Southern California Gas Company v. Utility Workers Union of America, Local 132, Afl-Cio

265 F.3d 787, 2001 Daily Journal DAR 9787, 2001 Cal. Daily Op. Serv. 7913, 168 L.R.R.M. (BNA) 2206, 2001 U.S. App. LEXIS 19814, 2001 WL 1020253

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 7, 2001
• Docket: 98-56842
• Status: Published

Opinions

Opinion by Judge BRUNETTI; Dissent by Judge ALARCON.

BRUNETTI, Circuit Judge:

In this case, two utility workers were terminated after their company learned from its medical review officer, whom the company believed was a licensed physician, that both workers had failed federally-required random drug tests. Shortly thereafter, the medical review officer was arrested for impersonating a licensed physician. Once the workers’ union learned that the medical review officer was an imposter, it pressed for the workers’ reinstatement. The company refused and arbitration ensued pursuant to a collective bargaining agreement between the company and the union. The arbitrator found in the workers’ favor and ordered them reinstated. Dissatisfied with this result, the company asks us to vacate the arbitration award. We have jurisdiction under 28 U.S.C. § 1291. Under well-established principles affording us an extremely limited role in reviewing arbitration awards, we refuse to disturb the arbitrator’s decision and thus affirm.

I.

Appellants Lorenza Wilson (“Wilson”) and Gerry Daniel (“Daniel”) are members of the Utility Workers Union of America, AFL-CIO, Local 132 (“the Union”). As members of the Union, they are subject to the terms of a collective bargaining agreement (“CBA”) between their employer, Southern California Gas Company (“the Gas Company”) and the Union. The CBA provides for the arbitrability of claims relating to discipline and, more specifically, discipline arising from drug abuse, on or off the job, in violation of the parties’ negotiated agreements and government mandates. The parties agreed that arbitration “shall be the exclusive means of settling such disputes.”

In 1988, the Union and the Gas Company negotiated a comprehensive drug testing policy. The policy was modified in 1990 in response to newly-implemented federal regulations, issued by the Department of Transportation (“DOT”), which require operators of pipeline facilities (including the Gas Company) to test employees for the presence of prohibited drugs and provide employee assistance programs. The parties subsequently agreed that they would utilize the CBA’s grievance procedure in the case of any disagreement over the Gas Company’s implementation and enforcement of the new regulations. The Union also reserved the right to grieve and arbitrate any action by the Gas Company which it believed was in violation of the DOT’s regulations.

The federal drug-testing regulations at issue require, inter alia, random testing for employees working in safety-sensitive positions. The regulations governing operators of pipelines, set forth in Title 49, Section 199 et seq. in the Code of Federal Regulations, require that the anti-drug program prescribed therein be conducted according to the requirements of that title, as well as “DOT Procedures.” These “DOT Procedures” are set forth in the Procedures for Transportation Workplace Drug Testing Programs published by the Office of the Secretary of Transportation, 49 C.F.R. § 40. The DOT Procedures exhaustively detail the protocol to be followed in administering drug tests to employees, including preparation for testing, specimen collection procedures, laboratory analysis procedures, quality assurance and quality control, and, most relevant here, reporting and reviewing results. 49 C.F.R. §§ 40.1 — 40.39. Employers are responsible for compliance by their officers, employees, agents, consortia and/or contractors. Id. § 40.1.

“An essential part of the drug testing program is the final review of confirmed positive results from the laboratory.” 49 C.F.R. § 40.33. Significant here, a positive test result does not automatically identify an employee as having used drugs in violation of a DOT regulation. Before such a determination is made, an individual with detailed knowledge of possible alternative medical explanations must review the results. This review shall be performed by a Medical Review Officer (“MRO”) prior to the transmission of the results to employer administrative officials. An MRO is defined as

[a] licensed physician (medical doctor or doctor of osteopathy) responsible for receiving laboratory results generated by an employer’s drug testing program who has knowledge of substance abuse disorders and has appropriate medical training to interpret and evaluate an individual’s confirmed positive test result together with his or her medical history and any other relevant biomedical information.

