MICHIGAN FAMILY RESOURCES, INC., Plaintiff-Appellee, v. SERVICE EMPLOYEES INTERNATIONAL UNION LOCAL 517M, Defendant-Appellant, 438 F.3d 653

The court delivered a PER CURIAM opinion. SUTTON, J. (pp. 658 - 663), delivered a separate concurring opinion. OPINION PER CURIAM. Local 517M of the Service Employees International Union challenges the decision of the district court to vacate an arbitration award in its favor. Because the award does not draw its essence from the collective bargaining agreement, we affirm. I. Michigan Family Resources (MFR) runs the federal Headstart Program that serves Kent County, which lies in western Michigan. Local 517M of the Service Employees International Union represents some of MFR’s employees.

On behalf of its members, the union negotiated a collective bargaining agreement with MFR that entitled its members to annual wage increases. For our purposes, the agreement contains four pertinent provisions. Article 35(1) of the agreement provides: Bargaining unit members will receive the same cost of living increases paid to other MFR employees pursuant to the directive of MFR’s funding source. The parties understand that the timing and amount of any such increase is entirely dictated by the funding source. JA 43.

The “funding source” mentioned in this provision, the parties agree, refers to the federal government. Article 35(2) provides: During the fall semester of each program year, bargaining unit members will be reviewed and will be considered for a merit increase.... MFR will guarantee at least that for each bargaining unit employee the sum of any [cost-of-living increase] paid during the year and the merit increase will be as follows: 2002 — 4%; 2003 — 2.5%; 2004 — 3.5%.

For example, if the [cost-of-living] increase for 2004 is 2.5%, effective on September 1, 2004 bargaining unit members will receive at least an additional 1.0%. JA 43-44.

Article 5(

c) requires the parties to arbitrate any disputes that they cannot resolve on their own. The arbitrator, it says, “shall have full authority to render a decision which shall be final and binding upon both parties and the employees, except that the arbitrator shall not have authority to change, alter, amend, or deviate from the terms of this collective bargaining agreement in any respect.” JA 27. This

article further provides that “[i]f the Union requests arbitration, the parties shall choose an arbitrator by selecting from the following list through the alternating strike method:” Mario Chiesa, Mark Glazer, William Daniel, George Roumell, and Lamont Stallworth. Id. And

Article 34 provides that the agreement “expresses the understanding of the parties and it will not be changed, modified, or varied, except by written instrument signed by duly authorized agents of the party hereto,” and that “[t]here are no past practices which are binding upon the parties.” JA 43. In May 2003, MFR notified the union employees that they would receive a 2.5% increase for 2003 — 1.5% from the “funding source” (i.e., the federal government), 1% from MFR — while non-union employees would receive a 4% increase for the year.

While the 2003 pay increase for union employees satisfied the collective bargaining agreement’s minimum requirement for that year (2.5%), the union claimed that the agreement required parity between union and non-union employees in the payment of cost-of-living increases. The union accordingly filed a grievance against MFR. In accordance with the agreement, the parties engaged an arbitrator, Mark Glazer, to resolve the dispute. On December 10, 2003, the arbitrator issued a written decision in favor of the union. As he saw the matter, the question was “whether

Article 35 requires MFR to provide parity in [cost-of-living] payments for its [union] employees when non-Union employees receive higher [] payments.” Arb. Op. at 2. On this point, the arbitrator reasoned,

Article 35 was not entirely clear. While it required union members to “receive the same payments from the federal funding source as other employees,” it did not directly address “the cost of living increases from other sources, such as from the Employer.” Id. at 7. The arbitrator then noted that before and after the adoption of the collective bargaining agreement, MFR granted the same cost-of-living increase to all employees, regardless of union affiliation. Id. at 8.

MFR never held merit reviews, he added, and in a 2002 memo (dealing with pay increases for the first year of the collective bargaining agreement) it characterized the entire wage increase to union employees as a cost-of-living increase. “I am persuaded,” the arbitrator then concluded, “that [Article 35] becomes ambiguous because of the Employer’s prior decision to characterize both its individual payment and its payment from the federal funding source as [cost of living].” Id. at 8.

Having identified this ambiguity, he resolved it in light of the employer’s practice of granting identical cost-of-living increases to all employees and therefore awarded union members an equivalent 4% cost-of-living increase. On January 9, 2004, MFR filed a complaint in federal court seeking to vacate the award, premising subject-matter jurisdiction on § 301 of the Labor Management Relations Act, 29 U.S.C. § 185. On November 10, 2004, 380 F.Supp.2d 886, the district court granted MFR’s motion for

summary judgment, holding that “the Arbitrator’s award does not draw its essence from the [collective bargaining agreement] because the Arbitrator considered evidence to aid in construing the [collective bargaining agreement] when, in fact, no construction was necessary.” ’ 380 F.Supp.2d at 890. “[T]he Arbitrator,” the court concluded, “went beyond the express terms of the [collective bargaining agreement] by imposing additional requirements upon the parties and considering past practices, which are specifically disclaimed by the [collective bargaining agreement’s] waiver provisions.” Id.

