In re Grievance Arbitration Between State of Hawaii Organization of Police Officers , 135 Haw. 456 ( 2015 )

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Electronically Filed
Supreme Court
SCWC-10-0000077
29-JUN-2015
08:03 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
In the Matter of the Grievance Arbitration Between
STATE OF HAWAII ORGANIZATION OF POLICE OFFICERS (SHOPO),
exclusive representative for Bargaining Unit 12, Police,
on behalf of SHELLY L. RODRIGUES, JAMES A. RODRIGUEZ,
and SHANE Y. SOKEI,
Respondents/Grievants-Appellants,
and
COUNTY OF KAUAʻI and KAUAʻI POLICE DEPARTMENT,
Petitioners/Employers-Appellees.
SCWC-10-0000077
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-10-0000077; S.P. NO. 09-1-0031)
June 29, 2015
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON JJ.
OPINION OF THE COURT BY POLLACK, J.
The County of Kauaʻi and Kauaʻi Police Department (the
Employer) filled five police sergeant positions in 2007 through
internal promotions. The State of Hawaii Organization of Police
Officers (SHOPO) challenged the non-promotions of three police
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officers through the grievance procedures of the collective
bargaining agreement governing the parties. When the parties
were unable to resolve the grievances, the matter was submitted
to arbitration for final determination. After finding that the
promotions were subjective, arbitrary, and capricious in
violation of the collective bargaining agreement, the arbitrator
awarded the three officers promotions and back pay. The Circuit
Court of the Fifth Circuit (circuit court) found that it was
beyond the scope of the arbitrator’s authority to award
promotions and vacated the arbitrator’s remedy. 1 The principal
issue before this court is whether it was proper for the circuit
court to vacate the arbitrator’s remedy.
I. BACKGROUND
In May 2007, the Employer notified SHOPO that it would
fill five police sergeant positions from the existing
promotional eligible list, which was based on the results of
written examinations. The acting chief of police decided to add
an oral interview to the promotional process. An examination
panel was assembled, and the interviews were conducted in August
2007. Five candidates were selected to the police sergeant
positions, and following the appointments, three of the
1
SHOPO appealed the decision of the circuit court to the
Intermediate Court of Appeals (ICA), and the ICA vacated the circuit court’s
decision.
2
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unsuccessful candidates filed grievances alleging violations of
the collective bargaining agreement.
The grievances were brought under the collective
bargaining agreement that pertains to the employment of state
and county police officers (agreement). 2 The agreement is
between SHOPO--the exclusive representative for public employees
in the police officers unit--and the State of Hawaiʻi, City and
County of Honolulu, County of Hawaiʻi, County of Maui, and County
of Kauaʻi. The agreement includes a four-step grievance
procedure that provides for the final settlement of unresolved
grievances through “final and binding” arbitration. 3
The four-step grievance procedure is set out in
Article 32, which provides for arbitration as the final step and
restricts review of the decision on appeal: “The award of the
Arbitrator shall be accepted as final and binding. There shall
be no appeal from the Arbitrator’s decision by either party, if
such decision is within the scope of the Arbitrator’s authority
as described below . . . .” Article 32 includes a limitation on
the arbitrator’s authority: “The Arbitrator shall not have the
2
The parties agreed that Articles 1, 14, 32, 35, and 47 were
substantially the same between the contract that was in effect July 2003
through June 2007 and the contract in effect from July 2007 through June
2011. All quotations from the agreement in this opinion are from the
agreement effective July 2007.
3
Article 32 provides for the grievance procedure to govern the
parties under the agreement; it includes provisions regarding the selection
of an arbitrator, the arbitrator’s jurisdiction, a pre-hearing, discovery,
and the arbitration award.
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power to add to, subtract from, disregard, alter, or modify any
of the terms of this Agreement.” Article 32 also sets forth the
arbitrator’s authority:
The Arbitrator’s authority shall be to decide whether the
Employer has violated, misinterpreted or misapplied any of
the terms of this Agreement and in the case of any action
which the Arbitrator finds unfair, unjust, improper or
excessive on the part of the Employer, such action may be
set aside, reduced or otherwise changed by the Arbitrator.
The Arbitrator may, in the Arbitrator’s discretion, award
back pay to recompense in whole or in part, the employee
for any salary or financial benefits lost, and return to
the employee such other rights, benefits, and privileges or
portions thereof as may have been lost or suffered.
Article 47 of the agreement specifically addresses
promotions: “Promotions shall be based upon fair standards of
merit and ability, consistent with applicable civil service
statutes, rules and regulations and procedures.” The “Rights of
the Employer” are provided for in Article 11; it includes a
single section titled “Management Rights” that provides, “The
Employer reserves and retains, solely and exclusively, all
management rights and authority, including the rights set forth
in Section 89-9(d)(1)-(8), Hawaii Revised Statutes, except as
specifically abridged or modified by this Agreement.” 4
4
HRS § 89-9(d) (Supp. 2007) prohibits agreement to a provision
that “would interfere with the rights and obligations of a public employer
to” do certain listed functions including the right to “[h]ire, promote,
transfer, assign, and retain employees in positions.” Notwithstanding HRS §
89-9(d)’s prohibition of agreements that interfere with certain management
rights, it also provides the following:
This subsection shall not be used to invalidate provisions
of collective bargaining agreements in effect on and after
June 30, 2007, and shall not preclude negotiations over the
procedures and criteria on promotions . . . .
