Fazio, Sidney D.

English

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Louisiana Law ReviewVolume 20 | Number 3April 1960Labor Law - Power of the Arbitrator to AwardDamagesSidney D. FazioThis Note is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusionin Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact kreed25@lsu.edu.Repository CitationSidney D. Fazio, Labor Law - Power of the Arbitrator to Award Damages, 20 La. L. Rev. (1960)Available at: https://digitalcommons.law.lsu.edu/lalrev/vol20/iss3/15NOTESfederal constitutional questions. While such a decision may bedesirable from the standpoint of uniformity of the law, and whileit may follow logically from statements of the abstention doctrinefound in many of the cases, it is the view of this writer that thedissent's argument that the civil rights legislation takes thiscase out of the general rule has not been met. The dissentingopinion points out that since the equitable abstention doctrinearose in the Pullman case, it has been extended so far as to havebecome a delaying tactic, both expensive and frustrating. Apartfrom regional connotations, there is some merit to the views ofone writer that applying the abstention doctrine in cases like theinstant case "gives utterance to the very legal discord which the[civil rights] statutes were enacted to silence. '23David W. RobertsonLABOR LAW - POWER OF THE ARBITRATOR TO AWARD DAMAGESPlaintiff union brought an action for specific enforcementof an agreement to arbitrate, which was treated as an action fora declaratory judgment interpreting a provision in the collectivebargaining agreement with defendant employer calling for arbi-tration of differences in the interpretation or performance ofthe agreement. Defendant had assigned an employee overtimework which plaintiff contended should have been assigned toanother employee. Plaintiff demanded that the aggrieved em-ployee receive premium pay for the work unjustly denied him.Defendant refused to pay him on the ground of a company policyof "no work-no pay," but did offer to let him work four hoursat his convenience, for which he would receive premium pay.Plaintiff refused this offer and requested arbitration. Defendantagreed on condition the arbitration be limited to a determinationof whether there had been a violation of the agreement, withoutformulating a remedy. The agreement was silent as to the ar-bitrator's power to award damages or penalties for misassign-ment of overtime, although other sections provided for remedies.'23. See Comment, 14 RUTGERS L. REV. 185, 191 (1959).1. E.g., Section 14 dealing with vacations; Section 15 dealing with pay forthose on jury duty; Section 16 dealing with severance pay; Section 17 dealingwith annuities; Section 18 dealing with funeral leaves. The district court said:"In these clauses [enumerated above] there is language to be applied for determin-ing an appropriate remedy, e.g., if there is a dispute as to whether or not a certainemployee qualifies for a vacation without pay, the arbitrator certainly has the rightto order the company to give the employee a two weeks' vacation with pay." Re-finery Employees v. Continental Oil Co., 160 F. Supp. 723, n. 4 (W.D. La. 1958).19601LOUISIANA LAW REVIEWIn the suit for specific enforcement the union requested sum-mary judgment ordering defendant to arbitrate the grievancewithout limiting the power of the arbitrator to provide a remedyfor breach of contract. The district court ordered defendant toproceed to arbitration, but limited the arbitrator's power to adetermination of whether there had been a violation of the con-tract.2 On appeal to the Court of Appeals, Fifth Circuit, held,affirmed.3 A provision in a collective bargaining agreement pro-viding for arbitration only of differences relating to its interpre-tation and performance and providing remedies in some sections,does not give an arbitrator unlimited power to determine a rem-edy in a section which is silent on that subject. Refinery Em-ployees v. Continental Oil Co., 268 F.2d 447 (5th Cir. 1959),certiorari denied, 4 L.Ed.2d 152 (U.S. 1959).The question of the power of an arbitrator to fashion a rem-edy where there is no express provision in the agreement