Midland Borough School Dist. v. Midland Educ. Ass'n, PSEA

• Decision Date: 13 November 1992
• Citation: 532 Pa. 530,616 A.2d 633
• Parties: , 141 L.R.R.M. (BNA) 3022, 79 Ed. Law Rep. 148 MIDLAND BOROUGH SCHOOL DISTRICT, Appellee, v. MIDLAND EDUCATION ASSOCIATION, PSEA, Appellant.
• Court: Pennsylvania Supreme Court

Page 633

616 A.2d 633

532 Pa. 530, 141 L.R.R.M. (BNA) 3022,

79 Ed. Law Rep. 148

MIDLAND BOROUGH SCHOOL DISTRICT, Appellee, v. MIDLAND EDUCATION ASSOCIATION, PSEA, Appellant.

Supreme Court of Pennsylvania.

Argued Sept. 28, 1990.

Decided Nov. 13, 1992.

William J. Maikovich, Mary Catherine Frye, Pennsylvania State Educ. Ass'n, New Brighton, for appellant.

Bruce M. Ludwig, Philadelphia, amicus curiae, for Joint Bargaining Committee of the Pennsylvania Social Services Union and the Pennsylvania Employment Sec. Employees Ass'n.

Robert J. Masters, Thomas H. M. Hough, Beaver Falls, for appellee.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA, PAPADAKOS and CAPPY, JJ.

OPINION

NIX, Chief Justice.

The present appeal concerns the propriety of the Commonwealth Court's decision 116 Pa.Cmwlth. 191, 541 A.2d 428 affirming the Order of the Beaver County Court of Common Pleas which, sua sponte, reversed, in part, an arbitrator's award providing for a remedy in favor of Midland Education Association which was to continue in effect well beyond the expiration date of the collective bargaining agreement between the two parties.

The specific facts surrounding the immediate controversy are as follows. Appellant, Midland Education Association, is the exclusive bargaining representative for purposes of collective bargaining on behalf of a bargaining unit comprised of the professional employees of Midland Borough School District, appellee herein. Appellant and appellee were parties to a two year collective bargaining agreement effective September 1, 1984, through August 31, 1986. On April 9, 1986, Appellee School District announced that it had entered into an agreement with the Beaver Area School District to send its seventh through twelfth grade students to the Beaver Area School District on a tuition basis. This agreement eliminated all teaching positions in grades seven through twelve in the Midland School District and transferred the students in those grades to the Beaver Area School District.

On April 14, 1986, Appellant filed a grievance challenging the District's decision to "tuition out" the students, and alleged that such action constituted "subcontracting out of bargaining unit work" and thus violative of the collective bargaining agreement. While the grievance was pending, the District implemented its decision to tuition out grades seven through twelve beginning August 26, 1986.

After an evidentiary hearing on August 25, 1986, the arbitrator selected by the parties sustained the grievance. The arbitrator ordered the Appellee to rescind its contract with the Beaver Area School District, ordered the Appellee to bargain in good faith with Appellant, and to make the affected teachers whole by returning the teachers to work no later than the 1987-88 school year.

Appellee then filed a Petition to Vacate, Modify or Correct the Arbitrator's Award with the Court of Common Pleas of Beaver County. The Court of Common Pleas held that the issue of subcontracting constituted "allocation of bargaining unit work" and was thus encompassed by the terms of the collective bargaining agreement; however, the court limited its affirmance of the arbitrator's award to the period from August 26, 1986, to August 31, 1986. The lower court vacated the arbitrator's rescission of the subcontracting agreement, the requirement that the appellee resume bargaining in good faith, and the order that appellee rehire and make whole the affected teachers no later than the 1987-88 school year. The Commonwealth Court affirmed the decision of the Court of Common Pleas and concluded that the arbitrator exceeded his authority in ordering post-expiration relief. Midland Education Assoc. v. Midland Borough Sch. Dist., 116 Pa.Commw. 191, 541 A.2d 428 (1988).