(continued . . .)
4
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The grievances of the three police officers asserted
violations of the collective bargaining agreement. The
grievants contended that the promotional process used by the
Employer was subjective, arbitrary, and capricious. Each
grievance statement stated the following under the heading
“remedy sought”: “That the employer promote the Grievant to
Police Sergeant on the effective date of promotion and be made
whole.”
The parties were not able to settle the grievances
through the first three steps of the grievance procedures before
the Employer, and in May 2008, SHOPO sent the Employer a Notice
of Intent to Arbitrate on behalf of each grievant. Larry L.
Cundiff, Sr. was selected as the sole arbitrator for
determination of the three grievances (arbitrator). A
consolidated arbitration hearing on the grievances was held
before the arbitrator for three days in January 2009.
At the beginning of the hearing, the arbitrator
stated, “Both parties have agreed that this matter is properly
before the arbitrator.” After a brief discussion with both
attorneys off the record, the arbitrator stated that the parties
previously agreed that SHOPO had the right to challenge “the way
(continued . . .)
Violations of the procedures and criteria so negotiated may
be subject to the grievance procedure in the collective
bargaining agreement.
HRS § 89-9(d).
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that the promotions were done; however, they do not challenge
the [Employer’s] right to make the promotions.” During the
hearing, a total of seventy-five exhibits were admitted into
evidence, and eight witnesses testified. Testimony indicated
that there were three to five vacant sergeant positions at that
time.
In the arbitrator’s June 2, 2009 decision, the
arbitrator found that the matter was properly before the
arbitrator and that the arbitrator had jurisdiction over the
grievances. 5 The arbitrator’s decision provided an overview of
the testimony presented regarding the three officers’ work
history and qualifications. The arbitrator found that the
grievants were denied promotions “due to subjective, arbitrary
and capricious promotional practices.” The arbitrator awarded
the grievants promotions to sergeant positions, back pay, and
“any additional rights, benefits and privileges they would have
been entitled to had they been promoted.”
SHOPO filed a motion to confirm the arbitrator’s award
in the circuit court on June 23, 2009, arguing that the award
was valid, binding, and issued within the arbitrator’s
authority. 6 The Employer opposed SHOPO’s motion and moved for
5
The arbitrator determined he had authority based on the section
titled “Arbitrators Authority” in Article 32.
6
The Honorable Kathleen N.A. Watanabe presided in all circuit
court proceedings in this case.
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the circuit court to vacate the award on the basis that the
arbitrator “exceeded his authority” under the agreement. The
Employer also maintained that the arbitrator’s actions “were
beyond the jurisdiction of negotiation and arbitration, as well
as a violation of public policy.” SHOPO opposed the Employer’s
motion to vacate and contended that the arbitrator had the
jurisdiction and authority to decide the matter and noted that
the Employer conceded in pre-arbitration proceedings that SHOPO
had the right to grieve the subject promotions.
The circuit court heard argument on the motions in a
July 29, 2009 hearing. The court stated during the hearing that
the grievances were properly before the arbitrator and that the
Employer had taken “inconsistent positions” regarding whether
the promotions were a proper subject of arbitration. The
circuit court stated, “I believe the employer is estopped from
arguing otherwise, because they agreed to final and binding
arbitration.” The circuit court continued, “They agreed that
this was a proper subject.”
However, the circuit court also found that it was
beyond the scope of the arbitrator’s authority under the
agreement and HRS § 658A-23 to award promotions and back pay.
The circuit court found that the agreement in this case was
distinguishable from the collective bargaining agreement in
University of Hawaiʻi Professional Assembly v. University of
7
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Hawaiʻi, 66 Haw. 214, 659 P.2d 720 (1983) (per curium)
[hereinafter UHPA II], 7 which the circuit court found granted the
arbitrator greater authority.
On August 6, 2009, the circuit court granted in part
and denied in part the Employer’s motion to vacate. The court
confirmed the arbitrator’s findings of facts and conclusions
with the exception of the arbitrator’s remedy, which the court
vacated. The court reasoned that the grievances were properly
before the arbitrator and within his jurisdiction, but the court
also found that the arbitrator’s remedy exceeded his authority
and powers granted under Article 32 of the agreement in
violation of HRS § 658A-23. In accordance with its rulings, the
court denied SHOPO’s motion to confirm the arbitrator’s award
and remanded the case for a rehearing on the issue of remedy.
SHOPO filed a notice of appeal, which was dismissed by the ICA
for lack of appellate jurisdiction.
