Millcreek Twp. Sch. Dist. v. Millcreek Twp. Educ. Support Pers. Ass'n

210 A.3d 993

MILLCREEK TOWNSHIP SCHOOL DISTRICT, Appellee

v.MILLCREEK TOWNSHIP EDUCATIONAL SUPPORT PERSONNEL ASSOCIATION, Appellant

No. 37 WAP 2018

Supreme Court of Pennsylvania.

Argued: April 10, 2019

Decided: July 17, 2019

Richard B. Galtman, Esq., Levin Legal Group, P.C., for Amicus Curiae Pennsylvania State Association of Township Commissioners, Pennsylvania State Association of Township Supervisors, Pennsylvania Municipal League, Pennsylvania School Boards Association.

Michael Ira Levin, Esq., Levin Legal Group, P.C., for Amicus Curiae Pennsylvania School Boards Association.

Katherine Marie Voye, Esq., Pennsylvania State Education Association (PSEA), for Amicus Curiae Pennsylvania State Education Association.

Richard Scott McEwen, Esq., Pennsylvania State Education Association (PSEA), for Appellant Millcreek Township Educational Support Personnel Association.

Mark Theodore Wassell, Esq., Knox, McLaughlin, Gornall & Sennett, P.C., Robert David Zaruta, Esq., for Appellee Millcreek Township School District.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

JUSTICE DONOHUE

In this case, we review whether the Commonwealth Court disregarded the law when it vacated a grievance arbitration award based on its independent interpretation of the parties' collective bargaining agreement ("CBA"). Pursuant to this Court's decisions under the Public Employee Relations Act, 43 P.S. §§ 1101.101 - 1101.2301¹ ("PERA"), a reviewing court must apply the highly deferential two-prong "essence test" to grievance arbitration awards: first, the court must decide whether the issue is encompassed by the CBA; second, the court must uphold the arbitrator's award if the arbitrator's interpretation can rationally be derived from the CBA. Westmoreland Intermediate Unit #7 v. Westmoreland Intermediate Unit #7 Classroom Assistants Educ. Support Pers. Ass'n , 595 Pa. 648, 939 A.2d 855, 863 (2007) (plurality) (quoting State Sys. of Higher Educ. (Cheyney University) v. State Coll. Univ. Prof'l. Ass'n. , 560 Pa. 135, 743 A.2d 405, 413 (1999) ). As discussed in more detail herein, subject to a narrow exception for awards that violate a dominant public policy, proper application of the essence test prohibits a court from vacating an arbitrator's award unless "the award indisputably and genuinely is without foundation in, or fails to logically flow from, the [CBA]." Id. Because we have no trouble concluding that the award in the instant matter draws its essence from the CBA and because no public policy will be violated by its enforcement, we reverse the decision of the Commonwealth Court.

Millcreek Township Educational Support Personnel Association (the "Association") and Millcreek Township School District (the "District") are parties to a CBA that became effective on July 1, 2011, and was set to expire on June 30, 2016.² The bargaining unit represented by the Association consists entirely of custodians for the District's properties. As pertinent to this appeal, the CBA provides that "[n]o work of the bargaining unit shall be subcontracted for the life of the Agreement." CBA, Art. III, ¶ H (hereinafter, the "no subcontracting provision"). The CBA further provides that "the rights and privileges of the Association and its representatives as set forth in the [CBA] shall be granted only to the Association as the exclusive representative of the employees and to no other organization." Id. , Art. III, ¶ E (hereinafter, the "exclusivity provision").

Negotiations for a successor CBA commenced on January 26, 2016 when the Association offered its initial proposal to the District. Approximately one month later, the District presented a counter proposal in which it sought, among other items, to eliminate the no subcontracting provision. N.T., 8/16/2019, at 24-25; Arbitration Decision, 11/7/2016, at 4. The Association rejected this proposal. N.T., 8/16/2019, at 24-25.

On March 29, 2016, with successor CBA negotiations ongoing between the Association and the District, the District issued a request for proposals ("RFP") seeking quotes from prospective bidders for the provision of custodial labor services. See RFP Cover Letter, 3/29/2016, at 1. Specifically, the RFP sought quotations for guaranteed pricing during a three-year contract period to begin the day after the current CBA was set to expire, namely from July 1, 2016, through June 30, 2019. Id. Bids were due by 11:00 a.m. on May 2, 2016, at which point they would be publicly opened. Id. All bids were to be submitted to the District in an envelope clearly marked "RFP CUSTODIAL SERVICES LABOR CONTRACT," and all prospective bidders were required to attend a pre-bid meeting on April 28, 2016. Id. Bidders were required to conduct site visits at the District's buildings. Id. The District advertised the RFP announcement in at least two regional newspapers.