40 C.F.R. § 40.3. The MRO is responsible for reviewing, interpreting, and confirming-positive results before communicating the result to an employer. Prior to making a final decision to verify a positive test result for an individual, the individual must be given an opportunity to discuss the test result with the MRO.

To comply with the regulations, the Gas Company contracted with Executive Health Group for MRO services. Through Executive Health, Gerald Barnes, a person whom all parties concerned believed to be a licensed physician, was assigned to perform MRO services for the Gas Company from mid-July 1995 to October 1995.

In 1995, Wilson and Daniel were employed in the position of crew assistant, a safety-sensitive position subject to random drug testing under the DOT’s regulations. Both were administered random tests which, according to Barnes, showed positive results for prohibited drugs. After Barnes consulted with Daniel and Wilson, he reported the results to the Gas Company. Both were immediately terminated pursuant to the parties’ agreement that anyone with fewer than fifteen years of seniority would suffer termination upon a first positive drug test. During the time Barnes served as the MRO, he also reported positive test results for nine other employees.

In April 1996, federal law enforcement authorities arrested Barnes for impersonating a licensed physician. He pleaded guilty to charges of mail fraud and illegally dispensing controlled substances. In the wake of Barnes’ arrest, the Gas Company and the Union met to discuss how to resolve the problem of Barnes’ masquerade as a doctor and the impact Barnes had on the affected employees.

Prior to Barnes’ arrest, the Gas Company had changed the company with which it contracted for MRO services. Consequently, a new MRO, Dr. Murray Lappe, took over the review of the Gas Company’s drug tests. The Gas Company contends that, after Barnes’ arrest, the Union agreed to allow Dr. Lappe to review Barnes’ notes and the aggrieved employees’ urine samples. It maintains that the Union agreed to accept those results as conclusive of whether the discharges made as a result of Barnes’ reporting were proper.

In August 1996, Dr. Lappe reviewed the Appellants’ earlier test results. He determined that the results were, in fact, valid. Although the Gas Company believed this ended the matter, the Union continued to press for reinstatement. While a dispute arose as to whether the Union waived its right to arbitrate on the Appellants’ behalf because of its purported agreement to allow Dr. Lappe to confirm Barnes’ results, the parties eventually agreed to have an impartial arbitrator resolve the following overarching issue:

With respect to each grievant, did the Company violate the parties’ collective bargaining agreement when it discharged [Daniel and Wilson]? If so, each grievant shall be reinstated and made whole; if not, their grievances shall be denied.

The three narrow issues before the arbitrator were: 1) whether the Union waived its contractual right to pursue the grievances by agreeing to a specific process of responding to the dilemma caused by the imposter Barnes; 2) if not, did the Gas Company comply with applicable federal regulations requiring review of positive test results by an MRO by having the grievants’ results reviewed by a new, qualified MRO or is the Gas Company precluded from relying on the positive test results because they were first reviewed by an imposter; and 3) were the grievants’ urine samples obtained in such a manner as to cast serious doubt on the reliability of the positive test results?

As to the first issue, the arbitrator heard evidence from the parties and found that the Union did not waive its right to challenge Appellants’ terminations due to an alleged violation of the applicable federal regulations governing drug testing.¹ Second, the arbitrator concluded that the Gas Company failed to comply with the strict requirements of the federal regulations regarding DOT drug testing and that Dr. Lappe’s later review did not cure the defect. The arbitrator did not reach the third issue. Based on the favorable finding as to the second issue, the Gas Company was ordered to reinstate and “make whole” both Appellants.

The Gas Company thereafter moved to vacate the award in district court. It also-sought a stay of Appellants’ reinstatement and the Gas Company’s obligation to award back pay. The district court denied the company’s motion to vacate, granted the motion for stay as to the back pay, but denied it as to reinstatement. Accordingly, Daniel and Wilson returned to work at the Gas Company subject to their agreement to submit to a drug test before returning to duty.