On July 8, 2010, the arbitrator issued a decision
regarding the circuit court’s order denying the Employer’s
request to vacate the arbitrator’s remedy. The arbitrator’s
7
In a series of four cases decided on the same day in 1983, this
court clarified judicial review of arbitration decisions in the context of
public sector collective bargaining agreements providing for final and
binding arbitration. See Univ. of Haw. Prof’l Assembly v. Univ. of Haw., 66
Haw. 207, 659 P.2d 717 (1983) (per curium) [hereinafter UHPA I]; UHPA II, 66
Haw. 214, 659 P.2d 720; Univ. of Haw. v. Univ. of Haw. Prof’l Assembly, 66
Haw. 228, 659 P.2d 729 (1983) (per curium) [hereinafter UHPA III]; Univ. of
Haw. v. Univ. of Haw. Prof’l Assembly, 66 Haw. 232, 659 P.2d 732 (1983) (per
curium) [hereinafter UHPA IV].
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decision stated that the parties agreed to a rehearing on the
remedy issue before the arbitrator by submitting their arguments
and positions via memoranda. The arbitrator concluded that the
remedy from his previous decision would “remain unchanged” based
on the arbitrator’s “reading and interpretation of the plain
language and meaning of the ‘Arbitrator’s Authority’ as set
forth in Article 32” of the agreement.
The arbitrator also made several findings with regard
to his authority under Article 32 including that “the words
‘otherwise change’ are clear and unambiguous” and grant the
arbitrator the authority to grant promotions as part of the
remedy to resolve grievances. The arbitrator found that the
remedy was consistent with past practices of parties under the
agreement. The arbitrator also found that the Employer “never
contended during the arbitration hearings that the language in
Article 32 was not sufficiently worded to permit the Arbitrator
to grant a promotion to remedy the grievances.” Additionally,
the arbitrator noted that he had “previously found” that the
grievants were “well qualified based on merit and ability for
promotion,” as shown by evidence presented during the
arbitration hearings.
SHOPO filed a motion to confirm the arbitrator’s July
8, 2010 award arguing that the arbitrator’s remedy “should be
confirmed as a ‘final and binding’ decision that was issued
9
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within the arbitrator’s authority.” The Employer opposed
SHOPO’s motion and filed a motion to vacate. On September 20,
2010, the circuit court issued orders resolving the parties’
motions. The court granted in part and denied in part SHOPO’s
motion to confirm the award; as it had done previously, the
court confirmed the arbitrator’s “findings and decisions in all
respects” but vacated based on the arbitrator’s remedy. SHOPO
timely filed a notice of appeal.
In a published opinion, the ICA first considered
SHOPO’s contention that the Employer was estopped from asserting
that the arbitrator exceeded his authority in awarding
promotions because the Employer failed to raise this argument
during arbitration. The ICA rejected SHOPO’s estoppel argument,
distinguishing the UHPA II case from this case based primarily
on the wording of the respective agreements. The ICA also found
that the Employer contested the arbitrator’s authority to
promote the grievants during the arbitration hearings.
With regard to the remedy awarded by the arbitrator,
the ICA concluded that pursuant to the agreement and HRS § 89-
9(d), the arbitrator did not exceed his authority in awarding
promotions and the circuit court erred in finding otherwise. In
its analysis, the ICA considered the public policies set forth
in HRS §§ 76-1 and 89-9 but did not expressly resolve whether
the agreement was contrary to public policy. Accordingly, the
10
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ICA affirmed in part and vacated in part the circuit court’s
August 6, 2009 and September 20, 2010 orders and remanded the
case to the circuit court for confirmation of the arbitrator’s
decision in its entirety.
The Honorable Lisa M. Ginoza concurred and dissented
in the decision, arguing that the arbitrator exceeded his
authority in granting the remedy (ICA dissent). The Employer
requests this court to adopt the analysis of the ICA dissent,
which interpreted the agreement as reserving the right to
promote solely to the Employer and to the exclusion of the
arbitrator.
II. STANDARDS OF REVIEW
“[J]udicial review of an arbitration award is confined
to ‘the strictest possible limits,’” and a court may only vacate
an award on the grounds specified in HRS § 658A-23 and modify or
correct on the grounds specified in HRS § 658A-24. See Daiichi
Haw. Real Estate Corp. v. Lichter, 103 Hawaiʻi 325, 336, 82 P.3d
411, 422 (2003). This standard applies to both the circuit
court and the appellate courts. See id. (noting that HRS §§
658–9 and –10 “also restrict the authority of [appellate courts]
to review judgments entered by circuit courts confirming [or
vacating] the arbitration awards” (quoting Mars Constructors,
Inc. v. Tropical Enters., Ltd., 51 Haw. 332, 336, 460 P.2d 317,
319 (1969)).
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The circuit court’s “findings of fact will not be set
aside unless they are clearly erroneous.” Beneficial Haw., Inc.
v. Casey, 98 Hawaiʻi 159, 167, 45 P.3d 359, 367 (2002).
A finding of fact is clearly erroneous when, despite
evidence to support the finding, the appellate court is
left with the definite and firm conviction in reviewing the
entire evidence that a mistake has been committed. A
finding of fact is also clearly erroneous when the record
lacks substantial evidence to support the finding. We have
defined ‘substantial evidence’ as credible evidence which
is of sufficient quality and probative value to enable a
person of reasonable caution to support a conclusion.
