The Submission Agreement in Contract Arbitration [Reprint 2016 ed.] 9781512816631

Citation preview

THE SUBMISSION

AGREEMENT

in

CONTRACT ARBITRATION

MORRISON AND MARJORIE HANDSAKER

Published for the

LABOR

RELATIONS

COUNCIL

o f the

WHARTON SCHOOL OF FINANCE AND COMMERCE by the

UNIVERSITY

OF

PENNSYLVANIA Philadelphia

1 952

PRESS

Copyright 1952 UNIVERSITY O F PENNSYLVANIA PRESS Manufactured

in the United States of

America

Morrison Handsaker is Chairman of the Department of Economics and Business Administration at Lafayette College, Easton, Pennsylvania. He has served the United States Government in several capacities, notably with the National Recovery Administration and the War Labor Board. He has functioned as a labor arbitrator in numerous cases and is the author of various publications in the field of labor. Marjorie Linfield Handsaker was formerly research assistant in statistics at the Harvard Business School, and a Fellow of the Department of Economics, University of Chicago. She subsequently served as editor of the Labor Bulletin published by the Illinois Department of Labor. She cooperated with Senator Paul H. Douglas, then a professor at the University of Chicago, on a study of the "production function" published in 1938.

CONTENTS CHAPTER

1. 2. 3.

PAGE

Preface

v

The Submission Agreement in the Voluntary Arbitration of the Terms of Labor Contracts

1

Cases in Which Limited Submissions Were Used

13

Analysis of Contract Arbitration and Particularly the Limited Submission

4.

38

Summary and Conclusions

78

Reference Notes

86

Appendix I

96

Appendix II

99

[iii]

PREFACE A better understanding of labor arbitration requires, it seems to me, an intensive analysis of specific problems rather than the broad general appraisals which are more commonly made. Perhaps progress in the effective use of arbitration will be accelerated when the compound is broken down into its various elements. This study of the submission agreement by Morrison and Marjorie Handsaker illustrates very clearly the values that derive from intensive research into a selected element of the broad subject of arbitration. These authors have carefully examined the problems involved in the formulation and in the use of various kinds of "submissions to arbitrate" the terms of new agreements. In doing so, they have opened up a new field for more intensive cultivation. They have also shown, in a striking way, some of the advantages of careful research into a particular aspect of labor arbitration in giving the depth of treatment which makes for a significant contribution. At the same time, the subject matter of the Handsakers' monograph is exceedingly important. Work stoppages over grievances arising under labor agreements have been greatly minimized by the use of voluntary arbitration. In marked contrast, voluntary arbitration is not extensively used to settle issues over the terms of new labor agreements. Negotiators generally prefer the risks of work stoppages to the risks of arbitration to settle differences over contract terms. Is that because the risks of arbitration of contract terms are inherently excessive? Should, therefore, the limited usefulness of arbitration in this area be accepted as a basic principle of industrial relations under collective bargaining? Or, does this limited usefulness primarily reflect a lack of understanding about the theory and practice of labor arbitration? These are the questions which prompted Morrison and Marjorie Handsaker to find out as much as possible about the [v]

various ways in which the risks of arbitration might be limited by the terms of the arbitration submission. That is the instrument through which the negotiating parties can instruct the arbitrator about how they wish him to go about settling their differences. The authors thus examine in detail an industrial-relations instrument, the arbitration submission, which, at least until quite recently, could logically be called the forgotten document of industrial relations. The essence of collective bargaining is the specification of employment terms by agreement between employee and management representatives. A meeting of minds is the fundamental criterion of collective bargaining. It is still the criterion when the ultimate pressures of a work stoppage are invoked. Under these circumstances, it is not difficult to appreciate the reluctance of the unions and the managements to pass along to an "outsider" the power to impose the terms of employment upon them. T h e reluctance to invoke a process entirely out of the control of the parties has resulted, when arbitration is used to avoid work stoppages, in the common use of the tripartite arbitration board. There has also been a less extensive but significant use of the limited submission to minimize the risks of arbitration. Proper use of the limited submission involves an obligation of the parties to agree upon as many details of the arbitration proceeding as possible even though they may be unable directly to agree upon a settlement of a substantive issue submitted to arbitration. Such an obligation would appear to be in the collective-bargaining tradition. It may be that unions and managements can work out ways and means for more effectively using arbitration to settle the differences over contract terms which result in the greatest number of work stoppages nowadays. It follows, it seems to me, that the entire subject of the arbitration submission calls for extended and objective examination. An excellent start on such a project has been made in the monograph which Morrison and Marjorie Handsaker have prepared. That study should provoke discussion and further research. As a consequence, perhaps it may be

[vi]

found that the restricted use of arbitration to settle issues over new contract terms is not due to an inherent shortcoming of arbitration but to a defective use of the mechanism. Nor should there be any sudden leap to a conclusion adverse to arbitration. The almost universal use of grievance arbitration is a quite recent phenomenon. Twenty years ago, the idea that an "outsider" might decide the problems that arise in day-by-dav operations was scoffed at—and for many of the same reasons now advanced to show that the work stoppage is superior to arbitration in settling issues over contract terms. GEORGE W .

TAYLOR

Philadelphia July 1952

[vii]

THE SUBMISSION AGREEMENT IN CONTRACT ARBITRATION Chapter 1

THE SUBMISSION AGREEMENT IN THE VOLUNTARY ARBITRATION OF THE TERMS OF LABOR CONTRACTS

"The men have hit the bricks," was the news with which the industrial relations director of a machine-manufacturing plant greeted the senior author. To the question, "Have you considered arbitration?" the director replied: "You misunderstand me. This is a strike over the terms of our next contract. This is not over a grievance." Further conversation showed that this man, although well informed on many aspects of industrial relations, did not know that it was possible to arbitrate a disputed clause when negotiations for a new or renewed contract broke down. He thought all voluntary labor arbitration was confined to settling grievances and interpreting existing contracts. This director is typical of a substantial group who have little information about voluntary arbitration of the terms of new or renewed contracts. There is a much larger group of management and labor representatives who know that it is possible to arbitrate contract terms, but appear to give little serious consideration to using arbitration when a work stoppage threatens. They say, with a regularity that suggests a formula: "We have an established system for grievance arbitration, but we do not arbitrate the terms of contracts." They follow this with extensive criticism of contract arbitration. After hearing these views expressed by many spokesmen for unions and management, the casual observer might conclude that there would be few, if any, instances in which voluntary arbitration of contract terms had been used. Paradoxically, careful study shows that there have been a [1]

substantial number of cases of voluntary contract arbitration, in a greater variety of industries than seems to be commonly known. Grievance cases still make up the bulk of labor arbitration cases, but there is some evidence that contract cases may represent around 8 per cent of labor arbitration cases. 1 " T h e Tribunal Vice-President of the American Arbitration Association wrote recently: "It is not unusual today to have the terms of new agreements determined by voluntary arbitration and such use should be encouraged. THE

PROBLEM

T h e resident of a community in which there is a prolonged strike in an important industry need only look at the smokeless factory chimneys, watch the restless pickets at the gates, and later note the meager purchases in the shopping baskets at the local grocery store to realize the heavy burden of work stoppage. These are only outward signs of the serious losses for management, stockholders, labor, and the public, of prolonged strikes or lockouts. Can Voluntary Industrial

Arbitration Peace?

of Contract

Terms

Promote

It is the purpose of this study to inquire into methods for peaceful settlement of disputes, to reduce these losses. Clearly it would be best if the parties could resolve these differences themselves either directly or, if necessary, with the aid of a mediator. W e address our attention to those situations in which negotiations even with the aid of a mediator have failed, in order to see if voluntary arbitration can provide a practical alternative to a trial of strength. At first thought, it might seem that voluntary arbitration would be readily substituted for work stoppages, if the parties were sufficiently informed about contract arbitration. T h e widespread acceptance of grievance arbitration has virtually ended strikes over grievances. Could not voluntary arbitration of contract terms in time win the same acceptance? • Reference notes at end. Pa^es 86-96.

[2]

On further analysis, however, it becomes evident that something more than general education about contract arbitration is needed. Many who speak for labor and management say that they do give arbitration serious consideration, but that in many instances they do not accept it, and that they have sound reasons for this decision. The evaluation of contract arbitration must, therefore, take account of these established beliefs, and the reasons on which they are based. The explanation of the existence of a substantial number of cases of contract arbitration, along with so much opposition to it, appears to lie in the fact that ( 1 ) even severe critics make exceptions for "special circumstances," and ( 2 ) there is another group who hold differing views about contract arbitration. Our purpose is to examine the thinking of labor, of management, and of arbitrators about contract arbitration, and to indicate whv our study leads us to the conclusion that voluntary arbitration of contract cases can make a greater contribution than at present to industrial peace. Can the Limited Submission Agreement Arbitration More Acceptable?

Make

Contract

The chief objection to contract arbitration cited by the parties is the risk of an extreme award that will be either ruinous to the business or costly to the workers, or one which is so unrealistic that it cannot be applied. It has been suggested by Dr. George W . Taylor and others that the parties could protect themselves against ruinous awards by giving special attention to the submission agreement. This instrument gives the arbitrator his authority to act. It sets forth the problem which he is to answer. If the submission agreement defines the problem precisely, the parties are sure that the arbitrator can rule only on those issues which they present to him. Thus, the parties gain protection from a carefully drawn submission. The view is put forth that the parties may increase their protection by using a limited submission. Such a submission provides that the arbitrator is to consider certain standards

[3]

or criteria in reaching his decision. These guideposts serve to keep the award within bounds determined by the parties. The limited submission has been discussed briefly in a number of articles on arbitration,3 but it is comparatively little known. A number of experienced arbitrators reported that they had had no cases in which a limited submission was used and one stated he had never heard of it previously. Others, however, have used it with varying degrees of success, as is shown in the following chapters. Cases chosen for study were mostly wage cases, although a number of them had other issues as well, such as pensions, vacations, seniority, etc. Assumptions To avoid misunderstanding there are several points which we want to emphasize at the outset. ( 1 ) We are concerned with voluntary arbitration of contract terms, not with compulsory arbitration under any governmental statute. In voluntary arbitration, the parties themselves agree on an arbitrator, and agree in advance to abide by his decision. The decision to use arbitration is their own. ( 2 ) Peacetime conditions are assumed, not a time of emergency, or of war. ( 3 ) Agreement of the parties in direct negotiations, or with the aid of a mediator, will give the most satisfactory contract. We do not propose that the parties should give up negotiation at the outset and let an arbitrator write a whole contract. ( 4 ) For the most part we are considering an unpremeditated, ad hoc arbitration of a few issues, remaining after genuine collective bargaining has deadlocked. (We do make an exception to this in the case of arbitration under a reopening clause where pre-arranged arbitration has in many cases proven successful for interim wage revisions.) SOURCES AND M A T E R I A L S

The study is based on (a) a review of the literature on contract arbitration, ( b ) arbitration cases published by the [4]

Bureau of National Affairs, 4 ( c ) cases from the files of the New York State Mediation Board, ( d ) some unpublished cases furnished by arbitrators, ( e ) on interviews and letters, and ( f ) on the experience and files of the senior author. In addition, Dr. Lois MacDonald gave us access to the replies from labor and management to her questionnaire which included: "Do you favor the submission of the terms of a new contract to arbitration? Why or why not?" 5 Twentyfive of these replies were pertinent to our study of contract arbitration. When the study was nearing completion, a summary of preliminary findings was prepared. This was sent, with a covering letter, asking for comments on eight specific points, to a selected list of 143 arbitrators with recognized status in the profession. Replies were received from eighty-one of these. Many of these answers were three or four pages in length, and were both carefully reasoned and fully illustrated. In total, the records of the study list 174 individuals with whom we had interviews or who replied to letters. In addition to the responses from arbitrators mentioned above, numerous replies were received from labor and management spokesmen. Four presidents or vice-presidents of international unions, and ten directors of research for international unions, commented on the summary of preliminary findings. The research staff of the A F L and C I O in Washington also contributed information. The director of industrial relations research for one of the large oil companies prepared a six-page memorandum after consultation with the legal department and their labor adviser. W e also had letters from other directors of labor relations and from management consultants. Letters from the parties in the individual cases studied also furnished a valuable source of information. W e did not make the usual statistical analysis of the replies, since these were not in the form of "yes" or "no" answers to stated questions. W e thought that a questionnaire of that type would easily be misunderstood since the concept of the limited submission was so little known. From [5]

letters commenting on our preliminary findings, it was possible to draw more deeply on the thinking of the respondents. In presenting the results, the objective is to report "the sense of the meeting." In those instances where we have given a rough indication of the proportion holding a given view, we consider these conclusions only tentative. The report on the existence of differing views, and the analysis of them, may point the way to further research, quantitative, as well as qualitative, along these lines. T H E F O R M OF T H E SUBMISSION A G R E E M E N T

T h e submission agreement is the formal statement signed by both parties in which they agree to arbitrate specified issues. 6 The submission agreement defines the issue (or issues). If desired it may also set up the rules for the arbitration. In addition it may make provision for the arbitration to conform to state law. In grievance arbitration, the submission may specify the pertinent clauses of the contract which apply to the dispute. T h e machinery for arbitration is commonly already set up in a clause in the contract, providing arbitration as the last step of the grievance procedure. 7 If the contract does not provide such an arbitration clause, a special agreement may provide for arbitration of the individual case, including choice of arbitrator and rules to be followed. Similarly, arbitration under reopening clauses may be provided in a clause of the current contract. The submission agreement for the disputed issue thus supplements these clauses of the contract. When arbitration of the terms of a new or renewed contract is contemplated, the submission agreement seldom can depend upon the previous contract for the agreement to arbitrate and for provision of arbitration machinery. 8 Sometimes there are two separate documents in a case in which the previous contract makes no provision for this kind of arbitration. There is great variation between individual cases in the items included and in their division between the two agreements. The first agreement is usually signed when [6]

the parties terminate a strike in favor of arbitration, or substitute arbitration for the deadlocked negotiations. It may be a simple statement of agreement to arbitrate, secured by a mediator. Often it provides a procedure for selecting the arbitrator (or arbitration board), and includes a time schedule for holding the hearing. Occasionally this first agreement provides for acceptance of all the items of the contract, except one or more disputed issues. After the arbitrator is chosen, the parties draw up a second agreement, 9 usually called the submission, to define the issue referred to the arbitrator. Frequently the submission contains only this statement of the problem. In other instances it contains guides for the arbitrator, rules for the conduct of the case, and a number of other items. 1 " Not all cases have two documents. Sometimes a single agreement is used. There the submission sometimes contains provision for the machinery of arbitration, as well as the definition of the problem. Even in the rare cases where the expiring contract provides for arbitrating the disputed terms of a new contract, a written submission is needed in addition. This submission defines the issues. In a number of states a submission is also needed to comply with state laws which recognize arbitration of "existing labor disputes," but do not recognize agreements to arbitrate "future disputes." Many states also require a written submission if a case is to be recognized subsequently in the courts. Sample forms of submissions can be obtained from the American Arbitration Association, and from state agencies such as the New Jersey State Board of Mediation. It is preferable to make the submission explicit on a number of points, rather than to assume agreement on these and confine the submission to a single statement of the issue. 11 In actual practice, many submissions are carelessly drawn, omitting the formal arrangements for arbitration machinery and procedure. They often are merely parallel lists of contract clauses written first as management would state them, and then as the union would phrase them. Sometimes a reopening submission apparently gives the arbitrator "open" powers [7]

and yet he is actually bound by criteria in the original contract (of which no mention is made in the submission). This often results in confusion. On one occasion the only submission was in the form of a letter to the arbitrator asking him to take the case. T H E IMPORTANCE OF C L E A R AND C O M P L E T E SUBMISSIONS

