Appeals Court Encourages Public Employers to Litigate Arbitration Decisions on Public Policy Grounds

In School Comm. of Lowell v Oun, 07-P-184 (Sept. 25, 2008), the Appeals Court upheld an arbitrator’s decision to reinstate three wrongfully-terminated teachers with full back pay and benefits.  In a possibly disturbing signal that could disrupt future judicial review of arbitration cases, the Court hinted that it can freely review evidentiary decisions of an arbitrator and significantly broaden the “public policy” arguments that may overturn arbitration awards.  The decision simultaneously discourages and encourages public employers to litigate “final and binding” arbitration decisions.

            In this case, Lowell schools terminated three teachers pursuant to G.L. c. 71A, § 4, which mandates that “all children shall be placed in English language classrooms” conducted by teachers “fluent and literate in English.” The Massachusetts Department of Education (“DOE”) provides guidelines and regulations for determining a teacher’s fluency.  These guidelines and regulations specify that if a teacher’s fluency is not apparent during classroom observation, then it may be demonstrated through testing. 

Here, all three teachers had professional, or tenured, status and were born outside of the U.S.  Prior to their terminations in 2003, all three teachers had received satisfactory evaluations.  Lowell Schools conducted no classroom observation and instead tested the teachers several times, including exams unapproved by the DOE.  The teachers failed these exams.  As a result Lowell then terminated the teachers.

            In a controversial part of his decision, the arbitrator excluded the teachers’ DoE test scores because they were unable to cross-examine the DoE test graders and because the School failed to evaluate the teachers’ fluency through classroom observation.  Without the DoE scores, the arbitrator concluded that the School could not justify its termination of the teachers.  As a separate basis to reinstate the teachers, the arbitrator reasoned that Lowell’s reliance on the DoE scores, even if valid, violated state anti-discrimination law because Lowell never used the test against native English-speaking teachers. 

            Lowell Schools appealed the arbitrator’s decision to the Superior Court.  The Superior Court ruled in favor of the teachers.  Lowell Schools appealed again.  The Appeals Court upheld the arbitrator’s decision to exclude the test scores.  As the court acknowledged, an arbitrator’s legal conclusions and factual findings, even if incorrect, are beyond judicial review.  Instead of relying on this cornerstone of arbitration law and dismissing Lowell Schools’ complaint out of hand, the Court reviewed the arbitrator’s reasoning in excluding the test results before it concluded that there was no error.  This extended analysis, therefore, should be considered dicta and non-precedential. 

More troubling, however, is the Court’s discussion of the public policy limitation. A court may overturn an arbitration decision on public policy grounds only if (1) the public policy is well-defined and dominant and ascertained by reference to the laws and legal precedents and not from general public interest considerations; (2) the discharged employee’s disfavored conduct must be integral to the performance of employment duties; and, (3) the reinstated employee’s conduct would have required dismissal.  Here, the Schools took issue with the arbitrator’s findings that the decision not to test native English speakers for fluency violated state anti-discrimination law, that the personal qualities of the teachers overrode any fluency problems, and that the Schools retrain and reassign, not terminate, teachers with fluency problems.  In an invitation to public employers to litigate arbitration decisions on this issue, the Court refused to state whether the employer’s assertions, if true, fall within the public policy basis to overturn awards.  The Court ruled that the arbitrator’s conclusion that the Schools inadequately assessed the fluency of the teachers is sufficient to reinstate the teachers and is immune from judicial review.