Platero v. Grand Hyatt

Background

The plaintiffs were former banquet servers employed by Grand Hyatt Hotel and members of the New York Hotel and Motel Trades Council, AFL-CIO. They sued the Hotel and the Union under Section 301 of the Labor Management Relations Act. The plaintiffs later dismissed the Union as a defendant, with prejudice; that dismissal is noted as having made the Union’s motion to dismiss moot.

The dispute concerned severance pay. The plaintiffs were classified as tipped employees under the Industry Wide Agreement, a collective bargaining agreement governing their employment. Under that agreement, tipped employees’ benefit-day pay reflected their lost tips by using twice the regular daily rate. The Hotel calculated the benefit-day rate for banquet servers as $310.96 per day.

In 2019, the Hotel and the Union entered into a redevelopment agreement providing enhanced severance pay if the Hotel proceeded with a specified demolition and redevelopment project and gave the Union notice that the Hotel was closing for demolition. The opinion states that the Hotel had not provided that notice, so the redevelopment agreement’s obligation to offer enhanced severance pay had not been triggered.

The parties’ 2019 settlement agreement resolved an earlier lawsuit and required the Hotel to offer enhanced severance pay to employees, including banquet servers, in accordance with the redevelopment agreement. The settlement agreement also required disputes to be submitted to arbitration.

After the Hotel’s food and beverage operations remained closed during the COVID-19 pandemic, the Hotel and the Union entered into a 2022 side agreement. That agreement offered food and beverage employees, including banquet servers, severance of 15 days per year of service. The plaintiffs rejected the Hotel’s proposed calculation, arguing that the 2019 settlement agreement entitled them to 60 severance days per year of service at the benefit-day rate.

Arbitration award

The parties submitted the contract-interpretation dispute to Elliott Shriftman, the Impartial Chairperson. The Hotel argued that the 2022 side agreement governed and provided 15 severance days per year of service. The plaintiffs and the Union argued that the settlement agreement incorporated the redevelopment agreement’s enhanced-severance provisions, including a requirement that the number of severance days for tipped employees be doubled.

The arbitrator concluded that the settlement agreement and the redevelopment agreement’s formula governed the calculation. He nevertheless rejected the plaintiffs’ request for 60 severance days per year. He reasoned that the redevelopment agreement referred to the Industry Wide Agreement’s severance-pay formula, which already doubled the daily pay rate for tipped employees. In his view, doubling both the pay rate and the number of days would effectively produce four times the ordinary rate and was not what the parties intended.

Motions to vacate and confirm

The plaintiffs moved to vacate, or set aside, the arbitration award. They argued that the arbitrator exceeded his authority and manifestly disregarded the law. The Hotel cross-moved to confirm the award, which would convert it into an enforceable court judgment.

Under the Federal Arbitration Act, courts give strong deference to arbitration awards. An award may be vacated only on narrow grounds, including when an arbitrator exceeds the authority granted by the parties or manifestly disregards clearly applicable law. A court may not vacate an award merely because it believes the arbitrator made a serious legal or factual mistake or interpreted a contract incorrectly.

Court’s analysis

Judge Engelmayer rejected the plaintiffs’ argument that the arbitrator exceeded his authority. The parties had agreed to submit the contract-calculation issue to arbitration, and the arbitrator decided the issue they presented. The plaintiffs’ challenge concerned the correctness of the arbitrator’s reasoning, not whether he had authority to decide the dispute.

The court also rejected the manifest-disregard argument. The arbitrator had relied on the text of the settlement agreement and the redevelopment agreement, including the reference to the Industry Wide Agreement’s severance formula. The court acknowledged that the plaintiffs’ interpretation had “undeniable force” and that the court might have reached a different result if it were reviewing the contract interpretation from the beginning. But the award had at least a barely colorable justification and was arguably derived from the agreements. That was enough to prevent vacatur under the limited standard governing arbitration review.

Disposition

The court denied the Banquet Servers’ motion to vacate the arbitral award and granted the Hotel’s cross-motion to confirm the award. The Clerk was directed to terminate all pending motions and close the case.