It is of vital importance, both for the parties and for the arbitrator, that the submission agreement be clear and complete. It is the responsibility of the arbitrator to settle all aspects of the question posed for him by the submission. It is also his responsibility not to rule on any point not properly before him. If he exceeds his jurisdiction by issuing a decision on a point not before him, his award may be set aside by court action on the motion of either party. Thus to protect themselves and to assist the arbitrator in the performance of his duties, the parties should with great care formulate the precise statement of the issues to be submitted to the arbitrator. This point was forcefully brought home to one of the authors some years ago when he was arbitrating a grievance. When the hearing convened, the parties had not formulated the question with any degree of definiteness. At the suggestion of the arbitrator, the hearing recessed briefly and the arbitrator withdrew from the room while the parties "agreed on what they were disagreed about." The result was a twopart submission, posing two different questions for the arbitrator. In his award the arbitrator ruled on the two questions. As soon as the award was issued, the attorney for one of the parties objected, stating that the arbitrator had exceeded his jurisdiction in ruling on two questions. "I didn't want to submit the second question to you; I was sort of talked into it by the attorney for the other side," he said. When the case was taken to court, however, the judge ruled that two questions had been submitted and two had been answered, so there was no exceeding of jurisdiction. The attorney, by signing a submission without realizing what was involved, had committed his client to accepting an award on a point [8]

which the client did not wish to have ruled upon by the arbitrator. In contract arbitration, a precise definition of the problem is even more acutely needed. If the issue is wages, for example, the submission should indicate which rates are to be the subject of an award. Time has been wasted and costs piled up in numerous cases because the parties did not agree in advance on which rate the arbitrator was to determine12 or on how his award was subsequently to be integrated into the wage structure. A decision must also be made as to whether the submission agreement will be open or limited.13 KINDS OF CONTRACT CASES

The kinds of contract cases which may come to an arbitrator on a voluntary basis may be classified as follows: ( a ) first contract cases, ( b ) revisions of contract terms under the reopening clauses of a current contract, and ( c ) determination of disputed issues in a renewed contract. Cases of types ( b ) and ( c ) are presented in Chapter 2 of this study. First Contract Cases While it is theoretically possible to have voluntary arbitration of the terms of a new contract, it is rarely done. Disagreement is more likely to result in a work stoppage.14 Cases under Reopening Clauses15 Contracts often provide for the reopening of the wage issue (and occasionally some other issues) before the expiration of the contract. A reopening date may be specified, or it may be contingent on a request from one of the parties, or on a significant change in cost of living, or on some other condition affecting the industry. Sometimes an arbitrator is asked to determine whether the conditions for reopening have been fulfilled. If he decides that they have, he may then be asked to rule on the wage rate (or rates). 16 Even reopening clauses based on a cost-of-living index may be subject to dispute, if there is debate over which [9]

monthly indexes are applicable. There may also be disagreement over the effective date. If the reopening clause depends on "a signal" from two criteria, and especially if one of these deals with a change in conditions in the industry, there may be greater need of arbitration to determine if wages can be reopened. Even if there is agreement that wages can be opened, there may be disagreement as to the wage rate. This may be arbitrated under an open submission, or by criteria in either the contract or the submission. Some contracts provide also that in the event of failure to agree on revised terms within a certain period the issue shall be arbitrated. 17 In other instances, the parties, after negotiations deadlock, agree on an ad hoc (for this occasion) arbitration of revised terms. Where a permanent impartial chairman handles arbitration of grievances, he usually prefers to have an outside arbitrator called for a wage-reopening case. As was pointed out above, the amount of detail needed in the submission agreement depends on the way the reopening and arbitration clauses (if anv) are drawn. Renewed

Contracts

When terms of renewed contracts are arbitrated voluntarily these are customarily ad hoc arbitrations of a few issues still in dispute after agreement has been reached on other terms. A detailed agreement is usually needed to set up the machinery of arbitration. The problem must also be defined in the submission. There are rare instances in which the expiring contract contains a clause providing for the arbitration of disputed issues in a new contract. In one instance an arbitrator was asked to drop an arbitration clause from a contract which had been extended by a series of revised agreements for a seventeen-year period. Each renewed agreement had carried forward the clause providing for arbitration of the next revision, in the event the parties did not agree directly. The arbitrator ruled that this clause could be omitted from the next revised agreement, since arbitration provisions of this type

[10]

were unusual, and year-to-year extensions, if unmodified, could amount to compulsory arbitration. He pointed out, however, that it would still be possible to arbitrate future differences over contract terms with separate arbitration submissions.18 It has been pointed out by a director of research for an international union that if the parties changed their minds about their willingness to arbitrate the new contract terms after the expiration of the previous contract, the arbitration clause in the expired contract would have little effect. In general, the parties do not favor chain arbitration clauses because they fear that conditions will change drastically. Unions also disapprove because they recognize that arbitrators hesitate to break new ground. Fact Finding With

Recommendations

This is not contract arbitration, but it is mentioned here because cases of this sort are reported by the services, and have certain similarities to contract arbitration. In factfinding cases, the issue is defined in a submission and the evidence is presented in hearings. The arbitrator may be asked to recommend a settlement, but the parties are not bound to accept it.19 INDUSTRIES U S I N G V O L U N T A R Y C O N T R A C T A R B I T R A T I O N

Voluntary contract arbitration has been used in a wider variety of industries than is often recognized. Many have heard of its use in public utilties,20 although they often do not distinguish between voluntary arbitration initiated by the parties, and compulsory arbitration under a state act such as that in New Jersey and, until recently, in Wisconsin.21 Others confuse it with National War Labor Board arbitration during World War II. A large number of people seem unaware of its use in manufacturing and service industries. Voluntary arbitration has been used extensively in the transit industry. The Amalgamated Association of Street and Electric Railway and Motor Coach Employees of America

[11]

point to a section on arbitration which has been in the constitution since 1892. Voluntary arbitration has also been used by gas and electric power companies and their unions. In the past, the newspaper industry also made extensive use of arbitration. However, there has been markedly less use of it between the Newspaper Publishers' Association and the International Typographical Union since a disagreement some years ago over what items were arbitrable. 22 There is sometimes arbitration of revised terms under a reopening clause in the newspaper industry as is evidenced by a New York case in 1949.23 Arbitration of contract terms on wage reopening also occurred in such cases as the New York World-Telegram and the American Newspaper Guild, CIO, June 15, 1949,24 and the Newspaper Association of Philadelphia and the Printing Pressmen, December 27, 1949.25 Contract arbitration has been used on occasion in the construction industry and in textiles and in hosiery. It has also been used in industries manufacturing such diverse items as cement, cutlery, jewelry, bedding, and soup. It has been used in restaurants, groceries, and department stores (particularly in New York). Macy, Gimbel and Bloomingdale have had reopening clauses providing for arbitration in the event of disagreement. 26 The Steinway and Sons Co. and the United Piano Workers' Union, CIO, also had a similar clause. Contract arbitration has also been used in the maritime and longshoring industries. This is an illustrative, and not a complete, list of industries in which voluntary contract arbitration has been used. Statistics on the number of contract cases are fragmentary. The Bureau of Labor Statistics does not compile information on arbitration cases, either grievance or contract, although it has studied arbitration clauses in contracts. 27 A number of cases are reported voluntarily to the publishing services such as Prentice-Hall and the Bureau of National Affairs. They select the most significant cases for publication. These cases show that contract arbitration has been used in a wide variety of industries, but do not give any quantitative information. Other cases remain in private files, or in the files of the

[12]

American Arbitration Association. The latter permits study of the cases by graduate students for special projects, but ordinarily does not publish the cases. Some of the industrial relations schools, especially the Institute of Industrial Relations of the University of California, have built up files of arbitration cases. A recent study made at that Institute, based on 528 replies to a questionnaire, showed a total of 1,387 contract cases and 15,432 grievance cases, in which the respondents had participated in the last two years (which would make contract cases around 8 per cent of the total). It was pointed out, however, that the same case could have been reported by management, union, and arbitrator. There is no clue as to whether there is an equal ratio of duplication in the grievance and contract figures. 28 Some indirect evidence as to the ratio of contract to grievance arbitration cases might also be obtained from the report that of the 893 arbitrators appointed by the United States Conciliation Service in 1946, 85 were named to arbitrate disputes over basic contract terms. 29 However, the ratio is subject to the limitation that the parties might have made arrangements for arbitration of grievance cases in many instances without Federal aid, and yet sought it for contract cases. Both the New York office of the American Arbitration Association and the New York State Board of Mediation report that they have observed an increase in the number of contract cases, and especially in reopening cases, in recent years, but say that a further study of the files would be needed to produce statistics. 30

Chapter 2

CASES IN WHICH LIMITED SUBMISSIONS WERE USED

In this chapter we shall examine a number of cases having submissions with varying degrees of limitation. Our purpose is to consider the types of submissions and [13]

the reasons why they were used, the difficulties that were encountered with them, the reactions of the parties to their experience, and the ways in which submissions can be improved. BLANK-CHEC K SUBMISSIONS

Even though arbitration may follow weeks of negotiations during which there have been a series of offers and counter proposals, when the wage question goes to arbitration, the most common practice seems to be to submit the wage question without limitation to the arbitrator. For example, one submission read: "Should there be a general wage increase; if so, how much?" 1 1 Here there is no specified limit placed upon the arbitrator's award in the submission. When parties state that they believe that arbitration of a wage clause involves too great risk and, therefore, cannot be undertaken they usually have this type of submission in mind. SPECIFICATION

OF

MAXIMUM

AND M I N I M U M

RATES

IN

THE

SUBMISSION

If the parties wish to limit the risk involved in asking a third party to determine a wage rate, they can write into the submission specifications as to a maximum which it can not exceed, or a minimum below which it can not fall. Often the minimum is assumed to be the present rate, although there are instances, even in the last five years, in which the company has asked for a decrease. Occasionally the minimum is a small increase already granted on a temporary basis. Sometimes the submission takes the form of a request for a ruling on a list of contract terms, written as the union would like to have them. Here the union demand for wages serves as a ceiling on the award, since an arbitrator would be unlikely to give more than the top union demand. If the union demand is rephrased so that the submission reads, "Shall there be an increase of 25 cents per hour as demanded by the Union, or some amount less than this?"

[14]

the limitation becomes more explicit. Still more definite are the submissions which specify that the increase awarded shall not exceed a definite amount, such as 10 cents an hour. Statement of Amount of Union Wage Demand in Submission An illustration of a case in which the union demand is incorporated in the submission is found in the Wesel Manufacturing Company case.32 "The issue to be determined is the following: Should the increase of 20 cents per hour, as demanded by the union, or any part thereof applicable to each of the employees of the company covered by the union agreement be granted? The parties have stipulated that any increase . . . is to be effective as of February 1,1946." A wage increase of 15 cents an hour was awarded. In a number of instances the submission quotes the union proposals for clauses to be inserted in the renewed contract. An example of this is the Milwaukee Bedding Company case.33 Here the wage clause read: "Article IV, Section 2 be eliminated and the following substituted in lieu thereof: Each employee shall receive an increase in his wage rate of 15 cents per hour, over the rate he received prior to the change in the rate schedule provided under Section 1 of this Article IV, such increases to be effective May 1,1949."34 In another instance the submission read: "Shall [the] Liquid Carbonic Corporation grant any increase in wages to employees covered by its Agreement with [the] Warehousemen's Union . . . for the period June 1, 1949, to May 31, 1950, and if so, in what amount up to and including 10 cents per hour?"35 Unions Demand and Company Counterproposal in Submission In some instances the submission lists both the union demand and the company's counterproposal. For example, in the Mason Contractors' Association of Detroit case,36 involving wage terms for a renewed contract, the submission quotes the bricklayers' demand that the basic wage scale be [151

raised from $2.50 to $2.75 per hour, and the contractors' proposal that the rate be reduced from $2.50 to $2.25 per hour. Arbitration of a demand for a further increase of 5 cents, beyond a 13.5 cents an hour increase already granted by the company, was agreed upon in the submission in the Baker and Co., Inc. case.37 The increase, if any, was to be effective as of September 3, 1946. The initial demand had been 25 cents.38 In the ferry industry furnishing transportation across Puget Sound, the parties signed a submission agreement which guaranteed a 10 per cent increase recently granted on a temporary basis, and provided that the arbitrator should rule on the union demand for further increases. (Also submitted was the union demand for changes in hours, and in rules governing shifts and overtime. The arbitrator was to determine the duration of the new contract.) The submission incorporated an agreement containing a table showing wagei by boat and occupation, (a) with a 10 per cent increase for the licensed personnel and a $20 a month increase for the unlicensed personnel included, and (b) with the further demands of the union added, so that the rate in each classification would be raised by $36 a month over the initial rate He granted the union request for revision in hours, and since this gave the union considerable financial gain, he denied the further increase in wages.39 Subsequently the same procedure, based on the experience with this case (but with a different arbitrator), was followed in a case in Seattle involving the city transit commission operating the buses and trolleys. In commenting on the ferry case Judge Seering said ". . . the objective of the parties, as far as the wage issue is concerned, is to reach a specific monetary figure, and if through collective bargaining the parties are able to reduce the area of disagreement to the point where they can express it in monetary terms rather than in criteria, which may be subject to various interpretations by different arbitrators [16]

then it would appear that the monetary expression would be preferable."40 The submission in the Baxter Laboratories case read: "What general increase of wages shall be granted by the Company to employees represented by the Union, it being agreed by the Company and the Union that such general increase shall not be less than 8 cents nor more than 15 cents per straight time hour?"41 This is a particularly interesting case because the minimum and maximum limits set represented the difference remaining after negotiation. The original demand of the union had been 25 cents and the original company offer, 5 cents. The arbitrator awarded 10 cents, after consideration of cost-of-living changes and the company's competitive position. The maximum and minimum limits were also expressly stated in the San Diego Retail Grocery Case.42 In this case, wages were reopened for the period October 2, 1948, to April 2, 1949, under terms of a special agreement signed in April 1948. This agreement, made following a strike, had provided for an immediate increase of $2.50 per week to employees in all classifications, and for reopening in October 1948. This agreement also provided for arbitration, if negotiations concerning the October revision were unsuccessful, and set up machinery for appointing the board of arbitration. It expressly provided that the wage determination was to be "limited to a minimum of the rates specified, and a maximum increase not to exceed $2.50 per week for each wage classification." In his opinion, Walter Burr, the chairman of the arbitration board, commented on the fact that the parties to the controversy agreed on no criteria upon which such a determination should be made. "Therefore it is necessary to give consideration to such criteria as are ordinarily used and acceptable, and further, in the absence of agreed-upon criteria, to use a large degree of judgment." Of the maximum and minimum limits, the chairman stated that the "Union had a right to expect that the amount de[17]

cided upon would be somewhere between the minimum and maximum so established," especially as it had terminated its strike and had voluntarily given up its right to strike again over reopened wages when it made the April agreement. Robert W. Gilbert, the labor-appointed arbitrator, stated, both in his dissenting opinion and in a letter to the authors, that he felt that an increase of the full amount was "justified statistically and economically." He denounced the award of $1.25, saying it "consists of playing King Solomon, and splitting the baby in half." The question of whether arbitration between specific limits leads to splitting the difference will be discussed in more detail below. 4 3 SPECIFICATION OF M A X I M U M INCREASE IN T O T A L P A Y R O L L

A case in which the total maximum amount of the increase was specified and in addition a limitation was placed on increases for individuals is that of A. M. Kidder & Company. 44 The arbitrator was asked to decide what wage increases were to be given to individual employees, subject to the following restrictions: ( a ) No individual increases in excess of $25.00 a month. ( b ) Overall increases not to exceed $25,000 per year. ( c ) Credit for last previous increases on both the foregoing items. ( d ) Retroactive to March 1,1947. ( e ) No across-the-board increase. 45 A variant of this form is to be found in the Consolidated Edison Companies case. 4 6 Here the maximum increase in total payroll was not fixed in the submission, but the issues were presented to the arbitration board in a form that would focus their attention on the total increase that would result from their award. Starting from this total they were to adjust the rates with a view to the overall equities. 47 In this case risk was not limited as definitely as in the A. M. Kidder & Company case, but it was limited more than it would have been if the submission had been a blankcheck submission of wage rates to arbitration. The form of [18]

the submission outlines a procedure for the arbitrators. In this sense, this case is more closely related to the succeeding group of cases. SUBMISSIONS W I T H C R I T E R I A

In the foregoing section we have been concerned with cases in which the limits imposed could be applied in a more or less specific fashion. A maximum rate, or a ceiling on an increase in a wage bill, put a definite limit on the decision. In this section we turn to cases which set up criteria for the guidance of the arbitrator in reaching his decision. Our purpose in this chapter is not to discuss the merits of various criteria, but rather to see which ones have been used and with what result. Campbell

Soup

Company

In one case the submission specified that the increase granted to three large C I O unions should be the criterion for settling a wage rate under a reopening clause. The Campbell Soup Company 4 8 and the union reopened the wage question on August 27, 1945, but negotiations were fruitless, and on November 30, 1945, they agreed to postpone negotiations until an agreement had been reached in current negotiations of the United Steel Workers of America, CIO; and the United Electrical, Radio and Machine Workers of America, C I O ; and United Automobile Workers, C I O . Then the union should have the right to reopen the wage question, for the purpose of negotiating a wage increase. The stipulation provided further: "In no case shall this increase exceed the prevailing increase granted to the aforementioned unions. . . . The parties agree that, if any such increase is granted pursuant to such negotiations, such increase up to but not exceeding five cents per hour shall be retroactive to September 27, 1945, as to all employees on the payroll at the time such increase is paid. . . . Should the parties agree to a wage increase in excess of five cents per hour, the retroactive five cents per hour, plus any additional increase agreed upon during negotiations, shall be effective

[19]

the date the agreement is reached." T h e stipulation provided for arbitration with a three-man board at the end of ten days of unsuccessful negotiation, and provided also that "the arbitrators shall be confined to the scope of the wage policy set by the UAW, U E , and United Steel Workers." Thus the criterion served first as a signal to reopen wages, and second as a standard to guide the arbitrator. It is in the second sense that we are interested in it here. T h e question that came to arbitration was whether the company had to grant the same increase as was granted to the other unions. T h e board ruled that under the stipulation the company was obligated to negotiate, but not compelled to grant the same increase. The board granted 15 cents an hour to regular employees and 12'A cents to seasonal workers, saying that this was consistent with the pattern of increases granted in the labor market in which the company was located.

