Contract Interpretation Jeffrey H. Keefe
Contract Interpretration
Instructor:
Jeffrey Keefe
Associate Professor and Director
Rutgers University Labor Center
Contract Interpretation Grievances
The moving party is the union. The union has the burden of proof. The union must demonstrate that management has violated the collective bargaining agreement. The agreement, however, may go beyond a simple reading of the contract.
Arbitrators begin by asking:
•Is there any contract language that directly applies to the fact pattern in this case?
•Is the language specific?
Specific language is controlling over general language.
Is the language clear or ambiguous?
Standard definitions of words defeat technical definitions unless the words are defined in the contract. Terms and phrases must be given consistent meaning throughout the contract (four corners test).
Clear and unambiguous language generally prevails over past practice.
What did the parties intend when they bargained the contract? Are there any minutes or notes from the negotiations?
Where the contract language is ambiguous or the contract is silent, past practice can be used to give the contract meaning. Several questions need to asked about past practices:
•Is there mutuality in the practice?
•What is the history of the practice?
•Is the practice clear and consistent?
•How many times has it been repeated?
•Has it been a widely accepted practice?
•What conditions gave rise to the practice and have those conditions changed?
Is there specific language in the contract covering the issue?
"Specific" means constituting or falling into a named category. A contract provision can constitute or fall into a named category and yet be loosely written, vague, and ambiguous in its treatment of that category. For example:
Supervisors may perform work in the bargaining unit in emergencies only, or for the purpose of instruction.
The named category is "supervisors performing bargaining unit work." Yet, what does the language mean? Regardless, such specific language will take precedence over general language.
General language deals with the issue, not as the named category but by inference only. For example:
Section 1: Short vacancies of less than 30 days duration may be filled without posting at the option of the Department Head.
At issue was an employee's birthday, a category listed in another provision of the contract as one of the eight paid holidays. The aggrieved employee had asked to work his birthday holiday, which would have entitled him to 2 1/2 times his straight-time hourly rate. Does Section 1 cover the issue?
Negotiating Specific Language Can Backfire
Specific language is so controlling in contract interpretation that when the contract is entirely silent on a particular matter, the union may be better advised to let well enough alone rather than negotiate language which does not clearly spell out its expectations. For example, the following language was proposed by a union and accepted by management:
It is agreed that all work shall be performed as much as practicable by union labor in the employer's own shop. In the event that all work cannot be rendered in the shop of the employer, the employer may contract his work to union shops only; provided that if union shops will not accept such work or are unobtainable for such work, then the employer may contract such work elsewhere.
It would appear that the union made an impressive gain on subcontracting, but the union's position would have been stronger if it had allowed the contract to remain silent on the issue. Why? Many arbitrators rely on the union recognition provision in the collective bargaining agreement to not sustain management if the subcontracting results in layoffs or the impairment of established employee benefits (provided that subcontracting is not a customary method of business or there has not been a drastic change in the underlying conditions of the jobs in question). But, when specific language on subcontracting is written into the agreement, it is not with the province of the arbitrator to go outside that language, except to fill gaps, to determine the intent of the parties. Standard arbitration criteria, which would have prevailed if the contract remained silent, are now superseded by the specific languageThe specific language now supersedes standard arbitration criteria, which would have prevailed if the contract remained silent.
Clear and Unambiguous Language Is Generally Controlling Over Past Practice
Is the language clear and unambiguous with respect to the issue?
If the words are clear and free of doubt as to their meaning, the arbitrator must stop right there. The language speaks for itself. When the language is clear, iIf an arbitrator infers a different meaning when the language is clear by resorting to some other criteria, such as past practice, this would ordinarily constitute an abuse of his authority. A court could then set aside the award. For example:
Lunch Period: "All employees in the bargaining unit shall have a thirty minute lunch period, except for ....(not including stationary engineers).”
For some thirty years, the company's stationary engineers had occupied themselves in the boiler room with no designated lunch period during their entire shift. Although their responsibilities were great, their tasks were not burdensome. They primarily read gauges, took notes in a log, occasionally turned gauges, or wiped up oil remnants with a rag. They usually ate lunch while they worked. Since the union in thirty years had never made an issue of a designated lunch period for the engineers, the company regarded the matter as settled and did not try to amend the language to bring it into conformity with its practice. Then an entirely new slate of union officers took over following a bitter election campaign. They claimed the old officers had failed to represent the members and enforce the contract. The new officers immediately filed a grievance on behalf of the engineers and pushed it into arbitration. The company pointed to a thirty year unchallenged past practice. The arbitrator sustained the union, holding that the omission of the stationary engineers fromform the exempt classifications inescapably and unambiguously placed them in the category of employees entitled to a thirty minute paid lunch.
