American Federation of State, County & Municipal Employees v. Highland Park Board of Education

577 N.W.2d 79, 457 Mich. 74

• Court: Michigan Supreme Court
• Decided: April 21, 1998
• Docket: 104934, Calendar No. 14
• Status: Published

Opinions

Cavanagh, J.

The issue presented is whether the American Federation of State, County and Municipal Employees Council 25 and Local 1416 timely filed suit against the board of education of the school district of the city of Highland Park for breach of a collective bargaining agreement between the two parties. We find that suit was timely filed, thus, we would affirm the decision of the Court of Appeals.

i

On May 2, 1984, the board posted notices regarding two openings for custodian positions. Union members Alvin Casey and Larry Anderson applied for the positions. Despite being the two most senior bargaining unit applicants, the board decided to hire two persons who were not employed by the district. Moreover, the two men who were hired were related by blood or by marriage to members of the school board.

On June 30, 1985, the board laid off union members holding the positions of bus driver and security guard, while also denying them certain benefits such as vacation pay, holiday pay, and “bumping rights.”¹

At all pertinent times, the union and the board were parties to a collectively bargained agreement governing the terms and conditions of certain bargaining unit employees, including custodians, building safety officers, bus drivers, and security guards. The parties’ collective bargaining agreement included a grievance procedure culminating in nonbinding arbitration as a method for resolving disputes between the parties.

The provision of the collective bargaining agreement in question states in relevant part:

8-Grievance Procedure

It is the intent of the parties to this Agreement that the grievance procedure set forth herein shall serve as a means for a peaceful settlement of disputes that may arise between them as to the application and interpretation of this Agreement and disciplinary action or other conditions of employment. Further, it shall serve to settle complaints by a bargaining unit employee, or by the Union in its own behalf.

(a) A grievance is a complaint by a bargaining unit employee, or by the Union in its own behalf ....

* * *

(d) All grievances shall be handled by the following procedures:

Any maintenance and operational employee who feels his rights and privileges have been violated shall have the right to Union representation in presenting his grievance in the following order:

Step 1 To the Maintenance Shop Foreman ....

Step 2 To the Director of Maintenance and Operations

Step 3 To the Assistant Superintendent ....

Step 4 The Union may appeal the decision of the Superintendent ... to the Board of Education ....

* * :|=

(g) Arbitration — within ten (10) school days after delivery of the Board’s decision, a grievance may be appealed to advisory arbitration by the Union. . . . The arbitrator’s decision shall be advisory only and shall not be binding upon any party except in matters involving wages, discharge or suspension.

Pursuant to the collective bargaining agreement, the union filed grievances and ultimately submitted the matters to arbitration.² The arbitrator issued an award in favor of the union; however, by the terms of the collective bargaining agreement, the arbitration was nonbinding,³ and defendant refused to accept the arbitrator’s award.

On April 15, 1991, plaintiffs instituted the present cause of action in circuit court, alleging a violation of the collective bargaining agreement. Defendant moved for summary disposition, stating that the statute of limitations precluded the complaint because the suit was filed more than six years after the breaches of contract were allegedly committed.

The circuit court held in favor of the board and entered summary disposition against the union. It stated that the grievances were filed in July 1984 and February 1985, respectively. The court held that the statutory period of limitations for the two claims expired in July 1990 and February 1991. Therefore, the suit that was filed in April 1991 was time barred.

The union appealed in the Court of Appeals, which reversed. In a two-to-one decision by Judge Marilyn Kelly, the Court held that the nonbinding arbitration provision was mandatory; therefore, the union was required to exhaust its contractual remedies before filing suit. Under equitable tolling principles, because the union filed suit within six years of the arbitrator’s decision, the suit was timely. 214 Mich App 182; 542 NW2d 333 (1995).

The dissent, by Judge Clifford Taylor, held that while the grievance procedure was mandatory, the nonbinding arbitration was permissive. Therefore, the union did not have to exhaust its contractual remedies before filing suit. The dissent held that the union should have filed suit at the time the contract was breached; thus, the complaint by the union against the board was time barred, and the principles of equitable tolling should not apply. Id. at 191-194.

n

The issue presented is one of first impression. In fact, to our knowledge, there is no case in the country dealing with precisely the same issue. This is so because the parties have negotiated a unique collective bargaining agreement, providing a mandatory grievance procedure that ends with nonbinding arbitration in all matters, except those dealing with wages, discharge, or suspension. To understand why this combination is unique, we must first examine the terms used to describe the methods of dispute resolution between parties.