Accordingly, we are now called upon to address the following two issues: first, whether the award of the arbitrator concluding that subcontracting out students constituted "allocation of bargaining unit work" was a proper exercise of his authority to resolve conflicts under a collective bargaining agreement that is silent on the issue of subcontracting; second, whether the arbitrator properly awarded a remedy which extended beyond the expiration date of the collective bargaining agreement.

On the issue of whether an arbitrator may resolve an issue not expressly covered by the collective bargaining agreement, the appellant, Midland Education Association, maintains that the role of the judiciary in reviewing such an award is limited to determining whether the subject matter may in any rational way be seen as encompassed by the terms of the agreement. Once such a determination has been favorably made, appellant argues, judicial scrutiny of the resulting award must cease. Maintaining that this principle fosters the well-established policy favoring the resolution of labor disputes and questions of arbitrability by the arbitration process itself, appellant argues that deference must be given to the conclusions and awards of arbitrators in observance of the restrictions upon judicial scrutiny.

Conversely, the appellee, Midland Borough School District, argues that an arbitrator is limited to addressing those matters which are expressly encompassed in or contemplated by the collective bargaining agreement. Because the agreement at issue is silent with respect to the issue of subcontracting, appellee argues that an award based on such an issue must fail for not having been derived from the agreement.

On the matter of the first issue, whether the arbitrator had the authority to address the issue of subcontracting students, we find that the arbitrator's authority to address that issue drew its essence from the collective bargaining agreement, and therefore was a proper exercise of the arbitrator's authority.

In United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960), one of the now famous Steelworkers Trilogy cases, the United States Supreme Court first enunciated the "essence test" as the appropriate standard of judicial review of labor arbitration awards. The Court, in arriving at this test, stated:

When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies. There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. Nevertheless, an arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award.

Id. at 597, 80 S.Ct. at 1361, 4 L.Ed.2d at 1428 (emphasis added). This Court expressly adopted the "essence test" in Community College of Beaver County v. Community College of Beaver County, Soc'y of the Faculty (PSEA/NEA), 473 Pa. 576, 594, 375 A.2d 1267, 1275 (1977). In Leechburg Area Sch. Dist. v. Dale, 492 Pa. 515, 424 A.2d 1309 (1981), we reinstated an arbitrator's decision to award full-time benefits to teachers who were laid off and then returned as substitutes. The Court applied the "essence test" in the following manner:

This so-called "essence" test draws its origins from federal decisional law which mandates judicial deference to an arbitrator's findings.

"It is the arbitrator's construction which was bargained for, and so far as the arbitrator's decision concerns the construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his."

The essence test requires a determination as to whether the terms of the agreement encompass the subject matter of the dispute. Where it is determined that the subject matter of the dispute is encompassed within the terms of the agreement, the validity of the arbitrator's interpretation is not a matter of concern to the court.

492 Pa. at 520-521, 424 A.2d at 1312-1313 (quoting United Steelworkers v. Enterprise Wheel and Car Corp., 363 U.S. at 599, 80 S.Ct. at 1362, 4 L.Ed.2d at 1429) (footnote omitted).

In the case at bar, the collective bargaining agreement between the two parties contained no provisions expressly addressing subcontracting out of students by Appellee. However, the agreement contains provisions entitled "VI. Hours of Work and Other Conditions of Employment," which expressly require that any changes in this area be agreed to by the parties, and "VIII. Job Security and Job Progression," which deals with job security provisions as provided under the Pennsylvania School Code governing "the manner in which the job security, job progression and reduction in force practices shall be effected, with respect to members of the bargaining unit." Reproduced Record at p. 68a.

While we agree with Appellee that subcontracting out bargaining unit work was not expressly addressed by the agreement, we believe, based on the above provisions, that the agreement implicitly encompasses regulations regarding such activity. The net effect of Appellee's tuitioning out its students was to eliminate all teaching positions for those grades in its own district. That consequence necessarily impinged upon the teacher's job security and condition of employment provisions, which had been previously bargained for with the School District. In Community College of Beaver County, we stated that the arbitrator's determination of

the intention of the contracting parties as evidenced by their collective bargaining agreement and the...