New York Law Review

Tag: arbitrability

  • City of Long Beach v. Civil Service Employees Assn., 8 N.Y.3d 465 (2007): Arbitrability of Collective Bargaining Agreements and Provisional Employee Tenure

    8 N.Y.3d 465 (2007)

    A collective bargaining agreement (CBA) provision granting tenure rights to provisional civil service employees beyond the statutory time limit is unenforceable as against public policy because it violates the merit and fitness requirements of the New York State Constitution and the Civil Service Law.

    Summary

    The City of Long Beach sought to stay arbitration demanded by the Civil Service Employees Association (CSEA) on behalf of terminated provisional employees, arguing that the CBA’s ‘tenure’ provisions for these employees violated public policy. The New York Court of Appeals held that the CBA provisions, which granted tenure-like rights to provisional employees after one year of service, were unenforceable because they conflicted with the Civil Service Law’s merit-based appointment system. Allowing such provisions would undermine the constitutional mandate for appointments based on merit and fitness, ascertained through competitive examinations.

    Facts

    The City of Long Beach, following a critical report from the New York State Civil Service Commission regarding its provisional appointments, terminated several provisional employees who had been serving beyond the statutorily prescribed time. The CSEA, representing these employees, filed grievances, arguing that under the CBA, these employees had acquired ‘tenure’ and were entitled to be rehired. The CBA stated that employees with one year of service were deemed tenured and protected from separation, except in specific circumstances. It further stipulated that displaced provisional employees should be transferred to other open positions for which they qualified.

    Procedural History

    The City petitioned to stay arbitration. Supreme Court granted the City’s petition, holding that the CBA provisions were unenforceable due to the employees’ provisional status. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a provision in a collective bargaining agreement that grants tenure rights to provisional civil service employees after one year of service is arbitrable when such a provision conflicts with the merit and fitness requirements of the New York State Constitution and the Civil Service Law.

    Holding

    No, because granting the relief sought by the provisional employees under the CBA’s ‘tenure’ provisions would violate the Civil Service Law and public policy by circumventing the constitutional mandate for merit-based appointments.

    Court’s Reasoning

    The Court of Appeals emphasized that while public policy generally favors arbitration of public sector labor disputes, arbitration is not permissible when it violates a statute, decisional law, or public policy. The court found that the CBA’s tenure provisions for provisional employees directly contravened Article V, Section 6 of the New York Constitution, which mandates that civil service appointments be based on merit and fitness, as determined by competitive examination where practicable. The Civil Service Law, implementing this constitutional provision, allows provisional appointments only when no eligible list exists and limits such appointments to a maximum of nine months. The Court stated, “The statutory scheme contained in section 65 by its very terms prohibits any right of tenure to provisional employees. Properly construed, the Civil Service Law renders the provisions of the CBA upon which CSEA relies meaningless.” Granting tenure rights to provisional employees who have served beyond the statutory limit would undermine the merit-based system and perpetuate the misuse of provisional appointments. The Court further reasoned that allowing the City to agree to provide superior rights to provisional employees holding positions beyond the statutory time period would be against public policy. Chief Judge Kaye dissented in part, arguing that the portion of the CBA that required displaced provisional workers to be transferred to an open position was severable and arbitrable. The majority rejected this argument, holding that no relief may be granted because it is contrary to statute and decisional law.

  • In Re City of Johnstown, 99 N.Y.2d 273 (2002): Arbitrability of Disputes Under Collective Bargaining Agreements

    99 N.Y.2d 273 (2002)

    A dispute is arbitrable if there is no statutory, constitutional, or public policy prohibition against arbitrating the grievance, and the parties agreed to arbitrate the specific issue in their collective bargaining agreement.

    Summary

    The Cities of Johnstown and Schenectady appealed a decision to compel arbitration of grievances filed by their respective Police Benevolent Associations (PBAs). The PBAs sought arbitration regarding the calculation of retirement benefits for Tier II employees under Retirement and Social Security Law § 302(9)(d). The New York Court of Appeals held that the grievances were arbitrable because no law or public policy prohibited arbitration, and the collective bargaining agreements (CBAs) contained broad arbitration clauses encompassing the dispute. The court emphasized the distinction between the merits of the grievance and the threshold question of arbitrability, stating that the arbitrator, not the court, weighs the merits.

    Facts

    The Cities of Johnstown and Schenectady entered into CBAs with their respective PBAs. The CBAs stipulated that retirement benefits would be calculated using the definition of “Final Average Salary” in Retirement and Social Security Law § 302(9)(d). At the time the CBAs were signed, this section applied only to Tier I employees. Subsequently, the statute was amended to extend the 12-month calculation formula to non-Tier I employees (Tier II). The PBAs then argued that all members, including Tier II employees, were eligible for these benefits under the existing CBAs. The cities disagreed, leading to the PBAs demanding arbitration based on the broad arbitration clauses in the CBAs.