The grievance procedure is the process by which the parties have chosen to settle their disputes. Typical grievance procedures provide a multistep process of resolution and appeal. The grievance procedure (which we will refer to as the multistep process of appeals not including arbitration) and arbitration may be mandatory or they may be permissive. If the procedure is mandatory, the aggrieved party may be forced to complete the grievance procedure before bringing suit in court. If the procedure is not mandatory, the aggrieved party may choose to complete the grievance procedure first, but is not required to do so, before filing suit.

The grievance procedure and arbitration can also be either binding or nonbinding (sometimes referred to as advisory). This simply means that, if binding, the parties must adhere to the decision of the arbitrator or the person of highest appellate authority under the grievance process. If nonbinding, the parties are not bound by the decision of the final appellate authority or arbitrator, but they may mutually agree to abide by the decision if they so choose.⁴

Most collective bargaining agreements provide for some sort of grievance procedure (mandatory or permissive) and binding arbitration. Over the past two decades, the courts have spent most of their time determining whether the terms of a particular grievance procedure are mandatory or permissive. As will be explained in more detail below, as a general rule, most courts have held that grievance procedures set out by the parties are mandatory. In those cases, almost all the procedures ended in binding arbitration. In fact, as we noted in Breish v Ring Screw Works, 397 Mich 586, 594; 248 NW2d 526 (1976), at that time, approximately ninety-six percent of contracts had provisions that resulted in final and binding arbitration as the result of the grievance procedure. Our situation today is unique because we have a rare combination: mandatory grievance procedures culminating in nonbinding arbitration.

Having stated this general background, it is important to understand the underlying arguments of the parties, and those arguments that the parties are not making. The union asserts that regardless of whether the final step of a grievance procedure is nonbinding, the entire process of going through the grievance procedure and arbitration is mandatory under the terms of the contract. Therefore, because the grievance procedure and arbitration are mandatory, the statute of limitations should be tolled until the completion of both steps.

The board, on the other hand, argues that regardless of whether the grievance procedure and arbitration are mandatory under the contract, if they end in a nonbinding result, it would be futile for the parties to exhaust the entire procedure before filing suit.

Having stated the positions of both sides, we note that, contrary to the position taken by both the majority and dissent in the Court of Appeals, the issue is not whether the arbitration provision was mandatory.⁵ Rather, regardless of whether the grievance procedure or arbitration is mandatory, if the process ends with something nonbinding, should the statute of limitations be tolled?

As this opinion will examine in the next section, there is a strong body of case law that favors exhaustion of grievance procedures before filing suit. Equally persuasive is a body of case law suggesting that if an agreement cannot provide a binding result, the aggrieved party may file suit before exhausting contractual remedies. Our task today is to resolve the apparent conflict that occurs when the two areas of law are merged.

m

Since the beginning of the twentieth century, employees have banded together to form labor unions to protect themselves from unfavorable conditions at the workplace. As a tool for achieving their goals, unions and management have negotiated collective bargaining agreements, which are contracts that govern the terms and conditions of employment. Unlike contracts of adhesion, parties to a collective bargaining agreement usually are able to negotiate on an even playing field. Thus, both employers and unions are free to negotiate the relative terms of their contracts, and are able to settle on mutually agreed conditions governing the employees’ working conditions. As a result, an entire body of federal labor law interpreting collective bargaining agreements has emerged over the decades.

A

In 1960, the United States Supreme Court decided three federal cases now known as the Steelworkers Trilogy.6 These cases gave birth to a family of labor law that has continued until today. They establish a strong presumption in favor of using negotiated grievance procedures for resolving disputes over the interpretation or application of a collective bargaining agreement. In United Steelworkers of America v American Mfg Co, 363 US 564; 80 S Ct 1343; 4 L Ed 2d 1403 (1960), the Court stated that the policy favoring negotiated dispute resolution mechanisms “can be effectuated only if the means chosen by the parties for settlement of their differences under a collective bargaining agreement is given full play.” Id. at 566.