H. Boker and Company Case In the H. Boker and Company case 49 five criteria for the guidance of the arbitrator were included in the submission. The submission did not include any specific limits on the amount of money to be awarded. It was brought out in the hearings that the union had started with an initial demand of 50 cents, but presented a demand for 29 cents at the arbitration proceedings. The essential points in the case are: The contract, executed on June 9, 1948, ran from January 16, 1948, to December 15,1949. Wages were reopened in accordance with the contract sixty days prior to December 15, 1948. Negotiations were unsuccessful, and the parties signed a submission agreement on that date, referring the wage question to arbitration. In the arbitrator's award, the submission agreement was quoted as follows: The Company and the Union agree to submit to arbitration the question of whether increases in the wage rates (hourly or incentive) are now justified, and if justified, in what amount, and the Company and the Union agree to abide by the arbitrator's

[20]

decision upon the understanding that justification for an increase, if any, shall be based on the following considerations and that the arbitrator shall show in his report how they affect his award: (1) The increase in cost of living since June 15,1948, as shown in the BLS [Bureau of Labor Statistics] index for the total cost of living. (2) Comparison of the Boker wage rates (hourly and incentive) on V-J Day with wage rates (hourly or incentive) paid in the cutlery or edged tool industry on V-J Day according to BLS records or other reliable statistics. (3) Comparison of the Boker wage rate increases (hourly or incentive) since V-J Day with wage rate increases (hourly or incentive) in the cutlery and edged tool industry since V-J Day according to BLS records or other reliable statistics. (4) Fringe benefits and other benefits affecting earnings, granted by Boker. (5) The arbitrator may give such consideration as he may deem appropriate to: (a) Wage increases granted in the immediate area. (b) Reduction in the work week. There was considerable debate during the hearings as to the relative weights to be given to the items in the submission. The arbitrator ruled that he was obliged to consider the five items and no others, but that he was not required to find all five of equal importance. He found that there had been no significant change in the cost of living in the sixmonth period, and that there had been no change since V-J Day in the fringe benefits paid by the company. The submission did not permit him to compare Boker fringe benefits with those paid in other plants in the area. There had already been an adjustment in the wage rate of 5 cents an hour, in accordance with the contract, when the hour schedule had been reduced to forty. Support for any increase in wages accordingly could not come from the three foregoing items, but must be based on items (2), (3), and (5a), which he considered of greater importance. When the arbitrator attempted to apply criteria (2) and (3) calling for a comparison of H. Boker and Company wage rates, and increases in those rates, with similar rates and

[21]

increases since V-J Day in the cutlery and edged tool industry as measured by BLS records or other reliable statistics he discovered that there were no data available to measure Boker Company wage rates as such. At the time of the arbitration 98 out of 185 employees were incentive workers. On V-J Day 138 out of 416 employees were incentive workers The company had thousands of incentive rates which apparently bore no well-defined relationship to the base or guaranteed rates which had become academic. New piece rates were fixed to earn past average earnings. In view of the difficulty of getting data on wage rates the company presented average-earnings data instead, but these were unreliable for the purpose because of differences in productivity and efficiency. On V-J Day, the H. Boker and Company straight-time hourly earnings were $1,169, or 19.5 cents above the average for the rest of the industry. Since V-J Day, H. Boker and Company had given an across-the-board increase of 15 cents an hour. Average hourly earnings had increased by 19.4 cents, however, because of greater use of piece rates. The union testified that across-the-board increases in the area had amounted to 44M cents in three rounds, and that some had received an additional 9K cent increase in the fourth round. The Bureau of Labor Statistics reported an increase in the average earnings in the cutlery and edged tool industry in general of 29 cents since V-J Day. The arbitrator pointed out that the submission did not permit comparison of the Boker and Company current level of wages with those of other plants in the area. It provided for comparison of levels on V-J Day and of increases since, but was not explicit as to whether the Boker employees should maintain, wholly or in part, the advantageous position they had had on V-J Day. At the hearings the company wanted to bring in the question of the severity of competition it had to meet in the industry. It said it was operating in a buyers' market, and that its unit costs were higher than those of its competitors. This, however, could not be considered by the [22]

arbitrator since the submission did not contain any provision for consideration of the economic condition of the industry, or of the company's "ability to pay." At the hearings the company also wanted to limit comparisons to the period since the last negotiations, following the pattern of other interim wage reviews, but the arbitrator ruled that this was inconsistent with the submission requiring reference to V-J Day. In the final determination of his award the arbitrator looked at the 19.5 cent advantage of Boker employees on V-J Day, and at the 15 cent across-the-board increases already granted, and ruled that the employees should have a 5 cents an hour increase, effective December 15, 1948, to be added to the minimum and maximum rates, and that in the case of incentive workers this increase need not be incorporated into the piece rates. In commenting further on the case in a letter to the authors50 Mr. Feinberg, the arbitrator, said he "believed at the time . . . that the creation of criteria by the parties was helpful in that it relieved me of the necessity of establishing my own criteria. On the other hand, it did limit the scope of the consideration I might have given to the problem, in that it excluded certain other generally recognized criteria. I believe that the Union was rather chagrined at discovering that fact at the hearing and had not realized the full implication of executing a submission agreement. I do not think the Union would desire to use a limited submission again." San Diego Gas and Electric Company Changes in the cost-of-living index for Los Angeles and comparable rates paid in gas and electric companies in the country as a whole, and in industry in the area, were specified as criteria for the determination of a wage increase in the San Diego Gas and Electric Company case.51 The case involved the amount of a general wage increase for the contract year August 1948 to August 1949. In October 1948, the parties agreed to submit the issue of wages to arbitration. Hearings were held in January 1949. The submission

[23]

provided for a seven-man board which was both to present the case and determine the award. In the event that there was no majority agreement, the chairman's sole decision was to be binding. The submission stated that the union demand was an increase of 30 cents per hour and the company's counter offer was no increase. It provided that the wage increase, if any, "shall be in cents per hour (no fractional cents) ap- < plied uniformly to the straight-time hourly wage or "book' rates." Any increase was to be retroactive to August 22, 1948. The submission also contained a detailed list of criteria to be used in determining the wage issue. It was stated: "The criteria set forth and qualified in paragraph 12 of this agreement are for the purpose of expediting the case by limiting the extent of the material to be submitted by the Company and the Union." It is to be noted that the company and union were not in complete agreement on the criteria to be used. "The Company's position is that, of the criteria listed in paragraph 12, only the cost of living as measured by the Bureau of Labor Statistics Index should be used in determining what increase, if any, should be granted by the decision of the Board or of the Chairman. The Union has requested that any such decision should be based upon all the criteria listed in paragraph 12." The net result of this was that the criteria in paragraph 12 were considered, but that this was deemed an exclusive list, and no additional criteria were accepted later. Paragraphs 12 and 13 read as follows: 12. The criteria and qualifications referred to in paragraph 11 of this agreement are as follows: ( a ) Cost of living ( 1 ) Any cost-of-living statistics published by the United States Bureau of Labor Statistics which are introduced by either party shall be confined to the city of Los Angeles, California. ( 2 ) Cost-of-living statistics from any other source may be introduced by either party. ( 3 ) The base date of the period in which wage increases are compared with cost-of-living increases shall be either January,

[24]

1941, as the Company contends, or August, 1947, as the Union contends. ( 4 ) T h e terminal date of the measured period shall b e the most recent date for which information is available. ( 5 ) F o r purposes of comparison between wage increases and cost-of-living increases during the measured period "wages" means straight-time hourly or "book" rates. ( b ) Standard of living ( c ) Comparable rates ( 1 ) Occupational wage-rate comparisons shall be limited to two classifications: linemen and laborers. ( 2 ) Comparisons between the Company and other utilities shall be on the following basis: a. T h e comparisons may embrace all utilities, regardless of size, anywhere in the United States, provided that no utility that does not sell either gas or electricity may b e included in such comparisons. b. T h e Board or Chairman shall determine whether publicly owned utilities shall be excluded from such comparisons, as the Company contends, or included, as the Union contends. c. Comparisons shall be limited to straight-time hourly rates, and shall not include "fringe" benefits or conditions of employment. ( 3 ) Comparisons between the Company and establishments in other industries shall be on the following basis: a. Such comparisons shall be restricted to the local area. b. T h e burden of proof shall be upon the party making the comparison to show that the job content of the classifications sought to b e compared is substantially the same as the content of the Company's lineman-electrician, or laborers' jobs. c. Such comparisons may include the element of continuity of employment, straight-time hourly rates, and "fringe" benefits. ( d ) Pattern ( 1 ) Comparisons between wage increases granted by the Company and those granted by other utilities and by industry generally should be made on the following basis: a. Such comparisons may be made with all utilities as defined in paragraph 12 c 2 ( a ) , regardless of size, anywhere in the United States for the period since January 1, 1941. b. Such comparisons may be made with all industry generally for the period since June 1, 1948. ( 2 ) Such comparisons shall b e limited to increases in straighttime hourly rates expressed in cents per hour or in percentages readily convertible into cents per hour.

[25]

13. It is mutually agreed that the Company's ability or inability to pay any wage increase which may be awarded by the Board or by the Chairman is not an issue in this case. Both parties recognize the possibility, however, that any wage increase awarded in this case may require the Company to seek a rate increase from the proper authorities. Although the parties had defined the cost-of-living and industry-comparison criteria in considerable detail in the submission, there were still a number of undecided points and a good deal of room for argument during the hearings. The union also attempted to introduce several series which were ruled out by the submission. Although the Los Angeles cost-of-living index was a specified criterion, the union challenged its validity as a measure of living costs in San Diego, because of greater increase in population in proportion to facilities in San Diego. The union also questioned the quantity weights in the index. The chairman of the arbitration board said that the submission precluded consideration of these arguments. The submission had stated that the base date for the period in which wage increases were to be compared with changes in the cost of living was to be either January 1941 or August 1947. In place of either of these the chairman of the arbitration board got acceptance of February 1948 as the base date. The reason for this was that the last wage agreement had been negotiated in February 1948 and had been made retroactive to August 1947, the beginning of the contract year. The 6 per cent increase granted at that time was largely determined by the 6.5 per cent rise in the Bureau of Labor Statistics Index for Los Angeles between August 1947 and February 1948. The chairman said that the date of the last negotiation represented the "true intent" of the parties better than either of the dates in the submission. Since February 1948, the Los Angeles cost-of-living index had risen 2.4 per cent. The union wanted to apply this to the lineman's rate of $1.83. The chairman supported the company in this instance, and applied it to the average straighttime hourly rate of $1.51, since this had been the practice

[26]

in the past. This gave an increase of 4 cents an hour under the cost-of-living criterion alone. There was considerable argument over the statistics which the union introduced to measure the rates in other public utilities and in other industries in the area. The chairman ruled out data on increases since 1941 in transit and construction industries in San Diego, because the submission permitted comparisons only for the period since June 1, 1948, for area industries which did not sell gas or electricity. The chairman ruled that comparisons with the Pacific Gas and Electric Company, the largest private gas and electric utility in the state, were valid. The latter had just agreed to an increase of 9 cents per hour effective January 1, 1949, for some of its employees, and March 1, 1949, for the rest. In view of this increase by the Pacific Gas and Electric Company, the chairman of the arbitration board, during executive sessions, explored the possibility of granting an increase of 6 cents retroactive to August 22, 1948, and an additional 3 cents effective as of the first pay period following die award. This was declined by the union. Accordingly the increase was reduced to 7 cents, retroactive to August 22, 1948, 4 cents of which represented a cost-of-living increase, and 3 cents "an improvement factor." This case has been presented in considerable detail because it shows again that the union did not anticipate, or, at least, did not secure acceptance in the submission for all the criteria which it wished to present at the hearings. Although there were limitations on the discretion of the arbitrator, there were still a number of points which the chairman had to decide. He construed liberally the section of the submission which gave him power to decide in the event a majority could not be achieved in order to help him secure what he thought was the true intent of the parties. He felt restricted by the specification of the retroactive date, tried to achieve an equitable result by mediation and, failing that, adjusted his award to approximate his idea of justice. 52 [27]

Los Angeles Transit Lines Two of the most instructive cases with limited submissions are those of the Los Angeles Transit Lines and the Bay Cities Transit Company. 53 These two cases are related since the union was the same in each case, and the submission in the second was based on the first. In the Los Angeles Transit Lines case there was a specific limit of 10 cents on the amount of the increase to be determined by the arbitration board. In addition, four criteria (and no others) were to be considered. The background of the case was as follows. A renewed agreement covering all issues but wages for the period June 1, 1948, to May 31, 1949, had been signed on June 17, 1948. There had been negotiations on the wage issue since April 5, 1948. The company had offered a 5 cents per hour increase, and a contribution toward a pension fund, amounting to 6 cents per hour, effective June 1, 1948. The union membership had refused to ratify this, and asked for a 10 cents an hour across-the-board increase in addition. A strike threatened. According to the International Constitution of the union a strike could not be approved unless it was preceded by an offer of arbitration. The union accordingly suggested arbitration. A company lawyer said, in a letter to the authors, "the Company was very hesitant to submit to arbitration, but in view of the serious threat of a strike, and because only one issue (wages) remained for settlement, they decided to do so, but only upon a limited submission basis." The Los Angeles legal firm of Gibson, Dunn, and Crutcher, drew up a proposed submission and presented it to the Federal Conciliator. The late O. A. Rowan, deputy of the union's international president, assigned to the dispute, recommended that the local division accept this limited submission as an alternative to a strike. 54 The union representatives, however, in a series of conferences tried to modify the limitations somewhat before final acceptance. 5 5 Henry P. [28]

Nlelnikow, the union-appointed

arbitrator,

did not

know

about the limited submission when he a c c e p t e d appointment and offered to resign when he heard a b o u t it, but was persuaded to serve, on the understanding that he could reserve his right to present his criticism of the limited submission in a separate opinion. 5 6 T h e submission provided for the establishment, effective J u n e 1, 1948, of the 5 cents an hour increase, and the 6 cents an hour pension contribution already offered by the company, and asked the arbitration board to rule on w h a t further increase, if any, should be granted. T h e increase was not to exceed

