Labor & Employment Law Daily Wrap Up, LABOR—ARBITRATION—8th Cir.: Court lacked jurisdiction to enforce ambiguous arbitration award against railway company, (Jan 15, 2025)

By Todd Harrison, J.D.

It was unclear whether a reinstated employee’s restored benefits included vacation when the employee did not meet an explicit condition for earning vacation outlined in the collective bargaining agreement.

Reversing a lower court’s determination that an arbitration award issued in favor of a railway worker was unambiguous and enforceable, the Eighth Circuit found that there was some ambiguity regarding the subject of paid vacation, which would require interpretation of the collective bargaining agreement (CBA). As a result, the lower court lacked jurisdiction to interpret the CBA because the controversy arose in the context of the Railway Labor Act (International Association of Sheet Metal, Air, Rail, and Transportation Workers, Transportation Division v. The Kansas City Southern Railway Co., Nos. 23-3332/23-3483 (8th Cir. Jan. 14, 2025)).

In 2018, the Kansas City Southern Railway Company (KCSR) fired one of its conductors after a disciplinary investigation. On the conductor’s behalf, the union filed a grievance pursuant to the CBA and the Railway Labor Act (RLA). In accordance with the RLA, the claim was submitted to arbitration before the First Division of the National Railroad Adjustment Board (Board).

Reinstatement. Following arbitration, the Board overturned the conductor’s discharge in 2022, reinstating him with his seniority unimpaired, pay for all time lost without any deduction for outside earnings, and with full benefits restored.

Enforcement petition. After KCSR reinstated the conductor, a disagreement arose over whether it could offset the conductor’s back pay by any outside earnings the conductor earned during the course of his unemployment. The union then filed a petition to enforce the award in federal court.

Clarification. In January 2023, KCSR emailed the arbitrator seeking clarification on the issue of back pay. The arbitrator explained that the union “expressly stated it was seeking back pay without any deduction for outside earnings” and that he “fully sustained the claim.” He stated it was not “permissible” to now change the award.

Interpretation request. While the union’s enforcement petition was still pending, KCSR asked for the Board to interpret the award as it pertained to the back pay issue and whether the conductor was entitled to paid vacation for 2023. To earn paid vacation, the CBA required an employee to perform 140 days of compensated service in the preceding year unless exceptions applied. The conductor had not worked the requisite 140 days, and KCSR believed he was not entitled to paid vacation in 2023.

Motion to dismiss. The day after KCSR’s request to the Board for interpretation, KCSR filed a motion to dismiss for lack of subject matter jurisdiction in the district court, arguing the award was incomplete and ambiguous. The district court denied the motion, ordering KCSR to provide the conductor with back pay with no deduction for outside earnings and all vacation benefits to which he was entitled. It also ordered KCSR to pay the union’s attorneys’ fees. KCSR appealed.

Back pay mooted. While KCSR’s appeals were pending, the Board issued an interpretation on the issue of back pay, characterizing KCSR’s request as whether the back pay awarded could be offset by the conductor’s interim earnings. It answered this question in the negative, sustaining the award in full. However, the Board’s interpretation did not mention the vacation issue. KCSR conceded that the Board’s interpretation mooted the issue of back pay.

Despite the back pay issue being rendered moot, KCSR asked the appeals court to reverse the district court’s decision enforcing the award and its decision awarding attorneys’ fees to the union, arguing that the district court erred by enforcing the award because it lacked jurisdiction and was required to remand to the Board for interpretation of an ambiguity. The court agreed.

Vacation not mentioned. Regarding the issue of the conductor’s paid vacation benefits, KCSR asserted that the parties did not discuss the impact of reinstatement on vacation benefits during arbitration, and no evidence was cited showing otherwise. Consequently, the award never mentioned the issue. The closest the Board came was to sustain the union’s claim, which requested the conductor’s reinstatement “with full benefits restored.” Unlike the issue of back pay, the Board has not interpreted the award’s impact on the conductor’s right to paid vacation for 2023.

CBA interpretation. KCSR contended that the award required restoration of the conductor’s benefits as provided by the CBA, which requires employees to have worked 140 days in the preceding year to earn paid vacation for the current year unless an exception applies. KCSR interprets this provision as applying to wrongfully terminated employees upon reinstatement, an interpretation the district court noted was consistent with KCSR’s past practice when reinstating terminated employees represented by the union.

Nonetheless, the district court determined “[t]he claim sought restoration of full benefits, and vacation time is necessarily included in any fair understanding of benefits.” On this point, the appeals court found that the district court had erred by going outside its jurisdiction to interpret a term of the CBA when it enforced the award.

Earning a benefit. Although the district court may have been correct that the phrase “benefits” includes vacation, it was not so clear that restored benefits include paid vacation when the conductor did not meet an explicit condition for earning vacation as outlined in the CBA, explained the appeals court.

Relief sought. In this instance, the conductor was capable of specifically identifying the relief he sought. Although his claim detailed several specific requests in the event his claim was sustained, it never mentioned paid vacation. Despite the fact that he had requested “full benefits restored,” this did not necessarily mean that the Board intended to automatically award him paid vacation upon reinstatement in light of the CBA’s requirements, observed the court.

This ambiguity, continued the court, was amplified by the fact that the issue was never brought before the Board, and the union’s position conflicted with the parties’ past practice. Thus, the court concluded that the award was ambiguous because each party offered a reasonable interpretation of the award.

Ultimately, resolving the ambiguity of the award required the interpretation of a particular provision of the CBA addressing the subject of paid vacation. As a result, the court lacked jurisdiction to interpret the CBA because the controversy arose in the context of the RLA. Accordingly, the district court erred by failing to remand to the Board for its interpretation of the award. Further, because the district court erred in enforcing the ambiguous award without the Board’s interpretation, the court vacated the award of attorneys’ fees and remanded the matter for further proceedings.

The case is Nos. 23-3332 and 23-3483.

Judge: Grasz, L.

Attorneys: Kevin C. Brodar Smart, for International Association of Sheet Metal, Air, Rail, and Transportation Workers, Transportation Division, Cuyahoga, Ohio. Clifford Alan Godiner (Thompson Coburn) for The Kansas City Southern Railway Co.

Companies: International Association of Sheet Metal, Air, Rail, and Transportation Workers, Transportation Division, Cuyahoga, OH; The Kansas City Southern Railway Co.

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