    Procedural History

    The Cities filed petitions in Supreme Court to stay the arbitrations. The Supreme Court granted the stays, reasoning that the parties did not intend to provide retirement benefits to Tier II employees. The Appellate Division reversed, dismissing the petitions and finding a “reasonable relationship” between the CBAs and the grievances. The Cities then appealed to the New York Court of Appeals.

    Issue(s)

    Whether a grievance concerning the interpretation of a collective bargaining agreement’s retirement benefits provision to include Tier II employees is arbitrable, despite the fact that at the time the agreement was signed, it would have been illegal to provide those benefits to Tier II employees?

    Holding

    Yes, because there is no statutory, constitutional, or public policy bar preventing the parties from agreeing that an arbitrator will decide whether they intended in these clauses to extend benefits to Tier II employees if and when it became lawful for municipalities to do so.

    Court’s Reasoning

    The Court of Appeals applied the two-part test from Matter of Acting Supt. of Schools of Liverpool Cent. School Dist. (United Liverpool Faculty Assn.) to determine arbitrability. The first question is whether any law or public policy prohibits arbitration of the grievance. The Court found that Retirement and Social Security Law § 443(f-1), which prohibits compulsory interest arbitration for these benefits, does not apply to grievance arbitration, which involves interpreting an existing CBA, not negotiating a new one. The second question is whether the parties agreed to arbitrate the dispute. The Court found a “reasonable relationship” between the subject matter of the dispute (retirement benefits) and the general subject matter of the CBA (terms and conditions of employment). The court emphasized that CPLR 7501 directs that when deciding whether a dispute is arbitrable, “the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute.”

    The dissenting judge argued that Civil Service Law § 201(4) expressly excludes retirement benefits from the definition of terms and conditions of employment subject to collective bargaining, meaning the dispute was not arbitrable. The dissent also noted the legislature specifically precluded interest arbitration for these benefits. The dissent asserted the majority’s focus ignored the right of a municipality to determine if it is able to bear the cost of extending the benefit, because there is no legal authority for an arbitrator to extend such retirement benefits in the absence of municipal authorization.

  • City of New York v. Uniformed Fire Officers Association, 95 N.Y.2d 278 (2000): Arbitrability of Employee Rights in Criminal Investigations

    City of New York v. Uniformed Fire Officers Association, 95 N.Y.2d 278 (2000)

    Public policy bars arbitration of disputes concerning the procedures used by the New York City Department of Investigation (DOI) in conducting criminal investigations, as allowing arbitration would impermissibly delegate the City’s broad authority to investigate its internal affairs.

    Summary

    The City of New York sought to prevent arbitration of a dispute with the Uniformed Fire Officers Association (UFOA) regarding whether the employee rights provisions of their collective bargaining agreement (CBA) applied to criminal investigations conducted by the DOI. The DOI had excluded a union representative from interviews with firefighters during a criminal investigation. The Court of Appeals held that public policy, as reflected in the New York City Charter and decisional law, prohibits arbitration that would interfere with the DOI’s authority to conduct criminal investigations, affirming the lower courts’ decisions to enjoin arbitration.

    Facts

    In February 1996, the DOI subpoenaed several firefighters, including members of the UFOA, as part of criminal investigations. One investigation involved a firefighter fraudulently claiming a disabling injury to obtain higher pension benefits. During DOI interviews, a fire officer’s union representative was excluded, and the union counsel questioned the adequacy of the notice given to the firefighters under Article XVII of the CBA, which contains provisions for employee rights during interrogations, interviews, trials, and hearings.

    Procedural History

    The UFOA filed a request for arbitration, claiming the City violated Article XVII of the CBA. The City challenged the arbitrability of the request before the New York City Board of Collective Bargaining (BCB), which determined the dispute was arbitrable. The City then commenced a special proceeding in Supreme Court to annul the BCB’s determination and enjoin arbitration. The Supreme Court set aside the BCB’s determination and enjoined arbitration. The Appellate Division affirmed. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether public policy bars arbitration of a dispute over whether the employee rights provisions of a collective bargaining agreement (CBA) can be invoked to limit or restrict the procedures of criminal investigations commenced by the New York City Department of Investigation (DOI).

    Holding

    No, because allowing an arbitrator to restrict the DOI’s investigatory procedures by invoking the employee rights provisions of a CBA would be an impermissible delegation of the City’s broad authority to investigate its internal affairs.