Daiichi, 103 Hawaiʻi at 337, 82 P.3d at 423 (citations
omitted) (quoting Beneficial Haw., Inc. v. Kida, 96 Hawaiʻi
289, 305, 30 P.3d 895, 911 (2001)) (internal quotation
marks omitted). We review the circuit court’s conclusions
of law under the right/wrong standard. Id.
III. DISCUSSION
The Employer raises one issue in its Application for
Writ of Certiorari, whether “the ICA gravely erred in holding
that the Arbitrator did not exceed his powers under the
applicable collective bargaining agreement . . . by ordering
that the Grievants be promoted to the position of Sergeant and
awarding the attendant back pay and benefits.” The Employer
argues that the Arbitrator exceeded his authority under the
agreement in promoting the grievants and maintains that the
agreement expressly reserves the right to promote to the
Employer. The Employer also submits that the arbitrator’s
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awarding of back pay and promotions are in violation of public
policy.
In response, SHOPO maintains that the ICA majority
reached the correct decision and that the circuit court
“contravened well established case law” in “second guessing” the
arbitrator’s interpretation of the collective bargaining
agreement, ignoring the unambiguous language of the agreement,
and disregarding the parties’ long standing practice “that
permitted the Arbitrator to resolve the grievances as he did.”
A. The Arbitrator’s Decision and Award Could Have Rested on an
Interpretation of the Agreement.
In this case, the parties agreed to “final and
binding” arbitration for the settlement of grievances. “It is
well settled that the legislature overwhelmingly favors
arbitration as a means of dispute resolution.” Tatibouet, 99
Hawaiʻi at 234, 54 P.3d at 405 (quoting Leeward Bus Co. v.
Honolulu, 58 Haw. 64, 71, 564 P.2d 445, 449 (1977)).
Accordingly, the legislature narrowly constrained judicial
review of arbitration awards in the HRS, Chapter 658A. Under
HRS § 658A-22 (Supp. 2001), 8 a party to an arbitration proceeding
8
HRS § 658A-22 provides the following:
After a party to an arbitration proceeding receives notice
of an award, the party may make a motion to the court for
an order confirming the award at which time the court shall
issue a confirming order unless the award is modified or
corrected pursuant to section 658A-20 or 658A-24 or is
vacated pursuant to section 658A-23.
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may make a motion to a court for confirmation of an award. HRS
§ 658A-22 requires the court to confirm the order unless the
award is modified or corrected under certain limited
circumstances 9 or is vacated pursuant to HRS § 658A-23 (Supp.
2001). 10 The circumstances under which a circuit court may
vacate an arbitration award are set forth in HRS § 658A-23,
9
The award may be modified or corrected by the arbitrator pursuant
to HRS § 658A-20 or by the court pursuant to HRS § 658A-24.
10
HRS § 658A-23(a) provides the following:
Upon motion to the court by a party to an arbitration
proceeding, the court shall vacate an award made in the
arbitration proceeding if:
(1) The award was procured by corruption, fraud, or other
undue means;
(2) There was:
(A) Evident partiality by an arbitrator appointed as a
neutral arbitrator;
(B) Corruption by an arbitrator; or
(C) Misconduct by an arbitrator prejudicing the rights of
a party to the arbitration proceeding;
(3) An arbitrator refused to postpone the hearing upon
showing of sufficient cause for postponement, refused to
consider evidence material to the controversy, or otherwise
conducted the hearing contrary to section 658A-15, so as to
prejudice substantially the rights of a party to the
arbitration proceeding;
(4) An arbitrator exceeded the arbitrator’s powers;
(5) There was no agreement to arbitrate, unless the person
participated in the arbitration proceeding without raising
the objection under section 658A-15(c) not later than the
beginning of the arbitration hearing; or
(6) The arbitration was conducted without proper notice of
the initiation of an arbitration as required in section
658A-9 so as to prejudice substantially the rights of a
party to the arbitration proceeding.
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which includes vacation of an arbitration award if an
“arbitrator exceeded the arbitrator’s powers.” Cf. Tatibouet,
99 Hawaiʻi at 234, 54 P.3d at 405 (discussing the limitations on
judicial review of arbitration awards under HRS § 658-9 (1993)
(repealed 2001)).
In determining whether an arbitrator has exceeded his
or her authority under the agreement, “there should be no
‘second guessing’ by the court” of the arbitrator’s
interpretation of his or her authority so long as the
arbitrator’s interpretation “could have rested on an
interpretation and application of the agreement.” 11 Local Union
1260 Int’l Bhd. of Elec. Workers v. Hawaiian Tel. Co., 49 Haw.
53, 56, 411 P.2d 134, 136 (1966); UHPA I, 66 Haw. at 210, 659
P.2d at 719 (explaining that the issue of arbitrability should
be decided by the arbitrator, rather than the court, because
“the parties agreed to submit to the arbitrator” disputes of
arbitrability); see also Haw. State Teachers Ass’n v. Univ. Lab.
