Baldwin-Woodville Area School District v. West Central Education Ass'n

2009 WI 51, 766 N.W.2d 591, 317 Wis. 2d 691, 2009 Wisc. LEXIS 135, 186 L.R.R.M. (BNA) 2973

• Court: Wisconsin Supreme Court
• Decided: June 17, 2009
• Docket: 2008AP519
• Status: Published

Opinions

ANN WALSH BRADLEY, J.

¶ 1. The West Central Education Association - Baldwin-Woodville Unit seeks review of an unpublished decision of the court of appeals which reversed an order of the circuit court and vacated an arbitration award.¹ The court of appeals concluded that Christine Johnson was not entitled to back pay because she failed to file a timely grievance against the Baldwin-Woodville Area School District.

¶ 2. The Association contends that the arbitration award should not be vacated. It asserts that the arbitrator's construction of the agreement was reasonable and not a perverse misconstruction. Because we conclude that the arbitrator's construction of the agreement had a foundation in reason, it was not a perverse misconstruction. Accordingly, we determine that the arbitration award should not have been vacated and we reverse the court of appeals.

I

¶ 3. Christine Johnson is a full-time teacher employed by the Baldwin-Woodville Area School District ("the District"). She is a member of the West Central Education Association ("the Association") which represents employees in negotiations with the District. The Association and the District are parties to a collective bargaining agreement that provides for final and binding arbitration of disputes that arise under the agreement.

¶ 4. The arbitration provision states in part:

It is understood that the function of the arbitrator shall he to provide an opinion as to the interpretation and application of specific terms of this Agreement. The arbitrator shall not have power, without specific consent of the parties, to either advise on salary adjustments, except the improper application thereof, or to issue any opinions that would have the parties add to, subtract from, modify or amend any terms of this Agreement. The decision of the arbitrator will be final and binding on both parties.

¶ 5. On June 26, 2006, the Association filed a grievance with the District on Johnson's behalf. The dispute went to binding arbitration before a Wisconsin Employment Relations Commission arbitrator. The subject of this appeal is the resulting arbitration award. It required the District to make Johnson whole for the wages that she would have earned between 2002 and 2005 had the District properly set her salary in accordance with the collective bargaining agreement. The facts below are taken primarily from the arbitrator's findings of fact.

¶ 6. Johnson was first employed as a BaldwinWoodville teacher in the fall of 2002. When she initially applied for the position, she provided her resume to the District. The resume indicated that she had a Bachelor's degree in elementary education and had earned an additional eleven graduate school credits.

¶ 7. Under the collective bargaining agreement, a teacher's base salary is determined by a salary schedule which fixes the salary based on the teacher's degree and additional graduate level credits. Teachers who have attained a Bachelor's degree are placed at the BA + 0 lane. Teachers who have received additional graduate credits are placed at advanced lanes such as BA + 8, BA -I- 16, depending on the number of graduate credits they have received.

¶ 8. The District initially placed Johnson at the BA + 8 lane based on the information she provided in her application. This placement was reflected in the contract prepared by the District which Johnson signed and returned. She was never asked to provide any additional information or documents verifying her education.

¶ 9. Shortly after Johnson began teaching, the District and the Association executed a new collective bargaining agreement. When Johnson signed her revised contract on October 17, 2002, she was unaware that it incorrectly placed her at the BA + 0 lane, when in fact she belonged at the BA + 8 lane. Johnson was paid at the BA + 0 level for the remainder of the 2002-2003 school year, as well as for the 2003-2004 and 2004-2005 school years.

¶ 10. In August of 2005, Johnson realized she was being underpaid. On August 30, she submitted a form entitled "Request to Change Lanes for the 2005-2006 School Year." The preprinted form addressed only the issue of earned graduate credits. Johnson did not make any separate back pay request at that time. The District approved her lane change request and placed her at the BA + 8 lane for the 2005-2006 school year. It also increased her wages prospectively to reflect the lane change, but it did nothing about any back pay for the period of time when Johnson was paid at an incorrect level.

