June 17, 2009 – The Wisconsin Supreme Court reinstated an arbitrator’s award of back pay to a teacher in a dispute with her school district on June 17, reversing the court of appeals.

A majority of the justices in Baldwin-Woodville Area School Dist. V. West Central Education Ass’n , 2009 WI 51, held that the arbitrator’s decision had a sufficiently reasonable basis to survive its deferential review.

In dissent, Justice David Prosser said that the arbitrator had rewritten the terms of the agreement between the school district and teachers union to reach an equitable outcome, exceeding the authority of his role. Prosser would have affirmed the Wisconsin Court of Appeals decision to vacate the award under the “perverse misconstruction” doctrine.

Disputed timeliness

Christine Johnson began teaching at the Baldwin-Woodville School District's Greenwood Elementary School in the fall of 2002. Johnson’s experience was misclassified under a new contract in October 2002, resulting in reduced pay for the remained of the 2002-2003 academic year and the 2003-2004 and 2004-2005 school years.

In August of 2005, Johnson realized the error and submitted a form to request reclassification. The district made the change and increased her salary prospectively for the 2005-2006 term.

The date at which Johnson understood the school district would not compensate her for the wages lost prior to the correction was contested before an arbitrator. Under the collective bargaining agreement, Johnson had to file a complaint within 15 days from the time the facts upon which a grievance is based first occurred or became known. When Johnson filed a formal grievance on June 26, 2006, for back pay, the district school board rejected it as untimely, among other reasons.

Taking the dispute before an arbitrator as the collective bargaining agreement provided, the district argued Johnson discovered the basis for her grievance in August 2005 when she noticed the mistaken classification so that her June 2006 complaint was procedurally barred.

But the arbitrator determined the erroneous reclassification was not the fact upon which the grievance was based because Johnson could have reasonably expected in August 2005 that the district would rectify its error by making her whole. The fact triggering the 15-day time limit is the school board’s denial of back pay and so her grievance was timely, the arbitrator found.

Deferential review

“The role of the court in reviewing an arbitration award is essentially supervisory,” the court majority said. “We are to ensure that the parties received what they bargained for when they agreed to resolve their disputes through final and binding arbitration.”

In this limited capacity, the court explained that it gives deference to the arbitrator’s factual and legal conclusions. “If the common law and statutory standards are not violated, the court should affirm the arbitrator’s award,” the court said.

A court will only vacate an award for an arbitrator’s misconduct, including “perverse misconstruction,” the majority stated. A perverse misconstruction occurs when an arbitrator effectively amends the plain terms of the agreement he or she is charged with upholding in the dispute between the parties.

“In reviewing this award, we do not determine which construction – the arbitrator’s or the District’s – is more reasonable,” the majority wrote. An award will stand if there is “some reasonable foundation for the interpretation of the contract offered in the decision,” the court said.

The court favorably quoted an amicus brief filed by the State Bar of Wisconsin’s Alternative Dispute Resolution Section: “The viability of arbitration as an alternative dispute resolution method relies upon the process being expedient, fair, and final. If participants are unsure that their dispute will be decided with finality, the presumptive result is that fewer persons will submit to arbitral determination, and will instead commence court-based litigation.”

Applying these principles to this case, the court said that the contract between the school district and its teachers does not unambiguously allow for only one possible construction and that the arbitrator’s award was reasonable.

Prosser’s dissent

Analyzing Johnson’s written grievance, Prosser remarked that the facts underlying her formal grievance with the school board’s decision are the same as those known to her beforehand. Prosser specifically identified an informal request Johnson made for back pay in May 2006. “In both instances, the grievant requested that she be made whole for the school years she was compensated according to the incorrect pay [scale],” Prosser wrote.

The majority commented that Prosser was impermissibly arguing the merits of the grievance, but Prosser rejected that characterization of his dissent.

“The majority asserts that this dissent makes an argument on the merits of the grievance and accuses it of ‘concluding that … the fact underlying the grievance was that [the grievant] had been placed at the wrong pay [scale].’” Prosser wrote. “The majority, however, fails to appreciate that this is what the grievant alleged in her formal grievance.”

The arbitrator ignored the facts stipulated to by Johnson in her formal grievance to reach a decision “in an equitable manner so that the grievant could be justly compensated,” Prosser concluded.

“[B]ecause the formal grievance submitted on June 26, 2006, expressly recognizes the existence of a grievance in May 2006, there is no foundation in reason for the arbitrator to have stated that the ‘facts upon which the [formal] grievance is based’ were not known by the grievant until ‘late June’ 2006,” Prosser wrote.

Prosser warned that the majority’s allowance for this instance of perverse misconstruction “open[ed] the door to the arbitration of stale claims.”

“Under the arbitrator’s and the majority’s reasoning, a grievant is effectively permitted to file an informal complaint, wait for the resolution, and if the grievant finds the resolution unfavorable, she can file a formal grievance and try again for the same relief,” Prosser wrote.