Unambiguity Is Never Absolute
First, like beauty, unambiguity is often in the eye of the beholder. Second, language which is unambiguous in respect to a given issue can be hopelessly vague and uncertain in regard to another issue. Language is clear if it is something less than ambiguous. Third, if the language points in one direction and the practice points in another, go with the language.
The Question Reformulated:
Is the contract sufficiently clear in respect to the issue that the mutual intent of the parties can be discerned with no other guide than a simple reading of the pertinent language? If the answer is no, then the language must be ambiguous.
Ambiguity: Patent and Latent
Although ambiguous and unambiguous language are opposites, they have a reciprocal relationship to each other -- that is, they are defined one through the other. Language is said to be unambiguous when a simple reading clearly and plainly suggests a single meaning and is susceptible to only one interpretation. Counter-examples of unambiguity are:
The mother was a small farmer's daughter.
Who or what was small?
An employee who does not work the day before the holiday or the day after the holiday will not be paid for the holiday.
Does the employee need only work one day, either before or after the holiday? Or, does the employee need to work both the day before and the day after the holiday?
Patent Ambiguity:
A patent ambiguity is one which appears on the very face of the language; it is an ambiguity which arises because the language used is defective, obscure, or insensible. Not all ambiguities arise from defects in language.
Latent Ambiguity:
Language is said to possess a latent ambiguity when it is clear and intelligible and suggests a single meaning, but some extrinsic fact or evidence makes the language susceptible to more than one interpretations. For example:
The Four Corners of the Agreement
The primary rule in interpreting a written agreement is not to rely on a single word or phrase, but to learn the meaning of a questioned word by understanding how it is used in all other parts and provisions of the agreement.
Alternative interpretations of a clause are possible; one could give meaning and effect to one provision of the contract, while thean other could render the other provision meaningless or ineffective. The arbitrator will be inclined to usethe interpretation which would give effect to all provisions.
When one interpretation of an ambiguous provision would lead to harsh, absurd, or nonsensical results, while an alternative interpretation, equally consistent, would lead to just and reasonable results, the latter interpretation is used.
Arbitrators sometimes apply the principle that to expressly include one or more of a class or category in a written statement is to exclude all others. For example, an employee with 20 years service with the company, but only one year in the bargaining unit, was specifically entitled to vacation benefits based on company service by a specific provision in the written agreement. The arbitrator concluded that, since sick leave was not specifically mentioned in that provision, it must have been the intent of the parties to base sick leave credit on bargaining unit accrued service; otherwise the parties would have included it in the list of benefits based on company service.
Where general words follow an enumeration of specific terms, the general words will be interpreted to include or cover only things in the class or category listed specifically. For example, a clause providing that seniority shall govern all cases of "layoff, transfer, or other adjustment of personnel" should not be considered to require allocation of overtime on a seniority basis.
Sources of Contract Ambiguity:
Deceptively Simple or Simply Deceptive?
By far, the principal source of contract ambiguities is the inherent limitations of language itself, both oral and written. Negotiators cannot write language to cover every possible situation. Language has meaning only in respect to an issue in dispute. The most frequent problems which arise during the life of a contract are those which were not anticipated by the parties when the language was created.
Ambiguous language is often used to disguise disagreement. During negotiations, parties intentionally leave language ambiguous rather than hold up an otherwise acceptable settlement. These are purposeful ambiguities. This is language that neither side is willing to totally concede or go all out to win. The failure of the parties to reform the language when the contract is open amounts to a tacit agreement that the ambiguities may be either negotiated during the life of the agreement or settled in binding arbitration. Often these ambiguities cannot be prematurely removed without upsetting a delicate balance in the relationship between the parties of which the ambiguity is but a surface manifestation.
A Case on Promotions & Seniority
Section XXI--Crew Leader
D. In the selection of a crew leader the more senior employee in the Section where the opening occurs, and then in the Department, shall be given first consideration for the appointment to crew leader provided that he or she possesses the qualifications, ability and physical fitness to perform the job and the candidate's past conduct and attendance are satisfactory.