10 cents per hour. T h e submission continued

as

follows: 4. In determining the issues stated herein the Board shall confine itself to hearing and considering evidence relating to, and shall base its decision only upon its findings in connection with the following criteria: ( a ) The justification for and feasibility of any additional wage increase in hourly rates in view of the existing sound financial ability of the Company to pay such increases, if any; ( b ) The justification for any additional increase in hourly wage rates in view of cost-of-living factors; ( c ) The justification for any additional increase in hourly wage rates in view of the prevailing wage rates for existing classifications in comparable companies in the transit industry elsewhere; ( d ) The justification for any additional increase in hourly wage rates in view of the current pattern of hourly wage increases in industry in general. 5. The decision of the majority of the members of the Board shall be final and binding upon both parties, and shall be enforceable in the Superior Court of the State of California, and shall be included as part of the collective bargaining agreement already agreed upon in part by the parties. Other paragraphs, not quoted, provided that the award should not be retroactive, but should be effective from the date of the award, and outlined the m e t h o d of selecting the board, established procedure to be used, and provided for sharing the expenses of the impartial arbitrator a n d the transcript. Although the criteria w e r e spelled out in considerable detail, there was still extensive argument on the interpreta-

[29]

tion of the factors, and on the assignment of their proper weights. The verbatim transcript of testimony ran to 1184 pages, approximately half of which were devoted to the ability-to-pay factor. The problems encountered in interpreting the criteria were as follows: (1) Cost of Living. The submission referred to cost-of-living factors, plural, so the union wanted to introduce budget data from the Heller Foundation of the University of California, or from the Bureau of Labor Statistics, and to compare these figures with the take-home pay. The chairman ruled against this, since hours were not at issue. Since, as the chairman pointed out, even the granting of the maximum increase of 10 cents would not bring the earnings u p to the level of these budgets, he thought that their attainment should be more properly a subject for future collective bargaining. The submission did not indicate whether, for purposes of comparison with cost-of-living changes, the board should use the 5 cents per hour increase in wages already agreed upon, or should take the 11 cents per hour package deal (including the 6 cents per hour contribution to the pension f u n d ) . The chairman decided to use 5 cents for the cost-of-living comparison, but to use 11 cents for the comparison with the patterns of increase in industry in general. The submission specified neither the cost-of-living index to be used nor the base date. At the hearings, the parties agreed upon the Bureau of Labor Statistics Consumers' Price Index for Middle Class Families, for Los Angeles. The company advocated a base date of January 1940, and the Union at first wanted a base date of October 1945. The chairman, however, chose June 1947, which was the date of the last wage negotiation. Between June 1947 and June 1948, there had been an increase of 8 per cent in the Los Angeles index. The company representative was very critical of the choice of the base date of 1947, saying that the period was too short and that if either 1940 or 1945 had been used, the increases

[30]

already granted (even without the 6 cent pension contribution) would have kept pace with cost-of-living changes. The chairman, using the 5 cent increase for comparison and the 1947 base date, concluded that cost of living would justify an increase of 6 cents per hour. This amount was reduced, however, by findings on succeeding factors. (2) Prevailing Wage Rates in Comparable Companies in the Transit Industry. The rate of $1.40 per hour for top one-man operator, especially if increased to $1.43, would fall approximately in the middle of the range for comparable rates in ten cities with population over one million. Quoted rates included both public and privately operated lines. By the end of the year, however, the Los Angeles rate might be below the weighted average of comparable rates, because of revisions then in process in some cities. (3) Current Pattern of Hourly Wage Increases. Here it was generally agreed that the current pattern of hourly wage increases was between 10 and 15 cents per hour. Increases in the transit industry had averaged even higher, but the submission provided for comparison of prevailing levels, but not the pattern of increase in the transit industry itself. The pattern of increase was to be measured by the increases in industry in general. When the 11 cent package increase of the Los Angeles Transit Lines was compared with the pattern in industry in general, it was held to be within the pattern. Mr. Melnikow, the union-appointed arbitrator, objected to the 11 cent comparison saying that the figures for the other companies did not contain fringe benefits. (4) Ability to Pay. This was the most hotly contested item. Here the question of relative weights of factors in the submission received special attention. The company said that this factor should have preponderant weight, but the chairman found nothing in the submission to support the view that this was the controlling criterion. He said that only the usual problems arising under ability to pay were concerned here.

[31]

Among these were: ( a ) the question of the correct interpretation of the company's books and statements, ( b ) the correct evaluation of the company's estimates of changing traffic patterns and downtrend in revenue, ( c ) whether ability to pay should be measured before or after taxes, and (d) whether costs of operation should properly include a reasonable dividend to stockholders. After weighing the significance of the criteria, the chairman reduced the 6 cents allowable under the cost-of-living factor, and awarded an increase of 3 cents. He secured a reluctant agreement from T. J. Manning, the companyappointed arbitrator, in order to make it a majority decision, as was required in the submission. Mr. Manning, in his supplementary opinion, said that the 3 cent increase could be paid only with severe economies in operation and with the aid of an increase in rates, applied for, but not yet granted. In retrospect, a lawyer for the company said that if the company ever should arbitrate a wage issue again, it would do so "only if the limitations were more specific than the ones used in this case. . . . [The Company] would also insist that it be specified whether the factors upon which the decision is to be based are to be generally balanced or whether certain of them are to have greater relative significance than others." In balancing the advantages and disadvantages from the company's point of view, he said: T h e Company was generally dissatisfied with this method of determining the wage issue for the following reasons: ( 1 ) In order to get an award at all, that is, a decision by a majority as required by the submission agreement, it had to accept more than it should have been required to pav. ( 2 ) T h e arbitration had been undertaken as a lesser of two evils. T h e Company had been placed in a difficult position because of the necessity for making an unpopular request for a rate increase which actually cut down passenger revenue. ( 3 ) The actual preparation and trial of the arbitration were time consuming and burdensome. The Company, however, was satisfied with, and realized the value of the limited submission agreement, particularly because

[32]

it recognized that even with these guides the task of the arbitrator is difficult."'7 Henry P. Melnikow, the union-appointed arbitrator, in his dissenting opinion was particularly critical of the limited submission. "This type of submission agreement seems to lessen the value of the entire arbitration procedure and in the long run is a disservice to all parties involved, in that it militates against a full consideration of all the merits involved in the equities of the parties." 58 Despite all the difficulties involved in this case, the fact remains that there could not have been a settlement of the dispute through arbitration without a limited submission. The alternative was a strike. The Bay Cities Transit Company

Case

The Bay Cities Transit Company case"'" is similar to the Los Angeles Transit Lines case, since the union was the same in both cases, and the contract period, June 1, 1948, to May 31, 1949, was the same. The question of wages was involved in both cases, although the Bay Cities case had two additional issues. In the Bay Cities case, the union proposed arbitration with an unrestricted submission. The company, through its attorney, Hector Baida, of Santa Monica, insisted upon "parity of treatment with the Los Angeles Transit Lines." On August 3, 1948, President D. D. McClurg of the Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America Transportation Union, Division 1277 "reluctantly agreed to this limited submission." 60 The wage question was not exactly the same as in the Los Angeles Transit Lines case where the company had already granted a 5 cent increase and a pension contribution equal to 6 cents per hour. In the Bay Cities case there was no advance agreement on a wage increase, although the parties had accepted a clause providing for a three-year accumulation-of-sick-leave-pay to be based on an eight hour minimum. The submission, dated August 3, 1948, specified 15 cents [33]

an hour as the top limit on any wage increase. It included the same four criteria which had been used in the Los Angeles case. In the Bay Cities case, however, the submission gave preponderant weight to the ability-to-pay factor. Ability to pay was mentioned in three sections of the submission. A large portion of the submission is quoted below to show the extremely detailed provisions that were used: ( a ) Does the Company have the financial ability to meet any or all of the hereinafter requests made by the Union, and contained in subparagraphs ( b ) , ( c ) , and ( d ) , or any one of them? ( b ) Should the Company grant an hourly wage increase, not to exceed 15 cents per hour, for all work classifications established between the parties, dated June 1, 1947, over the hourly wage rates now in effect under said agreement dated June 1, 1947, the increase, if any, to be retroactive to June 1, 1948? ( c ) Should the Company install heaters in all of its buses regularly used in its operations? (d) Should the Company establish a pension plan at a cost of approximately $9,760.17 to it for the first year, with increase in unascertained costs to the Company in future years? That it is the intention of the parties that the Board shall make no award in excess of that which the Company's financial ability will permit. And for the purpose of this agreement, the Company's financial ability will permit an award only from profits remaining, if any, after allowing the Company the following: A. A reasonable return on its rate-making base as established in those certain proceedings had before the Public Utilities Commission of the State of California, resulting in that Commission's decision of December 22, 1947, bearing number 41076; and B. Such additional sums as may be needed to adequately finance equipment, the commitment for the purchase thereof having been heretofore made by the Company in said proceedings, or equipment to be purchased in lieu thereof. The following paragraphs outlined the procedure for appointing the arbitration board, and provided for a decision by the majority of the board. The submission continued as follows: 4. In determining the issues stated herein the Board shall confine itself to hearing and considering evidence relating to, and shall base its decision only upon its findings in connection with the following criteria:

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( a ) T h e justification for and feasibility of additional operating costs resulting from any increase in the present hourly w a g e rates, the installation of heaters on buses regularly used by the Company, or the establishment of a pension plan in view of the existing sound financial ability ( a s defined and limited in p a r a g r a p h 1, h e r e o f ) of the C o m p a n y to pay such additional operating costs, if any. ( b ) T h e justification for any additional increase in hourly w a g e rates in view of cost-of-living factors. ( c ) T h e justification for any additional increase in hourly w a g e rates in view of the prevailing w a g e rates for existing classifications in c o m p a r a b l e companies in the transit industry elsewhere. ( d ) T h e justification for any additional increase in hourly w a g e rates in view of the current pattern of hourly w a g e increases in industry in general. 0 1

It is noteworthy that the same criterion on "current pattern of hourly wage increases in industry in general" was used in this case as it had been used in the Los Angeles Transit Lines case. This was not as advantageous to the union as a comparison with the pattern of increases in the transit industry alone would have been. 6 2 In his opinion, Dr. Clark Kerr, chairman of the arbitration board, showed how each of the four criteria had been evaluated in reaching the decision. ( a ) Cost of Living. From June 1, 1947 (opening date of the prior contract), to June 1, 1948 (opening date of present contract), the increase in cost of living was equivalent to an 11 cent increase. ( b ) Comparison with Prevailing Rates in the Transit Industry. The Bay Cities Transit Company rate for experienced operators was $1.35 per hour. The publicly operated transit system in Santa Monica paid $1.44. Rates in Glendale, Pasadena, and Long Beach were $1.35. The Los Angeles Transit Lines rate was $1.43. ( c ) Pattern of Increases in Hourly Wage Rates in Industry in General. This proved difficult to ascertain. The majority of those

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considered were between 5 and 15 cents, with the greatest concentration between 10 and 13 cents. ( d ) Ability to Pay. Since the submission had "made ability to pay the most important single wage influencing consideration," the board examined the financial reports of the company with considerable care. The company had lost a substantial amount of money in 1947 as a result of higher operating costs, fewer passengers, and a comparatively low fare structure. The board estimated that in 1948 the company would make a net profit, about half as great as it had made in the prosperous years 1942-46, but several times as great as it had made in 1941. The board decided to award an increase of 4 cents per hour during the period June 1 to December 1, 1948, and of 8 cents per hour during the period December 1, 1948, to June 1, 1949, resulting in rates of $1.39 and $1.43 per hour respectively. This award did not give full credit to cost-ofliving and pattern factors, but was the maximum permissible under the ability-to-pay factor. The pension plan and the heaters on the buses were denied on the grounds that the company could not meet additional costs. In commenting on the case, in a letter to the authors, Robert W. Gilbert, union-appointed arbitrator, said: "The Union was satisfied with the results of the Bay Cities arbitration in spite of the ham-stringing submission agreement, but not because of it. I am confident it would resist the device of limited submission in future contract cases, because of the extreme dissatisfaction with the L. A. Transit Lines award. . . . "One of the ironies of the Bay Cities situation was the denial of the Union's request for heaters on buses due to lack of financial ability of the company. . . . The hope which I expressed in my separate statement (11 LA 750) that the parties would be able to meet this problem 'as soon as the financial status of the Company permits' was realized only a few short months after the award was handed down, when the Company voluntarily installed the heaters." 83 [36]

H e went on to say that largely as a result of this experience the A F L organizations represented bv his office were strongly opposed to the use of the limited submission, and in fact to the arbitration of new wage rates or other contract changes. Dr. Clark Kerr, chairman of the arbitration board, said that the submission in the B a y Cities case was so confining that it greatly limited the board in arriving at a reasonable and acceptable solution. 64 Xational

Silver Deposit

Ware

A case in which the submission included both a specific limit on the amount of the award and list of criteria to be used by the arbitrator is the National Silver Deposit W a r e Co., Inc., case. 65 This grew out of a renegotiation of wages, as provided in an agreement dated August 5, 1947, which had extended the contract for approximately a year. W h e n wages were not settled by the parties, the issue was referred to arbitration with the following submission: What general wage increase, but in no event more than three ($3.00) dollars, shall be granted to employees covered by the agreement for the period from October 1, 1947, to August 22, 1948; any award to be made retroactive to October 1, 1947. . . . the arbitrator shall take into account, among other considerations, cost of living, standard of living of the employees, competitive conditions and wages, and the employer's ability to pay.

T h e award was an increase of $2.40 a week. Sidney Wolff, the arbitrator, said 66 that the company had refused to arbitrate the wage issue, unless the union would agree to an outside limit beyond which the arbitrator could not go. W h e n the limit of $3.00 was specified in the submission, the union apparently misunderstood its significance, and thought that the company was admitting that this was the proper amount of the increase, and that this was the amount that would be approved by the arbitrator. W h e n Mr. Wolff studied the other criteria, he awarded the increase of $2.40. This was not well received by the union. Mr. Wolff said that the specification of criteria had no [37]

particular effect on his award, since he would have considered these factors in any case. He noted, however, that the specification of the factor of ability to pay did give the company assurance that this item would be considered. In connection with Mr. Wolff's comment on criteria, it should be noted that the list was not an exclusive one, as in some cases, and furthermore that individual criteria were not defined in any detail. Herman Gray, lawyer for the company, emphasized also that the company had been willing to arbitrate the issue only with the protection afforded by the limited submission. He thought that they would be unwilling to arbitrate in the future, without similar protection. 67

Chapter 3 ANALYSIS OF CONTRACT ARBITRATION AND PARTICULARLY THE LIMITED SUBMISSION C O N T R A C T ARBITRATION

A wide difference of opinion exists concerning the desirability of contract arbitration. Some management spokesmen feel it has considerable usefulness. Other spokesmen for management dismiss suggestions of arbitration peremptorily. Divergent views concerning the usefulness of voluntary arbitration of contract terms also exist among union representatives and among arbitrators. Management

Views on Contract

Arbitration

Management's criticisms of contract arbitration are numerous, and often forcefully expressed. A review of the major management objections is followed by consideration of their thinking as to its use in special circumstances. Contract Arbitration Undermines Collective Bargaining. Many spokesmen for management say that contract arbitration cannot be viewed as an extension of collective bargain-

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ing. On the contrary, they say that widespread adoption of contract arbitration would be the death of collective bargaining. Parties who know that the issue may go to arbitration will make no genuine effort to resolve the differences themselves. They will keep their offers wide apart, and hope to impress the arbitrator with the firmness of their demands. They will keep as many issues unsettled as possible, in the hope that the arbitrator might award some favorable items to each side, and they might come out better on some items than if they settled them directly. This view that responsible collective bargaining would be impossible if contract arbitration were contemplated is repeated again and again. In part it probably comes from experience with compulsory arbitration under the National War Labor Board during World War II, since many who replied to our questionnaire say they have had no other experience with contract arbitration. It is true that the parties, before coming to the War Labor Board, sometimes made only halfhearted efforts to settle, and then tossed all the issues into the lap of the Board's representative, until he found himself ruling on such items as whether the union might post notices on the bulletin board. 88 The prospect of compulsory arbitration under state acts affecting public utilities appears to have similar effect. 69 The validity of this criticism is doubtful. We believe that voluntary arbitration need not have the same effect on collective bargaining that compulsory arbitration has. If arbitration is voluntary, there is no certainty that it will be used. (Cases where there is a prior agreement in the contract to arbitrate disputes over the terms of a succeeding contract are rare.) The decision to use arbitration usually is reached after many issues are settled, and only one or two remain. The use of voluntary arbitration is typically uncertain and unpremeditated, while the use of compulsory arbitration by the National War Labor Board during World War II was a foregone conclusion if the parties did not settle the issues and if mediation failed. In the absence of compulsory arbitration when the parties begin contract negotiations, they