    Court’s Reasoning

    The Court of Appeals determined that a two-pronged inquiry is required to assess arbitrability: (1) whether arbitration claims are authorized for the subject matter of the dispute, and (2) whether the parties consented to refer disputes in this specific area to arbitration. Applying the first prong, the Court found that public policy prohibits arbitration of the DOI’s criminal investigation procedures. The Court emphasized the importance of the DOI’s role in investigating corruption and criminal activity within the City, as outlined in the New York City Charter and relevant case law. According to the court, allowing an arbitrator to dictate investigation procedures would hinder the DOI’s role and contravene the City Charter’s prohibition against interference with investigations. The Court further reasoned that judicial intervention to stay arbitration is warranted when granting any relief would violate public policy. The procedural protections afforded to a City employee under the CBA cannot be separated from their impact on a DOI criminal investigation. The Court also stated that the BCB’s determination that the dispute is arbitrable is not entitled to due deference, as arbitration is prohibited by public policy here. Chief Judge Kaye dissented, arguing that the stay of arbitration was premature because the arbitrator could fashion a remedy consistent with public policy and because factual questions remained about the nature of the DOI investigation.

  • Smith Barney, Inc. v. Sacharow, 91 N.Y.2d 46 (1997): Arbitrability of Time-Bar Under NASD Code

    Smith Barney, Inc. v. Sacharow, 91 N.Y.2d 46 (1997)

    Parties can agree to arbitrate the question of whether a claim is eligible for arbitration under the NASD Code, including the six-year time bar, and a standard New York choice-of-law provision in a customer agreement does not prevent this.

    Summary

    Smith Barney sought to stay arbitration proceedings initiated by customers, arguing that the claims were ineligible under Section 15 of the NASD Code because the transactions occurred more than six years before the arbitration demand. The New York Court of Appeals held that the broad arbitration clause in the customer agreement, coupled with the NASD Code’s provision empowering arbitrators to interpret the Code, demonstrated a clear intent to arbitrate all disputes, including eligibility. The court further clarified that a standard New York choice-of-law provision does not override this agreement to arbitrate arbitrability.

    Facts

    The Sacharow brothers, executors of their father’s estate, filed a claim with the NASD for arbitration against Smith Barney, alleging fraudulent and negligent handling of their father’s investment account. Hause, another customer, also filed a claim alleging misrepresentation. Both customer agreements contained clauses requiring arbitration of “any controversy” and specifying that New York law governs the agreement. Smith Barney sought to block arbitration in both cases, citing Section 15 of the NASD Code, which renders claims ineligible for arbitration if six years have elapsed since the event giving rise to the dispute.

    Procedural History

    In Sacharow, the Supreme Court initially granted Smith Barney’s stay but reconsidered and denied it, directing arbitration. The Appellate Division affirmed. In Hause, the Supreme Court granted the stay, but the Appellate Division reversed, denying the stay and compelling arbitration. The Court of Appeals granted leave to appeal in both cases.

    Issue(s)

    1. Whether the eligibility requirement of Section 15 of the NASD Code is a condition precedent to arbitration, thus raising a question of arbitrability.

    2. Whether the parties clearly and unmistakably agreed to arbitrate the issue of arbitrability, including the Section 15 time bar.

    3. Whether the New York choice-of-law provision in the customer agreements overrides the agreement to arbitrate arbitrability.

    Holding

    1. Yes, because the NASD Code’s language limits the subject and range of arbitrable matters.

    2. Yes, because the broad language of the arbitration clause, coupled with Section 35 of the NASD Code, demonstrates a clear intent to arbitrate all issues, including arbitrability.

    3. No, because the New York choice-of-law provision incorporates substantive New York principles but does not restrict the parties’ ability to contract for plenary alternative dispute resolution.

    Court’s Reasoning

    The court reasoned that Section 15 of the NASD Code, stating that “[n]o dispute, claim, or controversy shall be eligible for submission to arbitration under this Code where six (6) years shall have elapsed,” presents a question of arbitrability. It then addressed whether the parties intended to arbitrate this issue. The court found that the language of the arbitration clause in the agreements, providing that “any controversy… shall be settled by arbitration,” was broad enough to encompass disputes over arbitrability. Further, Section 35 of the NASD Code (now rule 10324), which empowers arbitrators to interpret the Code, was incorporated into the agreements, indicating a clear intent to leave the question of arbitrability to the arbitrators.

    The court distinguished Matter of Smith Barney, Harris Upham & Co. v. Luckie, 85 N.Y.2d 193 (1995), noting that Luckie involved a statutory time limitation, whereas Sacharow and Hause involved a contractual time limitation under the NASD Code. The court also cited Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52 (1995), stating that the best way to harmonize a choice-of-law provision with an arbitration provision is to read the choice-of-law provision to encompass substantive principles but not special rules limiting the authority of arbitrators.

    The court emphasized the strong public policy favoring arbitration in New York. Permitting securities firms to avoid arbitration after agreeing to it would be “ironic and anomalous.” The court concluded that parties should be free to choose arbitration and that courts should hesitate to interfere with this choice.