirees and their spouses, not to the retirees' dependents.
The trial court disagreed. Specifically, the trial court determined the Union's grievance sufficiently asserted that its position arose out of the CBA, and Union's claim is defined within the terms of the CBA. To that end, the trial court observed that Union stated it was proceeding pursuant to the CBA grievance procedure. Furthermore, Union grieved Township's opposition to provide continued health insurance coverage to Grievant's dependent daughter, an issue addressed by the CBA. The trial court reasoned that the grievance does not attempt to assert rights under the Resolution. Rather, Union grieved pursuant to the existing CBA grievance procedure to seek a continuation of Township's interpretation of the CBA as stated in the Resolution. Therefore, the trial court determined Union's grievance fell within the terms of the CBA and invoked the arbitrator's jurisdiction. Furthermore, the trial court determined the arbitrator's award drew its essence from the CBA and did not violate public policy. Township appeals to this Court.
II. Discussion
Township presents two issues on appeal. First, Township asserts the arbitrator exceeded his jurisdiction by redefining Union's grievance to raise a grievable issue under the CBA. Second, Township contends the arbitrator's award does not draw its essence from the CBA.
To begin, we note that the standard of review is one of deference to the arbitrator's award. State Sys. of Higher Educ. (Cheyney Univ.) v. State Coll. Univ. Prof'l Ass'n (PSEA-NEA), 560 Pa. 135, 743 A.2d 405 (1999). When reviewing an arbitrator's interpretation of a collective bargaining agreement, this Court applies a two-prong approach, which is often referred to as the "essence test." Westmoreland Intermediate Unit #7 v. Westmoreland Intermediate Unit #7 Classroom Assistants Educ. Support Pers. Ass'n, 595 Pa. 648, 939 A.2d 855 (2007). Under this approach, we first consider whether the issue, as properly defined, falls within the terms of the collective bargaining agreement. Id.; Cheyney Univ. If so, we next determine whether the arbitrator's interpretation of the collective bargaining agreement can be rationally derived from its terms. Id.
A. Step-One
Township first asserts the issue Union grieved did not fall within the terms of the CBA because Union cited to the Resolution rather than the CBA in its grievance. Township maintains Union drafted a precise grievance requesting the arbitrator interpret and grant relief based on the Resolution, which is not part of the CBA. Therefore, the arbitrator lacked jurisdiction to hear the grievance. Furthermore, the arbitrator exceeded his authority by redefining the grievance to invoke his jurisdiction. In so doing, the arbitrator deprived Township of due process.
Section 903 of the Public Employe Relations Act requires public employers and employees to submit to arbitration for disputes arising out of the interpretation of the parties' CBA. The question under step-one of the essence test is whether the arbitrator's award has a foundation in the CBA. Westmoreland. If a grievant raises an issue that is "arguably dealt with by the bargaining agreement then arbitration is required." Ringgold Sch. Dist. v. Abramski, 426 A.2d 707, 710 (Pa. Cmwlth. 1981). If the issue is embraced by the CBA, the arbitrator has jurisdiction over the dispute. Pa. Tpk. Comm'n v. Teamsters Local Union No. 77, 45 A.3d 1159 (Pa. Cmwlth. 2012).
Act of July 23, 1970, P.L. 563, as amended, 43 P.S. §1101.903.
Here, Union submitted its grievance pursuant to the CBA's grievance procedure, which clearly provides "all disputes concerning the interpretation of this [CBA] shall be processed in accordance with the grievance procedure." R.R. at 28a. In the grievance, Union raised the issue of whether Grievant, a retired employee, can "maintain health care coverage for a dependent daughter while [she is] a full time student." R.R. at 71a. Union further asserted the Township's stated position is contrary to the position it set forth in the Resolution, and requested Township continue its past practice and interpretation.
It is undisputed the CBA provides the grievance procedure that Union referred to in its grievance. Moreover, the issue Union grieved concerns the health care benefits of retirees and their dependents. This issue is arguably addressed by the CBA's health and welfare provision found in Article XII and Appendix B of the CBA. Therefore, whether a retired employee is entitled to continuing dependent health care benefits is within the breadth of the CBA.
Township's argument to the contrary is misplaced. Township essentially asserts the arbitrator lacked jurisdiction because Union did not cite to the language of the CBA but focused on the Resolution's terms in its grievance. Township therefore asserts the arbitrator redefined the subject of the arbitration to assume jurisdiction. Although Union's grievance did not expressly identify the specific provision of the CBA in dispute, it is abundantly clear the grievance involved an interpretation of the CBA's health and welfare provision. Moreover, under the essence test, the question is not whether Union cited to the CBA or some other pleading standard, but whether the issue grieved is embraced by the CBA. See Pa. Tpk. Comm'n. Here, dependent health care benefit coverage arguably falls within the terms of the CBA; therefore, the arbitrator had jurisdiction.