Sch., 132 Hawaiʻi 426, 432, 322 P.3d 966, 972 (2014) (upholding
the principle that questions of arbitrability are reserved for
11
Federal courts apply a similar standard: an arbitrator’s award
“is legitimate only so long as it draws its essence from the collective
bargaining agreement.” United Steelworkers of Am. v. Enter. Wheel & Car
Corp., 363 U.S. 593, 597 (1960); see also W.R. Grace & Co. v. Local Union
759, Int’l Union of United Rubber Workers, 461 U.S. 757, 765 (1983) (“Because
the authority of arbitrators is a subject of collective bargaining, just as
is any other contractual provision, the scope of the arbitrator’s authority
is itself a question of contract interpretation that the parties have
delegated to the arbitrator.”).
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the arbitrator); UHPA III, 66 Haw. at 230, 659 P.2d at 731 (“It
is the arbitrator’s construction of the contract which was
bargained for.” (alterations omitted) (quoting United
Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593,
597 (1960)).
Consistent with our case law discussing the proper
review of arbitration awards, the agreement in this case
provided, “The award of the Arbitrator shall be accepted as
final and binding. There shall be no appeal from the
Arbitrator’s decision by either party, if such decision is
within the scope of the Arbitrator’s authority . . . .”
Accordingly, the outcome of this case depends on whether the
arbitrator’s interpretation of the scope of his authority “could
have rested on an interpretation and application of the
agreement.” Hawaiian Tel. Co., 49 Haw. at 56, 411 P.2d at 136.
In this case, Article 32 of the agreement expressly
grants the arbitrator the authority to “decide whether the
Employer has violated, misinterpreted or misapplied any of the
terms of this Agreement.” 12 Article 32 further provides that
12
Article 32 provides:
The Arbitrator’s authority shall be to decide whether the
Employer has violated, misinterpreted or misapplied any of
the terms of this Agreement and in the case of any action
which the Arbitrator finds unfair, unjust, improper or
excessive on the part of the Employer, such action may be
set aside, reduced or otherwise changed by the Arbitrator.
The Arbitrator may, in the Arbitrator’s discretion, award
back pay to recompense in whole or in part, the employee
(continued . . .)
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“any action which the Arbitrator finds unfair, unjust, improper
or excessive on the part of the employer, such action may be set
aside, reduced or otherwise changed by the Arbitrator.”
(Emphasis added). Further, Article 32 gives the arbitrator the
authority to “award back pay” and “return to the employee such
other rights, benefits, and privileges or portions thereof as
may have been lost or suffered.”
Article 32 supports an interpretation that the
arbitrator had the authority to award promotions and back pay in
this case. Article 32 grants the arbitrator the authority to
determine violations of the agreement and to remedy such
violations. By granting promotions to the grievants, the
arbitrator returned to the grievants “such other rights,
benefits, and privileges” that were “lost or suffered” as a
result of the nonpromotions, thus, “chang[ing]” the action of
the Employer it found to violate the agreement. Because the
arbitrator’s authority to grant promotions and back pay “could
have rested on an interpretation and application of the
agreement,” the circuit court should not have “second guessed”
the arbitrator’s award in this case. See Hawaiian Tel. Co., 49
Haw. at 56, 411 P.2d at 136. “Indeed, by giving the arbitrator
(continued . . .)
for any salary or financial benefits lost, and return to
the employee such other rights, benefits, and privileges or
portions thereof as may have been lost or suffered.
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the power to actually grant tenure or promotion, the collective
bargaining agreement is made that much more meaningful, since
‘the confidence of the workers in the equity of the agreement is
strengthened when they know that any dispute over the meaning of
the contract may be submitted to an impartial third party for
decision.’” UHPA II, 66 Haw. at 223, 659 P.2d at 727 (quoting
James M. Ringer, Note, Legality and Propriety of Agreements to
Arbitrate Major and Minor Disputes in Public Employment, 54
Cornell L. Rev. 129, 135 (1968)).
The Employer urges this court to adopt the analysis of
the ICA dissent, which found that the award of promotions
exceeded the arbitrator’s authority under Article 11 of the
agreement. Article 11 reserves exclusively to the Employer “all
management rights and authority, including the rights set forth
in Section 89-9(d)(1)-(8), Hawaii Revised Statutes, except as
specifically abridged or modified by this agreement.” The ICA
dissent seems to suggest that because Article 11 reserved the
Employer’s right to make promotions--“except as specifically
abridged or modified”--the agreement must expressly state that
the arbitrator has the authority to grant promotions. However,
this interpretation of the agreement does not give appropriate
judicial deference to the arbitrator’s interpretation of the
agreement and is contrary to the terms of the agreement itself.
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Additionally, the ICA dissent references a court’s
authority to review whether the arbitrator exceeded its
authority under the agreement and under HRS § 658A-23(a)(4) in
responding to SHOPO’s argument that the circuit court erred by
substituting its interpretation of the agreement for that of the
arbitrator. The ICA dissent states that the agreement in this
case is “even beyond the authority provided by HRS § 658A-
23(a)(4)” because the agreement in this case “expressly
contemplates that a party may seek judicial review when there is
a question whether the Arbitrator exceeded his authority.” 13
While it is true that HRS § 658A-23(a)(4) and the agreement
authorize judicial review for a determination of whether or not
the arbitrator exceeded its authority under the agreement, it
does not follow that the court may substitute its own
interpretation of the agreement for that of the arbitrator when
making such a determination.