II.

It is well-settled that federal labor policy favors the resolution of disputes through arbitration; thus, judicial scrutiny of an arbitrator’s decision is extremely limited. Stead Motors v. Auto. Machinists Lodge, 886 F.2d 1200, 1208 n. 8 (9th Cir. 1989) (en banc). We review de novo a district court’s decision confirming an arbitration award. Hawaii Teamsters and Allied Workers Union, Local 996 v. United Parcel Serv., 241 F.3d 1177, 1180-81 (9th Cir.2001).

In reviewing an arbitral award, “[c]ourts ... do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.” Id. (citing United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)). If an “ ‘arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,’ the fact that ‘a court is convinced he committed serious error does not suffice to overturn his decision.’ ” Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62, 121 S.Ct. 462, 148 L.Ed.2d 354 (2000) (quoting Misco, 484 U.S. at 38, 108 S.Ct. 364). Only where the arbitrator ignores the contract’s plain language, choosing instead to dispense his own brand of industrial justice, may we question his judgment. Teamsters Local Union 58 v. Boc Gases, 249 F.3d 1089, 1093 (9th Cir.2001).

III.

The Gas Company seeks to vacate the arbitration award pursuant to section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. While we accord an arbitrator’s decision a “nearly unparalleled degree of deference,” Stead Motors, 886 F.2d at 1205, we have identified narrow exceptions to that general rule. Vacatur of an arbitration award under section 301 of the LMRA is warranted: (1) when the award does not draw its essence from the collective bargaining agreement and the arbitrator is dispensing his own brand of industrial justice; (2) where the arbitrator exceeds the boundaries of the issues submitted to him; (3) when the award is contrary to public policy; or (4) when the award is procured by fraud. See SFIC Properties, Inc. v. Int'l Ass’n of Machinists & Aerospace Workers, Dist. Lodge 94, 103 F.3d 923, 925 (9th Cir.1996). The Gas Company challenges the award under the first and third grounds. We find both contentions to be without merit.

The Gas Company first argues that the arbitration award does not “draw its essence” from the CBA because it provides for the immediate termination of employees with fewer than 15 year's of seniority who test positive for prohibited drugs. The Gas Company contends that because the arbitrator opined that Daniel and Wilson were, in fact, drag users, the arbitrator had no choice but to uphold Appellants’ terminations under the CBA.

The Gas Company’s argument misses the mark. The relevant issue before the arbitrator was not whether Daniel and Wilson had in fact taken prohibited drugs, but rather whether their drug tests were properly administered so as to justify the loss of their jobs. At the arbitration hearing, the parties stipulated that they had agreed, effective March 1994, that an employee who tested positive on a random DOT drug test, and who had been in the Company’s service fewer than 15 years, would be terminated.

The clear import of this agreement, as the arbitrator understood it, is that an employee must fail a drug test given in accordance with DOT procedures in order to be subject to discipline. To “fail a drug test” under 49 C.F.R. § 40 means “that the confirmation test result shows positive evidence of the presence under DOT Procedures of a prohibited drug in an employee’s system.” Id. (emphasis added). Since the arbitrator found that the DOT procedures were not complied with in the tests’ administration, he deemed the Appellants’ terminations to be unwarranted under the parties’ agreement.

The Gas Company would have the arbitrator ignore the DOT regulations in upholding the Appellants’ discharge. In so doing, the Gas Company places undue emphasis on the arbitrator’s statement that “the evidence overwhelmingly demonstrates that the grievants in this case had, in fact, taken illegal drugs.” That the arbitrator gratuitously offered his opinion regarding the Appellants alleged drug use is irrelevant. The arbitrator was not charged with making a factual “finding” regarding such drag use. In this vein, it is worth noting that the arbitrator is no more a licensed physician than was “Dr. Gerald Barnes.” Neither is qualified, under DOT regulations, to confirm the presence of prohibited drugs from a urine sample, nor is that what the parties asked the arbitrator to determine.