Township also asserts a deprivation of due process because Union raised the issue of whether Township violated the CBA for the first time in its post-hearing brief. See R.R. at 143a. Township claims: it was unaware the issue involved whether Township violated the CBA; it was not afforded an opportunity to address this issue; and, it suffered prejudice. At argument, Township cited American Federation of State, County and Municipal Employees, District Council 84 v. City of Beaver Falls, 459 A.2d 863 (Pa. Cmwlth. 1983), which holds that an arbitrator may not exceed the scope of issues presented in the arbitration and can bind parties only on the issues submitted, to support its notice argument.
It is evident from Township's correspondence that Township understood the grieved issue to be whether the CBA provides for continued health care benefits for dependents of retirees. Specifically, Township informed Grievant in its initial response that the Resolution does not apply to this situation and that the terms of the CBA do not afford Grievant continued dependent health insurance coverage in retirement. R.R. at 72a. Moreover, in its post-hearing brief, Township asserted nearly the same arguments before the arbitrator as it does here. R.R. at 154a-163a. Therefore, there is no indication the arbitrator redefined Union's grievance in a manner that deprived Township of due process. Township's due process argument is without merit.
B. Step-Two
Second, Township contends the arbitrator's award does not draw its essence from the CBA. Township asserts the arbitrator's award is not rationally derived from the CBA because the CBA limits continued health insurance coverage to eligible retirees and their spouses, not to the retirees' dependents. The arbitrator exceeded his authority and rewrote the CBA under the guise of contract interpretation. Township also argues the arbitrator interpreted the CBA to impose an unfunded liability on Township. Furthermore, the arbitrator directed Township to commit an illegal act by creating a new benefit program without conducting the necessary actuarial investigation.
Under step-two of the essence test, we are limited to determining whether the arbitrator's award can in any way be rationally derived from the CBA in light of the language of the agreement, its context and any other indicia of the parties' intention. City of Johnstown/Redev. Auth. v. United Steelworkers of Am., Local 14354, 725 A.2d 248 (Pa. Cmwlth. 1999). The test is not whether we agree with the arbitrator's interpretation of a collective bargaining agreement, but rather whether the arbitrator's interpretation and application of the agreement can be reconciled with the language of the agreement. Dep't of Corr. v. Pa. State Corr. Officers Ass'n, 38 A.3d 975 (Pa. Cmwlth. 2011). We may vacate an arbitrator's award only if the award indisputably and genuinely lacks foundation in, or fails to logically flow from, the collective bargaining agreement. Id. at 980.
An arbitrator's award must be respected if it represents a rational interpretation of the parties' agreement. Pa. Tpk. Comm'n. An arbitrator's decision is not rational where it contradicts the plain language of the CBA. Dep't of Corr. An award draws its essence from the collective bargaining agreement where it logically flows from the agreement's language. Westmoreland.
Here, the arbitrator determined Grievant is entitled to continued health insurance coverage for his dependent daughter. In so doing, the arbitrator rejected Township's contention that the CBA excluded dependents from continued coverage. The arbitrator's interpretation is based on the CBA language which states "Township ... shall pay 100% of the cost of health insurance ... coverage to an Eligible Employee and his/her spouse until age 65 under whatever health insurance plan ... is afforded to then active employees." R.R. at 57a (emphasis added). The arbitrator reasoned that if Township provides health insurance to active employees which includes a dependent health insurance benefit, then Grievant is also entitled to that same benefit. Such interpretation is rationally derived from the CBA. As such, Township's argument that the arbitrator exceeded his authority and rewrote the terms of the CBA is meritless.
Moreover, Township's contention that the arbitrator exceeded his authority by imposing an unfunded post-retirement liability lacks merit. Specifically, Township asserts the arbitration award requires Township to commit an illegal act under the Second Class Township Code by creating a health insurance program for dependents of retirees without an actuarial study.
Act of July 28, 1953, P.L. 723, as amended, 53 P.S. §§65101-68701. --------
Here, the arbitrator's award does not compel an illegal act. Essentially, the arbitrator did not create a new benefit; rather, he determined the CBA already provided the benefit. Township is not permitted to escape a liability because it inaccurately failed to account for the benefit's cost in its initial actuarial analysis.
Under the arbitrator's rational interpretation of the CBA, Township bargained to provide continued health care benefits to eligible dependents of retirees. Accordingly, Township cannot avoid this interpretation on the grounds that it did not conduct its actuarial studies based on this interpretation.
For the foregoing reasons, we affirm.
/s/_________
ROBERT SIMPSON, Judge Judge McCullough concurs in the result only. ORDER
AND NOW, this 21st day of December, 2012, the order of the Court of Common Pleas of Westmoreland County is AFFIRMED.
/s/_________
ROBERT SIMPSON, Judge