W. R. Grace & Co. v. Rubber Workers
461 U.S. 757 (1983)

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U.S. Supreme Court

W. R. Grace & Co. v. Rubber Workers, 461 U.S. 757 (1983)

W. R. Grace & Co. v. Local Union 759, International Union of

Rubber, Cork, Linoleum & Plastic Workers of America

No. 81-1314

Argued February 28, 1983

Decided May 31, 1983

461 U.S. 757

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

Syllabus

Faced with the prospect of liability for violations of Title VII of the Civil Rights Act of 1964 in its hiring practices, petitioner employer signed with the Equal Employment Opportunity Commission (EEOC) a conciliation agreement that conflicted with the seniority provisions of petitioner's existing collective bargaining agreement with respondent union. Petitioner sued in Federal District Court to enjoin arbitration of certain employee grievances under the collective bargaining agreement. The District Court held that the conciliation agreement should prevail with respect to layoffs of employees in conflict with the seniority provisions of the collective bargaining agreement. The Court of Appeals reversed and compelled petitioner to arbitrate. Among the grievances arbitrated were those of two employees who had been laid off pursuant to the conciliation agreement and in violation of the collective bargaining agreement. The arbitrator awarded backpay damages against petitioner under the collective bargaining agreement, interpreting that agreement as not requiring him to follow a contrary prior arbitration award involving the same contractual issue, as providing that the District Court's order did not extinguish petitioner's liability for its breach, and as not providing a good faith defense to claims of violation of its seniority provisions. Petitioner then brought an action to overturn the award, and the District Court entered summary judgment for petitioner, finding that public policy prevented enforcement of the collective bargaining agreement during the period prior to the Court of Appeals' reversal in the prior action. The Court of Appeals reversed.

Held: The award in question is properly to be enforced. Pp. 461 U. S. 764-772.

(a) A federal court may not overrule an arbitrator's decision simply because the court believes its own interpretation of the collective bargaining agreement would be the better one. Thus, here, regardless of what this Court's view might be of the correctness of the arbitrator's contractual interpretation, petitioner and respondent bargained for that interpretation, and a federal court may not second-guess it. The arbitrator's analysis of the merits of the grievance is entitled to the same deference. Pp. 461 U. S. 764-766.

Page 461 U. S. 758

(b) Enforcement of the collective bargaining agreement as interpreted by the arbitrator will not compromise the public policy requiring obedience to a court order. Even assuming that the District Court's order that the conciliation agreement should prevail was a mandatory injunction, nothing in the collective bargaining agreement as interpreted by the arbitrator required petitioner to violate that order. The arbitrator's award neither mandated layoffs nor required that layoffs be conducted according to the collective bargaining agreement, but simply held retrospectively that the employees were entitled to damages for the prior breach of the seniority provisions. Petitioner was cornered by its own actions, and cannot now argue that liability under the collective bargaining agreement violates public policy. No public policy is violated by holding petitioner to its collective bargaining agreement obligations, which bar petitioner's attempted reallocation to union members of the burden of the losses resulting from petitioner's employment discrimination. Pp. 461 U. S. 766-770.

(c) Nor will enforcement of the arbitrator's award inappropriately affect the public policy favoring voluntary compliance with Title VII. Although petitioner and the EEOC agreed to nullify the collective bargaining agreement's seniority provisions, the conciliation process did not include respondent. Absent a judicial determination, the EEOC, not to mention petitioner, cannot alter the collective bargaining agreement without respondent's consent. Pp. 461 U. S. 770-772.

652 F.2d 1248, affirmed.

BLACKMUN, J., delivered the opinion for a unanimous Court.

Page 461 U. S. 759

JUSTICE BLACKMUN delivered the opinion of the Court.

