2d Circuit Reviews Manifest Disregard of the Law Standard in Labor Arbitration

Chelsea v. N.Y. Hotel and Motel Trades Council, ____F.3d____(2d Cir. April 3, 2018), is brought to readers attention because it is a recent Second Circuit decision which, once again, demonstrates how difficult it is to vacate a labor arbitrator's decision. The court notes that there is a strong presumption that an arbitrator has not acted in manifest disregard of the law and it will uphold the decision under review so long as there is at least a slightly colorable basis. The court goes on the describe the manifest disregard standard as follows:

An arbitral decision rendered under the Labor
Management Relations Act (“LMRA”) may be vacated if the
arbitrator has exhibited a “manifest disregard of law.”
Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 208
(2d Cir. 2002) (internal quotation marks omitted).
Judicial inquiry under the “manifest disregard” standard is
“extremely limited.” Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Bobker, 808 F.2d 930, 934 (2d Cir. 1986);
see also Burns Int’l. Sec. Servs., Inc. v. Int’l Union,
United Plant Guard Workers of Am., 47 F.3d 14, 17 (2d Cir.
1995). To establish manifest disregard, Chelsea Grand must
show the arbitrator made “something beyond and different
from a mere error in the law or failure on the part of the
arbitrators to understand or apply the law.” Saxis S.S.
Co. v. Multifacs Int’l Traders, Inc., 375 F.2d 577, 582 (2d
Cir. 1967) (internal quotation marks omitted).
An arbitrator commits manifest disregard of the law
when the “governing law alleged to have been ignored by the
arbitrators [was] well defined, explicit, and clearly
applicable,” and the arbitrator “appreciate[d] the
existence of a clearly governing legal principle but
decide[d] to ignore or pay no attention to it.” Westerbeke
Corp., 304 F.3d at 209 (first alteration in original)
(quoting Merrill Lynch, 808 F.2d at 934); see also N.Y.
Tel. Co. v. Commc’ns Workers of Am. Local 1100, 256 F.3d
89, 91 (2d Cir. 2001) (per curiam). The rule ignored by
the arbitrator must be “obvious and capable of being
readily and instantly perceived by the average person
qualified to serve as an arbitrator.” Merrill Lynch, 808
F.2d at 933.

Governor Signs Into Law Major Legislation Narrowing A Unions Duty of Fair Representation

On April 12, 2018, Governor Cuomo signed Chapter 59 of the Laws of 2018 into law which amends the Taylor to narrow a public sector unions duty of fair representation. The amended statute now provides (the underlined portion represents the amendment):

  Improper  employee organization practices. It shall be an improper
   practice for an employee organization or its agents deliberately (a)  to
   interfere  with,  restrain or coerce public employees in the exercise of
   the rights granted in section two hundred two, or to cause,  or  attempt
   to cause, a public employer to do so provided, however, that an employee
   organization  does not interfere with, restrain or coerce public employ-
   ees when it limits its services to and representation of non-members  in
   accordance with this subdivision; (b) to refuse to negotiate collective-
   ly  in good faith with a public employer, provided it is the duly recog-
   nized or certified representative of the employees of such employer;  or
   (c)  to breach its duty of fair representation to public employees under
   this article. Notwithstanding any law, rule or regulation to the contra-
   ry, an employee organization's duty of fair representation to  a  public
   employee it represents but who is not a member of the employee organiza-
   tion  shall be limited to the negotiation or enforcement of the terms of
   an agreement with the public employer.  No  provision  of  this  article
   shall be construed to require an employee organization to provide repre-
   sentation  to  a non-member (i) during questioning by the employer, (ii)
   in statutory or administrative proceedings or to  enforce  statutory  or
   regulatory  rights, or (iii) in any stage of a grievance, arbitration or
   other contractual process concerning the evaluation or discipline  of  a
   public employee where the non-member is permitted to proceed without the
   employee organization and be represented by his or her own advocate. Nor
   shall  any  provision  of this article prohibit an employee organization
   from providing legal,  economic  or  job-related  services  or  benefits
   beyond  those  provided  in the agreement with a public employer only to
   its members.

This statute was reportedly enacted in anticipation of the U.S. Supreme Court's decision in Janus which may ultimately hold that it is a violation of the First Amendment for states (such as New York) to mandate that employees pay "agency fees" if they chose not to become union members. The Governor signed this statute into law at UFT headquarters, here, and reportedly stated that this statute “is the first step of the resistance.”

Supremes Refuse To Interpret FLSA Exemptions In A Narrow Fashion

On April 3, 2018, the US Supreme Court decided Encino Motorcars v. Navarro  and decided 5-4, that FLSA exempts a service adviser at a car dealership from its overtime protections under the exemption for “any salesman . . . primarily engaged in . . . servicing automobiles.” 29 U.S.C. § 213(b)(10)(A).

But, the Court, in dicta went way beyond deciding this case and stated that the FLSA exemptions should not be narrowly construed. As the Court explained:

Because the FLSA gives no “textual indication” that its exemptions should be construed narrowly, “there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.” Scalia, Reading Law, at 363. The narrow construction principle relies on the flawed premise that the FLSA “‘pursues’” its remedial purpose “‘at all costs.’” American Express Co. v. Italian Colors Restaurant, 570 U. S. 228, 234 (2013) (quoting Rodriguez v. United States, 480 U. S. 522, 525-526 (1987) (per curiam)); see also Henson v. Santander Consumer USA Inc., 582 U. S. ___, ___ (2017) (slip op., at 9) (“[I]t is quite mistaken to assume . . . that whatever might appear to further the statute’s primary objective must be the law” (internal quotation marks and alterations omitted)). But the FLSA has over two dozen exemptions in § 213(b) alone, including the one at issue here. Those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”). We thus have no license to give the exemption anything but a fair reading.

This dicta would appear to apply to all of the FLSA exemptions and has the potential to result in a finding that many more employees, such as professionals, administrators, and executives, are exempt, and therefore, not entitled to over-time. 

Query whether courts will follow Justice Thomas' reasoning when deciding over-time cases under state law (as opposed to federal law).

Mitchell Rubinstein