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expect to draw up their contract themselves. If thev are unsuccessful, mediation typically is the next step. Arbitration may be suggested and considered after mediation is unsuccessful. Coming thus unexpectedly it does not appear to us that the possible ultimate use of voluntary contract arbitration can have the same undesirable effects on collective bargaining that compulsory arbitration probably has. Furthermore, the parties may be sufficiently concerned about costs of arbitration to make them settle as many issues as they can. Contract Arbitration Is Fundamentally Different from Grievance Arbitration. Many spokesmen for management reported to us that they were making successful use of grievance arbitration, either with an impartial chairman or on an ad hoc basis.70 Grievance arbitration is regarded as desirable because it is conducted under the contract, and because the sums involved are usually much less than losses from possible work stoppages over grievances. Contract arbitration is, however, entirely different, they emphasize. Here there is no contract for a guide, and the sums involved might make the difference between success and failure in the business. This is discussed in more detail below, where we raise the question of whether a limited submission may in some measure substitute for the contract in providing a guide, and in protecting from risk.71 Contracts Must Be Determined by Direct Agreement, and Not by Third Parties. As indicated elsewhere, we agree that it is certainly best if the parties can write their own contract, and that even if they make some use of arbitration, they should not expect the arbitrator to write the whole contract. Management emphasizes that it must make the final agreement on items which determine costs. They often accept mediation, but if that fails they seem to regard a strike or lockout as inevitable. One lawyer who often represents management says that he counsels his clients to give all they they can, and when they can give no more to accept a strike, because if they grant more and become bankrupt the plant [40]

will be closed anyway. With this rule he thinks there is no place for arbitration. A related argument advanced by management is that it would be unfair to the stockholders to accept the risk of arbitration. Stockholders will accept a costly strike as inevitable and place the blame upon the union, but they might regard arbitration as an abdication of responsibility by the management. Management says repeatedly that no third party could know enough about the business to decide vital questions of costs. They are very fearful of screwball awards which might be ruinous. Many are fearful that arbitrators will always feel they must give the union some gain, even though it be slight. Some have an uncomfortable feeling that the large unions may be in a position to give the arbitrator more business than a single firm without chain connections. Therefore, they fear the arbitrator may favor unions. With this accumulation of fears, the risk of arbitration appears to overshadow the fear of losses from work stoppage in many instances.72 Some management spokesmen also said that there are occasions on which a strike is needed to clear the air. When the parties accept the terms at the end, no matter how bitterly thev have fought about those terms, they accept the responsibility for making them work. There is no third party to blame. They contrast this with the situation in which resentment at an arbitrator's award smolders until the time for the next negotiation and then bursts out with uncontrollable heat. Some of these arguments are analyzed in more detail below.73 In passing, it should be pointed out that others question the clear-the-air principle, and say that "the scars of an arbitration are less severe than the scars of a strike." A Dangerous Habit Leading to Compulsory Arbitration. Some management spokesmen go even further in emphasizing the evils, as they see them, of voluntary arbitration of contract terms. Building on the idea that it marks the end of responsible collective bargaining, they add that the determination by a third party amounts to coercion. Even though [41]

the arbitrator has been chosen by the parties and invited to make the decision, they still regard the imposition of the will of a third party as detrimental to freedom. They say that this reliance on an outsider's judgment is the start of a dangerous habit which leads through compulsory arbitration to fascism. This seems to us to be an extreme and untenable view, but it is firmly held, and suggests that there is little chance for voluntary arbitration to be tried where these views prevail. Not all of management's views are adverse to contract arbitration. Some favorable comments follow: Useful to Unfreeze Negotiations. It is very significant that even those who are most outspoken in their criticisms of contract arbitration often have some second thoughts about it. Most of the criticisms follow a pattern. This may mean that these views are widely held, or it may mean that these criticisms have become the standard answer to any suggestion of arbitration and that they need further analysis. The first question on our questionnare asked for general views on voluntary contract arbitration and brought the numerous criticisms listed above. The succeeding items on our questionnaire which focused attention on deadlocked situations may have influenced the answers we received. In any case, even some of the severest critics often said that there was a place for contract arbitration when it was needed to unfreeze negotiations.74 Permissible with Reopening Clauses. Management spokesmen also make an exception to its criticism of voluntary arbitration of contract terms when they discuss the arbitration of terms under a reopening clause. Even though the agreement to arbitrate may have been made when the reopening clause was written, and the arbitration is premeditated, they feel that the usual criticisms do not hold. Since it is partly under the contract, it appears more like a grievance arbitration. Only one, or at most, a few issues are involved. The wage award is to run for a comparatively short period. Often the parties accept the principle of an interim review, so that only economic changes occurring since the last negotiation [42]

are examined, and the wages agreed on then are assumed to be correct for that period. It is usually fairly simple to apply any criteria in the reopening clause, although occasionally there is some dispute which can be resolved by an arbitrator. They do not feel that it is worth while to have a strike over a reopened wage issue. The apparent contradiction in attitude between denunciation of premeditated arbitration of contract terms and acceptance of it in reopening cases will be discussed below in more detail. Union Views on Contract

Arbitration

There are great variations among union leaders in their knowledge of contract arbitration, and in their experience with it. Some local leaders are hardly aware of its existence, while others have participated in it. Others insist that they give serious consideration to it, but that they seldom use it because they usually find some other way out of a deadlocked situation. One East Coast mediator said that he thought that in recent years unions had been somewhat more willing to arbitrate than had employers. Before the 1930's, he said, unions were generally opposed to it because they believed that they had to win all gains for themselves, by strikes if necessary. Experiences during the New Deal and War Labor Board periods led them to place more reliance on other methods. While still opposed to compulsory arbitration they were more willing to consider voluntary arbitration. Since World War II, voluntary arbitration has, with only a few exceptions (chiefly textiles), netted the union some gains, either because of costof-living increases, or when that was stationary or falling, because of increases in productivity or other improvement factors. Unions also realize the public relations gains to be had in offering arbitration. We noted above that the transit union's constitution provides that arbitration must be offered. While contract arbitration is more often used where mature collective-bargaining relationships exist, it is not necessarily used there. In fact, where the relationship is best [43]

established the parties reach agreement themselves without either strikes or voluntary arbitration. In general, union leaders oppose the wide use of contract arbitration, but think there are circumstances in which it is useful. Union leaders, like management, emphasize the risks of third party determinations, fearing that they will not get what they feel they are rightly entitled to receive. Some are critical of arbitrators who compromise, and others of those who assume a superior role in handing out justice. 75 Like management they also fear that wider use of voluntary arbitration will undermine responsible collective bargaining. They say arbitration is not the logical extension of collective bargaining, but something fundamentally different. 76 In presenting their criticisms of voluntary contract arbitration, unions say that it is of utmost importance that nothing weaken their right to strike. They want it as an ever-present threat during negotiations, and they want to have their membership keyed up to support the walk-out if necessary. This mounting tension starts the toboggan toward a strike, and it is very difficult to stop it and substitute arbitration. They often feel that an offer of arbitration would be regarded by the membership as a sign of weakness. Furthermore, they think that if they give up the right to strike in one instance, even though they do so voluntarily, it weakens their long-run claim on the strike weapon. It seems to us that this fear must be exaggerated, when applied to voluntary arbitration. (It is similar to management's fear that voluntary arbitration will undermine responsible collective bargaining and lead to compulsory arbitration.) We repeat that the choice between a strike and arbitration is made for the individual case. The parties can make the same or a different decision the next time they become deadlocked. The right of strike is still there until voluntarily surrendered for the individual case. It is true that if each contract provided for arbitration of disputes over the terms of a succeeding contract, the union would be giving up its strike rights in advance, but this is an unusual case.

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Unions have been willing to overlook these general arguments in opposition to voluntary contract arbitration, in the instances in which they have used it. They make exceptions for cases deadlocked on a few issues, and for cases under reopening clauses, if other conditions are favorable.77 Arbitrators' Views on Contract

Arbitration

There are marked differences among arbitrators in their views on contract arbitration. There are also differences in their experience with it. Some have had no experience with voluntary arbitration of contract terms even though they have arbitrated many grievance cases. Some arbitrators have, however, had War Labor Board experience which appears to have influenced their thinking. A few refuse to take contract-arbitration cases. A larger group of arbitrators do not believe in the advisability of contract arbitration in general, but will accept cases under special circumstances. Another still larger group recognizes limitations on the use of voluntary contract arbitration, but thinks that it can have a wider use than it does now. Arbitrators' criticisms of contract arbitration follow those of management and unions in saying that if it is anticipated it is likely to undermine responsible collective bargaining, again reflecting their War Labor Board experience. In addition, the arbitrators emphasize the legal point that grievance arbitration can be judicial because it is conducted under the terms of the contract. Contract arbitration, however, has no such overall guide. It cannot be judicial, and is rather, legislative. On the analogy that courts refuse to write contracts because that would be legislating, the lawyers say that arbitrators similarly should not "legislate" contract terms.78 Some who object to the legislative character of new or renewed contract arbitration make an exception for the arbitration of disputes under reopening clauses. They emphasize the fact that the parties agreed on the basic conditions in the original contract. Those conditions established in the con[45]

tract will still govern the arbitrator, while he makes interim adjustments for subsequent changes in one or two factors such as cost-of-living or technological change.79 While some arbitrators fear that extended use of voluntary arbitration may lead into compulsory arbitration (the same fear expressed by management), another group emphasizes the differences between the two. Dr. George W. Taylor has pointed out that industries in which a work stoppage creates a public emergency do not have the choice between arbitration and a work stoppage. The choice is rather between voluntary arbitration on the one hand and government intervention on the other. If they choose voluntary arbitration they have the privilege of choosing the arbitrator or board, and also of setting up the conditions of the arbitration in the submission. This is very different from submitting to compulsory arbitration, which unfortunately is likely to come if they refuse voluntary arbitration and insist on creating public emergencies.80 Professor Z. C. Dickinson81 commented on the advance beyond grievance arbitration to the voluntary arbitration of wage inequities and thence to arbitration of disputed terms under reopening clauses, and raises the question as to whether still further extension of voluntary arbitration to contract terms than we have now may not come in the future.82 Situations in Which Contract Arbitration Is Unlikely Spokesmen for management and unions, mediators, and arbitrators agree that there are a number of situations in which voluntary contract arbitration is most unlikely. Interestingly enough the arbitrators often indicate unwillingness to accept the kind of cases which the parties hesitate to submit to arbitration. The criticisms of arbitration presented above give a clue to the kind of situations in which arbitration is unlikely. A Large Number of Issues Unsettled. The parties usually do not want an arbitrator to write a whole contract or even a large part of it and he is unwilling to do so. [46]

A First Contract. Where there has been no previous bargaining relationship, the parties prefer to make their own agreement, even if it can be reached only after a strike. Employers are often resentful of the union's efforts, and the union wants to prove its strength to the membership, and neither side is likely to want arbitration. Pioneering Demands and Principles. A dispute over a pioneering demand, or one which breaks new ground, is not likely to be submitted to arbitration. When the union wants to exceed previously established rates and start a new round of increases, the parties are usually unwilling to let a third party set the precedent. When the demand involves a question of principle83 such as union security, or the establishment of a welfare fund, or pension or other new fringe benefits, the parties are similarly unlikely to submit the case to arbitration. Many arbitrators are unwilling to take these cases, although some will do so on the rare occasion when the parties submit them along with other issues. Unequal Economic Strength. Where the company is in a strong position it may want to sit out the dispute and will be unwilling to arbitrate. Similarly, if other jobs are plentiful and it has a full treasury, the union will feel it can win its demands in full by a strike, and will not accept arbitration. The weaker side may offer arbitration in such circumstances, but the stronger side refuses.84 Trial of Strength Seems Needed. After World War II, the unions were able in many instances to demonstrate by strikes that they had greater economic strength than had been supposed. It probably would have been impossible to establish this without strikes. In such situations, voluntary arbitration probably cannot be a substitute. Situations in Which Arbitration Is More

Likely

Of course, these are, in part, the opposites of the preceding situations. There is pretty general agreement that arbitration would be more likely if the strength of the parties was evenly divided, and if there was a deadlock on only a few [47]

remaining terms of a renewed contract. It would also be more likely if these issues did not involve principles, but were questions of "how much?" If a pattern has already been established, if no pioneering demand is involved, or if the issue arises under a reopening clause, these circumstances will also increase the likelihood of arbitration. There are some further factors which will encourage voluntary arbitration. No one case will illustrate all the succeeding situations, but each in turn contributes to willingness to arbitrate in some case. Long-Established Bargaining Relationship and Mutual Understanding. Arbitration is much more likely if the parties have had long and satisfactory bargaining relationships. They are more apt to have a predisposition to make arbitration work. (Of course, they are also better able to settle their disputes themselves.) Have Recently Had a Costly Strike. Parties who have recently had a costly strike often take a sober view of work stoppage and are willing to try an alternative this time. Parties Desire to Terminate a Strike Now in Progress. The president of a company which was going through the opening day of a strike remarked to the senior author that he did not want to consider arbitration at the outset, but if the strike dragged on for two weeks, he would give it more serious consideration then. Face Saving. Occasionally parties who have adamantly taken an untenable position in negotiation want to use arbitration as a means of graceful retreat. A number of arbitrators are willing to go along with a dictated award, although some think it is a misuse of arbitration. Semitrumopoly. If the management does not face keen competition, it can risk some variation in labor cost resulting from an arbitration award more easily than could a firm where keen competition forces it to watch every penny. One arbitrator suggested, on the basis of several cases in his city, that it might be easier to secure arbitration market-wide than individually. Public Utility and Other Industries Affected by Public Interest. Where a work stoppage causes severe hardship to the [48]

public, both sides are more likely to consider arbitration more seriously. These are not all the situations conducive to arbitration, but are the ones suggested most often by the actual cases which have reached arbitration. The Role of the Mediator When Parties Are

Deadlocked

When a mediator realizes that an impasse has been reached, it appears that he has a real opportunity to sell arbitration. He will be more likely to succeed if the special conditions discussed above exist. He may be refused, but even an occasional success is worth the effort. Mediators differ in the extent to which they suggest arbitration when a deadlock develops. They all recognize that what appears to be a deadlock today may not prove to be one tomorrow, after the union leaders and management have had time to analyze the situation further. Quite correctly, they make every effort to continue mediation. Some mediators feel that a suggestion of arbitration means an admission of failure on their part. They prefer to let the case continue or to mark it unsettled, rather than record "sent to arbitration." Other mediators conscientiously suggest arbitration every time an impasse is reached (even though it is often refused). This practice is more common in states where there are active mediation boards which also maintain lists of arbitrators and sponsor voluntary arbitration procedures, such as Massachusetts, Connecticut, New York, and New Jersey.*'' There are several steps which a mediator can use to encourage the use of voluntary arbitration. Suggest Arbitrator by Name. Experience shows that if a mediator suggests an arbitrator by name, rather than the idea of arbitration in general, confidence in the individual may dispel the general fears of arbitration, and result in acceptance of the idea of third-party settlement. Help Parties Estimate Probable Costs of Work Stoppage Realistically. Some of the writers on labor relations have suggested that the parties make precise calculations of the costs of work stoppage in advance.86 For example, they picture a [49]

union leader as saying that we can afford to stay out a week for a $2 weekly increase, two weeks for $4, etc. Some union leaders agree that they do try to have full knowledge of costs and make such estimates. There seems to be considerable evidence, however, that both sides often underestimate costs of work stoppages, in advance. An example is the steel strike of 1946. One of the Los Angeles union leaders told the senior author that the union would get what it wanted in just a few days, but the strike went on for weeks. After the stoppage has begun, it is often continued until costs outrun any possible economic gain, because the parties are determined to stick to a principle. The union is often determined to get the pattern for an individual plant, no matter how long it takes, while the management is equally determined to keep the pattern out of its individual area. A textile plant in eastern Pennsylvania had a strike of this sort that lasted all of one summer, although during the last weeks the parties were only two cents apart on a new wage scale. A mediator can help the parties to make some more realistic calculations of the probable costs of beginning (or continuing) a strike. There are, of course, certain unknowns which make this difficult, but he can focus attention in a rational fashion on idle plant and lost wages. He can also help them to balance the risks of arbitration against the risks of a work stoppage. No course is riskless, but often it would appear that the probable costs of a strike far overshadow the risks of arbitration. 87 Focus Attention on the Submission to Reduce Risk. If the submission defines the problem so that there can be no misunderstanding of the issue, this will reduce risk. A provision in the agreement for a three-man board, where partisan views can be presented to the chairman during the executive session, may also reduce risk under some conditions. The mediator can also acquaint the parties with the device of the limited submission. He can help them to decide [50]

whether or not to use it by reviewing some of the points of the succeeding analysis. If they do decide to use it, he can help them avoid the difficulties encountered in some of the cases reviewed above. If they choose to list criteria, he can sometimes help them select the appropriate standards. As is developed more fully below, we believe that the mediator can help the parties to retain the progress made in direct negotiations if he can get them to agree to arbitrate the difference still remaining by specifying maximum and minimum limits in the submission. One mediator, who has given generously of his time in discussing our study with us, has been suggesting arbitration of the remaining difference in recent weeks, but has had four straight refusals of the idea, and of arbitration in general. He is still willing to try the suggestion again, however. The Connecticut Board of Mediation and Arbitration thought there was merit in the device, and had had one favorable reaction to a suggestion of it just previous to replying to us. The New York State Board of Mediation has had some experience with it, as indicated in cases quoted above. The Massachusetts Board of Conciliation and Arbitration encourages arbitration in deadlocked cases and even provides free arbitration in some instances, but has discouraged limited submissions on the ground that they are inflexible.88 We shall proceed with a more complete analysis of the thinking of parties and arbitrators on the subject of the limited submission, in the following section. ANALYSIS OF T H E D E V I C E O F T H E L I M I T E D SUBMISSION

