It isn’t often that we see clear, unambiguous contract language be disregarded by an arbitrator.  Most times, those cases don’t even make it to arbitration because the parties are willing to settle their disagreements. However, one of those rare instances occurred recently in an arbitration between the State of Minnesota and AFSCME.

The issue to be decided by Arbitrator Beens in this case was whether the employer violated the collective bargaining agreement when it refused to allow all hours worked by employees on a designated holiday to be placed in an employee’s compensatory time (“comp time”) bank when the employee did not work over 40 hours in a week.  The collective bargaining agreement stated the following with regard to payment for work on a holiday:

Any employee, including intermittent employees, who works on any holiday provided by this agreement shall be paid in cash at the employee’s appropriate overtime rate for all hours worked, provided that the payment for work on a holiday may be placed in the compensatory bank at the employee’s option.

In analyzing the language, the arbitrator found that this language clearly meant it was up to an employee to determine how the employee would like to be paid for hours worked on a holiday.

However, the State argued that under FLSA regulations, the language giving employees the opportunity to place non-overtime hours into a compensatory time bank was actually illegal.  They based this argument on the FLSA definition of compensatory time, which states that public employees may receive, “in lieu of overtime compensation, compensatory time off at a rate not less than one and one-half for each hour of employment for which overtime compensation is required…” 29 U.S.C. §207(o).

Federal regulations also provide that comp time is paid time off which is earned “in lieu of cash payment for employment in excess of the statutory hours for which overtime compensation is required…” 29 CFR §553.22.

These two laws, along with an interpretation of FLSA by the Director of Classification and Compensation for Minnesota Management and Budget, led to the arbitrator ignoring the plain language of the contract.  He stated that allowing employees to put the entirety of their holiday pay into their comp time banks during weeks where they do not work more than 40 hours in a work period was illegal.  No caselaw supporting this interpretation was included in the award.

Upon this finding, as well as evidence that the State had twice given notice to the union that it would be following the FLSA when it came to interpreting the contract’s holiday language, the arbitrator found he had no choice but to deny the grievance and refuse to allow the practice to continue.  Employees were allowed to continue to put the ”half” portion of “time and a half” pay from their work on holidays into the compensatory time bank, but were required to take cash for work performed prior to working 40 hours in a week.

Seasoned practitioners know there’s more than one way to win a contract interpretation grievance.  A party may think it has ironclad language on its side, but contract language will almost always be trumped by the law of the land.  Obviously the union was disappointed that this case did not go their way, but an employer cannot be forced to violate the law simply because a negotiator agreed to illegal language decades before.  If you, or your organization, need assistance in drafting, interpreting or applying contract language with your groups, contact Wiley Reber Law, for labor experience that works.