The opinion of the court was delivered by: Honorable Joseph E. Irenas
The action before this court involves a motion to compel arbitration filed by Amalgamated Local 2327 United Automobile, Aerospace, and Agricultural Implement Workers of America (hereinafter "Local 2327") against Tri-County Community Action Agency, Inc. (hereinafter "Tri-County"). Local 2327 represents employees of Tri-County's Head Start program and wishes to arbitrate its dispute with Tri-County over the distribution of Quality Improvement funding awarded by the United States Department of Health and Human Services (hereinafter "HHS"). Local 2327 also seeks a preliminary injunction prohibiting Tri-County from dispersing any Quality Improvement funding pending the arbitrator's decision. For the reasons set forth below, the Court will deny Local 2327's application to enjoin Tri-County from distributing Quality Improvement funding pending arbitration. The Court will, however, direct Tri-County to distribute its Quality Improvement funds as detailed in this opinion and will direct Local 2327 and Tri-County to resume negotiations and possibly arbitrate any disputes regarding the relative distribution of the funds among the various Head Start teachers employed by Tri-County and represented by Local 2327. Because there are no further disputes to be adjudicated by this Court, the order issued pursuant to this opinion shall be a final judgment. The Court will retain jurisdiction for the purpose of enforcing its order.
Local 2327 and Tri-County are parties to two collective bargaining agreements covering professional and non-professional employees effective from January 22, 2000 through January 21, 2004. These agreements cover employees of Tri-County's Head Start program. (Am. Compl. ¶ 4; Am. Compl. Ex. A.) This dispute involves the distribution of Quality Improvement funding by HHS. HHS typically distributes this funding once per year. (Mosley Aff. ¶ 4.)
On April 9, 2002 HHS issued a "guidance" letter to Tri-County (as well as to other Head Start grantees nationwide) indicating total Quality Improvement funding for 2002 and detailing the responsibilities of grantees with respect to their shares of the increased funding. This letter is designed to provide general guidelines to Head Start administrators regarding the use of the funds. (Mosley Aff. ¶ 6; Mosley Aff. Ex. A.) On April 23, 2002 Tri-County received its specific grant letter from HHS, with Quality Improvement funding of $48,182 directed towards enhancing the salaries and fringe benefits of Head Start teachers. (Mosley Aff. ¶ 7; Mosley Aff. Ex. B.) Tri-County submitted its budget proposal to HHS on June 6, 2002 and this budget was approved in July of 2002. (Mosley Aff. ¶ 8; Letter from Harrison to Court of 7/26/02.) As of this date, HHS has yet to make an actual dispersal of the funds to Tri-County.
Article XI, Section E of both collective bargaining agreements reads:
[i]t is agreed that future Quality Improvement funding will be utilized for the purpose of wage and benefit improvements for the members of the UAW Local 2327 bargaining unit. The Employer will advise the Union of the amount of the Employer's allocation of Quality Improvement funding within 30 days of receipt of same. At that time, the parties will meet to negotiate the amount of the distribution of the funding to be utilized on behalf of the bargaining unit. If a dispute arises regarding the distribution of funds, the parties agree to mutually select an impartial arbitrator to resolve the dispute. As such, the parties agree to accelerate the aforementioned arbitrator selection process within 30 days of the request of either party. (Am. Compl. Ex. A.)
While there was a process of negotiations between the union and Tri-County, the parties were unable to come to an agreement regarding the distribution of the funds. The budget submitted to HHS by Tri-County included deductions of 19.5% from the total funding for Head Start teacher salary and benefit improvements for the costs of salaries and vacation, holiday and sick pay for personnel not directly affiliated with Head Start. (Kelly Aff. Ex. C.) These costs are considered indirect costs of running the Head Start program. Tri-County claims that this specific percentage is set by agreement between the agency and HHS and cannot be modified. (Def.[`s] Br. at 4.) In addition to these indirect costs, Tri-County also deducted 27% for fringe benefits of the Head Start payroll. *fn1 (Am. Compl. Ex. D.) Total increased funding towards Head Start teacher salaries resulting from the Quality Improvement funding, according to Tri-County and based on the method described above, equaled $25,777. *fn2 (Am. Compl. Ex. D.) Local 2327 also disputes a deduction of $3,000 towards dental expenses for Head Start children. (Am. Compl. ¶ 9.) However, according to the evidence submitted, this deduction has not been made from Quality Improvement funding dedicated towards enhancing the salaries and benefits of Head Start teachers and has not been deducted from the funding of $48,182 which is in dispute here. *fn3 (Am. Compl. Ex. D.) Therefore, the $3,000 dedicated towards dental expenses is not at issue in this dispute. The funds remaining (the $25,777) were then distributed as salary increases for twelve Head Start teachers, while thirty eight additional Head Start teachers received no salary increase under the Tri-County budget proposal. Tri-County's method for determining which teachers would receive the funding applied towards their salaries was to give the funding to those Head Start teachers who have at least a two year degree in early childhood development and who do not teach in one of the Abbott school districts. *fn4
Local 2327 alleges that the proper procedure for determining the distribution of the Quality Improvement funding was not met and that under the terms of its collective bargaining agreements with Tri-County it is entitled to arbitration regarding this distribution. Tri-County responds that it attempted to negotiate with the union but that, due to HHS restrictions, it had almost no discretion as to how to spend the funds. Therefore, Tri-County claims that any changes in the distribution as a result of arbitration may lead to a loss of the Quality Improvement funding from HHS.
In general, there is a presumption in favor of upholding arbitration clauses in collective bargaining agreements. See United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 567-68 (1960); United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 599 (1960); United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). "This presumption of arbitrability for labor disputes recognizes the greater institutional competence of arbitrators in interpreting collective-bargaining agreements." AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986). The correct analysis regarding the applicability of an arbitration clause is to look at three issues: "(1) [d]oes the present dispute come within the scope of the arbitration clause? (2) does any other provision of the contract expressly exclude this kind of dispute from arbitration? and (3) is there any other `forceful evidence' indicating that the parties intended such an exclusion?" E.M. Diagnostic Systems, Inc. v. Local 169, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, 812 F.2d 91, 95 (3rd Cir. 1987).
When a labor dispute involves issues not resolvable under the language of the relevant collective bargaining agreement, however, it is not appropriate for an arbitrator to be appointed. It is clear that an arbitrator "has authority to resolve only questions of contractual rights." Alexander v. Gardner-Denver, 415 U.S. 36, 53-54 (1974). Within the context of arbitration and labor disputes, arbitrators are helpful in interpreting contractual provisions and in understanding the law of the shop. However, it is not appropriate to leave to arbitration issues of law. As noted in Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), "different considerations apply where the employer's claim is based on rights arising out of a statute." Id. at 737. It is clear that when an arbitration award violates the law that award can be vacated. Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3rd Cir. 1969). This principle applies whenever the issue to be arbitrated exceeds the scope of the collective bargaining agreement. Labor arbitrators have specific skills that are not easily transferable to issues that go beyond the actual collective bargaining agreement they are attempting to interpret.