Only five years later, the United States Supreme Court issued a decision reinforcing the principle that contractual grievance procedures should be used. In Republic Steel Corp v Maddox, 379 US 650; 85 S Ct 614; 13 L Ed 2d 580 (1965), the Court stated:

As a general rule in cases to which federal law applies, federal labor policy requires that individual employees wishing to assert contract grievances must attempt use of the contract grievance procedure agreed upon by employer and union as the mode of redress. . . . [U]nless the contract provides otherwise, there can be no doubt that the employee must afford the union the opportunity to act on his behalf. [Id. at 652 (citations omitted; emphasis added).]

As stated by the Court, federal courts must presume that the grievance procedures are mandatory unless otherwise expressly stated in the contract. Even language providing that an employee “may” discuss a complaint with a union committeeman before embarking on the next step of a grievance procedure does not demonstrate that an employee may ignore the contractual remedies provided under the agreement. Indeed, the Court stated that the

[u]se of the permissive “may” does not of itself reveal a clear understanding between the contracting parties that individual employees, unlike either the union or the employer, are free to avoid the contract procedure and its time limitations in favor of a judicial suit. Any doubts must be resolved against such an interpretation. [Id. at 658-659.]

However, as noted by the board in this case, Republic Steel was decided on the basis of a grievance procedure that resulted in binding arbitration. Emphasizing the importance of binding arbitration, the Court stated that the policy favoring exhaustion of grievance procedures would be undermined if the Court held otherwise because “it would deprive employer and union of the ability to establish a uniform and exclusive method for orderly settlement of employee grievances. If a grievance procedure cannot be made exclusive, it loses much of its desirability as a method of settlement.” Id. at 653.

Later, in Clayton v Int’l Union, United Automobile, Aerospace & Agricultural Implement Workers of America, 451 US 679; 101 S Ct 2088; 69 L Ed 2d 538 (1981), the United States Supreme Court distinguished the Republic Steel decision. The Court was faced with deciding whether an employee was required to exhaust the internal union appeals procedure before seeking redress from a court.⁷ The Court stated that the policies behind the exhaustion requirement are only advanced where the internal procedures either grant the aggrieved employee full relief or reactivate his grievance. The Court held:

Where internal union appeals procedures can result in either complete relief to an aggrieved employee or reactivation of his grievance, exhaustion would advance the national labor policy of encouraging private resolution of contractual labor disputes. In such cases, the internal union procedures are capable of fully resolving meritorious claims short of the judicial forum. Thus, if the employee received the full relief he requested through internal procedures, his [federal labor] action would become moot, and he would not be entitled to a judicial hearing. Similarly, if the employee obtained reactivation of his grievance through internal union procedures, the policies underlying Republic Steel would come into play, and the employee would be required to submit his claim to the collectively bargained dispute-resolution procedures. In either case, exhaustion of internal remedies could result in final resolution of the employee’s contractual grievance through private rather than judicial avenues.

By contrast, where an aggrieved employee cannot obtain either the substantive relief he seeks or reactivation of his grievance, national labor policy would not be served by requiring exhaustion of internal remedies. In such cases, exhaustion would be a useless gesture: it would delay judicial consideration of the employee’s [federal labor] action, but would not eliminate it. The employee would still be required to pursue judicial means to obtain the relief he seeks under [federal labor law]. Moreover, exhaustion would not lead to significant savings in judicial resources, because regardless of the outcome of the internal appeal, the employee would be required to prove de novo his [federal] suit that the union breached its duty of fair representation and that the employer breached the collective-bargaining agreement. [Id. at 692-693.]

