Be Careful What You Bargain For: Arbitrability

Be Careful What You Bargain For

To Arbitrate, or Not to Arbitrate

The cautionary tale of City of Reno v. Fire Fighters Local 731, 130 Nev. Adv. No. 100, 2014 BL 367941 (Nev. Dec. 31, 2014) reminds us that arbitration is a privilege, not a right. It also highlights, however, that we possess the power to craft a clause with which we can live, and the responsibility is ours to bargain our way to a clearer collective bargaining agreement (CBA).

In May 2014, the City laid off 32 firefighters upon discovering that an application to renew a federal grant, which had previously funded those positions, had been denied.

Article 2 of the CBA between the City and the International Association of Firefighters (IAFF), Local 731 provided that (1) the right to lay off employees due to lack of funds was not subject to mandatory bargaining and (2) the layoff decision was reserved solely to the employer without negotiation. The City relied on this article, asserting a “lack of funds,” as the reason for the budget-related layoffs.

The union proceeded to arbitration. IAFF also filed a complaint requesting a preliminary injunction, which the district court granted, enjoining the City from enforcing layoffs pending the union’s exhaustion of remedies under the CBA, namely, it’s pursuit of arbitration.

The City subsequently appealed to the Supreme Court of Nevada, and concurrently moved to stay the injunction pending the appeal. The district court denied the City’s motion and the preliminary injunction remained in effect, preventing the employer from enforcing the layoffs.

What a Bargain

The arbitrability of an issue is dependent on the parties’ contract, and the jurisdiction of an arbitrator is derived from same. Accordingly, despite the existence of a presumption in favor of arbitration, the terms bargained for in the contract ultimately govern the resolution of the dispute. To this end, Article 2 of the parties’ CBA controlled.

Because the arbitration clause in the CBA failed to encompass matters referenced in Article 2, such as budget-related layoffs, the City’s decision did not constitute an arbitrable matter. The Court concluded that the layoffs were exempt from arbitration as the City possessed sole discretion with regard to reduction in force decisions. Further, finding that the lower court lacked authority to rule on the request, the Supreme Court reversed the preliminary injunction order.

Bargaining Better

As evidenced in the above case, the key to constructing an applicable labor arbitration clause is to bargain for it, effectively.

For purposes of this discussion, consider likening the bargain for an arbitration to the bargain for an antique. In both instances, the parties likely are unable to foresee all the factors that could affect the bargained-for subject (in this case, the arbitration clause). Additionally, at the bargaining table, the parties are unable to call upon an appraiser to speak to the actual “value,” or applicability, of the clause.

In City of Reno v. Fire Fighters Local 731, the parties’ exclusion of Article 2 matters from the arbitration clause led Chief Justice James W. Hardesty to conclude that budget-related layoffs were not arbitrable.
Though it is impossible to foresee each and every opportunity for arbitration, it is important to consider such cautionary tales in bargaining and contract drafting. Further, while the benefit of arbitration is that it is up to the parties to determine the “who, what, when, where, and why,” it is imperative that the parties consider this much during bargaining, and prior to arbitration, in order to reap the rewards of this process.

In the end, we, the people, possess the inherent power to protect the arbitration process, one bargain at a time.

Take advantage of an authoritative resource to address the ever-evolving issues in labor and employment law with a free trial to the Labor & Employment Law Resource Center.