This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-703

School Service Employees Local 284,

a/k/a Service Employees International Union,

Local 284, et al., petitioners,

Respondents,

vs.

Independent School District No. 728,

Elk River, Minnesota,

Appellant.

Filed April 4, 2006

Affirmed

Halbrooks, Judge

Dissenting, Shumaker, Judge

Sherburne County District Court

File No. C9-03-2819

Bruce P. Grostephan, Peterson, Engberg & Peterson, 700 Old Republic Title Building, 400 Second Avenue South, Minneapolis, MN 55401-2498 (for respondents)

Paul Engh, The Pillsbury Building, Suite 215, 220 South 6th Street, Minneapolis, MN 55402; and

Ivars Krafts, P.O. Box 279, Circle Pines, MN 55014 (for appellant)

Considered and decided by Lansing, Presiding Judge; Shumaker, Judge; and Halbrooks, Judge.

U N P U B L I S H E D O P I N I O N

HALBROOKS, Judge

Appellant school district challenges the district court’s decision to confirm the arbitration award in this case. The school district argues that the arbitrator exceeded his powers in finding that it failed to negotiate in good faith the effects of its decision to subcontract its special-education transportation and by terminating respondent bus drivers without cause. In addition, appellant claims that the arbitrator did not have the power to reinstate employees because the collective-bargaining agreement did not contemplate that remedy. We affirm.

FACTS

Appellant Independent School District No. 728 (school district) and respondents School Service Employees Local 284 entered into a collective-bargaining agreement (CBA) covering the terms of employment for bus drivers for the school district. The CBA was in effect from July 1, 2000 through June 30, 2002. On January 8, 2002, the school district reached an agreement with Vision Transportation (Vision) to subcontract its special-education transportation. The agreement with Vision was to begin July 1, 2002.

In May 2002, the school district notified the 15 special-education bus drivers of its intention to subcontract its transportation operation and terminate their employment. The parties ultimately engaged in five negotiation sessions and two mediations. In June 2002, respondents brought a grievance against the school district as a result of their termination. In November 2002, the school district issued its final denial of respondents’ grievance. As a result, in December 2002, respondents requested and received a list of arbitrators.

Respondents did not select an arbitrator or inform the school district that they were proceeding to arbitration until October 2003. The school district, believing that respondents had abandoned their grievance, refused to select an arbitrator, forcing respondents to move to compel arbitration in the district court. The district court granted the motion, and arbitration occurred in June 2004, with the arbitrator issuing his award in October 2004. The award ordered the school district to reinstate employees with full back pay, benefits, and seniority.

The school district moved in the district court to vacate the arbitrator’s award on the ground that the arbitrator had exceeded his powers. Respondents moved to confirm the arbitrator’s award. The district court confirmed the arbitrator’s award, thereby granting respondents’ motion and denying the school district’s. This appeal follows.

D E C I S I O N

An arbitration award generally may be vacated only on the grounds listed in Minn. Stat. § 572.19, subd. 1 (2004). See Hunter, Keith Indus., Inc. v. Piper Capital Mgmt., Inc., 575 N.W.2d 850, 854 (Minn. App. 1998) (applying predecessor statute). One of the statutory grounds is if “[t]he arbitrators exceeded their powers.” Minn. Stat. § 572.19, subd. 1(3). “A court shall not overturn an award merely because it disagrees with the arbitrator’s decision on the merits,” County of Hennepin v. Law Enforcement Labor Servs., Inc., Local No. 19, 527 N.W.2d 821, 824 (Minn. 1995), but rather, “[o]nly where the arbitrators have clearly exceeded their powers,” Wolfer v. Microboards Mfg., LLC, 654 N.W.2d 360, 365 (Minn. App. 2002) (quoting Nat’l Indem. Co. v. Farm Bureau Mut. Ins. Co., 348 N.W.2d 748, 750 (Minn. 1984)), review denied (Minn. Feb. 26, 2003). The party challenging an arbitrator’s award has the burden of proving that the award is invalid. Nat’l Indem. Co., 348 N.W.2d at 750.

Arbitrators are the “final judge[s] of both law and fact.” State, Office of State Auditor v. Minn. Assoc. of Prof. Employees, 504 N.W.2d 751, 754 (Minn. 1993) (quotation omitted). If the arbitrator’s decision were subject to reconsideration by the courts, arbitration proceedings would work merely to delay final decisions of controversies rather than bring them to a speedy resolution. Eric A. Carlstrom Constr. Co. v. Ind. Sch. Dist. No. 77, 256 N.W.2d 479, 483 (Minn. 1977). A district court may not vacate an arbitration award if the award “draws its essence” from the CBA and can “in some rational manner be derived from the agreement.” Metro. Airports Comm’n v. Metro. Airports Police Fed’n, 443 N.W.2d 519, 524 (Minn. 1989) (quoting Ramsey County v. AFSCME, Council 91, Local 8, 309 N.W.2d 785, 792 (Minn. 1981)). An appellate court independently reviews the parties’ agreement to determine the scope of the arbitrator’s power. State, Office of State Auditor v. Minn. Assoc. of Prof. Employees, 493 N.W.2d 591, 593 (Minn. App. 1992), aff’d, 504 N.W.2d 751 (Minn. 1993).

