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Arbitration Award and Appeal

Reinstatement ruling reversed and then reinstated

Arbitration is being used with increasing frequency as a method of alternative dispute resolution (ADR), particularly in connection with employment-related matters. It has long been used in resolving management-labor disagreements under collective bargaining agreements, but has spread to other issues in the workplace, as well. 

There are many advantages to arbitration, and some short comings, as well. Arbitration generally is more expedient and economical, provides confidentiality, and utilizes arbitrators who are supposedly expert in the field, compared to some of the travails of long, drawn out and expensive litigation in the public eye and ultimately decided by lay people sitting as jurors.

But arbitration has some drawbacks, too. One of them is the limited ability to appeal from an adverse arbitration award. The goal of achieving finality in an efficient, economical way generally trumps the desirability of correcting arbitral errors.

Some of these features were on display recently in a ruling of the Eighth Circuit Court of Appeals, the Federal appellate tribunal that oversees Federal court litigation in Minnesota and six surrounding states. 

Roller Coaster Ride

The case, PSC Custom LP v. United Steel, Paper and Forestry Workers Local No. 11-770, 756 f.3rd 627 (8th Cir. 2014) was a veritable roller coaster ride for a discharged employee, his union, and the employer who fired him. The discharged employee worked at a company that manufactures tanks used to transport liquids. On one occasion, he failed to perform a task that his supervisor directed him to do, leading to his termination. The employee, a member of the Union, challenged the termination under the Union’s collective bargaining agreement with management. The employer claimed that the discharge was permissible because the employee violated one of its standards of conduct, insubordination, which allowed for “immediate termination.” 

But an arbitrator differed and modified the termination, reducing it to a suspension, and ordering that the employee be reinstated, ruling that the single incident did not constitute “just cause,” as required in the Bargaining Agreement, to terminate the employee, and ordered him reinstated. The company appealed to the Federal District Court under the Federal Arbitration Act, 9 U.S.C. § 1, which covers most labor arbitration agreements. The trial judge ruled that the arbitrator “exceeded his authority” by reinstating the employee and overturned the decision. 

But the Union and the employee then appealed to the Eighth Circuit, which reversed that decision and reinstated the arbitrator’s reinstatement ruling. It pointed out that arbitrators have “broad” authority to resolve management-labor disputes and the parties to the labor agreement in this case did not “place remedial restrictions on the arbitrator’s authority.” Further, the parties “expressly requested that the arbitrator value the proprietary of the discipline,” which gave the arbitrator plenary authority to reduce it from a termination to a suspension.

The appellate court ruling highlights several features of arbitral law. While decided under Federal law, a similar result probably would have occurred under state law, which is governed by the Uniform Arbitration Act, Minn. Stat. § 573.01, et seq. Both federal and state statute provide very narrow ground for overturning an arbitration award, primarily fraud, corruption, or other aberrant behavior by the arbitrator. Otherwise, arbitrators are generally deemed to be the final judges of “law and fact,” and their decisions are generally impervious to challenge through the judicial system, as reflected in this case. Although the employer managed to get the award overturned by the trial court, the Eighth Circuit reversed that decision and reinstated the employee, which is consistent with the general rule in arbitration of employment and labor disputes.

Parties who choose to arbitrate their disputes should be aware of the advantages of arbitration:  speed, saving of expense and other features, but also should be mindful that once an arbitrator makes a decision, it is generally final and binding and will rarely, if ever, be overturned on appeal through the courts.