While this language tends to support the position of the board in this case, the opinion noted the difference between contractual grievance and arbitration procedures that are negotiated by the parties to a collective bargaining agreement “and are generally designed to provide an exclusive method for resolving disputes,” and internal union procedures that do not arise under the terms of a contract. Id. at 695-696. The Court stated, “Because of this distinction, the policies underlying Republic Steel, encouraging private resolution of grievances arising out of the collective-bargaining process, are not directly applicable to the issue whether to require exhaustion of internal union procedures.” Id. at 696. Therefore, the Court held that if the internal grievance procedures are inadequate, “the employee’s failure to exhaust should be excused, and he should be permitted to pursue his claim ... in court under [federal labor law].” Id. (Emphasis added.)

The only case that we find extending the holding of Clayton to the collective bargaining context is a federal district court decision from the Eastern District of Pennsylvania. However, the case is only reported in the Labor Relations Reference Manual, not in any federal reporter. In Metropolitan Dist Council of Philadelphia v Pomerantz & Co, 149 LRRM 3056 (1995), the court, in a cursory four-sentence paragraph, stated that where a collective bargaining agreement merely contemplates a series of meetings among various representatives from the disputing parties that result in nonbinding arbitration, the exhaustion requirement does not “impede” the plaintiff’s ability to demand direct resolution in court. However, we note that Pomerantz does not address the identical issue presented here, because, in this case, the contract specifically provides that the grievance procedure “shall” be exhausted. This mandatory language is a far ciy from the agreement in Pomerantz, which stated that the procedure “merely contemplates a series of meetings” between the union and the employer.

B

As can be seen from the cited cases, there are two distinct areas of law relevant to this case. One area supports the proposition that grievance procedures are deemed mandatoiy unless specifically stated otherwise, and those procedures must be exhausted internally; the other supports the proposition that exhaustion is not required where the result is not the exclusive remedy of the parties. As we stated earlier, we are forced to resolve the apparent conflict when the two areas are merged.

We would hold that where the parties have expressly agreed that a particular grievance procedure “shall” be the method of resolving disputes, we will not punish the employee for exhausting those procedures before filing suit, even if the result is nonbinding arbitration.⁸ However, we recognize that the uniqueness of this case dictates its result.

We agree with the proposition stated by the United States Supreme Court in Clayton, supra at 696, that in cases where the contract does not specifically state otherwise, “[i]f the internal procedures are inadequate, the employee’s failure to exhaust should be excused, and he should be permitted to pursue his claim . . . .” (Emphasis added.) We do not feel that our decision today conflicts with the principles stated in Clayton. While the employee in Clayton was “excused” from exhausting the internal union procedure and was “permitted” to go to court to enforce his claim, we do not feel that he would have been required to file suit before exhausting his contractual remedies. Nor do we feel that the Court would hold against the union representing an employee the fact that the employee exhausted his contractual grievance procedure before filing suit, especially where, as here, the union was a party to a contract that expressly stated that the employee “shall” follow a four-step grievance procedure. We feel this principle is consistent with Republic Steel. Therefore, where the language of a contract expressly states that a grievance shall be handled in a particular manner, we would allow the statute of limitations to be tolled while the union or employee is exhausting that mandatory procedure, regardless of whether the result is nonbinding.

c

We agree with the Court of Appeals in this case that the six-year period of limitation for breach of contract actions applies. MCL 600.5807(8); MSA 27A.5807(8). A claim accrues, for purposes of the statute of limitations, when suit may be brought. Harris v City of Allen Park, 193 Mich App 103, 106; 483 NW2d 434 (1992); Smith v Treasury Dep’t, 163 Mich App 179, 183; 414 NW2d 374 (1987). For contract actions, the limitation period generally begins to run on the date of the contract breach. Id. Here, the claims accrued on the dates the grievances were filed, which were July 1984 and February 1985, respectively. We also agree with the Court of Appeals that plaintiffs’ claims should have been equitably tolled. We would hold that the statute of limitations will be tolled until exhaustion of mandatory grievance procedures provided under a contract.

We note that we need not decide whether the arbitration provision under the collective bargaining agreement was mandatory. As the dissent in the Court of Appeals noted, the grievance procedure (steps 1-4) was mandatory. 214 Mich App 191. The grievance procedures were completed in September and November 1985. Suit was filed in April 1991, less than six years after the completion of step 4 of the grievance procedure. Under the six-year period of limitation, suit was timely filed even if arbitration was not mandatory. Therefore, we need not address whether, under the terms of this unique contract, the arbitration clause was also mandatory.⁹

In conclusion, where a collective bargaining agreement expressly states that a party “shall” use the grievance procedures provided under the terms of the contract, we would hold that the union or employee is not required to file suit until the grievance procedure is exhausted, even though the result is nonbinding arbitration. Under such circumstances, the applicable statute of limitations should be equitably tolled until the conclusion of the mandatory grievance procedures.

