The Company Violate the Agreement

Read the “Case study 11-2” entitled “Did the Company Violate the Agreement When it Did Not Pay Holiday Pay?” that appears on page 521-525 of your textbook (reproduced below for your convenience). Please comprehensively answer the five questions at the end under “questions.”Please answer the questions in essay form, making sure to cite appropriate authority as necessary,Length 750-1,500 words (about 2-4 single spaced pages).BackgroundDuring September 2005, the parties were negotiating the labor agreement due to expire on October 31, 2005. The union had proposed to add Martin Luther King, Jr.’s birthday and Memorial Day as nonwork holidays. The company countered with a proposal to “Swap George Washington’s birthday for Memorial Day.” On October 25, 2005, the parties agreed to a contingent agreement on contract extension, which stated:It is understood by all parties that:1. The current Labor Agreement expires at midnight on October 30, 2005;2. The parties are negotiating in good faith to reach a new Agreement;3. The parties wish to provide every opportunity for the bargaining unit’s voters to consider the negotiation proposals while work under the existing Agreement continues uninterrupted and without threat of interruptions; and4. The parties do not wish for the current Agreement to expire without a new Agreement in place unless and until all reasonable efforts to avoid operating without an Agreement have been pursued.As such, the parties agree as follows:1. The current Agreement will remain in full force and effect until midnight November 15, 2005, unless a new Agreement is substituted for the current Agree- ment or the parties mutually agree in writing to end the Agreement earlier;2. After November 15, 2005, either party may terminate the current Agreement’s extension by written notice to the other of at least seven (7) calendar days;3. The parties agree to apply the terms of any wage or benefit change agreed upon during the extension of the current Agreement back to the expiration of that Agreement on October 30, 2005.On November 10, 2005, a Negotiation Proposal Status and Counter Proposals Report was prepared. In regard to holidays, the union proposal was: “Add Memorial Day and MLK’s birthday as non-work holidays.” The company proposal was: “Exchange GW’s (George Washington) birthday for Memorial Day.”On January 20, 2006, the company presented its final proposal. Article 6 Holiday, paragraph 12, included:Article 6 Holidays Paragraph 12Exchange George Washington’s birthday for Memorial Day.On February 14, 2006, Jim Fulgham, HR manager, posted the following notice:Effective immediately, the company-paid George Washington’s birthday holiday has been swapped for the Memorial Day holiday, as agreed upon with the union.This means beginning this year (actually next week), George Washington’s birthday will not be a company-paid holiday. Memorial Day, Monday, May 29, 2006, will be a company-paid holiday.On February 15, 2006, Mr. Marty H. Stokes, com- pany attorney, sent an e-mail to Mr. Jim McBride, the union’s staff representative. Mr. Stokes stated:Holidays Memorial Day will become a paid holiday in exchange for the current George Washington’s birth- day holiday.On February 23, 2006, Mr. Stokes sent a second e-mail message to Mr. McBride, which stated:This is to confirm our discussions from yesterday:1. The retro pay of $150 per person eligible will be paid no later than March 10, 2006, presuming a ratification by this weekend;2. The $150 will be paid either in a separate check or noted in a single, regular check and programmed so as to note the additional amount and so as to avoid the extra taxes paid if the retro pay was combined as ordinary income with the regular check;3. The “show up pay” will also be paid no later than 3/10/06. These amounts will be paid in a regular check with a notation of the additional amount, or in a separate check. Since this must be included in ordinary income, the amount will be paid at 100 percent [rather than 80 percent, with no deductions], and normal deductions will be made;4. The terms and conditions offered for the final offer are as spelled out in our memo dated 2/14/06.On February 24, 2006, Mr. Stokes sent an e-mail message to Mr. McBride, which contained the Labor Agreements Final Proposal. Included was:Holidays Memorial Day will become a paid holiday in exchange for the current George Washington’s Birthday holiday.The company did not pay its employees holiday pay for George Washington’s birthday, and the follow- ing Grievance was filed by Jim McBride on March 6, 2006: Statement of Grievance:The company scheduled the bargaining unit employees to work on George Washington’s Birthday and did not pay them their proper holiday pay.Articles & Sections of Contract Alleged Violated Including, But Not Limited To:Article 6 Holidays, Paragraph 12 and Paragraph 14 of the extended Agreement.Settlement Desired:Make the bargaining unit employees whole by paying everyone who worked four (4) hours pay for working and eight (8) hours holiday pay. Employees who did not work the holiday to be paid eight (8) hours holiday pay only.The company response was provided by Jim Fulg- ham, HR manager, who wrote: Disposition of Grievance:George Washington’s Birthday was paid in accordance with the ratified agreement.The grievance was appealed to arbitration.IssueWere the employees entitled to holiday pay for George Washington’s birthday, 2006?If so, what is the remedy?Relevant Provisions of the AgreementArticle 6, Section 12b: HolidaysRecognized Holidays–The holidays to be recognized are New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day, Christmas Day, Martin Luther King, Jr.’s Birthday, and the employee’s birthday. The company retains the right to schedule work on the holidays enumerated above with the exception of Christ- mas and Thanksgiving. (When one of the named holidays falls on Saturday it shall be celebrated on the preceding Friday. Holidays falling on Sunday shall be celebrated on Monday.)Article 22: Effective Dates of AgreementIn witness whereof, the parties hereto have signed and executed this Agreement effective this 1st day of November 2005.Positions of the PartiesThe Union:The union stated that during the most recent contract negotiations, the company proposed eliminating George Washington’s birthday as a paid holiday and making Memorial Day a paid holiday instead. The union countered with a proposal to have both days as paid holidays. The parties were unable to conclude a new agreement prior to October 31, 2005, the expiration date of the previous agreement. On October 25, 2005, the parties entered into a contingent agreement that extended the previous agreement subject to agreement had occurred. The union accepted that the current CBA became retroactive at the time of ratification vote on February 26, 2006, back to the old expiration date of October 30, 2005, by the time the obligation to pay for the prior week’s work had occurred. The CBA in effect did not include an obligation to provide holiday pay for February 22, 2006.Under the totality of circumstances, granting the union’s grievance would have a harsh and unjust result. The cost of an additional paid holiday for the company approaches $100,000. This is far more than a token amount, even for a large plant. Consequently, it would be unreasonable and inequitable for the company to be saddled with this obligation absent an unambiguous intent and mandate to do so. The company contended that, furthermore, if the union really believed that the information in Mr. Fulgham’s posting was inaccurate, it should have clarified its position before all other retroactive payments were made.In this case, the company asserted that there is no such clear obligation as the Contingent Agreement on Contract Extension signed by the parties applies the wage and benefit terms of the new agreement retroactive to October 30, 2005. This eliminates any obligation to provide holiday pay for George Washington’s birthday in 2006.The company argued that the union seeks to have it both ways by:- Allowing the retroactive application of other wages and benefits at considerable expense- The payment of an extra ninth holidaySuch a result is just too much of “having your cake and eating it, too.”As noted in the sixth edition of How Arbitration Works by Elkouri and Elkouri (BNA, Washington, D.C.): When an interpretation of an ambiguous contract would lead to harsh, absurd, or nonsensical results, while an alternative interpretation, equally plausible, would lead to just and reasonable results, the latter interpretation will be used. (pp. 470–471) The company strongly contended that the terms of the Contingent Agreement on Contract Extension are unambiguous when read reasonably and nullify the George Washington’s birthday holiday for 2006. The equitable application of normal contract interpretation rules would not allow the double rewards sought by this grievance.For the reasons stated previously, the company concluded that this grievance should be denied.Questions1. Which party has the burden of proof in this case? Why?2. Evaluate the union’s argument that, since George Washington’s birthday holiday had occurred before the agreement was ratified, employees were entitled to holiday pay.3. Evaluate the company’s argument that the parties agreed to make the effective date retroactive.4. Should the holiday pay be included in the category of wages and benefits?5. Be the arbitrator. How would you rule? Give your reasons.