The grievant was the senior employee in the section with fourteen years seniority. He was passed over for another employee with ten years seniority. At the heart of the controversy was the phrase "first consideration."
The union argued that if the senior employee met the requirements of the provision, as the grievant did, then the employer should proceed no further, but was obligated to promote him to crew leader.
The company insisted that Section XXI(D) did not preclude management from considering other prospective appointees in the order of their seniority, subjecting them to the same tests as those put to the most senior employee. Then management would select the employee with the highest seniority who was deemed most capable.
The company offered proof of its interpretation by introducing a six-year record of adhering to the appointment procedure in dispute. Of 16 appointments made in that period, on only three instances was the most senior employee selected to fill the crew leader vacancy; a junior employee was selected thirteen times. Only twice did the union challenge the appointments.
The contract provided that the more senior employee be given first consideration. The senior employee must possess the qualifications, ability, and physical fitness to perform the job, and the employee's conduct and attendance must be satisfactory. The company insists that the job must be awarded to the most capable employee as measured by these criteria. The unions argued the grievant meets all the basic criteria in XXI(D). The company does not dispute this.
The arbitrator turned to the standard reference text, Elkouri and Elkouri, How Arbitration Works (DC:BNA), to gather some background on seniority disputes. He found that it is a popular misconception that unionized establishments rely exclusively on seniority for promotion. Data indicate that only 4% have a strict seniority rule, and they usually have short job ladders. Most collective bargaining agreements contain one of three forms of modified seniority clauses.
1) Relative ability -- seniority shall govern if ability and other qualifying factors are relatively equal, substantially equal, or simply equal.
2) Sufficient ability -- the senior employee will be promoted if he or she possesses sufficient ability and meets the other qualifications to perform the job. Comparisons with other employees are unnecessary and improper.
3) Hybrid -- requires consideration of both seniority and ability but the weighting may vary from case to case. Thus a high seniority, low ability employee could be passed over for an employee with greater ability and less seniority.
What type of seniority clause is XXI(D)? What is your ruling?
Now, use the promotion language in your contract. What type of seniority clause is it? Using the same facts presented in this case, but your contract language, what is your ruling?
Tests
Although not an issue in this dispute, for your information, arbitrators generally hold that tests used in determining ability must meet four criteria:
1)Tests must be related to the skill and knowledge required in the job.
2)A test will be considered fair and reasonable if it covers relevant factors, is not unduly difficult, and is given under proper conditions.
3)The test must be fairly administered, graded, and uniformly applied. It must be given to all applicants without undue advantage.
4)The test must be properly evaluated in the light of the contract provisions relating to seniority and job requirements, and it must not be used in a manner inconsistent with the contract.
Even in the absence of specific contract provisions, management has been held to give reasonable and appropriate written and oral performance exams and aptitude tests as an aid in determining the ability of competing employees.
Management Rights & Employee Rights: The De Minimis Rule
The operation of an organization can be divided between two main areas of responsibility. One area consists of the those functions which are exclusively management rights. Management certainly would like this to be as expansive as possible. Although labor wants to limit these issues, many labor leaders historically have accepted issues such as the determination of the product, the machines, the method of operation, the price, the organizational structure, the marketing strategy, and innumerable other questions as exclusively management rights. On the other hand, Neil Chamberlain attempted to isolate a pure management function and concluded that the task of coordination is the only unique function of management.
The other main area of responsibility covers the terms and conditions of employment, including the direction of the workforce. Authority in the area is not an exclusive function of management, but may be subject to collective bargaining. The sharing of this authority is in some respects regulated by law, but even more fundamentally, the degree and extent of the sharing is determined by a balancing of strengths of the parties.
No hard and fast line of demarcation exists between these two areas of responsibility. How should we decide whether something is a management function?
The Major-Minor Test or the De Minimis Rule
When the employee benefit is minor and the contract language is ambiguous or silent, the practice is considered a basic management function which can be altered or abolished at management's discretion. When the benefits are major, doubts are generally resolved in favor of the employees, and the practice is considered a basic employee benefit which cannot be withdrawn until the contract is open. This deliberate weighing of the scales as to what is major or minor to reach a decision is inescapable in any judicial process.