Michigan Lawyers Weekly, May 10, 2010, Monday

Copyright 2010 Dolan Media Newswires
Michigan Lawyers Weekly

May 10, 2010, Monday

Provisional awards from arbitrators can be win-win

BYLINE: Barry Goldman, Esq.

Mediators often tell the parties what they would do in the case before them as though they were hearing it as an arbitrator. It's a common settlement technique.

But mediators are not arbitrators. They have no authority to issue awards. The exercise is purely hypothetical.

What would happen if arbitrators used the same technique? What would happen if arbitrators issued provisional awards?

Imagine a labor arbitration addressing the interpretation of a contract provision involving, say, layoff. The contract says layoff will be by seniority within classification. Position X is considered a member of classification A for some purposes and a member of classification B for other purposes.

The contract is silent about which criterion is to be used in making layoff decisions. The employer makes a decision to apply one criterion or another and institutes layoffs. The union files a grievance, and the case goes to an arbitrator. The parties make arguments, cite authorities, write briefs, and the arbitrator makes a decision and writes an award.

What if, instead of writing a final and binding decision, the arbitrator wrote a draft decision and circulated it to the parties? Neutral arbitrators on tripartite panels do this all the time. In that context, it is done to give the party-appointed arbitrators - the "wing men" - a chance to lobby for changes.

On the theory that a negotiated agreement is almost always preferable to an imposed solution, and that the parties who have to live with the result are in the best position to craft it, this is a good thing.

An arbitrator, after all, has only a very limited range of freedom in crafting an award. Typically, either the employer's view prevails or the union's does. There is not much room for a nuanced approach to the particular situation on the shop floor.

First, the arbitrator is not likely to know much about the situation on the shop floor, and second, even if he did, his decision is supposed to be based on principles of contract interpretation, not particular circumstances.

The two approaches may yield very different results. Principles of contract interpretation may require that the employer lay off Smith and retain Jones. The particular circumstances in the shop may make that course of action pointless, cruel, or just plain stupid.

Smith may be about to retire, and Jones may be about to have a baby. It may be that laying off Smith and retaining Jones is not what anybody wants. In that case, if the parties get a look at the arbitrator's opinion before it becomes final, it may open the door to a settlement that improves the outcome for everyone involved.

Some people believe that arbitrators have no business making deals. We can call this the "Shut Up and Rule School. " If the parties wanted a dealmaker, the argument goes, they would have contracted for one.

This is a valid point. Arbitrators do have a duty to make rulings when they are called upon to do so. But an arbitra-tor who simply parachutes in from the Land of Contract Interpretation may do more harm than good. A richer and more productive view of the arbitration process sees it as an extension of collective bargaining.

The point of collective bargaining is that the parties negotiate the terms of their relationship. From time to time, it may be necessary to call in a third-party neutral to resolve disputes, but the goal of that intervention should not be to supplant collective bargaining. It should be to assist it.

By issuing a provisional award, an arbitrator affords the parties an opportunity to engage in bargaining to improve the outcome of the case for both of them. The provisional award combined with the particular circumstances on the shop floor can be used to inform settlement discussions.

If the parties choose to take the opportunity, the outcome can be improved and the collective bargaining relation-ship strengthened. If they choose not to take it, the provisional award becomes final and the parties are in the same position they would have been if there had been no provisional award.

The suggestion has no downside.

Barry Goldman is a Bloomfield Hills-based arbitrator and mediator of workplace disputes. He is a member of the National Academy of Arbitrators, an adjunct professor at Wayne State University Law School and the Scheinman Institute for Dispute Resolution at Cornell University. Contact him at bagman@ameritech.net

LOAD-DATE: May 17, 2010