San Jose Healthcare System v. Stationary Engineers Local 39 Pension Trust Fund

Background

San Jose Healthcare System, LP, doing business as Regional Medical Center of San Jose (RMC), and Stationary Engineers Local 39 (the Union) were parties to a collective bargaining agreement. That agreement required RMC to make pension contributions for covered employees but excluded certain per diem and casual employees, including employees hired for no more than 90 calendar days. The agreement also provided a grievance procedure ending in arbitration as the sole method for resolving disputes between RMC and the Union about interpreting or applying the agreement.

RMC and the Stationary Engineers Local 39 Pension Trust Fund were parties to a separate Trust Agreement. That agreement authorized the Pension Fund to demand and enforce payment of contributions, and a later amendment allowed the Trustees to refer claims for delinquent employer contributions to expedited arbitration. The Trust Agreement also stated that no matter involving interpretation or enforcement of a collective bargaining agreement was subject to arbitration under its arbitration article.

After a payroll audit, the parties resolved most disputes, but disagreed about pension contributions for Kevin Keith and Steve Keith. RMC argued that the employees were per diem employees excluded from the collective bargaining agreement. The Pension Fund took the position that the exclusion applied only to employees who worked 90 days or less. Arbitrator William E. Riker held a hearing on June 24, 2021, and issued an award on October 1, 2021. He found RMC liable for pension contributions for the two employees and found that RMC had failed to provide certain relevant documents.

Jurisdiction and governing standards

The court concluded that it had subject-matter jurisdiction under Section 301 of the Labor Management Relations Act because the case concerned an arbitration award addressing an employer’s liability for pension contributions under a collective bargaining agreement. The court also concluded that it had jurisdiction under the Employee Retirement Income Security Act because the Pension Fund brought its cross-petition under that statute. The court explained that the Federal Arbitration Act, by itself, does not provide federal subject-matter jurisdiction.

The court determined that the California Arbitration Act supplied the arbitration rules because the Trust Agreement clearly stated that covered arbitrations would be conducted under that Act. The court noted that the Labor Management Relations Act, Federal Arbitration Act, and California Arbitration Act all generally require courts to defer to arbitration awards, but permit vacatur when an arbitrator exceeds the authority granted by the relevant agreements. RMC, as the party opposing enforcement, had the burden of proof.

Court’s analysis

The court rejected RMC’s argument that the award should be vacated because it was issued more than ten days after the hearing. Although the award was late under the Trust Agreement, RMC had not shown that it gave written notice of its objection before the award was served. Under California law, the court held, RMC waived that timeliness objection.

The court also rejected RMC’s argument that the arbitrator exceeded his authority by considering testimony from Pension Fund Trustee Jerry Kalmar. RMC did not show that considering the testimony exceeded the arbitrator’s authority.

The court agreed, however, with RMC’s central argument that the arbitrator exceeded his authority by interpreting the collective bargaining agreement. The arbitrator expressly interpreted the agreement’s exclusion for per diem employees and used that interpretation to conclude that Kevin Keith and Steve Keith were per diem employees who had worked more than 90 days and were therefore owed pension contributions. The court held that this interpretation directly conflicted with the Trust Agreement’s prohibition on arbitrating matters involving interpretation or enforcement of a collective bargaining agreement.

The court rejected the Pension Fund’s argument that the prohibition applied only to a particular type of arbitration involving a deadlock by the Trustees. The court reasoned that the amendments authorizing arbitration over delinquent contributions did not authorize interpretation of the collective bargaining agreement and did not otherwise modify the prohibition. The court further explained that the Trust Agreement authorized enforcement of contributions required by the collective bargaining agreement, but did not authorize the arbitrator to decide whether contributions were required in the first place. The court stated that the eligibility dispute could have been addressed through the collective bargaining agreement’s grievance procedure, after which the Pension Fund could have used Trust Agreement arbitration to determine or enforce the amount due.

The court did not reach RMC’s public-policy argument because it vacated the award on the ground that the arbitrator exceeded his authority.

Disposition

The court held that the arbitrator exceeded his authority and that the award therefore had to be vacated. RMC’s motion to vacate the arbitration award was GRANTED, and the Pension Fund’s cross-motion to confirm the arbitration award was DENIED. The court also set a case-management conference for July 12, 2022, to discuss whether any issues remained.