American Federation of State, County and Mun. Employees, AFL-CIO, Michigan Council 25 and Local 1416 Highland Park School Dist. Bd. of Educ., AFL-CI

Decision Date21 April 1998
Docket NumberNo. 14,AFL-CI,Docket No. 104934,MICHIGAN,14
Citation457 Mich. 74,577 N.W.2d 79
Parties, 158 L.R.R.M. (BNA) 3103 AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES,COUNCIL 25 AND LOCAL 1416, Plaintiffs-Appellees, v. BOARD OF EDUCATION OF the SCHOOL DISTRICT OF the CITY OF HIGHLAND PARK, Defendant-Appellant. Calendar
CourtMichigan Supreme Court
OPINION

MICHAEL F. CAVANAGH, Justice.

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 N.W.2d 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, 542 N.W.2d 333.

II

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 N.W.2d 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.

III

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...

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