Faced with the prospect of liability for violations of Title VII of the Civil Rights Act of 1964, as amended, petitioner signed with the Equal Employment Opportunity Commission (Commission or EEOC) a conciliation agreement that was in conflict with its collective bargaining agreement with respondent. Petitioner then obtained a court order, later reversed on appeal, that the conciliation agreement should prevail. The issue presented is whether the Court of Appeals was correct in enforcing an arbitral award of backpay damages against petitioner under the collective bargaining agreement for layoffs pursuant to the conciliation agreement.

I

A

In October, 1973, after a lengthy investigation, the EEOC's District Director determined that there was reasonable cause to believe that petitioner W. R. Grace and Company (Company) had violated Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U.S.C. §§ 2000e to 2000e-17 (1976 ed. and Supp. V), by discriminating in the hiring of Negroes and women at its Corinth, Miss., plastics manufacturing facility. App. 2. In addition, the Director found that the departmental and plantwide seniority systems, mandated by the Company's collective bargaining agreement with respondent Local Union No. 759 (Union), were unlawful because they perpetuated the effects of the Company's past discrimination. The Company was invited, pursuant to § 706(b) of the Act, 42 U.S.C. 2000e-5(b), to conciliate the dispute. Although the Commission also invited the Union to participate, the Union declined to do so.

B

A collective bargaining agreement between petitioner and respondent expired in March, 1974, and failed negotiations led to a strike. The Company hired strike replacements, some

Page 461 U. S. 760

of whom were women who took Company jobs never before held by women. The strike was settled in May with the signing of a new agreement that continued the plant seniority system specified by the expired agreement. The strikers returned to work, but the Company also retained the strike replacements. The women replacements were assigned to positions in the Corinth plant ahead of men with greater seniority. Specifically, the Company prevented men from exercising the shift preference seniority (to which they were entitled under the collective bargaining agreement) to obtain positions held by the women strike replacements. The men affected by this action filed grievances under the procedures established by the collective bargaining agreement.

The Company refused to join the ultimate arbitration. Instead, it filed an action under § 301 of the Labor Management Relations Act of 1947, 61 Stat. 156, 29 U.S.C. § 185, in the United States District Court for the Northern District of Mississippi. The Company sought an injunction prohibiting arbitration of the grievances while the Company negotiated a conciliation agreement with the Commission. The Union counterclaimed to compel arbitration.

Before the District Court took any action, the Company and the Commission signed a conciliation agreement dated December 11, 1974. App. 10. In addition to ratifying the Company's position with respect to the shift preference dispute, the conciliation agreement provided that, in the event of layoffs, the Company would maintain the existing proportion of women in the plant's bargaining unit. Id. at 15-16. The Company then amended its § 301 complaint to add the Commission as a defendant and to request an injunction barring the arbitration of grievances seeking relief that conflicted with the terms of the conciliation agreement. The Commission cross-claimed against the Union and counterclaimed against the Company for a declaratory judgment that the conciliation agreement prevailed, or, in the alternative, for a declaratory judgment that the seniority provisions were not a

Page 461 U. S. 761

bona fide seniority system protected by § 703(h) of the Civil Rights Act, 78 Stat. 259, 42 U.S.C. § 2000e-2(h). [Footnote 1]

While cross-motions for summary judgment were under consideration, the Company laid off employees pursuant to the conciliation agreement. Several men affected by the layoff, who would have been protected under the seniority provisions of the collective bargaining agreement, filed grievances. In November, 1975, with the Company still refusing to arbitrate, the District Court granted summary judgment for the Commission and the Company. It held that, under Title VII, the seniority provisions could be modified to alleviate the effects of past discrimination. Southbridge Plastics Division, W. R. Grace Co. v. Local 759, 403 F.Supp. 1183, 1188 (1975). The court declared that the terms of the conciliation agreement were binding on all parties and that "all parties . . . shall abide thereby." App. 44. [Footnote 2] The Union appealed, and no party sought a stay.