¶ 11. Based on the testimony at the arbitration hearing, the arbitrator determined that it was not until May 2006 that Johnson realized the District had not made her whole for the unpaid wages. She and an Association representative met with the superintendent to resolve the situation. The superintendent declined to act and instead stated that he would take the matter to the School Board. It subsequently voted to deny Johnson's request for back pay. The date of the Board meeting is not in the record, but the arbitrator determined that Johnson did not learn of the Board's action until late June.

¶ 12. The Association submitted a formal grievance to the District on June 26, 2006. On July 17, the District denied the grievance "for a series of substantive and procedural reasons," including that the grievance was untimely. Subsequently, Johnson filed several additional grievances as required by the collective bargaining agreement. They were denied, and the Association gave notice that it was requesting final and binding arbitration.

¶ 13. The Association stated the issue as follows:

Did the District violate the Contractual Agreement between the [District] and the [Association] when it refused to pay back pay for the period of time in which Christine Johnson was paid at the incorrect lane on the schedule?

The District countered with the argument that the grievance was untimely.

¶ 14. To determine whether the grievance was timely, the arbitrator interpreted the provision in the collective bargaining agreement that sets forth the grievance procedure. It states in relevant part:

Grievances shall be processed in accordance with the following procedure:

Step 1

a. An earnest effort shall first be made to settle the matter informally between the teacher and his immediate supervisor.

b. If the matter is not resolved, the grievance shall be presented in writing by the teacher or employee representative to the immediate supervisor within fifteen (15) days after the facts upon which the grievance is based first occur or first become known....

¶ 15. The District argued that the "fact[] upon which the grievance is based" was Johnson's placement at the incorrect pay lane, and that she was aware of the District's mistake in August 2005. The arbitrator acknowledged the District's argument but determined that this was not the fact upon which the grievance was based. Instead, he concluded: "the fact which the grievant is challenging is the District's denial of back pay, not the District's initial placement of Johnson in the BA lane."

¶ 16. The arbitrator concluded that in August 2005, the District implicitly acknowledged that Johnson had been entitled to BA + 8 status all along and that she "could reasonably have expected that the District would rectify its error by making her whole." He determined that the critical event was the decision to deny Johnson's request for back pay: "It is thus the Board's action rejecting Johnson's request that is the critical event in the processing of this grievance[.]"

¶ 17. The arbitrator found that Johnson learned of the Board's decision in "late June." He concluded that Johnson's June 26 grievance was filed within 15 days of when Johnson learned that the Board had decided to deny her request for back pay. Therefore, he determined that the grievance was timely.

¶ 18. The arbitrator also concluded that Johnson's placement at the BA + O lane was in violation of the collective bargaining agreement.² He ordered the District to "make Christine Johnson whole for the wages she would have earned had she been maintained at the BA + 8 lane for the 2002-03, 2003-04 and 2004-05 school years."

¶ 19. The District sought judicial review of the arbitration award. The circuit court denied the District's motion to vacate the award. On appeal, the court of appeals reversed the circuit court and remanded with instructions that the award be vacated.

II

¶ 20. The role of the court in reviewing an arbitration award is essentially supervisory in nature. Racine County v. Int'l Ass'n Machinists & Aerospace Workers, 2008 WI 70, ¶ 11, 310 Wis. 2d 508, 751 N.W.2d 312. We are to ensure that the parties received what they bargained for when they agreed to resolve their disputes through final and binding arbitration. Id. Courts are guided by the statutory standards in Wis. Stat. §§ 788.10 (2007-08)³ and 788.11⁴ and by the standards developed at common law. Lukowski v. Dankert, 184 Wis. 2d 142, , 515 N.W.2d 883 (1994). We give deference to the arbitrator's factual and legal conclusions. City of Madison v. Madison Prof l Police Officers Ass'n, 144 Wis. 2d 576, 585, 425 N.W.2d 8 (1988). If the common law and statutory standards are not violated, the court should affirm the arbitrator's award. Lukowski, 184 Wis. 2d at 151.

¶ 21. Courts will vacate an award when arbitrators exceeded their powers through "perverse misconstruction,"⁵ positive misconduct, a manifest disregard of the law,⁶ or when the award is illegal or in violation of strong public policy. Racine County, 310 Wis. 2d 508, ¶ 11 {citing Wis. Stat. § 788.10(l)(d)); Lukowski, 184 Wis. 2d at 149. This case calls upon the court to determine whether the arbitrator exceeded his authority by perversely misconstruing the collective bargaining agreement.

