3rd Circuit Issues Precedential Opinion in Verizon Labor Arbitration Award Dispute

On Wednesday, an appellate panel affirmed the findings of a Eastern District of Pennsylvania trial court in an arbitration dispute between Verizon Pennsylvania LLC and two unions, the Communications Workers of America, AFL-CIO, Local 13000 and Communications Workers of America, AFL-CIO District 2-13. The Third Circuit Court of Appeals struck the arbitration award because the issuing arbitration board improperly revised its decision without the parties’ consent in violation of the “functus officio” doctrine.

The opinion explained that Verizon FiOS is a television, internet, and phone service that was first established in Pennsylvania in 2006. At that time, Verizon FiOS reportedly offered TV content that entered the home through fiber optic cables connected to a set-top box. 

When the company launched, customers could upgrade or switch out their set-top box in one of several ways. A union service technician delivered the box to the customer’s home and installed it, or the customer picked up the box from a Verizon store and installed it themselves. Beginning in November 2007, Verizon mailed the box to the customer’s home using a common carrier and either had the customer install it themselves or had a service technician install it for a fee.

In February 2008, the unionized installation technicians filed a grievance alleging that Verizon violated the collective bargaining agreement (CBA) by contracting out union work to common carriers through the mail options. The court noted that the workers did not challenge the in-store pickup or self-installation options.

The union arbitration board determined that Verizon indeed violated the CBA by contracting with common carriers to deliver the set-top boxes to existing customers for self-installation, work that was formerly performed by service technicians exclusively. Months later, this week’s opinion explained, the arbitration board, “under the guise of creating a ‘remedy,’ improperly expanded the scope of the violation identified in the Merits Award to include not only deliveries to both existing and new customers, but also the accompanying self-installations.” Verizon subsequently filed suit seeking vacatur of the modified award. 

In its ruling, the appellate panel held that the secondary remedy improperly expanded the scope of the protected work. The court explained that while arbitration awards enjoy significant and “almost unparalleled” deference, their power is not absolute. “An arbitrator’s powers are derived from and limited by the parties’ agreement, which is made against a background of default legal rules,” the opinion stated. As such, once an arbitrator, unlike a judge, issues a finding she may not modify it absent all parties’ consent.

The court reached this decision over the unions’ argument that the court should abrogate the functus officio doctrine in labor arbitration cases on the basis that it was previously only applied to common law. The court declined to abrogate the doctrine and instead held “that it is alive and well in this Court.”

The appellants are represented by Willig, Williams & Davidson and Verizon by Jones Day.