Further, we disagree with the ICA dissent’s
interpretation of the arbitrator’s authority under the
agreement. The ICA dissent looked at Article 32 and Article 42
separately for express grants of such authority, while not
13
The agreement’s provision that the arbitrator’s decision be
“final and binding” and that there shall be “no appeal” of an arbitrator’s
decision within the scope of the arbitrator’s authority is consistent with
HRS § 658A-23 and Hawaiʻi case law limiting judicial review of arbitration
decisions. Accordingly, the provision for judicial review under the
agreement appears to be coextensive with HRS § 658A-23(a)(4).
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considering the importance of reading the two provisions
together. See Leeward Bus Co., 58 Haw. at 68, 564 P.2d at 448
(“[A]n agreement should be construed as a whole and its meaning
determined from the entire context and not from any particular
word, phrase or clause.” (quoting Ching v. Hawaiian Restaurants,
Ltd., 50 Haw. 563, 565, 445 P.2d 370, 372 (1968))). When read
together, Article 47 and Article 32 make promotions subject to
the grievance procedures of the agreement and, thus, grant the
arbitrator the authority to “otherwise change” any action with
relation to a promotion that the Arbitrator finds “unfair,
unjust, improper or excessive.” Article 32 also specifically
gives the arbitrator the authority to “award back pay” and
“return to the employee such other rights, benefits, and
privileges or portions thereof as may have been lost or
suffered.”
The arbitrator determined that the grievants were
denied promotions “due to subjective, arbitrary and capricious
promotional practices.” Under Article 32, the arbitrator was
authorized to “return to” the grievants the right, benefit, or
privilege of their promotions that they lost due to the improper
interview procedure. It would be illogical for the arbitrator
to have authority over the promotion grievances yet have no
authority to “otherwise change” the grieved action and “return
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to” the grievants the privileges and benefits lost as a result
of the nonpromotions.
An interpretation of the agreement that recognizes the
arbitrator’s authority to remedy the promotion grievances is
further bolstered by the fact that the arbitrator’s authority
over the grievances was agreed to by the parties, affirmed by
the circuit court, and not raised on appeal. Further, the
arbitrator found that the remedy granted in this case was
consistent with past practices of the parties under the
agreement, and the record indicates that there were three to
five positions that were open at the time of the arbitration
hearing. 14
For the reasons discussed above, the ICA majority
correctly concluded that “the arbitrator’s award did not exceed
his authority and the circuit court erred in failing to so
conclude.”
B. The Arbitrator’s Decision and Award Does
Not Violate Public Policy.
In its Application, the Employer asks this court to
“set aside the ICA’s holding pertaining to whether the
Arbitration Decision violated public policy.”
14
This case therefore does not raise, and we do not address, a
situation where an arbitrator’s remedy would require an employer to establish
a new position for a grievant.
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Hawaiʻi case law recognizes “that there is a limited
public policy exception to the general deference given
arbitration awards.” Inlandboatmen’s Union of the Pac. v. Sause
Bros., Inc., 77 Hawaiʻi 187, 194, 881 P.2d 1255, 1262 (App.
1994); see also Gepaya v. State Farm Mut. Auto. Ins. Co., 94
Hawaiʻi 362, 366, 14 P.3d 1043, 1047 (2000). This public policy
exception is based on the exception recognized by the United
States Supreme Court in United Paperworkers International Union
v. Misco, Inc., 484 U.S. 29 (1987); see Sause Bros., 77 Hawaiʻi
at 194, 881 P.2d at 1262 (adopting the public policy exception
of Misco and directing that the exception should be applied
under the guidelines set forth in Misco).
The Court in Misco established a framework for courts
reviewing public policy claims. First, the court must determine
whether there is an “explicit, well defined, and dominant”
public policy that is “ascertained ‘by reference to the laws and
legal precedents and not from general considerations of supposed
public interests.’” See E. Associated Coal Corp. v. United Mine
Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000) (quoting W.R.
Grace & Co. v. Rubber Workers, 461 U.S. 757, 766 (1983)) (citing
Misco, 484 U.S. at 43)); accord Sause Bros., 77 Hawaiʻi 187, 193,
881 P.2d 1255, 1261 (App. 1994). Second, the court must
determine whether the arbitration award itself is clearly shown
to be “contrary” to the “explicit, well-defined, and dominant
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public policy.” See E. Associated Coal Corp., 531 U.S. at 62-
63; Sause Bros., 77 Hawaiʻi 187, 194, 881 P.2d 1255, 1262 (App.
1994) (stating that the court must determine that “the violation
of the public policy is clearly shown” in order for the public
policy exception to apply (alterations omitted) (quoting W.R.
Grace & Co., 461 U.S. at 766)).
We consider whether the arbitrator’s award violates
public policies with regard to the merit principles as set forth
in HRS § 76-1 and the authorized scope of negotiations of
collective bargaining agreements as expressed in HRS § 89-9(d).
