Alaska Employment Law

Introduction

The Alaska Supreme Court issued a new opinion on Friday, April 3rd, in which it held that a public employer’s decision to outsource labor was not subject to grievance arbitration because the collective bargaining agreement in question didn’t specifically prohibit outsourcing. The case is Classified Employees Association v. Matanuska-Susitna Borough School District, et al., Slip Op. No. 6353 (Alaska Apr. 3, 2009). This summary briefly reviews the opinion and its significance.

The Mat-Su School District (”Employer”) decided to outsource some of its custodial work to an independent contractor. The Union objected and sought to compel arbitration under the existing collective bargaining agreement. The collective bargaining agreement included standard grievance resolution procedures by which claims could be resolved through different stages, ending with binding arbitration. The collective bargaining agreement had a savings or integration clause specifying that it represented the complete agreement as between the Employer and the Union. There was no clause reserving any other specific powers to the Employer. The subject of outsourcing was not addressed at all in the agreement. The Employer and Union addressed the outsourcing subject when the agreement had been negotiated, but had never been able to reach any definite agreement. The Employer refused to arbitrate the outsourcing decision. The dispute wound up before the superior court. The superior court affirmed the Employer’s decision. The Union appealed.

The Alaska Supreme Court affirmed by a 3-2 split. Justice Matthews (recently retired) authored the majority opinion, joined by Justices Eastaugh and Winfree. The majority acknowledged that there is a presumption in favor of arbitrability. However, the court noted that this presumption could not compel arbitration of subjects that were not covered by an agreement. The issue, therefore, was whether or not outsourcing was covered in the collective bargaining agreement. The court concluded it was not.

The superior court had reasoned that the grievance provision specified that it covered claims “under which an employee works,” that is, claims relating to wages, hours, and conditions of employment. Outsourcing was not a claim that related to conditions “under which an employee works.” It therefore followed in the superior court’s view that outsourcing was not a covered grievance and accordingly arbitration could not be compelled. The majority did not agree with this part of the superior court’s analysis. However, the court perceived a separate impediment to compelling arbitration. Claims could be arbitrated only if they were caused by a “misinterpretation or inequitable application” of personnel policies or terms of the collective bargaining agreement. The outsourcing grievance didn’t fit within either category.

It didn’t relate to a “misinterpretation or inequitable application” of the terms of the collective bargaining agreement because the agreement did not address outsourcing. It didn’t relate to a “misinterpretation or inequitable application” of the Employer’s personnel policies because the union was not arguing that the outsourcing policy had been misinterpreted. Instead, it was attacking the policy itself. There was no evidence or argument that the policy had been inequitably applied. The majority also noted that there was no statutory bar to outsourcing labor in the public employment context. Accordingly, the majority concluded that arbitration could not be compelled.

Chief Justice Fabe dissented, joined by Justice Carpeneti. The dissent believed that the Union’s dispute was a claim involving the interpretation of the collective bargaining agreement, and therefore should have been submitted to arbitration. The Union argued that the collective bargaining agreement prohibited outsourcing by not affirmatively permitting it. Therefore, the outsourcing issue involved interpretation of the collective bargaining agreement. The dissent criticized the majority for effectively resolving the merits of the dispute by concluding that the agreement did not address outsourcing. In the dissent’s view, the only issue that the court should have resolved was the threshold issue concerning whether or not the dispute was arbitrable. Anything else, the dissent believed, should have been submitted to the arbitrator. In the dissent’s view, the majority had essentially resolved the ultimate issue (thereby undermining the arbitrator’s role) by concluding that the collective bargaining agreement did not cover outsourcing.

The dissent noted that federal cases had upheld arbitration of implied contract terms. It viewed the outsourcing issue as embracing another form of implied contract term. The dissent acknowledged that there was some federal authority holding that outsourcing could not be subject to arbitration where not expressly covered by the terms of a collective bargaining agreement. However, the dissent viewed these cases as being “outlier” cases that did not represent the majority view or trend.

This opinion underscores the significance of the actual terms and conditions in a public employment collective bargaining agreement. The majority’s conclusion could be criticized for being too stringent and for undermining the basic principle that arbitrators should resolve the merits of a dispute. The dissent’s implied contract analysis, however, opens the door to grievance arbitration of any problem that may arise in the workplace. That approach seems clearly overbroad. An intermediate approach might be to allow grievance arbitration of implied terms where those terms relate to fundamental labor policies or goals. Outsourcing would fit within that concept because it relates to work being performed by employees in the collective bargaining unit. The work would otherwise be performed by employees in the unit but for the fact that it was outsourced to independent contractors.

It would be fair for students of the court to wonder whether or not a change in the court’s composition may lead to a different result at some point in the future. Justice Matthews recently retired and it is believed that Justice Eastaugh may want to retire at some point in the next few years, too. Justice Christen has been installed on the court. It is possible that the result here could be changed at some point if a case raising similar issues comes before the court.