appar-ently had not been passed on in any reported federal court de-cision prior to the instant case. The few decisions in state courtshave not been consistent. While some state courts have held thatan arbitrator has no power to award damages unless specificallyauthorized by the parties, 4 others have recognized power to makean award of damages, where there was no express authoritygiven.5 Although there is a dearth of judicial authority on thesubject, an examination of the reported labor arbitration de-cisions will reveal that the power is well recognized and oftenused by arbitrators. In some decisions involving problems sim-ilar to that in the instant case, i.e., misassignment of overtime,the award has consisted of allowing the aggrieved employees tomake up the work which they should have been assigned.6 How-ever, in many cases the arbitrators have awarded the employeesmoney without any make-up requirement.7 Generally, three rea-2. Refinery Employees v. Continental Oil Co., 160 F. Supp. 723 (W.D. La.1958).3. Brown, J., dissented. Hutcheson, C.J., wrote a rather caustic concurringopinion in which he takes the dissenting judge to task for "taking too seriouslyhis role of leader in our court of an activist movement to deride and destroy theancient landmarks of the law." 268 F.2d 447, 460 (5th Cir. 1959).4. Publishers' Ass'n v. Typographical Union, 168 Misc. 267, 5 N.Y.S.2d 847(1938) ; Guidry v. Gulf Oil Corp., 320 S.W.2d 691 (Tex. Civ. App. 1959) ; LoneStar Cotton Mills v. Thomas, 227 S.W.2d 300 (Tex. Civ. App. 1949).5. See Niles-Bement-Pond Co. v. Local 405, 140 Conn. 32, 97 A.2d 898 (1953)Magliozzi v. Handschumacher & Co., 99 N.E.2d 856 (Mass. 1951) ; Application ofWestinghouse Air Brake Co., 166 Pa. Super. 91, 70 A.2d 681 (1950).6. Celanese Corp. of America, 24 Lab. Arb. 168 (1954) ; Bridgeport Brass Co.,19 Lab. Arb. 690 (1952) (allowed make-up and money damages) ; Goodyear Tire& Rubber Co., 5 Lab. Arb. 30 (1946) ; Walworth Co., 5 Lab. Arb. 551 (1946).7. Mississippi Aluminum Corp., 27 Lab. Arb. 625 (1956) ; Goodyear Atomic[Vol. XX1960] NOTESsons have been advanced in support of awarding money dam-ages. First, it has been said that money awards are necessaryto insure compliance with the contract in the future." Theseawards are apparently regarded as penalties for breach of thecollective bargaining agreement.9 It is argued that to hold theabsence of specific provisions for penalties to preclude arbitra-tors from awarding such penalties would have two detrimentalresults, (1) some method other than arbitration would be neededfor a remedy, making arbitration a relatively unimportant pro-cedure, and (2) agreements would become loaded down withliquidated damage clauses to allow such penalties.10 Secondly,some arbitrators have stated that the award actually amounts tocompensatory damages for breach of the contract. It is said tobe misleading to speak of penalties for work not performed be-cause the real issue is a loss sustained by an employee throughthe employer's breach of the agreement.1 The third proposedbasis for power to make awards is simply the inherent power ofthe arbitrator.12 The purpose of arbitration, it is contended, 8 isto settle disputes peacefully in place of strikes and lockouts. Theparties contemplate that the arbitrator will fully settle the dis-pute by granting adequate relief. It would be futile to restrict theCorp., 27 Lab. Arb. 634 (1956) ; Phillips Chemical Corp., 17 Lab. Arb. 721 (1951) ;International Harvester Co., 14 Lab. Arb. 430 (1950) ; Monsanto Chemical Co.,15 Lab. Arb. 589 (1950); American Machine & Foundry Co., 15 Lab. Arb. 822(1950) United States Rubber Co., 13 Lab. Arb. 839 (1949) ; Firestone Tire '&Rubber Co., 9 Lab. Arb. 518 (1948) ; Bethlehem Steel Co., 7 Lab. Arb. 493(1947); Ingersoll Rand Co., 7 Lab. Arb. 564 (1947); International HarvesterCo., 9 Lab. Arb. 894 (1947). But see Textron Inc., 12 Lab. Arb. 475 (1949).8. American Machine & Foundry Co., 15 Lab. Arb. 822 (1950) ; United StatesRubber Co., 13 Lab. Arb. 839 (1949).9. See, e.g., Bethlehem Steel Co., 7 Lab. Arb. 493 (1947), wherein the arbi-trator said that the aggrieved employees were entitled to recover from the employertheir fair share of the premium pay, and