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Justices reverse appellate ruling that negated union arbitration

The Minnesota Supreme Court, in a divided ruling, has reversed a ruling from the Minnesota Court of Appeals regarding an arbitrator’s decision. On May 17, in Hennepin Healthcare System, Inc. v. AFSCME Minnesota Council 5, the court found that an arbitrator did not exceed its power when its decision drew its essence from the underlying collective bargaining agreement.

AFSCME represents two bargaining units of Hennepin Healthcare clerical and general health care employees. In 2015, Hennepin Healthcare used staffing agency workers to fill some roles and offered three-year service contracts to staffing agency workers. Then, in 2018, Hennepin Healthcare renewed its service contracts with the staffing agency.

AFSCME objected before the 2018 renewal, claiming that Hennepin Healthcare had violated the collective bargaining agreements by using the staffing agency workers for more than six months. Hennepin Healthcare denied the grievance AFSCME filed, arguing that the collective bargaining agreement placed no durational limit on its right to use subcontracted workers.

An arbitrator reviewed the dispute, looking at two provisions in the collective bargaining agreement. While one provision said that Hennepin Healthcare was not prohibited from contracting with vendors or others for materials or services, another provision defined a “temporary employee” as an individual whose employment was not to exceed a six-month duration in temporary status in a calendar year.

The arbitrator issued an award in favor of AFSCME, finding that agency workers were limited to employment terms of no more than six months in a calendar year despite Hennepin Healthcare’s right to subcontract for services. Hennepin Healthcare claimed that the arbitrator had exceeded his powers and filed a motion in district court to vacate the arbitration award. When the district court confirmed the award, Hennepin Healthcare appealed. The Minnesota Court of Appeals reversed, concluding that the award did not “draw its essence”  from the agreement because it was not rationally based on the language of the collective bargaining agreement.

Arguing before the Supreme Court, Josie Hegarty, representing AFSCME Council 5, said, “Since at least 1981, this court has held that in arbitration challenges that, if an arbitration award passes the essence test, it must be upheld. The arbitrator’s award is very clearly founded on the contract language. The award very clearly lays out which language was interpreted, what the meaning of that language was, and how this conflict was to be found.”

“This is not just a very bad arbitration decision. It rises to the level of manifest disregard,” argued Martin Munic, senior assistant Hennepin County attorney, who represented Hennepin Healthcare System.

The court considered whether it could overturn the arbitration award, even if it disagreed with the finding. “The respondent is not disputing that judicial review of arbitration awards is very limited. Anyone seeking to vacate an award is taking on a difficult and daunting journey,” admitted Munic. “But it should not be impossible to vacate an arbitration award.”

“The arbitrator did quite clearly read the contract language, interpret it, defined its purpose, and made a decision based on that purpose,” Hegarty maintained.

The court found that the arbitrator interpreted the collective bargaining agreement and parties’ mutual intent, so the award was rationally derived from the agreement. It noted that Hennepin Healthcare, and the dissent, took issue with the arbitrator’s interpretation of the collective bargaining agreement. This, the court noted, was an incorrect reason to vacate the arbitrator’s award.

“[I]t is not the role of this court (or any court) to re-examine the merits of the case and vacate the award merely because we believe that our interpretation of the collective bargaining agreement is better than the arbitrator’s interpretation,” the court wrote. It added, “[W]hether we agree with the arbitrator’s decision or not is irrelevant.”

Justice G. Barry Anderson, who dissented along with Chief Justice Lorie Gildea, called the arbitrator’s decision “outrageous.” They determined that the arbitrator exceeded his authority granted by the agreement of the parties. Pointing to the stipulated facts that the arbitrator acknowledged, they expressed incredulity that the arbitrator arrived at the decision that he did.

“Put more simply and bluntly, this is a misuse of the arbitration process that we should not countenance,” Anderson avowed.


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