As we have stated above, the case for the limited submission has been presented in a number of articles and speeches by Dr. George W. Taylor. 89 The limited submission has also been mentioned in a number of other studies and at conferences on arbitration in recent years. 90 Except for those who keep in touch with the literature, however, the device is comparatively little known. Even arbitrators with extensive practice often know of the limited submission only in-

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directly, and have had no personal experience with the device. Although a comparatively small number of people have had experience with it, nearly everyone, even those hearing about it for the first time, could see a lot of implications in it, some good and some bad. In fact, the variety of criticisms equaled the variety of objections to contract arbitration in general. Since the criticisms of the two are closely related, it has been necessary to devote a great deal of space to the discussion of contract arbitration in general. Without it, it would be impossible to evaluate the criticisms of the limited submission alone, or to measure the points in its favor. Criticisms of the Use of the Limited

Submission

Some of the criticisms apply to any restrictions at all, other than a definition of the problem, upon the power of the arbitrator. Others refer to the use of criteria as standards in the submission. A third group applies to the specification of monetary limits in a wage case.91 General

Criticisms

Parties have insufficient knowledge to write a limited submission. Many commentators believe that the limited submission can be used only by parties with a long experience with collective bargaining and arbitration. Others do not have the requisite knowledge to use it. One arbitrator wrote, "I have had the sad experience more than once, when I suggested to the parties to an arbitration that they try to agree in advance on standards, to find that they had not the slightest notion of what standards would be applicable in their case or the relative weights to be given to the factors which they wished to stress for consideration." It appears that this difficulty arising from lack of knowledge could be avoided: ( a ) by using an open submission, ( b ) by getting information about the contents of limited submissions from a mediator, or ( c ) by getting some help from the arbitrator himself. While the practice among the arbitrators with whom we have been in contact is unusual [52]

and is subject to some hazards, one arbitrator wrote that he often spent as much as half a day working with the parties on the form of the submission in advance of the arbitration. If the parties could agree on the terms of a limited submission they could settle the case. This is perhaps the most frequently voiced objection.92 It is argued that any parties who could agree upon standards for settling a case can agree upon the points at issue themselves. There is considerable reason to take exception to this view, however. In the first place, as cases given in detail often show, parties have agreed upon standards when they could not agree on limits. In the second place, an attempt to agree upon the terms of a submission may result in further consideration of the issues by the parties and thus lead to a settlement by normal collective bargaining. In one such case, in Colorado, the parties appointed an arbitrator, and then had a meeting to write a submission—an open submission in this case. While drafting the submission, they reached an agreement on the issues without having to present the case to the arbitrator. In another instance, in a reopened wage case in the plate glass industry, where the arbitration clause had specified criteria, the parties met in the arbitrator's presence to try to write the submission. He said he played the role of a passive mediator. The parties settled the case without his having to rule on the wage issue. While this does not happen with great frequency, it can be considered a point in favor of the limited submission, because in focusing attention on the standards needed to settle the problem it has brought about an agreement. Critics add, however, that the mediator ought to be able to help the parties secure the same rational approach to their problem. A limited submission duplicates the function of a threeman arbitration board. A three-man board, with the requirement of a majority decision, is often regarded as a way of reducing risk in a contract case. Similarly, a limited submission is intended to reduce risk. Some arbitrators have contended that one is sufficient. If both are used together as was done in several of the cases studied above, it seems to [53]

some arbitrators to increase the difficulty of getting an agreement. Related to this criticism is the argument of some who say that all that is really needed in the way of protection is a competent impartial arbitrator. Then there is no need for a limited submission. A limited submission prevents the arbitrator from making a fust decision. A number of arbitrators fear that if they must work under a limited submission that they will be forced to give an award that seems to them to be unjust. One arbitrator wrote that he was "unwilling to enter a case with [his] hands tied in any way beyond, of course, the bounds which must be set under the terms of a stipulation to arbitrate . . . which ordinarily carries no reference to limitations in ruling on these issues." Others fear that they may not be allowed to admit certain facts into evidence which they wish to consider, or that they may be forced to give what appears to be undue weight to certain factors.93 Some arbitrators prefer to assign their own weights to criteria if they work under a limited submission.94 However, the parties sometimes want to specify them as an additional measure of control.95 The question of whether the objective is to secure abstract justice, as viewed by the arbitrator, or the desires of the parties, as expressed through the submission, is discussed in more detail below.96 A limited submission prevents the arbitrator from mediating. In a few industries, such as the hosiery industry, the arbitrator is often expected to try to sell his award to the parties in advance of issuance.97 In such cases, an arbitrator may claim that he is hampered by restrictions in the submission, such as specification of a retroactive date. For example, if the date is left open, he can sometimes persuade the union that a lower rate of increase, accompanied by an appreciable "bundle of cash" from a retroactive date quite far in the past, is an acceptable answer; or he can sell the employers a higher rate, with no retroactive pay. He can sometimes also persuade parties to put a new reopening date further into the future, if the issue is open. [54]

Difficulties in the courts. Henry Mayer has made the point that if one party is dissatisfied with the award under a limited submission it is easy for that party to "insist that the arbitrators had not given sufficient weight to certain criteria, or that they had ignored certain criteria, or that they had applied certain criteria improperly." Then they could appeal the case to the courts and the judge would be likely to rule that the arbitrator had failed to stay within the letter of some one of the restrictions and would throw out the award.98 Not very many cases go to the courts, however. Furthermore, if a limited submission helps to produce a more workable award, it is less likely to go to court. Criticisms of the Use of Criteria in Limited

Submissions

Merely shifts from debate over issues to debate over criteria. The director of research for a large union wrote that an effort to obtain criteria for a submission was merely "adding a new element to the dispute." The president of another large union said that it would "transfer the conflict from the merits to the definitions of the criteria." A professor of industrial relations developed the point further by referring to the frequently expressed view that "criteria were rationalizations." For example, on an upswing of business the union usually wants to include cost of living, and ability to pay, while on the downswing of the cycle management often wants these criteria to help its case. The economic conflict is still there, even though the criteria may give it a more detached appearance. For this reason, it is alleged to be as difficult to get agreement on criteria as to settle the original dispute. This argument is closely related to the general argument that if the parties could agree on standards they could settle the issue themselves. The answer to both arguments is, as we have stressed above, that the parties sometimes do agree on criteria and not on issues, as we can see from the cases presented. Criteria stack the deck for the more astute side. This criticism is expressed in many ways such as a fear that one side will try to outfox the other, or that the less astute side [55]

will feel frustrated" on discovering as hearings progress that it had unknowingly permitted the inclusion of criteria that helped the other side excessively, or left out some much needed items, or allowed the submission to assign preponderant weight to certain criteria which later proved to undermine its own case. That this is a very real difficulty is shown in cases discussed above. The union arbitrator in the Los Angeles Transit case said that the submission was so drawn as to "preclude a fair hearing." The union member of the arbitration board in the Bay Cities case said that the American Federation of Labor Unions he represented in the Los Angeles area were unwilling to use arbitration again after their experience with the limited submission in the Los Angeles Transit case and the Bay Cities Transit Company case. Recognition of the problem will, however, go a long way toward solving it in future cases, if the parties can be persuaded to give it a second try. The limited submission is inflexible. Even though the parties do not deliberately stack the criteria, they may overlook items which could strengthen their respective cases during the course of the hearings. For example, in the H. Boker and Company case the company wanted to consider its competitive position in the industry and the union wanted to consider the present levels of wage rates in comparable firms, but both were ruled out by the limited submission. It is possible to meet the difficulty by writing an open-end clause which lists criteria and then permits the consideration of all other pertinent data. However, if this is done the submission no longer offers the same control over the result, and risk is increased. Control is greatest when only one or two criteria are named, and decreases with further additions, until with an open-end list, there is little more influence on the result than there would be with an open submission. The real answer to both stacking the deck and inflexibility is to study the criteria thoroughly in advance and bargain about them intelligently when the submission is written.

The same criteria would be considered whether [56]

specified

or not. This argument is inconsistent with arguments about inflexibility. It applies only to cases with long, or open-ended, lists of criteria. Arbitrators advancing this argument pointed to the lists of customary criteria which have been discussed in arbitration literature, and indicated that any that were pertinent would probably be presented in the hearings whether the submission listed them or was open.100 Hearings devoted to questions of semantics. Even though the parties have agreed on the criteria for a limited submission, there still may be extended debate as to what the criteria mean, how they are to be measured, and what weights are to be assigned to them. One arbitrator (who is also a professor of law) wrote, . . the whole matter of specifying criteria is-one of changing an economic problem into the problem of semantics . . . the result is one of muddying the waters rather than in any way clearing them." Parties have tried to avoid this difficulty by putting a great deal of detail into the submission,101 as in the San Diego Gas and Electric Company case. Nevertheless, there was still extended debate. However, the Vice-President in charge of operation of the San Diego Gas and Electric Company wrote, "If we were again to submit a wage question to arbitration, I believe we would try to secure a submission agreement, and as extensive as could be obtained." He thought that the answer lay in more rather than less detail in the agreement "to restrict the evidence and discussion to agreedupon issues, rather than have the testimony wander through devious paths which possibly could lead to an incorrect conclusion."102 Similarly, a lawyer for the company in the Los Angeles Transit Lines case103 indicated that if the company ever should arbitrate again (a thing it would do only in special circumstances) it would try to define the criteria more specifically and also to get agreement on the weights of the factors. Neither wanted to give up the protection of the limited submission. Criticisms of Specific Monetary Limits in a

Submission

A number of the foregoing objections to criteria in a [57]

limited submission could be listed under the heading that the award was still unpredictable because the arbitrator still had latitude in measuring and weighting the criteria. To meet these objections, we suggested in our preliminary summary of findings that, in wage cases, the parties might find greater protection in specific monetary limits. We have already reviewed a number of cases in which such limits were used. We have also emphasized the point that limits would be more effective if they represented genuine "last offers" rather than initial demands.104 Specific monetary limits drew their own quota of special criticisms in the replies to the questionnaires. These may be summarized as follows: Artificially wide limits. One mediator -with long experience in a state mediation agency said that the parties considering specific monetary limits for a submission would recognize that limits defined for the arbitrator their "area of expectation." The parties accordingly would be reluctant to sacrifice their "outside expectations" by agreeing to limits that were close together. Many commentators, from both the parties and arbitrators, said that if the parties contemplated arbitration they would keep the limits artificially wide. One expressed it by saying they would "jockey for position before the arbitrator." This is only another form of the general argument that if arbitration is contemplated there is no genuine effort to reduce differences through collective bargaining. As we have said above, we think this argument is more applicable to compulsory arbitration than to ad hoc voluntary arbitration which was not anticipated when collective bargaining began. The cases reviewed show that when conditions are favorable some parties do exchange their long-chance expectations for an agreement to arbitrate with more realistic limits. Arbitration of remaining difference unacceptable. In our questionnaire we asked for comments on our suggestion of arbitrating the difference still remaining when negotiations broke down, using the last offer and the final demand as minimum and maximum. [58]

Several arbitrators criticized this on the ground that if management had been unwilling to accept the last demand of labor at the time of the deadlock they would be unwilling to agree to a submission which would make them liable to accept that amount as an award, if the arbitrator should set the rate at the maximum. Similarly, it was contended by a union attorney that the union would not accept the possibility of being awarded management's last offer. These commentators said that their criticisms were based on deduction rather than experience with actual situations in which specific monetary limits were being considered. There is, however, some support for this argument in the experience of the mediator referred to above.105 In four successive attempts to sell arbitration of the remaining difference, management had refused on the ground that the arbitrator might award the maximum. In our study of cases, however, we found (a) that management has sometimes accepted last demands (and even initial demands) as a maximum in a submission (to avoid the costs of a strike) and similarly unions have accepted minima, and ( b ) that few of the awards were at either the maximum or minimum. Limits give more protection to management than to the union. This is related to the preceding argument, but is listed separately because it explains more fully why some union spokesmen say that a mediator will have particular difficulty in selling the union on arbitration of the "remaining difference." The union recalls the concessions that they made before reaching their final demand. If they accept that as a maximum now, they say that they are protecting management from risk at the cost of their own chances of getting something beyond that figure. They do not feel that the guarantee of a minimum figure in the submission in any way compensates them for this sacrifice, particularly in a time of rising prices. They feel that in such a period the union is unlikely to get an award as low as the minimum figure. If it develops later that they might have had good chances of exceeding the maximum,

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they will be very critical of any mediator who sold them the idea of the limited submission. 106 This analysis does not, however, cover all situations. In one case, an arbitration board acting under an open submission awarded less than the last offer of the company, even though the amount of it was known to them. The board attached great weight to low comparable wage rates in the community in reaching its decision. T h e union contention would have more meaning if the minimum figure called for no change in rate. W e have seen some cases with this type of minimum, but they probably did not represent last offers. If, however, the last offer of the company was made after considerable sharpening of pencils, it may already contain some allowance for the upward movement of business conditions, and so may be a genuine protection to the union. One case reviewed above showed virtually no expectations above the maximum and a genuine desire for a minimum. Here the minimum had already been agreed upon in advance, and the union wished to peg it down while it arbitrated a further increase. In the Baker and Company case, 107 the company had already agreed to a 13.5 cent increase. The union quickly whittled down a demand of 25 cents to a demand for 18.5 cents, which was the national pattern. Since they had few expectations of an award above the pattern, the union representative said "they were willing to concede a maximum limitation in exchange for a minimum," and to arbitrate the 5 cent difference. 108

Too great temptation to arbitrator to split the

difference.