On April 7, 2016, upon learning that the District had issued an RFP to subcontract the bargaining unit's work, the Association filed a grievance with the District.³ Grievance, 4/7/2016. As set forth in the grievance, the Association alleged that the District "[had] violated the [CBA] by placing in several papers ... a Legal Notice that the District [was] accepting bids for custodial labor services" and by announcing the pre-bid meeting scheduled for April 28, 2016. Id. According to the Association, "these actions directly violate[d] the [CBA], and in particular the provision that there will be no subcontracting." Id.⁴ The Association requested that the District "cease and desist efforts to subcontract the custodial labor force" and "withdraw all present and scheduled Legal Notices." Id. It further requested that the District "inform any party contacting [it] with questions or actual proposals that there is no subcontracting of custodial labor services" and additionally sought "any other specific relief that the arbitrator deems appropriate." Id.

Following a grievance hearing on May 11, 2016, before the District's Board of Education (the "Board"), the Board issued a brief decision wherein it stated, "we do not believe that [Mr. Revell] demonstrated that [the District] violated the [CBA] by soliciting RFPs from outside vendors. No member of the bargaining unit lost work hours nor was any work done by an outside vendor. Request for ... RFPs [sic] is not the same as outsourcing actual work." Decision of Board, 5/19/2016. The Board also explained its belief that the District "has an obligation to the tax payers to manage its budget and ensure it is paying a competitive price for the services provided." Id. It concluded that "the only way to determine what pricing options are available to [the District] is to ask," and opined that the District did not demonstrate bad faith in its negotiations with the Association by issuing the subcontracting RFP. Id.

On July 11, 2016, the District advised the Association that Facilities Management Systems ("FMS") had been selected as the successful bidder. Arbitration Decision, 11/7/2016, at 4. The District provided the Association with the bid information it received from FMS but did not in fact enter into a contract with that bidder or any other.

Pursuant to the grievance procedure set forth in the CBA, the Association appealed its grievance to arbitration, consistent with section 903 of PERA.⁵ See CBA, Art. I, ¶ C. Following a hearing before an arbitrator selected by the parties and briefing, the arbitrator granted the Association's grievance in a written decision dated November 7, 2016. See Arbitration Decision, 11/7/2016, at 15. The arbitrator stated that the issue before him was whether "the District violate[d] the CBA by its issuing of a[n RFP] for custodial services in the District," and if so, what the remedy should be. Id. at 8. He also noted that "the primary factor to be determined" was when subcontracting begins. Id.

As set forth by the arbitrator, the District believed that it was acting within its managerial rights to investigate alternatives when it issued the RFP, conducted building walkthroughs and received bids. The District was also of the view that using this research in CBA negotiations with the Association, either to modify the CBA or to reach impasse and subsequently enter into a subcontract for custodial services, was both permissible under the terms of the CBA and in the best interest of taxpayers. Id. The arbitrator, however, did not credit the District's position because, in his view, it would have been possible to conduct due diligence and compare costs without formally requesting bids, advertising in newspapers, conducting building walkthroughs, and holding a public meeting to open bids. He characterized the District's conduct as a bad faith tactic that had a chilling effect on the negotiation process, noting that "the only step remaining in the outside contracting scheme of the District was to declare ‘impasse,’ sign the contract of the successful RFP bidder and have them commence work." Id. at 14. He indicated that those "final acts" would merely be the culmination of the subcontracting process which began, at the latest, on March 29, 2016, when the District issued its RFP.

The arbitrator reached this conclusion based on testimony regarding the parties' long history together. Specifically, the arbitrator made the following findings of fact:

• The parties' history includes the prior subcontracting of school bus drivers' work, which eliminated that work from the bargaining unit;

• this conduct "created raw nerves" and lasting wounds within the Association;

• the Association was aware of this history and its effect on employees;

• this history was the driving force, pursuant to testimony, behind the Association negotiating for the current and former CBA to include the no subcontracting provision.

Id. at 10.

Addressing the specific question of whether the District had subcontracted work in the instant situation, the arbitrator first concluded that the question was "definitely within the confines of...