¶ 22. In reviewing this award, we do not determine which construction — the arbitrator's or the District's — is more reasonable. See Lukowski, 184 Wis. 2d at 153 ("[T]his court will not upset the award even if this court might have decided the matter differently.") Instead, we will uphold an award if there is "some reasonable foundation for the interpretation of the contract offered in the decision." Id.

¶ 23. When there is no contractual language that would allow for the arbitrator's construction, there is no reasonable foundation for the award. Lukowski, 184 Wis. 2d at 153. In such a case, the arbitrator perversely misconstrues the contract and exceeds the authority granted by the collective bargaining agreement. City of Oshkosh v. Oshkosh Pub. Library Clerical & Maint. Employees, 99 Wis. 2d 95, 106, 299 N.W.2d 210 (1980). Whether an arbitrator has exceeded his authority by perversely misconstruing the parties' agreement is a question of law that this court reviews independently of the determinations rendered by the circuit court and the court of appeals. Racine County, 310 Wis. 2d 508, ¶ 11.

Ill

¶ 24. We recently reviewed an arbitration award in Racine County, 310 Wis. 2d 508. There, we determined that the award "raise[d] substantial separation of powers concerns" and that the arbitrator "exhibited a manifest disregard for the law by making no attempt to apply or interpret" a statutory provision that directly conflicted with the award. Id., ¶¶ 23, 33. Thus, we concluded that the arbitrator had exceeded her authority and we vacated the award. Id., ¶¶ 34, 36.

¶ 25. This case is quite unlike Racine County. Here, there is no claim that the arbitrator's award raises a constitutional concern or conflicts with a governing statute. Instead, the District claims that the arbitrator's award conflicts with the collective bargaining agreement freely negotiated between two parties with equal bargaining power. In a case such as this, the arbitrator derives his authority from the parties' contract. "The arbitrator is free to give his own construction to ambiguous language in the collective bargaining agreement but he is without authority to disregard or modify plain and unambiguous provisions." City of Milwaukee v. Milwaukee Police Ass'n, 97 Wis. 2d 15, 27, 292 N.W.2d 841 (1980). The award will be upheld if there is some reasonable foundation in the contract language for the award. Lukowski, 184 Wis. 2d at 153.

¶ 26. Here, the arbitrator recognized that the limitations provision would bar arbitration of the grievance if "the facts upon which the grievance was based" were known to Johnson more than 15 days before June 26, 2006, the day she filed the grievance. Thus, the arbitrator was required to apply this language to the facts to determine what facts the grievance was based upon and when those facts became known.

¶ 27. This court has remarked, "rare will be the case when a party aggrieved by an award will not view the arbitrator's opinion as adding to, subtracting from, or otherwise modifying the collective bargaining agreement." City of Oshkosh, 99 Wis. 2d at 105. Nevertheless, when an arbitrator's interpretation of a negotiated agreement has a foundation in reason, "[i]t would be contrary to a policy which favors the final resolution of labor disputes through arbitration to afford a litigant a review of the merits of an arbitral decision[.]" Id.

¶ 28. The District acknowledges that if the arbitrator's construction of the limitations provision in this case has a foundation in reason, the award cannot be vacated. It contends, however, that the arbitrator's construction is unreasonable because he ignored the unambiguous language of the grievance procedure outlined in the collective bargaining agreement when he determined that Johnson's grievance was timely. The District asserts that the language of the provision — "the facts upon which the grievance is based" — is plain and unambiguous, and there is nothing ambiguous "about how [the provision] applied to the undisputed facts of the case."

¶ 29. The essence of the dispute presents the question of which facts trigger the limitation. To prevail, the District must show that there was no foundation in reason for the arbitrator's construction that the "fact[] upon which the grievance is based" was the District's denial of back pay in June of 2006.