First, “[t]he merit principle is the selection of
persons based on their fitness and ability for public employment
and the retention of employees based on their demonstrated
appropriate conduct and productive performance.” HRS § 76-1
(Supp. 2000). There is nothing in the record to suggest that
the arbitrator’s authority to grant promotions and back pay in
this case violates the merit principle. To the contrary, the
agreement is in accordance with the merit principle as it
requires promotions to be based on “fair standards of merit and
ability, consistent with applicable civil service statutes,
rules and regulations and procedures.” The arbitrator heard
testimony with regard to the grievants’ professional background
and work performance, and the arbitrator found that “the
grievant officers were well qualified based on merit and ability
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for promotion to the rank of sergeant based on the evidence
presented during the arbitration hearings.” Thus, the
arbitrator’s award in this case was not contrary to the merit
principle. Accordingly, there is no basis to support a finding
that the arbitrator’s authority to grant promotions and back pay
was contrary to the public policy of promotions in accordance
with the merit principle.
Second, HRS § 89-9, which pertains to the scope of
negotiations for public sector collective bargaining, provides
that an employer and union may not agree in collective
bargaining to any provision “which would interfere with the
rights and obligations of a public employer to” perform several
listed functions including to “[h]ire, promote, transfer assign,
and retain employees in positions.” While HRS § 89-9(d)
expresses a policy that a collective bargaining agreement should
not interfere with an employer’s prerogative to make promotions,
the provision expressly provides that this subsection “shall not
preclude negotiations over the procedures and criteria on
promotions . . . as a permissive subject of bargaining during
collective bargaining negotiations.” Further, HRS § 89-9(d)
states, “Violations of the procedures and criteria so negotiated
may be subject to the grievance procedure in the collective
bargaining agreement.”
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Thus, HRS § 89-9(d) expresses a policy to avoid
interference through collective bargaining with an employer’s
function to make promotions, but the statute specifically states
that this policy is to be balanced against a policy to encourage
negotiations over the procedures and criteria on promotions that
may be subject to grievance procedures. Accordingly, HRS § 89-9
does not include an “explicit, well defined, and dominant”
public policy discouraging the arbitrator’s award of promotions
and back pay in this case.
The public policy to encourage negotiation over the
procedures and criteria for promotions that is clearly expressed
on the face of HRS § 89-9(d) is further bolstered by the history
behind the 2007 amendment to the provision. 15 The legislature’s
2007 amendments to HRS § 89-9(d) were made in light of United
Public Workers v. Hanneman, 106 Hawaiʻi 359, 105 P.3d 236 (2005),
15
The 2007 amendments added the following language:
This subsection shall not be used to invalidate provisions
of collective bargaining agreements in effect on and after
June 30, 2007, and shall not preclude negotiations over the
procedures and criteria on promotions, transfers,
assignments, demotions, layoffs, suspensions, terminations,
discharges, or other disciplinary actions as a permissive
subject of bargaining during collective bargaining
negotiations or negotiations over a memorandum of
agreement, memorandum of understanding, or other
supplemental agreement.
Violations of the procedures and criteria so negotiated may
be subject to the grievance procedure in the collective
bargaining agreement.
2007 Haw. Sess. Laws Act 58, § 1 at 101 (emphasis added).
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wherein the court held that management rights under HRS § 89-
9(d) precluded collective bargaining over the City and County of
Honolulu’s unilateral decision to transfer refuse workers to a
different employment location. Under Hanneman, the scope of
topics subject to negotiation cannot “infringe upon an
employer’s management rights under [HRS § 89-9(d)].” Hanneman,
106 Hawaiʻi at 365, 105 P.3d at 242. The purpose of the 2007
amendments was to clarify that management rights enumerated in
HRS § 89-9(d) do not invalidate or preclude negotiations
concerning agreements on procedures and criteria on promotions
and other management functions. See S. Stand. Comm. Rep. No.
889, in 2007 Senate Journal, at 1438. The House Committee on
Labor & Public Employment stated that “negotiations over
procedures and criteria of promotions . . . are consistent with
the underlying purpose of chapter 89, HRS.” H. Stand. Comm.
Rep. No. 1465, in 2007 House Journal, at 1595.
Further, as the parties agreed before the arbitrator,
SHOPO challenged the way in which the promotions were done and
did not challenge the Employer’s right to make promotions.
Thus, the arbitrator’s decision and award did not infringe on
the Employer’s authority to make promotions in accordance with
the bargained for criteria and procedures and relevant law. See
UHPA II, 66 Haw. at 220-21, 659 P.2d at 725 (holding that HRS
89-9(d), which granted the employer the “exclusive jurisdiction
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over matters such as setting the criteria for determining
tenure, promotion, and other areas of faculty employment,” did
not prohibit the arbitrator “from actually granting tenure or
promotion upon a finding of arbitrary or capricious conduct”).
Thus, the arbitrator’s award has not been clearly shown to be
“contrary” to an “explicit, well-defined, and dominant public
policy.”
We thus conclude that the arbitration award in this
case did not violate public policy.
C. Clarification of the Doctrine of Quasi-Estoppel.
The ICA majority held that the Employer was not
estopped from contesting the arbitrator’s authority. The ICA
majority’s ruling was based primarily on a distinction that it
drew between this case and the UHPA II case, which is discussed
below.
