Originally from Dispute Resolution Journal

The public-policy exception to the enforcement of arbitration awards opens the door to courts’ second-guessing the decision of the arbitrator. This article examines the case law to determine when and how the exception is being applied.

The use of “public policy” as a ground to seek to vacate labor arbitration awards ordering reinstatement of a grievant is a relatively new development. The public-policy exception to enforcement of awards, although explicitly recognized by the U.S. Supreme Court, raises the issue of uniform application, as well as the question of whether it is being misunderstood or misused by courts, allowing them to substitute their judgment for those of arbitrators.

This article examines the pertinent Supreme Court cases and how other courts have applied the public-policy exception, particularly in awards reinstating grievants, but in other situations as well.

Background

Prior to World War II, there were only a few arbitration clauses contained in collective bargaining agreements (CBAs). Yet, by the War’s end, largely due to the success of the old War Labor Board, approximately 60% of employers with union contracts included in their grievance procedures provisions for binding arbitration. Today, more than 97% of all CBAs contain an arbitration clause, which provides for arbitration of grievances that cannot be resolved at a lower step of the grievance procedure. Parties that are displeased with the arbitration award may seek to have the award vacated on the grounds provided in the Federal Arbitration Act. However, some courts entertain arguments to vacate awards on judicially created grounds, among them the controversial public-policy exception.