The relevant issue for determination required the arbitrator to draw a legal conclusion regarding whether the Gas Company followed DOT procedures in testing the Appellants before it discharged them. The issue was as follows:

[D]id the Company comply with applicable federal regulations requiring review of positive test results by a medical review officer (MRO) by having the griev-ants’ results reviewed by a new, qualified MRO or is the Company precluded from relying on the positive test results because they were first reviewed by an imposter?

The arbitrator unequivocally decided that “the later review of the test results by Lappe could not and did not cure the defect caused by their initial review and certification by the imposter Barnes.” This refusal to excuse the initial mishap was based upon the arbitrator’s reading of the “plain and unambiguous language” of 49 C.F.R. § 40.33(a)(1) governing MRO review. Consequently, the arbitrator affirmed the Union’s position that “the Regulation is clear: it requires certification of a positive test by a licensed physician (the MRO) before the Company is told and therefore before discipline is imposed.”

At the same time, the arbitrator rejected the Gas Company’s “no harm, no foul” argument that Daniel and Wilson were not harmed by the imposter’s certification in light of a later re-test by a qualified MRO. The arbitrator resolved this question by examining the reasons why a positive test result must be reviewed by a qualified physician before the Gas Company takes action. Noting that “[rjandom drug testing is, of course, a serious invasion of a person’s privacy,” the arbitrator considered the grievous effect a false positive result could have on a person’s livelihood.

Finally, the arbitrator rejected the Gas Company’s arguments that the grievances should be denied because it “substantially complied” with the drug regulations. As the arbitrator noted, adopting a substantial compliance standard would create a slippery-slope which could eventually have the effect of undermining the interests the procedural requirements are designed to protect.

The dissent’s ultimate concern in this case echoes that of the arbitrator’s here. Reluctantly finding in the Appellants’ favor, the arbitrator stated:

I am frank to admit, however, that sustaining these grievances is troubling. I have little doubt that both grievants had the illegal substances in question in their bodies, based on the evidence presented, and I am not particularly happy about ordering them reinstated. That outcome, however, is compelled by the clear language of the Regulation, by the policies underlying the MRO review, and by the problems posed by a “substantial compliance” interpretation.

But, as the arbitrator’s final decision reflects, whether the arbitrator had “little doubt” about the employees’ purported drug use is neither here nor there. The arbitrator found that, under the parties’ agreement, the Appellants were entitled to have the Gas Company follow the DOT’s drug testing procedures before imposing discipline. While the Gas Company may view the Barnes debacle as an easily-correctable, technical deviance from mandated procedures, the arbitrator did not. This is precisely the type of legal conclusion which a court may not disturb. As the Supreme Court recently reiterated, “[cjourts are not authorized to review the arbitrator’s decision on the merits despite allegations that the decision rests on factual errors or misinterprets the parties’ agreement.” Major League Baseball Players Association v. Garvey, 532 U.S. 504, 121 S.Ct. 1724, 1728, 149 L.Ed.2d 740 (2001) (citing Misco, 484 U.S. at 36, 108 S.Ct. 364). Because we' agree that the arbitrator’s decision “drew its essence” from the parties’ agreement, we affirm as to this ground.

IV.

We turn to the Gas Company’s argument that the arbitration award must be vacated because it is contrary to public policy. “[T]he question of public policy is ultimately one for resolution by the courts.” United Food & Commercial Workers Int’l Union, Local 588 v. Foster Poultry Farms, 74 F.3d 169, 174 (9th Cir. 1995) (quoting Misco, 484 U.S. at 43, 108 S.Ct. 364 (quotations omitted)). While a court should be reluctant to do so, it may vacate an award for violating a public policy that is “explicit,” “well-defined,” and “dominant” as “ascertained by reference to the laws and legal precedents and not from general considerations of proposed public interest.” Misco, 484 U.S. at 42, 108 S.Ct. 364. The court must focus on the award itself, not the behavior or conduct of the party in question. In this case, for example, the court’s inquiry is not whether drug use in a safety-sensitive position violates some public policy, but rather whether Daniel’s and Wilson’s reinstatement pursuant to the arbitration award contravenes some explicit, well-defined, and dominant public policy. See Eastern Assoc. Coal Corp., 121 S.Ct. at 467, 121 S.Ct. 462; Stead Motors, 886 F.2d at 1212. In other words, to vacate an award on public policy grounds, the court must find that “the policy is one that specifically militates against the relief ordered by the arbitrator.” Stead Motors, 886 F.2d at 1212-1213.