We would affirm the decision of the Court of Appeals and would remand this case for a determination whether defendant breached the collective bargaining agreement.

Mallett, C.J., concurred with Cavanagh, J.

1 “Bumping rights” are an employee’s right to replace another employee in a different job description in the same or lower classification, thus, taking over the position.

2 Step 4 of the grievance procedures was completed on September 17, 1985, and November 12,1985, respectively. The arbitration award for both procedures was dated October 16, 1990.

3 Actually, the collective bargaining agreement provided that arbitration would be nonbinding in all matters except wages, discharge, or suspension. Initially, the union argued that the grievances in question involved wages, and thus, arbitration was binding. The board disagreed, arguing that the disputed grievances did not involve wages and, thus, arbitration was not binding. The parties submitted the issue whether arbitration was binding. The arbitrator held that the grievances did not involve wages; therefore, his decision was nonbinding. Because the parties do not raise that issue here, we assume for purposes of this appeal that the arbitration of the grievances in question is nonbinding.

4 In a situation in which the procedure is binding, generally a party may only seek limited review of the decision in court if it is alleged that the decisionmaker somehow exceeded the scope of authority. Otherwise, the decision is the exclusive remedy of the parties. If the decision is nonbinding, the parties may not sue to enforce the award, but they may sue to enforce the provisions of the underlying collective bargaining agreement.

5 Counsel for the board stated at oral argument:

If you submitted to non-binding arbitration as being mandatory, I would submit that that would make no difference. That would be a distinction without a difference because at the end of the day you don’t have a decision that forces the union and the employer to abide by it. If you have something that in effect does not give you full relief, you do not have the exhaustion requirement.

He also conceded:

If the Union chooses arbitration, the Board theoretically must go through with it. There’s no provision to opt out.

He stated later:

[A]gain, the grievance procedure is only viewed under the contract as being mandatory if you want to pursue the advisory arbitration.

Therefore, whether the arbitration clause is mandatory is not an issue.

6 United Steelworkers of America v American Mfg Co, 363 US 564; 80 S Ct 1343; 4 L Ed 2d 1403 (1960); United Steelworkers of America v Warrior & Gulf Navigation Co, 363 US 574; 80 S Ct 1347; 4 L Ed 2d 1409 (1960); United Steelworkers of America v Enterprise Wheel & Car Corp, 363 US 593; 80 S Ct 1358; 4 L Ed 2d 1424 (1960).

7 We note that internal union procedures differ from contractual grievance and arbitration procedures. The former are typically created by the union constitution and are designed to settle disputes between the employee and the union, while the latter are created by contract between the union and the employer and are designed to settle disputes between the employer and employee. Cf. Clayton, supra.

8 This is especially true where there was a dispute between the parties regarding whether arbitration of the grievances in question was nonbinding. See p 79, n 3.

9 We note that to the extent that this decision may be inconsistent with our prior decision in Ensley v Associated Terminals, Inc, 304 Mich 522; 8 NW2d 161 (1943), we expressly overrule it. Ensley was decided before the enactment of the National Labor Relations Act, 29 USC 151 et seq. and the claim would now be preempted by federal law. Furthermore, since the United States Supreme Court’s decisions in the Steelworkers Trilogy, n 6 supra, we have consistently used federal precedent for guidance in matters concerning labor law. See, e.g., Port Huron Ed Ass’n v Port Huron Area School Dist, 452 Mich 309; 550 NW2d 228 (1996); Amalgamated Transit Union, Local 1564, AFL-CIO v Southeastern Michigan Transportation Authority, 437 Mich 441; 473 NW2d 249 (1991); Bay City Ed Ass’n v Bay City Public Schools, 430 Mich 370; 422 NW2d 504 (1988).