Fifth Circuit Reverses Arbitrator’s Ruling in Southwest Airlines Labor Dispute

The United States Court of Appeals for the Fifth Circuit has overturned an arbitrator’s ruling in a labor dispute that was filed against Texas-based Southwest Airlines.  In Southwest Airlines v. Local 555, No. 18-10122 (5^th Cir., January 9, 2019), a labor union, Local 555, entered into a newly negotiated collective bargaining agreement (“CBA”) with Southwest Airlines in 2016.  The terms of the CBA stated “it would become ‘effective’ after Southwest accepted the agreement and the union ratified it.” The CBA also required “that grievances be filed within ten working days of notice of a management decision.” Although the CBA was ratified by Local 555 members on February 19, 2016, it was not signed by the parties until March 16, 2016.

Less than ten working days after the CBA was signed, but more than one-month after it was ratified, Local 555 filed a grievance with the airline over Southwest’s purported use of non-union vendors.  In response, Southwest challenged the timeliness of Local 555’s grievance in arbitration.  An arbitrator, however, ruled the grievance was timely because it was filed less than ten working days after the CBA was signed by the parties.  Interestingly, another arbitrator determined that an essentially identical grievance was untimely while the original arbitration proceeding was still ongoing.

Next, Southwest asked the Northern District of Texas to review the arbitrator’s ruling.  The federal district court upheld the arbitrator’s decision and Southwest appealed the case to the nation’s Fifth Circuit.  In the company’s appellate brief, “Southwest limited the scope of its appeal to the district court’s affirmance of the arbitrator’s ruling on timeliness.”

In the court’s written opinion, the Fifth Circuit stated judicial review of an arbitrator’s decision that arises out of the terms of a CBA “is narrowly limited.”  Because Southwest Airlines is a common carrier by air, the company is subject to the terms of the Railway Labor Act (“RLA”).  Based on RLA-related case law:

An award may be set aside:

[1] for failure of the [arbitrator] to comply with the requirements of [the RLA], [2] for failure of the order to conform, or confine itself, to matters within the scope of the [arbitrator’s] jurisdiction, or [3] for fraud or corruption by [the arbitrator] making the order.

Southwest’s appeal challenged the arbitrator’s decision based solely on the second exception by arguing the arbitrator issued “a decision that is contrary to an unambiguous provision of the CBA.”  With regard to this challenge, the Fifth Circuit stated:

If the arbitrator’s decision “may be supported by any analysis” that “arguably construes” the CBA, whether or not relied on by the arbitrator, we must defer to that decision. “Even if the chain of reasoning is not correct” and the “decision appears . . . to be a serious error,” we “must defer as long as no step in the reasoning process ignores an unambiguous provision” of the CBA.

After examining the facts of the case, however, the Court of Appeals held:

We hold that the arbitration award conflicts with the plain language of the CBA. It was not an arguable construction of the CBA and instead amounted to the arbitrator’s own brand of industrial justice. The arbitrator’s interpretation failed to account for (1) the CBA’s title page that sets February 19, 2016 through February 18, 2021 as the “period” for the CBA; (2) Article 29’s express language that the CBA shall “remain in full force and effect as of the date of ratification through and including February 18, 2021”; (3) the CBA’s one-time bonus paid to employees working under the CBA as “of the Date of Ratification”; and (4) the parties’ conduct, including Southwest’s payment of the increased rates and bonuses set out in the CBA, starting after the CBA was ratified but before it was signed.

The arbitrator ascribed significance to the CBA’s “Execution Page.” But the Execution Page is not one of the CBA’s terms, and none of the CBA’s terms mentions “execution,” “signing,” or “execution date.” In contrast, Article 29 expressly provides that the CBA “shall remain in full force and effect as of the date of ratification . . . .” By relying on the Execution Page, the arbitrator ignored the express terms of the CBA. The arbitration award therefore was contrary to and not an interpretation of the CBA.

We are aware that Article 3, titled “Status of the Agreement,” ties the effective date to ratification and acceptance by Southwest, whereas Article 29, titled “Duration and Amendments,” states only that the agreement “shall remain in full force and effect as of the date of ratification . . . .” But that does not justify the arbitrator’s reasoning. Article 3 says only that Southwest must accept the agreement; it does not prescribe a specific mode of acceptance. The cases holding that a CBA need not be signed to create an enforceable agreement and that ratification is generally the last act necessary to create an enforceable agreement foreclose Local 555’s argument that “accepted by the Company” in this instance meant the date the parties signed the CBA. Rather, the CBA’s title page and language stating that it shall “remain in full force and effect as of the date of ratification” confirm that it became effective on the date of ratification.

Because the arbitrator ignored the plain language of the parties’ CBA, the United States Court of Appeals for the Fifth Circuit reversed the district court’s judgment and remanded the case.

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