The parties’ CBA states that respondents “recognize[] [the school district’s] right to subcontract. . . . In the event [the school district] wishes to eliminate its bus/van fleet and subcontract the entire Independent School District 728 transportation operation, it will negotiate in good faith concerning the effects of such subcontracting consistent with Minnesota State Law.” The CBA also contains an arbitration clause that provides, in part: “In the event that the employee and the [school district] are unable to resolve any grievance . . . the grievance may be submitted to arbitration.”

Thus, the question before the arbitrator was within his power to adjudicate: whether the school district negotiated in good faith the effects of its decision to subcontract. The arbitrator found that the school district violated the CBA by failing to bargain in good faith with the respondents over the subcontracting of the special-education transportation and by terminating respondents without just cause.

The school district relies heavily on Ind. Sch. Dist. 88 v. Sch. Serv. Employees Union Local 284, 503 N.W.2d 104 (Minn. 1993) (Ind. Sch. Dist. 88), for the proposition that it had the unilateral right to subcontract its transportation operation. In Ind. Sch. Dist. 88, a case in which the CBA had no provision addressing subcontracting of services, the supreme court stated:

In the absence of contractual language relating to contracting out of work, the general arbitration rule is that management has the right to contract out work as long as the action is performed in good faith, it represents a reasonable business decision, it does not result in subversion of the labor agreement, and it does not have the effect of seriously weakening the bargaining unit.

503 N.W.2d at 110. The school district states that it engaged in collective bargaining with respondents after the supreme court decided Ind. Sch. Dist. 88,and specifically included language in the CBA to address the subcontracting of its transportation operation. As a result of that language, the school district claims that it need not meet the four criteria listed in Ind. Sch. Dist. 88. Additionally, it asserts that due to the parties’ collective bargaining, it does not need to negotiate with respondents the threshold decision to subcontract or the underlying decision to terminate employees from school district employment.

The arbitrator partially agreed, stating that “[t]here can be no doubt that the [school district] is correct in its assertion that it obtained the right through collective bargaining to subcontract all of its bus services.” But he also noted that “that right is limited by the [requirement contained in article 1.2 of the CBA] to ‘negotiate in good faith concerning the effects of such subcontracting consistent with Minnesota State Law.’”

The CBA explicitly provides the school district with the right to subcontract its transportation operation. Following that decision, the school district need only negotiate the effects of the subcontracting. The CBA does not require the school district to negotiate with respondents regarding the threshold decision to subcontract, but, contrary to the school district’s interpretation, it does require the school district to negotiate with respondents regarding the effects of that decision.

Based on the record, the school district had many available options other than termination. For example, as suggested by the arbitrator, the school district could have, as part of the subcontracting, required Vision to allow the Local 284 employees to drive their buses or bargain with the union; the school district could have transferred the employees to other positions within the district; or the school district could have negotiated a mutually acceptable severance package.

As the arbitrator noted,

“[w]hile the Employer had no obligation to propose or agree to any of the above alternatives, it had a contractual obligation to negotiate with the Union over if and how these employees would be assigned, transferred, re-employed or laid off. The Employer’s clear refusal to meet this contractual obligation and its insistence on bargaining from a fixed position compels a finding that the Employer did not bargain with the Union in good faith in violation of Article 1.2 of the collective agreement.

In light of the foregoing discussion, it follows that the Employer’s decision to terminate Grievants was also in violation of the collective agreement. Grievants were terminated at the beginning of June 2002 when the collective bargaining agreement was still in full force and effect and there was work for them to perform. At no point during these proceedings did the Employer contend that it had cause for discharging Grievants within the meaning of Article XII.

Evidence of the school district’s refusal to bargain in good faith can be found in the correspondence between the parties in the spring and summer of 2002, as well as in the minutes of the negotiation and mediation sessions. On May 15, 2002, the school district sent a letter to Local 284 stating its intention to subcontract and to terminate the employees’ employment with the district. Appended to that letter was a proposal of payment of benefits and severance. On May 17 and 24, 2002, the school district sent letters to two employees informing them that their employment with the district would be terminated effective June 6, 2002 (the last day of the school year). Thus, it is clear that the school district had decided that, as a result of its decision to subcontract, it would terminate the employees without any consideration of any alternative.

Additionally, offers and proposals by the school district during negotiation and mediation sessions confirm its decision to terminate the employees’ employment and show that the school district was only willing to bargain over the issue of severance. For instance, at the April 17, 2002 negotiation session, the school district proposed a cash payment to the employees as severance, but did not propose an actual figure. At the end of the session, the school district proposed a $500 payment to each employee. Also, when confronted with the alternative of requiring Vision to hire the employees and let them organize with Local 284, the school district stated that it “would not impose restrictions on a private contractor.” Local 284 also proposed that the employees remain district employees in another capacity, but that proposal was rejected outright.

