Attorneys' Fees Awarded As Make Whole Remedy For Refusal To Arbitrate

Sacramento City Unified School District (2020) PERB Dec. No. 2749-E (Issued on 11/02/20)

The district and union in this case were parties to a collective bargaining agreement (CBA) containing a grievance procedure culminating in binding arbitration. The union sought to arbitrate a grievance (the details of which are not relevant to my discussion of this case). The district refused. The union filed a motion to compel arbitration in superior court and prevailed.

The union then filed an unfair practice charge with PERB alleging that the district’s refusal to arbitrate the grievance constituted an unlawful unilateral change; namely, a repudiation of the parties’ CBA grievance provision. The ALJ agreed and PERB affirmed. Notably, PERB affirmed the ALJ’s order that to make the union whole, the district was required to reimburse the union for its attorneys’ fees incurred in bringing the motion to compel arbitration.

In ordering the payment of attorneys’ fees, PERB emphasized that it was not deviating from the “American Rule” which requires the parties to bear their own legal expenses. PERB also emphasized that it was not awarding attorneys’ fees as a sanction for bad faith conduct. Instead, the award of attorneys’ fees was part of the standard “make whole” remedy to place the charging party in the position it would have been in absent any unfair practice.

Although the exact amount of attorneys’ fees will be determined in compliance proceedings, the Board provided the following guidance on how to calculate the award:

Attorneys’ fees includes virtually any item customarily billed to a client by a law firm. This includes both attorney and paralegal time. It also includes costs such as filing fees, electronic research fees, or fees for service of process.
Calculation is via the familiar “lodestar method”: (1) the number of hours reasonably expended, and (2) reasonable market rates for such hours. “After calculating the basic lodestar fee, a court may enhance or reduce the amount based upon numerous factors.”
In determining reasonable hourly rates, PERB will look at prevailing market rates for private law firm staff with similar experience and not necessarily the actual salaries of attorneys involved. However, the cases cited by PERB note that the lodestar approach is flexible and that adjustments can be made, either up or down.

Comments:

It is well-understood by practitioners that arbitrability is generally arbitrable. So in the labor context it is relatively rare to refuse to arbitrate a grievance, especially if it is a matter of procedural arbitrability. With respect to substantive arbitrability, whether you can refuse or not is a bit more murky. But depending on the language of the CBA, this PERB decision essentially makes it possible for a prevailing union to obtain attorneys’ fees if it successfully brings a motion to compel arbitration by filing an unfair practice charge with PERB. Smart employers will keep that in mind when considering whether to refuse to arbitrate a grievance.
In terms of the calculation of the attorneys’ fees, I believe that if the purpose of such an award is to make the charging party whole, the charging party should not be able to recover more in attorneys’ fees than it actually spent. But this decision opens the door to such a result, especially where a union uses in-house counsel. However, the cases cited by PERB do emphasize that adjustments can be made in the interest of fairness. Hopefully PERB will keep that in mind …