This' appeal followed, which we review de novo. Beacon Journal Publ’g Co. v. Akron Newspaper Guild, 114 F.3d 596, 599 (6th Cir.1997). II. Although the standard for reviewing arbitration awards is “one of the narrowest standards of judicial review in all of American jurisprudence,” Tenn. Valley Auth. v. Tenn. Valley Trades & Labor Council, 184 F.3d 510, 514-15 (6th Cir.1999) (internal quotation omitted), “our review is not toothless when an arbitrator’s award disregards the collective bargaining agreement and its terms,” Beacon Journal Publ’g Co., 114 F.3d at 599.

When an award “draws its essence from the collective bargaining agreement,” we will uphold it; when it does not, we will vacate the award. United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) (internal quotation omitted).

An award does not “draw its essence” from the collective bargaining agreement, we repeatedly have said, when any of the following is true: “(1) it conflicts with express terms of the agreement; (2) it imposes additional requirements not expressly provided for in the agreement; (3) it is not rationally supported by or derived from the agreement; or (4) it is based on general considerations of fairness and equity instead of the exact terms of the agreement.” Sterling China Co. v. Glass Workers Local No. 21, 357 F.3d 546, 556 (6th Cir.2004) (internal quotation omitted); see Cement Divs., Nat’l Gypsum Co. v.

United Steelworkers, Local 135, 793 F.2d 759, 766 (6th Cir.1986). Applying these standards, the district court determined that the arbitrator’s award did not draw its essence from the collective bargaining agreement. We agree.

By its terms, Article 35(1) of the agreement addresses the requirements for government-funded cost-of-living increases, providing that “[bargaining unit members will receive the same cost of living increases paid to other MFR employees pursuant to the directive of MFR’s funding source.” Wdiatever cost-of-living increase that “MFR’s funding source” (the federal government) provides in a given year, in other words, must be provided equally to union and non-union members alike. But the agreement does not spell out any requirements for employer-funded cost-of-living increases.

And Article 35(2) addresses merit increases and guarantees a minimum raise for all union employees and yet says nothing about parity between union and non-union members. Each fall, it says, “bargaining unit members will be reviewed and will be considered for a merit increase.” JA 43. It then “guarantee^] at least that for each bargaining unit employee the sum of any [cost-of-living increase] paid during the year and the merit increase will be as follows: 2002—4%; 2003 — 2.5%; 2004 — 3.5%.” JA 43-44.

According to the terms of this provision, union members are guaranteed a minimum increase each year, regardless of what the federal government’s cost-of-living increase is, while non-union members receive no such guarantee. The terms of the two provisions, it seems to us, admit of one proper

interpretation. While the agreement requires parity in government-funded cost-of-living increases, it does not require parity in employer-funded cost-of-living increases or in merit increases (an odd concept at any rate) and therefore does not require parity in the sum of the cost-of-living and merit increases. The parties- reached agreement on the minimum amounts owed to union employees, but they tied that agreement to set percentages, not to what MFR happened to pay non-union employees in a given year. See Article 35(2), JA 43-44.

Faced with an agreement that gives union employees the same government-funded cost-of-living increases as non-union employees and that assures union employees a minimum salary increase for each of the three years of the agreement, the arbitrator had no authority to impose an additional term on the employer, namely that any cost-of-living increase provided to non-union employees, no matter how funded, must be provided to union employees.

When the arbitrator required parity in employer-funded salary increases, he thus imposed an “additional requirement! ] not expressly provided for in the agreement,” one that “conflict[ed] with express terms of the agreement,” Sterling China Co., 357 F.3d at 556, and -one that accordingly did not draw its essence from the, agreement.

Given this clarity in the agreement, the arbitrator also had no basis for consulting evidence of the-parties’ custom of wage increases and no basis for invoking that custom as a source in construing the agreement. “[P]ast practice or custom should not be used to interpret or give meaning to a provision or clause of the collective bargaining agreement that is clear and unambiguous.” Beacon Journal Publ’g Co., 114 F.3d at 601; see also Allied Indus. Workers v. Gen. Elec. Co., 471 F.2d 751, 756-57 (6th Cir.1973) (“[WJhere the meaning of the clause is clear, no construction is necessary.”).

Disregarding this more pertinent custom, the arbitrator committed a severe order-of-operations error, reasoning that the language of

Article 35, “becomes ambiguous” because of MFR’s past salary-increase practices. JA 55, (emphasis added). Under these circumstances, the district court rightly concluded that the award did “not draw its essence from the [collective bargaining agreement] because the Arbitrator considered evidence to aid in construing the [collective bargaining agreement] when, in fact, no construction was necessary.” 380 F.Supp.2d at 890.

In reaching this conclusion, we are not unmindful of appellant’s argument that an arbitration award should not be vacated merely because the arbitrator commits a legal error in construing the collective bargaining .agreement. As the concurrence points out, the argument is a compelling one and Supreme Court precedent provides some suppprt for it. But as the concurrence also points out, this circuit’s four-part. test — resting in part on these same Supreme Court precedents — has been in place for 20 years and binds us here. See Cement Divs., Nat'l Gypsum Co. v.

United Steelworkers, Local 135, 793 F.2d 759, 766 (6th Cir.1986). If appellant is to have success on this front, in short, it will have to be through a petition for rehearing en banc, one that the three of us would be open to consider in this case or in any other case presenting the issue. III. For these reasons, we affirm.