¶ 30. Under the District's interpretation of the collective bargaining agreement, the triggering event is Johnson's realization that she had been underpaid. The District has advanced alternative dates when this event could have occurred. The District has argued that this event occurred in August 2005, when she filed a request to change lanes. However, at oral argument, the District contended that at the latest, the triggering event occurred in September:

In September of 2005, when [Johnson] requests] [] the movement and [she] knows she was improperly paid, that's the trigger. That's when she knows the underlying facts. That's when she has to file her grievance. . .. The board didn't pay her the back pay ... She obviously wasn't getting the money in terms of back pay. She didn't get her money in the first payroll; she didn't get her money in the second payroll, she didn't get her money in the fifteenth payroll.

¶ 31. In its brief to the circuit court the District selected a different date on which Johnson was aware of the facts underlying the grievance. It argued that "the 'grievable' event with respect to [Johnson's] placement on the salary schedule occurred in October 2002" when she was initially placed at the BA + 0 lane. The District continued:

Even if the Court accepts [Johnson's] argument that signing the 2002-03, 2003-04, and 2004-05 individual employment contracts, all clearly setting out her placement on the BA + 0 credits lane, somehow does not prove that [Johnson] "knew" of her salary grid placement for those three years, her August 2005 request for a change to the BA + 8 lane demonstrates that she knew of the allegedly incorrect lane placement at that time.

¶ 32. The District has offered several possible dates for the triggering event, all of them contrary to the arbitrator's determination that the triggering event occurred when the Board decided to deny Johnson's back pay.⁷ In reviewing this award, we do not determine which construction is the most reasonable. Lukowski, 184 Wis. 2d at 153. Instead, we simply examine whether the determination that the arbitrator made had "some reasonable foundation." Id.

¶ 33. The arbitrator reasoned that Johnson was not aware that she had a grievance with the District in August 2005 because "she could have reasonably expected that the District... [would make] her whole." When she brought the matter to the attention of the superintendent in May 2006, she still did not know that the District would refuse to grant her request for back pay. The arbitrator determined that Johnson did not know that she had a grievance with the District until she was aware that the District had made a decision to deny back pay.

¶ 34. He stated:

The District contends the grievance failed to conform with Step 1(b), Section C, Article VI, which requires that the grievance "be presented in writing... to the immediate supervisor within fifteen (15) days after the facts upon which the grievance is based first occur or first become known."

I find that this clause does not prevent consideration of this grievance. First, the fact which the grievant is challenging is the District's denial of back pay, not the District's initial placement of Johnson in the BA lane.... It is thus the Board's action rejecting Johnson's request that is the critical event in the processing of this grievance....

Because the District has failed to provide any evidence at all that the District's action rejecting Johnson's request for back pay was more than 15 days prior to June 26, the provisions of Article VI, Section C, Step 1(b) do not make this matter untimely.

¶ 35. Upon review of the arbitrator's decision, we conclude that his construction of the limitation provision had a foundation in reason. Our obligation is not to review the merits of the award,⁸ but rather to ensure that the parties have received what they bargained for — resolution of the labor dispute within the terms of the collective bargaining agreement and by an arbitrator who has not exceeded his authority by going beyond the terms of the contract.

¶ 36. The court of appeals, however, concluded that the "arbitrator's construction of the fifteen-day time limit for filing grievances was a perverse misconstruction because it was contrary to the collective bargaining agreement's plain and unambiguous terms." Baldwin-Woodville Area Sch. Dist. v. W. Cent. Edu. Ass'n, ¶ 12, No. 2008AP519, unpublished slip op. (Ct. App. Oct. 21, 2008). It determined that the "fact underlying the grievance was that [Johnson] was paid in the wrong compensation lane for most of the 2002-03 through 2004r-05 school years." Id., ¶ 14. Therefore, the court concluded that to be timely, the grievance "was required to be filed within fifteen days of when this fact occurred or became known." Id.

¶ 37. As discussed above, we cannot agree with the court of appeals that the contract unambiguously allowed for only one possible construction. The court of appeals never considered whether the arbitrator's construction of the contract had a foundation in reason. Instead, while paying lip service to the deferential standard of review afforded to arbitration awards, the court of appeals substituted its own preferred construction of "the facts underlying the grievance." The court of appeals' construction of the contract language may well be reasonable, but the court's analysis does not comport with the limited standard of review for arbitration awards.⁹

¶ 38. Because we conclude that the arbitrator's construction of the agreement had a foundation in reason, it was not a perverse misconstruction. Accordingly, we determine that the arbitration award should not have been vacated and we reverse the court of appeals.¹⁰

By the Court. — The decision of the court of appeals is reversed.