This is a criticism frequently expressed by all sides. Since the union feels it has already made its concessions in accepting the maximum limit in the submission, it often feels entitled to that maximum figure. In the Silver Deposit Ware case the arbitrator said that the union thought that all that was needed was "his blessing upon the maximum figure." The union arbitrator in the San Diego Retail Grocery case took the same position and denounced the impartial chairman for "splitting the baby in half." 1 0 9

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Similarly management often condemns a compromise decision, thinking that the arbitrator has not given genuine consideration to the financial burden it puts upon management. Both unions and management say that if they reallv wanted a compromise settlement of this type they could split the difference themselves and avoid the costs of arbitration. Arbitrators themselves frequently pointed out the danger of mechanical or unimaginative arbitration, in a bracketed case. A judge pointed out that the complaint against "splitting the difference mechanically" was not so much a criticism of the device of monetary limits, as it was a criticism of the particular arbitrator. If he were inclined to do it, he could achieve the same result whatever the type of the submission. One would conclude that if arbitrators believe that the half-way mark is the just answer, they should substantiate their conclusion with thorough analysis of the criteria, to avoid this charge of mechanical decision. The fact that arbitrators are criticized both for awarding either extreme, or for splitting the difference, emphasizes the problems facing an arbitrator. Final offers in hearings preferable to limited submission. A number of arbitrators have pointed out that they usually do learn (sometimes informally) in the course of the hearings what the "final demands and offers" had been. One professor of law thought nothing was to be gained by writing them in the submission. ( H e had not, however, had direct experience with a limited submission.) He suggested an alternative. "If, as you suggest, there is a risk to be avoided, it would seem to me preferable that the parties simply agree to present to the arbitrator at some point in the proceedings their 'final offers.' Perhaps this has exactly the same effect as the fixing of limitations upon the area of the arbitrator's discretion, and yet I have the feeling it does not emphasize the matter the same way." Even if there were a stipulation that these final offers were to serve as limits, this would be buried in the record, and probably would not be as easily recalled when the next

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negotiation period came around, as though it had been a formal part of the submission. W e recognize the validity of a number of these points, but we still wonder if this arrangement would be as effective in selling parties protection from risk in advance. Points in Favor of a Limited

Submission

After this extended review of the criticisms, first of contract arbitration, and then of limited submissions, one might assume that there was nothing to be said in favor of either contract arbitration or limited submissions. 110 Some of the arguments based on deductions, rather than experience, have apparently reasoned it out of existence. We have, therefore, to come back again to the real cases, and to the comments of arbitrators who have worked with limited submissions. Here we find awareness of difficulties, but real support for the idea in a number of instances. Especially favorable reports came from some arbitrators who had used specific monetary limits. More people reported successful experience with standards provided for the arbitrator in reopening clauses (or in supplementary submissions in wage-reopening cases), but this may reflect the apparently greater willingness to arbitrate wage terms under reopening clauses than when a contract for a new period is being established. There is also support for the potentialities of the device of the limited submission among those who have had no direct experience with it. A significant number thought it would encourage parties who were faced with deadlock to make use of arbitration, and that mediators should make this device known to the parties, if they do not know about it already. They thought the device would be difficult to "sell" to parties where poor relationships existed, even though it might be most needed in such instances. They said that they thought the limited submission was most likely to be successful where there was an established and well-functioning bargaining relationship between the parties. If the parties had had favorable experience with grievance arbitration thev might have more predisposition to try this. If both sides were

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predisposed to make the device work and bargained about standards in good faith, much could be accomplished. If, on the other hand, they considered it only a new tactical device with which to outsmart the other side, the losing side would be reluctant to use it again, and would discourage others from doing so. It would be used again, in emergency situations, only if the parties drew up the submission to give both sides a measure of protection. The points, especially emphasized, in favor of the use of limited submissions are summarized below. General

Advantages

Protection from risk. The parties can, by the standards they put into a submission, protect themselves from those extreme awards which they most fear. This protection may be just enough to win a reluctant party over to arbitration. Extension of collective bargaining in writing limited submissions. Whereas the parties were once deadlocked, their attention is now focused on establishing certain areas of agreement. A rational approach has been substituted for an emotional one, as the parties define the issues and consider appropriate standards. This will improve the subsequent presentation at the hearings. Bargaining about the terms of the submission should be conducted with full knowledge by both sides of the implications of the standards suggested. Thus, for example, if the company could get agreement for a lower maximum rate, and an earlier retroactive date, or, under certain conditions, consideration of ability-to-pay and competitive conditions, the union could get a guarantee of some increase already offered plus consideration of cost of living with an advantageous base date, or consideration of some comparable wage rates that would help its case. The relative advantages of these criteria to individual parties change through time, and the success of one side in getting favorable items would also depend on its bargaining strength. The weights to be attached to the factors in the submission could also be made the subject of bargaining. The submission can be used to [63]

instruct the arbitrator on items which are to be omitted from consideration. For example, the submission sometimes says that ability to pay is not to be considered. The submission could also require the arbitrator to make allowance for concessions already made in clauses agreed upon before the remaining issues went to arbitration. For example, previous agreements on vacations, fringe benefits, etc., might be given weight in the submission. Standards in submission make contract arbitration more judicial. The limited submission can, in some measure, play a role similar to that of the contract in grievance arbitration, by providing guides for the arbitrator. Contract arbitration can thus become more judicial and less legislative.111 Can be used for face saving. Some people question whether this is a worthy use of arbitration,11- but others agree that if a strike is averted it is worth while. If it is wanted for this purpose, the standards can be closely set to dictate the answer. It is hard to document cases of this kind, but a state mediator mentioned experience with several cases in which monetary limits had been used for this purpose with an expectation that the arbitrator would split the difference. One arbitrator pointed out that a limited submission would be particularly useful in permitting correction in a new contract of inequities which had long been carried over from contract to contract. If a few influential workers had disproportionate advantage over other workers the union representative would have difficulty taking responsibility for corrections of inequities, but could agree to standards that would make it possible for an arbitrator to correct them. Emphasize technical judgment of arbitrator. Both union and management spokesmen have indicated that they found value in the technical ability of the arbitrator to establish facts for them. They were often more hesitant about letting him determine policy. They suggested that a submission could be so drawn as to have him rule on these disputed facts for them. The application of them would then be closely prescribed.113 This comes very close to the alternative of fact finding with a recommendation which some parties prefer. [64]

Advantages of Criteria Several arbitrators expressed preference for arbitration with submissions including criteria over either open submissions or specific monetary limits. T h e y felt it was helpful to know in advance the standards that the parties felt were important. T h e y thought that the parties, by focusing their attention on criteria for the submission, could agree on using pertinent local data that might be overlooked otherwise. For example, it would be helpful to have the parties think in advance and agree on what company data were to be used to measure wage rates, and what firms could be used to establish comparable rates. Criteria are especially useful as standards for reopening clauses since they can be specified in advance. W e are speaking here of standards to guide the arbitrator if the case should go to arbitration—not criteria to serve as signals that wages are to be reopened if a certain change occurs. Other points in favor of criteria over monetary limits were that they were applicable to more issues, that they were broader concepts, and that they permitted the arbitrator more opportunity to exercise judgment. T h e parties did not have to make so definite a commitment or so certain a sacrifice of expectations, and were not so liable to receive mechanically determined awards, as in the case of monetary limits. One arbitrator suggested that economists would probably prefer "esoteric criteria," while others would prefer "the barnyard variety" of limits. This did not seem to be b o m e out in the comments of the arbitrators who were economists, however, since some of these did prefer limits while a number of lawyers wanted to have the greater freedom of criteria. Advantages

of Monetary

Limits

These are, of course, applicable only to wage questions and do not have as broad application as do criteria. Several arbitrators emphasized the fact that monetary limits were useful when the parties had one type of objective. Criteria served other purposes. Monetary limits have the advantage of "bracketing" the

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issue clearly for the arbitrator. He knows precisely the area of expectation. The parties have more precise protection, and the probability of a workable award is increased. 114 Monetary limits have the added advantage of being simple for the parties to understand. They preserve the gains made in collective bargaining. Often the guarantee of these gains far outweighs any sacrifice of extreme expectations. As we have seen above, the union sometimes gets agreement on a partial increase and arbitrates the question of an additional increase with a ceiling on that increase. Limits can be used in a submission supplementing a reopening clause, even though it would be difficult to forecast them in order to put them into the contract itself. 115 Total amount of increase limited. This is a rather unusual type. 116 It is chiefly useful when a series of wage rates is to be reviewed, rather than a single rate determined. It forces the arbitrator or board to see the issue in the large, and balance the equities. Results might have been quite different if each wage rate had been judged separately, and then the whole totaled. This method, like bracketed limits, puts a ceiling on risk for management. The union's acceptance would depend on the amount of the total, and on its bargaining strength. The Open versus the Limited

Submission

Parties faced with a decision between an open or a limited submission will weigh the factors in the individual case. If both sides are willing to arbitrate with an open submission, and have confidence in their arbitrator, or feel that a three-man board will exert sufficient control, they may well choose the open submission. It will require simply a formulation of the problem. The case can be developed as seems best in the course of the hearing. The arbitrator can exercise his judgment more fully. Less formal means than the submission may be used to give him a clue as to what would be a workable award. On the other hand, if one side wants arbitration and the [66]

other side is reluctant because of fears of extreme awards, the protection of the limited submission may be enough to tip the balance in favor of arbitration as opposed to a work stoppage. All the advantages of control described above then come into play. The type of control, whether criteria or monetary limits, would have to be adjusted to the given situation. T H E P R O B L E M O F A C C E P T A B I L I T Y OF T H E INSTITUTION O F VOLUNTARY CONTRACT ARBITRATION

Any proposal to substitute arbitration for work stoppages, under the conditions which are favorable to arbitration, brings up the question of the essential nature of the two, and the question of the extent to which the results from the two are similar. It also raises the question of what the parties expect from arbitration, both in the short run and in the long run, and the thinking of arbitrators about their function. Since there are wide variations in the thinking within these groups, it is difficult to establish patterns. However, a review of some of the main points may help advance one step further in the search for "acceptable" voluntary arbitration. Can Arbitration Bargaining?

Be Considered

an Extension

of

Collective

This question points up some of those raised in the preceding paragraph. W e have considered this question to some extent above, when we pointed out that the parties often think that the natural sequel to collective bargaining which has broken down is a work stoppage. Collective bargaining emphasizes the economic forces. During negotiation the strike threat is in the background. When negotiations break down, those economic forces are intensified by the strike or lockout to force a final settlement. Labor and management spokesmen often emphasize that arbitration is something fundamentally different from either collective bargaining or a work stoppage. It is possible, however, to think of a deadlock in collective bargaining as being

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the fork in the road. T h e branch to be chosen depends on a number of factors. 117 Arbitration has, of course, numerous essential differences from the work stoppage. In the first place, it involves the decision to give up the right to strike, in this instance, and accept the judgment of a third party as final and binding. It is an appeal to reason, rather than an appeal to force. Arbitration has its costs and its risks, but these can, with proper safeguards, be appreciably less than those of a long strike. Although some people emphasize the possibility of intense resentment against an award that seems unjust, a number of spokesmen think that under the majority of awards the parties continue operations after arbitration with much less ill will than after a strike. Much would of course depend on the circumstances of the individual case, especially the personalities involved. In the foregoing paragraphs, we emphasize differences between work stoppages and arbitration, hoping to highlight the advantages of arbitration. There are, however, certain similarities that need examination. The most obvious is that both eventually produce a settlement, and the settlement has a dollars and cents significance. The results of arbitration come from a reasoned consideration of economic data presented in a hearing. Many of these facts are first collected in preparation for direct bargaining. If a limited submission is used, bargaining also governs the choice of criteria to be presented at the hearing, or sets limits within which the award must be made. If a three-man board is used, partisan views are presented to the impartial chairman as he prepares the final award. If a majority opinion is required, something akin to bargaining also goes on before the final award. Questions of the weight which arbitrators attach to different types of economic factors, and whether they "try awards on for size" before issuing them, are also a part of the general question of whether arbitration is to be considered an extension of collective bargaining. This is discussed in more detail below.

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What Do the Parties Want from

Arbitration?

The glib answer to this question is that they want to win. Some partisan commentators emphasize this to the extent of saying that "predictability" of the award makes no difference to them. If it were outside the range of expectation, in their favor, they would consider this so much the better. On reflection, however, the parties realize that this is not the long-run answer. If arbitration favors one side to a great degree, the other side will be reluctant to agree to arbitration in the future and it will discourage others from arbitrating also. If management and labor are asked to think in long-run terms, they list a number of things which they hope to secure from voluntary arbitration of a disputed case. Among the objectives are: (1) A settlement without a work stoppage with as little delay and expense as possible; (2) a clear and understandable award that will not require a supplementary opinion from the arbitrator, or further negotiation by the parties to agree on a method of applying the award; (3) an award that can be carried out without introducing new inequities; (4) an award such that neither side will be so excessively burdened that it regrets that it assumed the risk of arbitration. If the award is far outside the area of expectation in either direction the probable ensuing difficulties reflect on the institution of voluntary arbitration. The losing party may condemn the arbitrator roundly and then let the resentment smolder for a long time. They may try to put as many obstacles as possible in the way of the successful operation of the agreement, and may count on getting even at the next negotiation period. If they can find some evidence that the arbitrator exceeded his jurisdiction, they can appeal the case to the courts. They may on rare occasions even break their agreement to accept the award and engage in a strike or lockout. This will probably bring a court injunction, but it sometimes finesses an additional concession from the other party beyond the arbitrator's award. [69]

The Question of the Arbitrators Judgment versus the Mediated Award There is a great variation between industries in what the parties expect from the arbitrator, and between arbitrators in their thinking on the principles that should guide them. Many representatives of labor and of management say that what they want from the arbitrator is abstract justice, or a reasoned judgment based on the evidence presented at the hearing. They do not want a third party to identify himself with the interests of the parties. They choose a third party to decide the question because they believe him to be impartial and capable of giving a detached judgment. This is consistent with the practices of the American Arbitration Association which emphasizes the quasi-judicial function of the arbitrator. Parties who ask for a reasoned judgment condemn political awards, or awards in which the arbitrator hopes to make a compromise. They recognize that if there are several issues, the arbitrator is very likely to strain his reasoning to award at least one issue to the side that is losing most of the issues and they object to this practice. They are critical of mechanically made compromises, especially splitting the difference. 1 1 8 On the other hand, in the hosiery industry and some others, the parties want to have the arbitrator act much as a mediator in determining what will be acceptable, sometimes balancing one concession against another. This technique has its difficulties because an arbitrator may fail to find a common ground, and yet must go ahead and issue an award to fulfill his obligations. In some cases, the parties expect a preview of the award, with a chance to persuade the arbitrator to revise it before it becomes final. With a three-man arbitration board, the partisan members can try to influence the arbitrator in this way. In some cases, however, the parties expect it even with a single arbitrator, although this is confined to a few industries only, and is unusual. These parties feel that in this way they can prevent extreme awards. They

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are critical of arbitrators who insist on doling out abstract justice, in accordance with their own lights, and who remain out of touch with the urgent realities of the situation, as the parties see it. They denounce this type of award as "playing God." Arbitrators vary in their philosophy of arbitration, also. Some admitted that in the pressure of individual cases, where personalities played such a great part, they seldom paused to think about the principles underlying their action. A large number believe their function is to apply reasoned judgment to the facts presented. Some arbitrators say they think their objective should be to learn the needs of the parties, and that they should regard themselves as the servant of the parties in reaching a realistic decision. Some say they prefer to work with a three-man board on contract cases, so that they can get guidance which will keep them from issuing an unworkable award. Some of these think also that they can get help from a limited submission as to the area of expectation. While some feel that mediation is entirely different from arbitration and should have no place in it, others are willing to attempt it if the parties want it. Consideration of Economic