Under the doctrine of quasi-estoppel, a party is
estopped from taking “a position inconsistent with a previous
position if the result is to harm another.” UHPA II, 66 Haw. at
221, 659 P.2d at 725; see also, e.g., Godoy v. Haw. Cnty., 44
Haw. 312, 320, 354 P.2d 78, 82 (1960) (“But there is a species
of equitable estoppel, sometimes called quasi-estoppel, which
has its basis in election, waiver, acquiescence, or even
acceptance of benefits and which precludes a party from
asserting to another’s disadvantage, a right inconsistent with a
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position previously taken by him. No concealment or
misrepresentation of existing facts on the one side, no
ignorance on the other, are necessary ingredients.” (quoting
Hartmann v. Bertelmann, 39 Haw. 619, 627-28 (Haw. Terr. 1952)).
In UHPA II, this court found that the doctrine of
quasi-estoppel provided a basis for affirmation of an
arbitrator’s award of tenure and back pay to a grievant. 66
Haw. at 216-17, 659 P.2d at 723. The UHPA II court found it
significant that the parties contractually agreed that the
arbitrator’s decision would be “final and binding” and that the
Employer agreed to arbitrate the tenure and promotions dispute.
Id. at 221, 659 Haw. P.2d at 726. The court explained that the
Employer “could have either excluded subjects such as tenure and
promotion from the agreement’s arbitration provision altogether,
or it could have made clear, at the outset of the arbitration
proceedings, that it was not submitting to the arbitrator the
power to actually grant tenure or promotion.” Id. at 221-22,
659 Haw. P.2d at 726. UHPA II found that the grievant would
have been “substantially disadvantaged in terms of time and
money spent in the arbitration process and in litigation” if the
employer were permitted to argue that the arbitrator never had
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the power to resolve the grievances only after the arbitration
award was not decided in its favor. 16 Id.
The agreement in this case, like the agreement in UHPA
II, provides for “final and binding” arbitration. Also like the
agreement in UHPA II, the agreement here does not exclude
promotions from the arbitrator’s powers. Further, Article 47 of
the agreement expressly provides requirements for promotions,
and Article 32 gives the arbitrator the authority to “award back
pay” and “return to the employee such other rights, benefits,
and privileges or portions thereof as may have been lost or
suffered.” Thus, the scope of the arbitrator’s authority in
this case is not significantly different from that of the
arbitrator in UHPA II.
The ICA majority distinguished this case from UHPA II
on the basis that the agreement in UHPA II “expressly gave the
16
The court in UHPA II stated,
After having contractually agreed that arbitration would be
the last step in the grievance process and that the
arbitrator’s decisions would be “final and binding,” and
after agreeing to arbitrate these tenure and promotion
disputes only to see the arbitration award go against it in
each and every instance, the University now complains that
the arbitrator never had the power to resolve these
grievances in the first place. We find this complaint
untenable. The University could have either excluded
subjects such as tenure and promotion from the agreement’s
arbitration provisions altogether, or it could have made
clear, at the outset of the arbitration proceedings, that
it was not submitting to the arbitrator the power to
actually grant tenure or promotion.
66 Haw. at 221, 659 P.2d at 726.
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arbitrator the right and power to ‘substitute his judgment for
that of the official’ if the arbitrator found the official’s
decision to be arbitrary and capricious,” while in this case the
Employer retains the management rights under the agreement
“except as specifically abridged or modified.” However, this is
not a meaningful distinction because the UHPA II court’s focus
was on the parties’ agreement to “final and binding” arbitration
and the Employer’s consent to arbitrate tenure and promotions.
See UHPA II, 66 Haw. at 221-22, 659 P.2d at 726. Further, the
ICA majority’s comparison of the arbitrator’s authority in UHPA
II with the Employer’s authority in this case does not support
the ICA majority’s distinction, particularly since the employer
in UHPA II and the employer in this case retained similar
authority over promotions. 17
We note that the arbitrator in this case made an
express finding that the Employer “never contended during the
arbitration hearings that the language in Article 32 was not
sufficiently worded to permit the Arbitrator to grant a
promotion to remedy the grievances.” Nonetheless, the ICA
majority made a contrary finding that the “Employer did contest
the arbitrator’s authority to actually promote the grievants.”
17
The employer in UHPA II had “exclusive jurisdiction over matters
such as setting the criteria for determining tenure, promotion, and other
areas of faculty employment.” UHPA II, 66 Haw. 214, 220, 659 P.2d 720, 725
(1983).
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Because we find that the arbitrator acted within the scope of
his authority under the agreement, we need not decide whether
the doctrine of quasi-estoppel applies in this case and,
therefore, do not address this conflict between the findings of
the ICA majority and the arbitrator.
IV. CONCLUSION
Accordingly, the ICA’s December 5, 2014 Judgment on
Appeal is affirmed, but for the reasons set forth herein.
Mauna Kea Trask /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Vladimir Devens
for respondent /s/ Sabrina S. McKenna
/s/ Richard W. Pollack
/s/ Michael D. Wilson
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