Business Law 101 / Arbitration In Labor Agreements

By Albert L. Kelly

In 1957, the United States Supreme Court decided that if a labor agreement had an arbitration clause and a party refused to arbitrate a dispute, they could be sued for violation of the labor agreement. This was clarified in 1960 when the Supreme Court ruled on what became known as the Steelworker’s Trilogy- three cases all involving arbitration of labor agreements. The Court held that the arbitrators determined if a matter went before the arbitrators or the court, that the court would give deference to the decision of the arbitrators since the arbitrators have more shop knowledge than the court, and that the arbitrators had no obligation to explain themselves to the court.

When the parties develop a dispute resolution policy that includes arbitration, they need to set up certain procedures.

First, how many arbitrators will be needed? Usually an agreement calls for one or three arbitrators (even numbers of arbitrators could result in a deadlock). The general rule for a three member arbitration panel is that each party picks one arbitrator and then the two arbitrators together select a third arbitrator.

Second, how long will an arbitrator preside over a contract? The arbitrator may be permanent- that is, he presides over the entire life of the contract, or he may be ad hoc where he just presides over one dispute.

Third, look at the characteristics of the arbitrators. The parties may want someone based on his or her reputation or location or they may want someone educated in a particular field. Interestingly, studies have shown little correlation between the arbitrator’s background and how they rule.

Arbitration is similar to a trial. Once the arbitrators are chosen, the parties prepare prehearing briefs that spell out the position of the respective parties. Some arbitrators instead prefer a stipulated statement written by both sides together and sets out what issues they agree on and what issues are in dispute. At the start of the hearing the parties make an opening statement spelling out their positions and then go through with a presentation of their exhibits and witnesses to present their case. The witnesses can be cross examined by the opposing side. At the conclusion of the hearing, the parties either make their closing arguments or file a post hearing brief stating how the evidence supported their position.

There are some differences between arbitration and trials. First is the use of shop rules. The parties are not asking the arbitrators to base his or her decision on the law, but on the practices and rules of the individual business. Because of this, the arbitrators can’t rely on a fixed set of principles. They must look at each labor agreement separately and review all past practices of the business.

Second are the rules of evidence. Courts have strict rules on when evidence will be allowed; arbitrators don’t have to follow those rules.

The arbitrator’s decision will be in writing, and will cover a statement of facts surrounding the grievance, the pertinent provisions of the labor agreement, a summary of the positions of the parties, the validity of each position, and the final ruling.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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