The Gas Company contends that the “unconditional reinstatement” of an employee who fails a drug test runs contrary to an “explicit, well-defined and dominant public policy” such that the arbitrator’s decision should be overturned. Stead Motors, 886 F.2d at 1212. In support of its argument, the Gas Company cites a DOT regulation, applicable to this case, which provides that “[a]n operator may not knowingly use as an employee any person who fails a drug test required by this part and the medical review officer makes a determination [that no legitimate medical explanation for the confirmed positive test result exists].” 49 C.F.R. § 199.9(a)(1).

We find the Gas Company’s argument to be misguided. Accepting it would require us to find that the Appellants in fact “failed a drug test” under the DOT’s regulations. Under the regulations, this initial premise is unsound.

To “fail a drug test” under 49 C.F.R. § 40 means “that the confirmation test result shows positive evidence of the presence under DOT Procedures of a prohibited drug in an employee’s system.” Id. (emphasis added). The regulations make it clear that, in order to fail a drug test, the test must be valid under DOT procedures. The employer is responsible under the regulations for ensuring compliance with those procedures. Here, no one disputes that the proper procedures were not followed in the first instance. The Gas Company argues that, notwithstanding the mishap with the phony doctor, Daniel and Wilson essentially failed their drug tests because a qualified MRO later confirmed that Daniel and Wilson had taken prohibited drugs. The Gas Company therefore contends that it is against public policy to employ Daniel and Wilson based upon the DOT’s prohibition against an employer “knowingly us[ing] as an employee any person who fails a drug test.”

The problem with this argument is that it has no logical end. The DOT prohibits an employer from knowingly employing a person who fails a drug test that the DOT specifically requires. The DOT set up the procedures that must be followed before a person can be branded a “confirmed drug user.” It is only through these carefully-crafted procedures that an employer may gain access to information regarding its employees’ drug use. If the procedures are not followed, a person is not deemed to have failed a drug test, under the regulations, and there is no prohibition against employing him. If a “substantial compliance” standard were adopted, there would be no way to draw the line as to the circumstances under which it could be said that an employee has “failed a drug test” under the DOT regulations. The exceptions would inevitably swallow the regulations.

Furthermore, the DOT regulations at issue do not exist in a vacuum. Once the government requires an employer to administer random drug tests to a certain class of workers, the Fourth Amendment is implicated; thus, the “search” effected by a urine test is subject to the Fourth Amendment’s reasonableness requirement. See Skinner v. Railway Labor Executives’ Assoc., 489 U.S. 602, 615-617, 634, 109 S.Ct. 1402, 103 L.Ed.2d 639 (1989) (“Because it is clear that the collection and testing of urine intrudes upon expectations of privacy that society has long recognized as reasonable, ... these intrusions must be deemed searches under the Fourth Amendment.”). To excuse non-compliance with the regulations-or to adopt a substantial compliance standard-may have the unintended effect of vitiating an individual’s Fourth Amendment rights. In Skinner, the Supreme Court found government-mandated drug testing of safety-sensitive employees to be reasonable under the Fourth Amendment, in part, because of the “limited discretion exercised by ... employers under the [government-mandated] regulations.” Skinner, 489 U.S. at 634, 109 S.Ct. 1402. Thus, ensuring that the guidelines are followed vindicates a competing policy concern.

