Arbitration in the Field of Labor Relations

The U.S. Supreme Court’s first shots at Wilko came in the 1960 cases of United Steelworkers of America v. American Manufacturing Co.,[1] [2] [3] United Steelworkers of America v. Warrior & Gulf Navigation Co.,87 and United Steelworkers of America v. Enterprise Wheel & Car Corp.88 The facts of each case dealt with arbitration under the guise of a collective bargaining agreement, and each carved away at Wilko, but in markedly different ways.

American Manufacturing Co. dealt with collective bargaining and labor relations, and particularly questioned the role of the judiciary in collective bargaining under the Labor Management Relations Act of 1947 (LMRA). In its holding, the Supreme Court first warned that, under the auspices of a collective bargaining agreement, “[t]he function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract.”89 It then concluded:

The courts ... have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim. The agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.[4] [5] [6] [7] [6] [6]

Finally, in a nod to the expertise of arbitrators of labor disputes, the Court pointed out that “[t]he processing of even frivolous claims may have therapeutic values of which those who are not a part of the plant environment may be quite unaware.”91 American Manufacturing Co. not only indicated the Court’s willingness to go along with agreements to arbitrate in collective bargaining agreements, but also highlighted a turning point in the Court’s outlook on the practice of arbitration and the ability of arbitrators themselves. Contrary to its skeptical view in Wilko, the Court explicitly acknowledged that arbitrators were capable of understanding and settling disputes between parties and, with specialization, may even do a better job of settling complicated disputes than courts.

Instead of once again overlooking Wilko and using the LMRA as a shield, as it did in American Manufacturing Co., the Court’s holding in Warrior & Gulf Navigation Co., faced the Wilko decision more directly. The Court noted the existence of a “federal policy ... to promote industrial stabilization through the collective bargaining agreement”92 and its belief—derived from earlier case law—that “[a] major factor in achieving industrial peace is the inclusion of a provision for arbitration of grievances in the collective bargaining agreement.”93 This policy, and the importance of arbitration to the promotion of industrial stabilization, thus rendered “the run of arbitration cases, illustrated by Wilko ... irrelevant to our problem.”94 The Court acknowledged that parties have a “choice . between the adjudication of cases or controversies in courts with established procedures or even special statutory safeguards on the one hand and the settlement of them in the more informal arbitration tribunal on the other.”[6] Wilko, the Court pointed out, was a commercial case, and in such cases, “arbitration is the substitute for litigation.”[6] In cases such as the one at bar, however, the Court asserted “arbitration is the substitute for industrial strife.”[6] Therefore, it continued:

Since arbitration of labor disputes has quite different functions from arbitration under an ordinary commercial agreement, the hostility evinced by courts toward arbitration of commercial agreements has no place here. For arbitration of labor disputes under collective bargaining agreements is part and parcel of the collective bargaining process itself.[6]

Therefore, the Court drew a distinction between arbitration of labor disputes and arbitration of commercial disputes. Although this seems to be an instance where the Court was simply straining to distinguish the case at bar from Wilko, it made clear that arbitration, at least under the LMRA, was a favorable alternative to litigation. It went on to make this point, along with the role judges may play in construing arbitration clauses under the LMRA, abundantly clear:

[T]he judicial inquiry under § 301 [of the LMRA] must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance or did agree to give the arbitrator power to make the award he made. An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.[14]

Although the Court’s decision in Warrior & Gulf Navigation Co. was not revolutionary in its treatment of Wilko, essentially selecting to detour around it through a commercial dispute versus labor dispute distinction, it did provide clarity on broad powers arbitrators wielded under the LMRA, and confined the ability of courts to strip power from them. In a way, the Court was once again signaling its confidence in the arbitration process, along with those who arbitrate disputes under the LMRA, similar to what it did in American Manufacturing Co.

The third case in the United Steelworkers trilogy of cases was United Steelworkers of America v. Enterprise Wheel & Car Corp.100 (hereinafter “Steelworkers ПГ). In Steelworkers III, the Court was faced with the issue of when, whether, and to what extent courts may review arbitration awards under labor agreements. The Court began by noting that “[t]he refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements. The federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards."[15] [16] Following this limiting statement, the Court pointed out the limitations placed on arbitrators: “An arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice," and “his award is legitimate only so long as it draws its essence from the collective bargaining agreement."[17] Taking a closer look at the facts of the case, the Court admitted that the arbitrator’s opinion may have been ambiguous, but quickly diminished the importance of this concession by noting “[a] mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award. Arbitrators have no obligation to the court to give their reasons for an award."[18]

If nothing else, the Court’s opinion in Steelworkers III reinforced its position that, at least in labor relations cases, arbitrators’ awards and opinions should be given great deference, based both on the federal policy of settling labor disputes through arbitration and allowing parties to have their agreements to arbitrate enforced. In all, the Steelworkers Trilogy cleared the way for arbitration of labor disputes and arbitration clauses in collective bargaining agreements. However, it did nothing to open the doors for arbitration of commercial disputes—like the one in Wilko.

  • [1] United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564 (1960).
  • [2] Id. at 574.
  • [3] Id. at 593.
  • [4] Id. at 567-68.
  • [5] Id. at 568.
  • [6] Id.
  • [7] United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 565(1960) at 578.
  • [8] Id.
  • [9] Id.
  • [10] Id.
  • [11] Id.
  • [12] Id.
  • [13] Id.
  • [14] Id. at 582-83.
  • [15] 363 U.S. 593 (1960).
  • [16] Id. at 596.
  • [17] Id. at 597.
  • [18] Id. at 598.
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