this was in the nature of a penaltyagainst the employer because he had promised to divide the work equally and hadnot done so.10. International Harvester Co., 9 Lab. Arb. 894 (1947). See MississippiAluminum Corp., 27 Lab. Arb. 625 (1956).11. In International Harvester Co., 14 Lab. Arb. 430 (1950), the arbitratorsaid that the company's contention that a money award was in effect a penaltywas without merit because (1) it confused compensatory damages with punitivedamages, and (2) it spoke of paying for work not performed, whereas the issuewas loss sustained by breach of contract. In United States Rubber Co., 13 Lab.Arb. 839 (1949), the arbitrator said that clearly the employee was entitled to bemade whole for his loss, and that make-up work was not an adequate remedy be-cause he was entitled to the work when it arose and not at a later time more con-venient to the employer. In Firestone Tire & Rubber Co., 9 Lab. Arb. 518 (1948),the arbitrator said that the employee was ready, willing, and able to work at theproper time, but through management mistake was prevented from doing so, andmake-up work would not place him in the "status quo."12. Standard Lime & Cement Co., 26 Lab. Arb. 468 (1956) (dictum) ; PhillipsChemical Co., 17 Lab. Arb. 721 (1951).13. Phillips Chemical Co., 17 Lab. Arb. 721, 722 (1951) : "The purpose ofLOUISIANA LAW REVIEW [Vol. XXarbitrator to finding that the agreement has been violated with-out the power to redress the injury. Thus it is inherent in thearbitral process and implied in the arbitration provision that thearbitrator has power to grant adequate relief.There is language in the instant case that could possibly beinterpreted as laying down a broad rule that arbitrators have nopower to make an award of damages unless specifically author-ized by the parties.' 4 However, a close examination of the de-cision will disclose that it is limited to the narrow issue ofwhether the arbitrator had "unlimited power" to make anyaward he thought appropriate. The court held that under theterms of the collective bargaining agreement the arbitrator didnot have an unlimited power to make an award of damages. Byits terms the collective bargaining agreement provided for arbi-tration only of disputes as to its interpretation or performance. 15In holding that this precluded the arbitrator from making anaward of damages, the court relied on Marchant v. Mead-Morri-son Mfg. Co.,' 6 a commercial arbitration case. However, an anal-ogy between commercial and industrial arbitration is of doubt-ful value because of basic differences in the two processes. 17Further, there is some question as to the validity of the Marchantcase in the field of commercial arbitration,18 with the weight ofarbitration is to settle disputes justly and fully, as a substitute for strikes andlockouts. If a grievance has no merit, relief is denied; but if it has merit, adequaterelief should be granted. That is what the parties contemplate. Anything lessthan that would not effect justice and would not satisfy the complaining party.Therefore it is implied in the arbitration section that the Arbitration Board haspower to grant adequate relief. The power merely to decide that the Agreementhas been violated without power to redress the injury, would be futility in theextreme."14. 268 F.2d 447, 457 (5th Cir. 1959) : "[T]he federal courts have been fullyaware of the force of the considerations supporting a broad commitment of labordisputes to arbitration, but have adhered firmly to the principle that remedies(damages) are not arbitrable unless there is clear contractual authority for theirarbitrability. See especially Local No. 149 of American Federation of TechnicalEngineers (A.F.L.) v. General Electric Company, 1 Cir., 1957, 250 F.2d 922, 926,930." The cited case dealt only with the problem of whether under the contractthe question of job grading of a new employee was arbitrable. Nothing in the casedealt with any express or implied power of arbitrators to award damages.15. The arbitration clause was Section 21-1 of the contract, reading as follows:iOnly differences relating to the interpretation or performance of this agreementwhich cannot be adjusted by mutual agreement, after processing through the griev-ance procedure may, upon written notice by one party to the other, not later thansixty (60) days after the date of the decision of the regional manager of manufac-turing be submitted to arbitration." Id. at 453, n. 6.16. 