1 Baldwin-Woodville Area Sch. Dist. v. W. Cent. Edu. Ass'n, No. 2008AP519, unpublished slip op. (Ct. App. Oct. 21, 2008) (reversing an order of the circuit court for St. Croix County, Eric J. Lundell, J., presiding).

2 The District does not challenge this conclusion.

3 Wis. Stat. § 788.10(1) reads:

In either of the following cases the court... must make an order vacating the award upon the application of any party to the arbitration:

(a) Where the award was procured by corruption, fraud or undue means;

(b) Where there was evident partiality or corruption on the part of the arbitrators, or either of them;

(c) Where the arbitrators were guilty of misconduct in refusing to postpone a hearing,... or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced;

(d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

All subsequent references to the Wisconsin Statutes are to the 2007-08 version unless otherwise indicated.

4 Wis. Stat. § 788.11(1) reads:

In either of the following cases the court.. . must made an order modifying or correcting the award upon the application of any party to the arbitration:

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award;

(b) Where the arbitrators have awarded upon a matter not submitted to them ... ;

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

5 See, e.g., City of Oshkosh v. Oshkosh Pub. Library Clerical & Maint. Employees, 99 Wis. 2d 95, 106, 299 N.W.2d 210 (1980); Winkelman v. Kraft Foods, Inc., 2005 WI App 25, ¶ 7, 279 Wis. 2d 335, 693 N.W.2d 756.

6 See, e.g., Racine County v. Int'l Ass'n Machinists & Aerospace Workers, 2008 WI 70, ¶ 11, 310 Wis. 2d 508, 751 N.W.2d 312; Lukowski v. Dankert, 184 Wis. 2d 142, 149, 515 N.W.2d 883 (1994); City of Madison v. Madison Prof'l Police Officers Ass'n, 144 Wis. 2d 576, 586, 425 N.W.2d 8 (1988).

7 Despite offering several different dates, the District has never asserted that the fact triggering the grievance occurred in May 2006, the date selected by the dissent as the latest date on which the facts underlying the grievance became known. See dissent, ¶ 46.

8 The dissent provides an argument about the merits of the grievance, concluding that the terms of the agreement were "plain" and that the fact underlying the grievance was that Johnson had been placed at the wrong pay lane. Dissent, ¶¶ 39, 47. The dissent's analysis exceeds the limited standard of review for arbitration awards.

There are good reasons for not relitigating the merits of the award upon judicial review. We recognize the dissent's concern that the arbitrator's determination allowed Johnson to maintain a stale claim. See dissent, ¶ 51. Nonetheless, we are persuaded by the amicus brief of the Alternative Dispute Resolution Section of the State Bar of Wisconsin: "The viability of arbitration as an alternative dispute resolution method relies upon the process being expedient, fair, and final. If participants are unsure that their dispute will be decided with finality, the presumptive result is that fewer persons will submit to arbitral determination, and will instead commence court-based litigation." When parties with equal bargaining power agree to be bound by the arbitrator's construction of contract terms, courts refrain from reviewing the merits of the award under most circumstances.

9 In this case, six amicus briefs were filed by organizations whose members frequently participate in arbitration: the Alternative Dispute Resolution Section of the State Bar of Wisconsin; the Wisconsin Professional Police Association; the Wisconsin State AFL-CIO; the Wisconsin Realtors Association; the AFT-Wisconsin, Milwaukee Teachers' Education Association and Professional Fire Fighters of Wisconsin, IAFF, AFL-CIO; and the AFSCME District Council 40.

All six amici argued that the court of appeals' analysis expanded the "perverse misconstruction" standard and undercut the presumption of finality in arbitration awards. The amici uniformly expressed concern that if allowed to stand, the court of appeals' analysis would reduce the viability of arbitration as an efficient means of resolving disputes in Wisconsin.

10 We note that the arbitrator's award stated that "[t]he district may structure the payments as it finds necessary, provided Johnson is made whole by December 31, 2008." This deadline elapsed as the parties pursued judicial review. The parties have not requested that we set a new deadline for payment and we therefore make no determination about the issue here.