The dissent cites Eastern Associated Coal Corp. v. United Mine Workers, Dist. 17, 531 U.S. 57, 121 S.Ct. 462; 148 L.Ed.2d 354 (2000) and United Food & Commercial Workers Int’l Union, Local 588 v. Foster Poultry Farms, 74 F.3d 169 (9th Cir.1996), in support of its argument that we should vacate the arbitration award on public policy grounds. Both cases are inapposite. Eastern Associated involved the reinstatement of employees whose positive drug tests indisputably complied with all regulatory procedures. 121 S.Ct. at 465-66. And, in Foster Poultry, while one employee initially disputed whether proper procedures were followed for his random drug test, that was not an issue in the case. Instead, the court examined whether it was appropriate for the arbitrator to reinstate two employees based on the fact that the employer refused to bargain with the Union over the non-mandatory and discretionary aspects of its drug testing program. The court ultimately concluded that the DOT regulations (governing commercial truck drivers) “do not express an explicit, well-defined and dominant public policy permanently enjoining the employment of commercial motor vehicle drivers who test positive for drug use.” 74 F.3d at 174 (internal quotations omitted). The court did not address the question whether public policy militates against reinstating an employee whose drug test did not technically comply with all government-mandated procedures.

Here, no one disputes that the Appellant’s testing did not comply with all applicable DOT procedures. Indeed, the Gas Company concedes as much by arguing that it “substantially complied” with the regulations. In this regard, we respectfully disagree with the dissent’s characterization of Wilson and Daniel as “confirmed drug users” because neither failed a drug test as defined in the DOT regulations.

The party seeking to vacate the arbitration award bears the burden of showing that the award violates public policy. Foster Poultry, 74 F.3d at 175. Applying the proper framework here, the question presented is whether an explicit and well-defined public policy prohibits the reinstatement of two employees whose drug tests did not comport with DOT regulations. Neither the Gas Company nor the dissent has pointed to any authority which identifies such a public policy, and we have found none. Accordingly, we reject the Gas Company’s challenge to the arbitral award on public policy grounds.

We note that the Appellants agreed to submit to DOT drug tests before returning to duty. And, of course, nothing in the arbitrator’s remedy changes the Appellants’ continuing obligations to submit to random tests. Thus, the dissent’s fear that we are returning confirmed drug users to safety-sensitive positions is unfounded in all respects.

V.

We take very seriously the dissent’s concern over employing “confirmed drug users” in safety-sensitive positions. But that is not the case here. In this case, the parties explicitly agreed, and the DOT regulations mandate, that random drug tests to which Gas Company employees are required to submit must comply with DOT procedures. The arbitrator found that Daniel and Wilson were entitled to return to work because the random drug tests which led to their discharge were invalid under those government-mandated procedures. “Because the parties have contracted to have disputes settled by an arbitrator chosen by them rather than by a judge, it is the arbitrator’s view of the facts and of the meaning of the contract that they have agreed to accept.” Misco, 484 U.S. at 37-38, 108 S.Ct. 364. Furthermore, the arbitrator’s award does not violate any explicit, well-defined, and dominant public policy. Accordingly, we AFFIRM.

1 . The dissent's characterization of the parties’ pre-arbitration agreement to have the Appellants' test results verified by a “third MRO whose decision would be final” finds no basis in the record. The parties disputed whether the Union agreed to waive its right to arbitra-lion, thus making any future review “final.” In fact, this issue was submitted to the arbitrator for resolution. The arbitrator explained, "[w]ilh respect to the waiver issue, the parties introduced conflicting evidence on their respective understandings of what they 'agreed' to following discovery of Barnes' fraud.” The arbitrator found that the Union did not waive its contractual right to grieve the discipline imposed by agreeing to have the test results resubmitted to Dr. Lappe. In so doing, the arbitrator rejected the Gas Company's suggestion that the parties' agreement to submit the test to a qualified MRO would end the matter. Therefore, discussion of the parties' pre-arbitration agreement is simply a red herring.