252 N.Y. 284, 169 N.E. 386 (1929).17. For a thorough study of the differences between commercial and industrialarbitration, see Chamberlain, Collective Bargaining and the Concept of Contract,48 COLUM. L. REV. 829 (1948) ; Summers, Judicial Review of Labor Arbitrationor Alice Through The Looking Glass, 2 BUFFALO L. REV. 1 (1952).18. The case is criticized at length in STrURoES, A TREATISE ON COMMERCIALNOTESauthority seemingly against it.1 9 However, while the value of theMarchant decision as authority in the instant case may be doubt-ful, a literal reading of the collective bargaining agreement clear-ly supports the court's view that the agreement was restricted.In many places the agreement provided a remedy expressly orimpliedly, but in the provision at issue, relative to misassign-ment, no remedy was mentioned or implied. Thus the court con-cluded that the parties did not intend to give the arbitratorpower to fashion a remedy in disputes arising under that section.It appears to this writer that the instant case will have littleif any effect on the long line of arbitrators' decisions claiming aninherent or implied power in the arbitrator to make an appro-priate compensatory award. In rejecting the union's contentionas to the unlimited power of the arbitrator to fashion any rem-edy he thought appropriate, the court did not hold that an arbi-trator does not ,have an implied power to fashion an appropriatecompensatory remedy. The agreement in the instant case is fair-ly subject to the court's interpretation of restricting the arbi-trator's power. This interpretation leaves open the question ofthe power of an arbitrator to fashion a remedy where the partieshave neither expressly granted him such power nor impliedlykept it from him by specifying remedial power in other situa-tions. 20Sidney D. FazioARBITRATION AND AWARDS 602-07 (1930). The author of that work suggests thatthe case is not in accord with the weight of authority and is based on reasoningthat is not convincing. He suggests the majority of the court may have been pri-marily concerned with the excessiveness of the award, but concedes that, unfor-tunately, this reason was not assigned.19. Colcord v. Fletcher, 50 Maine 398 (1862) ; Pearce v. McIntyre, 29 Mo. 423(1860) ; Garrow v. Nicolai, 24 Ore. 76, 32 Pac. 1036 (1893) ; Slocum v. Damon,1 Pin. 520 (Wis. 1845). See Baldwin v. Moses, 66 N.E.2d 24 (Mass. 1946). Seealso STURGEs, A TREATISE ON COMMERCIAL ARBITRATION AND AWARDs 255(1930) : "Have arbitrators power, as of course, that is, without explicit authorityfrom the parties, to assess money damages upon disputed claims with respect towhich, admittedly, they have authority to determine the right and the liability ofthe respective parties? There are few decisions upon which to base an answer tothis question. A majority of the cases and prevailing judicial opinion, however,support an answer in the affirmative." Cf. RUSSELL, LAW OF ARBITRATION 39(15th ed. 1952).20. The instant case might be interpreted as holding that in all collective bar-gaining agreements where some sections expressly mention a remedy and othersections do not the arbitrator is always denied the power to make an appropriatecompensatory award in disputes arising under the silent sections. If the practiceof spelling out remedies in some sections and leaving others silent is widespread,such a holding would be equivalent to denying arbitrators any implied power tomake an appropriate compensatory award. However, it is felt no such broad hold-ing was handed down in the case. As indicated elsewhere in the Note, the caseturned on the union's insistence on an "unlimited power" of the arbitrator to makeany award he thought appropriate and on the restrictive terms of this particularagreement.19601

Labor Law - Power of the Arbitrator to Award Damages

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Labor Law - Power of the Arbitrator to Award Damages

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