Do “Make Whole” Arbitration Awards Allow Offsets?

In United Electrical, Radio & Machine Workers of America v. General Electric Co., No. 18-330-E, 2020 U.S. Dist. LEXIS 55677 (W.D. Pa. Mar. 31, 2020), a Pennsylvania federal court had to determine whether the language “make whole for lost wages and benefits” in an arbitration award was too ambiguous to be enforced. Ultimately the court held that the language was not ambiguous and meant that the employer could not offset any outside income the employee had earned when it paid him for lost wages.

On December 19, 2016, General Electric (GE) fired employee Michael Rowan for “unacceptable attendance.” That same day, United Electrical, Radio & Machine workers of America Local 506 (the Union) filed a grievance on Rowan’s behalf pursuant to the parties’ Collective Bargaining Agreement (CBA). When GE denied the grievance, the parties submitted the matter to binding arbitration.

The issues in the arbitration were, “Was the discharge of Michael Rowan for just cause? [and; i]f not, what shall the remedy be?” United Elec., at 3. Perhaps assuming that the grievance would be denied, GE did not address the issue of an appropriate remedy during arbitration. However, the arbitrator found that GE had not established just cause for Rowan’s discharge and sustained the grievance. The award simply stated: “The Grievant shall be reinstated to his employment and made whole for lost wages and benefits.” Id. at 4. The arbitrator did not indicate that he was retaining jurisdiction over the matter to calculate such lost wages or benefits or for any other purpose.

GE reinstated Rowan to his former position but did not provide him with any back pay for lost wages. Instead, GE asked the Union to provide information verifying and quantifying any outside income that Rowan earned while his employment was terminated. GE argued that the language of the award requiring Rowan to be made whole unambiguously required a determination as to any relevant offsets, maintaining that there is a universal principle in labor and employment law, that a “make whole” remedy is not intended to make the aggrieved party “more than whole” and therefore any interim income that Rowan earned from outside sources must be deducted from the back pay provided by GE. Id. at 11.

The Union refused to provide the information, asserting that the award did not mention any offset and that GE had not raised the issue of an offset during the arbitration. GE asked the arbitrator to direct the Union to provide the information GE had requested, or alternatively, to participate in a conference call with the parties to discuss the matter. Although the arbitrator was willing to engage in such a conference, he noted that, because he had not retained jurisdiction over the arbitration, both parties would have to agree to his further involvement. The parties did not reach such an agreement, whereupon the Union filed suit to enforce the award, and the parties filed cross-motions for summary judgment.

The district court noted that its authority to review an award is “extremely limited,” but that it does have authority to enforce arbitration awards when one or more parties have failed to comply with the award. The court also noted that “when the remedy awarded by the arbitrator[] is ambiguous, a remand for clarification of the intended meaning of an arbitration award is appropriate.” Id.at 7-8.

The district court stated that the award contained no language suggesting that Rowan’s “make whole” remedy was subject to an offset. It also noted that, during the arbitration, GE did not raise the issue of offset at all, suggesting that an offset was not an issue GE deemed to be relevant. In addition, the CBA contained no provisions requiring offset in connection with a make whole remedy, providing GE with no basis for assuming that the make-whole award was subject to offset. Therefore, the court held, “[T]here is nothing about this case to imply that [the Arbitrator’s] silence as to offsets and mitigation was anything other than an intentional exclusion of these issues from the Award.” Id.

Currently, there is no binding Third Circuit precedent on whether an award with a “make whole” remedy that is silent on the issue of offsets or mitigation means that such offsets or mitigation do not apply. Here, however, the district court cited as persuasive authority decisions from the Fourth, Fifth, and Seventh Circuits stating that the absence of language regarding offsets or mitigation “unsurprisingly means that none were intended.” Id. at 9. If this issue finds its way to the Third Circuit, it will be interesting to see if that court reaches the same result or takes a different path.