With the Union's appeal pending before the United States Court of Appeals for the Fifth Circuit, the Company, following the terms of the conciliation agreement, laid off more employees. Again, adversely affected male employees filed

Page 461 U. S. 762

grievances. In January, 1978, over two years after the District Court's decision, the Court of Appeals reversed. Southbridge Plastics Division, W. R. Grace & Co. v. Local 759, 565 F.2d 913. Applying Teamsters v. United States,431 U. S. 324 (1977), which was decided after the District Court's decision, the Court of Appeals held that, because the seniority system was not animated by a discriminatory purpose, it was lawful and could not be modified without the Union's consent. 565 F.2d at 916. The court granted the Union's counterclaim, compelling the Company to arbitrate the grievances.

In response to this decision, the Company reinstated the male employees to the positions to which they were entitled under the collective bargaining agreement. The pending grievances, seeking backpay, then proceeded to arbitration. The first to reach arbitration was that of a male employee who had been demoted while the District Court order was in effect. Arbitrator Anthony J. Sabella, in August, 1978, concluded that, although the grievant was entitled to an award under the collective bargaining agreement, it would be inequitable to penalize the Company for conduct that complied with an outstanding court order. App. 45. He thus denied the grievance. Id. at 47. Instead of filing an action to set aside that award, the Union chose to contest Sabella's reasoning in later arbitrations.

C

The next grievance to be arbitrated resulted in the award in dispute here. Id. at 48. Arbitrator Gerald A. Barrett was presented with the complaints of two men who had been laid off before, and one man who had been laid off after, the entry of the District Court order. [Footnote 3] Acknowledging that the Sabella arbitration resolved the same contractual issue, id.

Page 461 U. S. 763

at 51, Barrett first considered whether the collective bargaining agreement required him to follow the Sabella arbitration award. He concluded that it did not. The collective bargaining agreement limited the arbitrator's authority, Barrett found, to considering whether the express terms of the contract had been violated. [Footnote 4] Because Sabella had considered the fairness of enforcing the terms of the contract, he had acted outside his contractually defined jurisdiction. Id. at 55-56. Barrett determined that the finality clause of the collective bargaining agreement [Footnote 5] therefore did not require him to follow Sabella's award. Ibid.

Arbitrator Barrett then turned to the grievances before him. The Company did not dispute that it had violated the seniority provisions of the collective bargaining agreement, [Footnote 6] id. at 56, and Barrett also accepted the Company's contention that it had acted in good faith in following the conciliation agreement. He found, however, that the collective bargaining agreement made no exception for good faith violations of the seniority provisions, and that the Company had acted at

Page 461 U. S. 764

its own risk in breaching the agreement. The Company, he held, could not complain that the law ultimately had made this out to be an unfortunate decision. Ibid. In essence, Barrett interpreted the collective bargaining agreement as providing that the District Court's order did not extinguish the Company's liability for its breach.

D

The Company then instituted another action under § 301 of the Labor Management Relations Act to overturn the award. The United States District Court for the Northern District of Mississippi entered summary judgment for the Company, finding that public policy prevented enforcement of the collective bargaining agreement during the period prior to the Court of Appeals' reversal. App. 58-69. The United States Court of Appeals for the Fifth Circuit reversed. 652 F.2d 1248 (1981). We granted certiorari to decide the important issue of federal labor law that the case presents. 458 U.S. 1105 (1982).

II

The sole issue before the Court is whether the Barrett award should be enforced. Under well-established standards for the review of labor arbitration awards, a federal court may not overrule an arbitrator's decision simply because the court believes its own interpretation of the contract would be the better one. Steelworkers v. Enterprise Wheel & Car Corp.,363 U. S. 593, 363 U. S. 596 (1960). When the parties include an arbitration clause in their collective bargaining agreement, they choose to have disputes concerning constructions of the contract resolved by an arbitrator. Unless the arbitral decision does not "dra[w] its essence from the collective bargaining agreement," id. at 363 U. S. 597, a court is bound to enforce the award and is not entitled to review the merits of the contract dispute. This remains so even when the basis for the arbitrator's decision may be ambiguous. Id. at 363 U. S. 598.

Under this standard, the Court of Appeals was correct in enforcing the Barrett award, although it seems to us to have

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