During the mediation session on May 8, 2002, Local 284 stated that the employees rejected the $500 cash payment offer and asserted that the employees wanted to remain district employees. The school district “restated their intention to not enter in another contract for continuing employment.” On August 13, 2002, the parties again met for a mediation session at which Local 284 rejected the school district’s severance offer. The minutes of the session state that “[t]he intent of the school district is not to negotiate the original contract.” Therefore, it is evident from these letters and bargaining sessions that the school district was unwilling to consider alternatives to termination.

As a result of the school district’s failure to negotiate in good faith, the arbitrator ordered that it reinstate employees with full back pay, benefits, and seniority. The school district claims that this, too, is an abuse of the arbitrator’s powers because the CBA does not contemplate this remedy.

But the supreme court has stated, “[w]here the arbitration agreement contains no provision on remedies, we defer to the arbitrators’ discretion, preserving the flexibility which commends arbitration as an effective means of resolving labor disputes.” Children’s Hosp., Inc. v. Minn. Nurses Ass’n, 265 N.W.2d 649, 653 (Minn. 1978). In that case, the hospital demoted two head nurses. Id. at 650. The arbitrator ordered the hospital and the nurses association to bargain for a specified period of time, and if that failed, to reinstate the nurses to their former positions with back pay and compensation for any other losses as a result of the demotion. Id. at 651. The supreme court refused to upset the arbitrator’s remedy, despite the absence of any express remedial provision in the CBA. Id. at 653.

Furthermore, this court stated in Ind. Sch. Dist. 88 v. Sch. Serv. Employees Union Local 284, 490 N.W.2d 431, 435 (Minn. App. 1992),that “where the school district violates the terms of an existing agreement, arbitration is proper and the arbitrator’s remedy of reinstatement with back pay will be affirmed.” Because the CBA in this case does not contain a remedy provision and the school district violated the terms of the CBA, we defer to the arbitrator’s decision regarding the appropriate remedy.

Affirmed.

SHUMAKER, Judge (dissenting)

I respectfully dissent. I believe the majority opinion effectively negates or impermissibly qualifies two clear and unconditional rights expressly accorded the school district in the parties’ collective-bargaining agreement (CBA). The first is “the School Board’s right to subcontract,” and the second is the right to eliminate altogether the “bus/van fleet” the Local 284 members had been operating “and subcontract the entire Independent School District 728 transportation operation,” as provided in Article I, paragraph 1.2, of the CBA.

There is no condition in the CBA placed on either of those rights. However, there is a provision in paragraph 1.2 that if “the School Board wishes” to exercise its right to eliminate the existing bus/van fleet operation and its right to subcontract that operation to someone else, then the school district “will negotiate in good faith concerning the effects of such subcontracting consistent with Minnesota State Law.”

The majority correctly holds that the “CBA does not require the school district to negotiate with respondents regarding the threshold decision to subcontract, but . . . it does require the school district to negotiate with respondents regarding the effects of the decision to contract.” But I believe the majority then errs when it includes in those “effects” an obligation to consider ways to retain the Local 284 members as employees, either as bus drivers or in other employment positions.

If, as it clearly did, the school district had a contractual right to eliminate the transportation operation, that would seem to mean that it had the right to eliminate both the vehicles and the drivers—that is, it had the right to terminate the drivers’ jobs. The “effects” of a job termination would be what is commonly known to be the effects of most job losses, namely, severance pay, pension adjustments, health-care protection, vacation-pay adjustments, and the like. It is a contradiction to say that the CBA gives the district a right to eliminate the transportation operation but then to suggest that the district cannot do so without first making a good-faith effort to retain the people employed in that operation. Because the majority’s overly broad interpretation of the word “effects” impinges a clear bargained-for right that the CBA provides to the school district, the end result is the replacement of an unconditional right that was the product of bargaining with a conditional right through judicial fiat.

Finally, I believe the school district’s reliance on Indep. Sch. Dist. No. 88 v. Sch. Serv. Employees Union Local 284, 503 N.W.2d 104 (Minn. 1993), is correct. The school district and the majority cite a significant part of the holding in that case, but for opposite reasons:

Id.at 110 (quotation omitted). The operative language of the holding is the opening phrase: “In the absence of contractual language relating to contracting out of work.” In the Indep. Sch. Dist. No. 88 case, there was no CBA provision that dealt with “contracting out of work,” id. at 106, and, thus, the supreme court applied the general rule, id. at 110. If that rule applies, the majority here is correct that the “contracting out of work” cannot be done without first complying with the requirements of the general rule. But the general rule does not apply because there is language in the CBA regarding the “contracting out of work.” Thus, that action is controlled by whatever the CBA says about it and not by the general rule, which applies only when there is no such language.

For these reasons, I would reverse.