Strength

The last item in our questionnaire was: "If the arbitration of a wage issue is considered as an extension of collective bargaining, should the arbitrator be guided, in whole, or in part, by the economic strength of the parties in determining his award?" One arbitrator who replied called this the "64 dollar question." A number of others objected to the premise that arbitration should be considered an extension of collective bargaining, because of the obvious differences between twoparty negotiation and third-party determination according to a reasoned consideration of the evidence. 119 There were very pronounced reactions to this question on economic strength. A distinguished arbitrator, formerly dean of a law school, denounced this idea as a "pollution of arbitration." Another arbitrator said it was as unjust as though [71 ]

a judge were to inquire into the bank balances of the litigants before him, and allow this to influence his judgment. Others said that the weaker party must have as much claim as the stronger when the arbitrator is deciding what is right. Some arbitrators looked more deeply into the definition of economic strength. They recognized that an arbitrator, no matter how judicial his approach to the problem, is influenced by economic factors when he weighs evidence on ability to pay, cost of living, and competitive conditions in the industry. Economic Justification Underlying Criteria. One arbitrator made a very useful and valid distinction between economic justification, on the one hand, and other economic factors which would measure staying power in the event of a work stoppage. Before negotiations begin, well-prepared parties compile information on cost of living, competitive conditions in the industry, comparable wage rates, changes in productivity as a result of new technical processes, ability to pay and a number of other pertinent items. The economic factors underlying these affect the strength of the case of the individual parties. If the case goes to arbitration, these same considerations are presented to the arbitrator by one side or the other. They serve, depending on the conditions of the time, as economic justification for the respective sides. There is another group of factors which the parties measure before negotiations and reassess before deciding on a work stoppage or on arbitration as an alternative. It is not customary to present these formally at arbitration hearings, although they are still in the back of the minds of the parties. These are considerations such as whether the company can go through a fairly long work stoppage without being ruined by fixed charges, whether it will lose its customers, or whether it can transfer its operations to another plant elsewhere (if organized perhaps by a different union). If the company offers most of the employment in the area, it is relatively strong because its workers can find few other jobs. Management will also be influenced by its degree [72]

of responsibility to the general public for continued operation. On the other hand, the union considers the strength of its hold on the membership, the size of its treasury, the financial support from the international, or from other unions, statistics on number of unemployed in the area, the job opportunities in allied lines, and other factors in order to measure its coercive strength in the event of a strike. We shall consider first the question of whether the arbitrator should give any consideration to this second group of factors. One group would say summarilv "no," because information on these items is not presented by the parties in evidence. The award is to be based on the "economic justification" factors and other logical considerations. Another group would say that there has to be some recognition of the existence of the "staying power" factors, or the award will not work under the real conditions in which it has to operate. They agree that it is difficult for the arbitrator to assess economic strength. No one, however, suggested that the parties should formally introduce evidence in the hearings which would give the arbitrator an indication of relative economic strength in this second category. Arbitrators' Views as to Appropriate Objectives. The use which the arbitrator makes of considerations of economic strength depends on his belief in his objectives in making his award. "The lion's share to the lion with much unction." This is the formula suggested by an arbitrator who has long experience, both theoretical and practical, in labor relations. This assumes that the arbitrator will try in his award to approximate the results of a strike if it had occurred. The theory of this is that the strong will have no occasion to go back on its agreement, and that the weak will be unable to protest. Both will benefit by the elimination of the potential work stoppage. This approach emphasizes the need for the arbitrator to go beyond the usual criteria and get all available information about the economic strength of the parties. Spokesmen for the parties have said that, if this were the common practice of arbitrators, the weak side might be

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unwilling to accept arbitration. They would be better off to give in and save the costs of arbitration. Find a point that will satisfy the parties allowing for estimated costs of avoided stoppage. If the award tries to approximate the result of a strike, it does not make proper allowance for the fact that the parties were saved the actual cost of the strike. The "Hon was not required to prove he was a lion." As one student of the subject put it, "maybe the lion is only a moth eaten skin." This party will certainly be satisfied with something less than it might have won by a strike, if it can avoid the costs of the strike. Because of the advantages to the parties of avoiding a stoppage, there are probably several possible points within a range which would be acceptable. If an arbitrator adopts the objective of finding an acceptable answer which makes allowance for these estimates of strike costs, he needs more information than he can obtain from a study of the economic issues as measured by the criteria presented in the hearing under an open submission. One way would be by that form of the mediation technique in which the arbitrator tries out a possible award and ascertains whether that would be reasonably acceptable to the parties. In individual conversation with the parties the arbitrator may learn how much actual leeway there was between the stated demands and a figure that the parties prior to the arbitration agreement would have regarded as so unacceptable as to be worth risking a work stoppage. He could also keep from making an award which would result in a work stoppage in defiance of the agreement to accept the arbitrator's decision. Opponents of the mediation technique say, however, that this should have been done previously by a real mediator, and that it doubles the difficulty of the arbitrator if he does not sell his tentative award. If the arbitrator accepts this philosophy of arbitration but chooses not to use the mediation technique he has to find other evidence in addition to the formal criteria which will give him a clue to the area of expectation. Such evidence may come incidentally in the [74]

hearing or may come from partisan members of an arbitration board. As is emphasized below, the information may also come from a limited submission with specific monetary limits. The placing of the monetary limits may reflect indirectly the company's and the union's rough estimates of the cost of a strike or lockout. We have commented above on the difficulty of making precise estimates, because of the impossibility of forecasting the length of a strike. Sometimes evenly matched parties have a brief strike, and sometimes a prolonged one. It would be difficult for an arbitrator to make his own estimate of potential strike costs, but he can make use of the parties' hunches on these matters, as reflected in their final offers and more especially in specific limits, if they agree on them in the submission. Approximate the results which would have come about if direct negotiations had resulted in agreement. This is approximately the same as the preceding, but has a little different emphasis. It was mentioned separately by different arbitrators as a possible objective, and so is listed separately here. It would include also the situation where arbitration is used for face saving. This again seems to suggest use of the mediation technique, although it could also be based on other evidence as to what would be acceptable. Judgment based on criteria and principles. Most arbitrators speak of their function as that of giving a considered judgment based on the evidence presented formally in the hearings. That is, in fact, a usual definition of arbitration. This philosophy appears also to be what is most commonly accepted by unions and management. As it is stated, it often sounds as though it meant a ruling based on abstract justice which is arrived at by weighing criteria according to certain ethical principles. Arbitrators who support this view in its purest form do not favor mediation in arbitration and may prefer to work with an open submission,120 and as single arbitrators (or with the power to write the decision of a board if no majority is obtained). They say they do not consider the economic strength of

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the parties (i.e., in the coercive sense). Actually, the results of this approach may not be so different from the others suggested above as one might at first suppose. W e have pointed out that parties of very unequal economic strength probably do not often go to arbitration, so some of the considerations related to great inequality of strength are ruled out before the arbitration starts. Furthermore, the criteria considered in a quasi-judicial approach (ability to pay, comparable wages in other plants, etc.) often are determinants of economic strength. In addition, data on final offers may be presented at the hearing and may thus become a part of the evidence weighed in reaching the award. Either approach may lead the arbitrator to about the same result in his award.

Contribution of the Limited Submission to the of the Award

Acceptability

W e have distinguished above between economic justification as measured by criteria, and economic strength, or staying power, which the parties might have used if they had had a strike. Both kinds of economic considerations influence the parties' reactions to an award. Several arbitrators commented on the fact that their task was made easier if evidence on the parties' expectations was readily available to them, without indirect attempts to ascertain this information. The parties can, by bargaining about the submission, greatly reduce or entirely eliminate (depending on the type of submission) the danger of excessive awards in either direction. This assumes, of course, enlightened bargaining about the submission, so that the difficulties with limited submissions recounted above are eliminated.

Contribution of the Limited Submission to the Greater Use of Contract Arbitration Many of those answering our questionnaire thought that [76]

the limited submission would promote more use of arbitration since labor and management could thereby b e confident of confining awards to an anticipated area. Others, however, thought that a great many other factors were involved in decisions to use or not use contract arbitration. T h e y thought that the limited submission would not make a substantial difference. Some thought that the c o m p e t e n c e of and confidence in arbitrators were more important than the form of the submission in encouraging contract arbitration. Others felt that the parties could get protection from extreme awards b y less formal methods of indicating expectations than by the limited submission. In the view of the authors, it would b e desirable for the parties to proceed in this manner, if they have sufficient confidence to do so. T h o s e parties, however, who feel the need for additional protection, may be encouraged to use arbitration, if they know of the possibilities of the limited submission. T h e limited submission can help the parties give the arbitrator more definite information as to the way they assess the second group of factors measuring staying power which are not often formally presented at the hearing. As was pointed out above, their estimates of these factors are reflected in the area of expectation. This can be put into the submission in the form of specific limits. Furthermore the parties can use their bargaining strength to help them secure concessions on the criteria to be included in a limited submission. T h e authors think that voluntary contract arbitration could save labor, management, and the public the heavy costs of work stoppage in more instances than it does at present. Also, if management and labor gain more knowledge about the limited submission, and about the ways to make the submission express the true intent of the parties, the device of the limited submission will contribute to both the acceptability of the award in the individual case, and the long-run acceptability of the institution of voluntary arbitration.

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Chapter 4

SUMMARY AND CONCLUSIONS This study is concerned with the voluntary arbitration of the terms of new or renewed (or reopened) contracts. This is in contrast to the more usual arbitration of grievances arising under an existing contract. Our object is to inquire, generally, into the nature of, and problems connected with the use of, arbitration in contract cases, and, specifically, to see if the form of the submission agreement has an influence on the willingness of the parties to use contract arbitration. T h e losses to labor, management, and the public from work stoppages make it highly significant to examine in detail any method which may, at least in some instances, bring about peaceful settlement of industrial disputes. In this study we are concerned only with peacetime conditions; we do not deal with the settlement of disputes during a war emergency. W e are concerned with voluntary, not compulsory, arbitration. W e wish especially to emphasize that we take it as axiomatic that the best way to make an agreement between labor and management is for the parties to reach agreement themselves through collective bargaining. However, experience shows that if collective bargaining fails to produce an agreement, a strike or lockout need not necessarily be the result. After the parties have made a genuine but unsuccessful effort to reach agreement, the services of a mediator often result in the reaching of a settlement. If mediation fails, the parties may well turn to arbitration as an alternative to a work stoppage. W e suggest that parties in this situation should give serious consideration to arbitration in view of the serious costs involved in the stoppage. In the course of our study we have found what appears to be a curious paradox. On the one hand, we have found that

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voluntary contract arbitration has been used successfully in more cases and in more industries than appears to be popularly supposed. On the other hand, we have found that spokesmen for labor and management and arbitrators themselves in many instances have numerous and firmly held convictions that arbitration of contract terms is impractical and undesirable. Many of these spokesmen maintain that they give serious consideration to arbitration when faced with a work stoppage, but that they have dismissed it for good and strongly held reasons. A consideration of the numerous cases in which contract arbitration has been used successfully, however, brings one to the realization that more careful thought and extended analysis of the problem are worth while. Even the severest critics agree that there are special circumstances in which contract arbitration may be useful. The adverse criticisms of contract arbitration fall into a number of categories. These views about arbitration are expressed with great conviction by those who cite them, although at least some of them appear to be of rather questionable validity. They may be summarized as follows: (1) We arbitrate grievances under the contract, but we just do not arbitrate terms or provisions of new agreements. (2) The only way to get a contract is through collective bargaining. If that fails a strike is inevitable. Arbitration cannot be considered as an extension of collective bargaining. It is fundamentally different. From some unions comes the statement that arbitration is a concession to weakness, because it involves giving up, temporarily, the right to strike. (3) Grievance arbitration can be quasi-judicial because it is based on a contract established by the parties. (4) Contract arbitration has no fundamental basis because it requires legislation by the arbitrator, and is not founded upon direct agreement by the parties. (The submission can, however, as the study shows, increase the judicial character of the proceeding.) (5) A third-party determination of the terms of a contract is unworkable because no outsider can possibly know enough

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about the business to make a workable decision. (Manageagement sometimes believes this so sincerely that it would rather incur prolonged strike losses than arbitrate.) ( 6 ) T h e arbitration of a contract is a much riskier undertaking than the arbitration of grievances, because of the larger sums involved. A "screwball" decision might result, on the one hand, in serious loss to the union, or, on the other hand, might put the company out of business. Furthermore, there is danger that arbitrators may compromise mechanically, or may "play God" and have utterly unworkable ideas of justice. (There are, however, ways of limiting these risks, as we have developed in our study.) ( 7 ) If there is any prospect of contract arbitration the parties will not bargain responsibly. They will merely "jockey for position before the arbitrator." This argument appears to spring from experience with the National War Labor Board and state compulsory arbitration boards and is applied to voluntary arbitration without much distinction between compulsory and voluntary arbitration. ( 8 ) The parties will resent an answer from a third party, even one chosen by themselves. They will have no incentive to make the award work, and they will be harboring resentment which will burst out redoubled when it comes time to write another contract a year hence. On the other hand, spokesmen claim "strikes clear the air," and afterward the parties have a special responsibility to make their agreement work, no matter how reluctantly they agreed to it. (Others, however, said that they thought that the scars of a strike were deeper than the scars of arbitration.) ( 9 ) The habit of voluntary arbitration leads to compulsory arbitration. T h e award of the third party, even on a voluntary basis, represents "coercion" by an outsider. (This seems to the authors to be an unfounded fear.) After the parties (and even some arbitrators) have voiced one or more of the objections listed above, they frequently pause reflectively and say, of course, there are situations in which it is possible to use contract arbitration to "get off dead center." Few would say categorically that it never

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should be used. Most say it can be used only in special circumstances. T h e circumstances surrounding the special case reduce the onus of the objections listed above. From our observations, we conclude that contract arbitration probably is most useful when most of a contract has been agreed upon by the parties and only a few issues remain, and serious deadlock has developed on these. Issues most likely to be arbitrated are ones involving dollars and cents, and not pioneering demands. Matters of policy such as union security, etc., are seldom arbitrated. T h e parties will be most likely to choose arbitration if relatively evenly matched in economic strength, and if costs to the parties or to the public of a long work stoppage will be serious. This is especially true of public utilities and similar industries, but contract arbitration is by no means limited to such industries. Furthermore, if the parties have had a costly strike in the past, they may be more willing to avoid such costs again by trying arbitration. W e emphasize that the proceeding will be most successful if the arbitration is unexpected, and is chosen at the last moment as an alternative to the work stoppage. (This meets the objection that it is impossible to combine responsible collective bargaining with a subsequent arbitration.) The mediator has a special opportunity, when he is dealing with a case of this kind. He can help the parties estimate realistically the probable costs of a work stoppage and can suggest arbitration as an alternative. He can mention a competent arbitrator by name since such reference to a specific arbitrator often inspires confidence which overcomes objection to arbitration in the case. If fear of the risk of an unworkable or screwball decision is uppermost in the minds of the parties, they may be more willing to choose arbitration in preference to a work stoppage, if it is pointed out that they can set limits to that risk by writing either criteria or specific monetary limits into the submission when the case goes to arbitration. A number of parties have had experience with arbitration of wage rates in accordance with standards provided in re-

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opening clauses. (This is to be distinguished from criteria used merely as a signal for wage reopening.) Usuallv only one or two criteria are provided as standards for such corrections. A change in the cost of living, a new "pattern" in comparable wage rates, adjustment for changes in technical processes are some standards that have been used. Frequently the contract provides directly for arbitration in the event of unsuccessful negotiation on reopened wage rates. This may seem inconsistent with the view that arbitration of contract terms must be unpremediated, but we find evidence of greater willingness to arbitrate under a reopening clause. This is probably because the agreement to arbitrate is made at a time when agreement on the entire contract is made, not at a time of stress. Also the parties feel that this is more closely comparable to grievance arbitration, because it is under the contract. Furthermore, only one or two issues are to be considered. Correction is often for "erosion" since the last agreement, not a complete review of all the factors in wage determination. Since the period covered by the new scale is brief, the parties do not want a work stoppage. Standards or limits in the submission give additional protection in an ad hoc arbitration of contract terms. Criteria such as cost of living, comparable wage rates in the industry or in the area, competitive conditions in the industry, ability to pay, and others may be specified for the guidance of the arbitrator. The submission exerts a tighter control over the award, the fewer the criteria, and if there is no open-end factor such as "and all other relevant items." If the weights which the arbitrator is to assign to the criteria are specified, this also fixes the award more closely. If several wage rates are to be determined, the arbitrator may be directed to fix the total increase in the wage bill first, and then assign it to the individual rates by balancing equities between them. Even more definite control can be obtained by writing into the submission the exact amount by which the wage bill may be increased. Other terms of agreement can also be included in the submission, such as effective date of the award,

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and the way the award is to be integrated into the wage scale. Specific monetary limits, such as a maximum and a minimum amount of wage change in the wage rate which shall be awarded by the arbitrator, also serve to limit risk. These figures are also helpful to the arbitrator in indicating the area of expectation. They are most helpful if they represent the final offers of both sides, after genuine collective bargaining, rather than initial offers which may be wide apart for strategic reasons. It is possible, of course, to combine both criteria and specific monetary limits in one submission. The objectives of the two types of guides are different. Criteria have more general uses, while specific limits are confined to dollars and cents issues. Both have certain limitations which the parties should recognize. Criteria may be subject to varying interpretations, and argument about their measurement and relative importance may be prolonged. If one party is much better informed than the other, it may "outfox" the other side by winning acceptance of an exclusive list of criteria, which in the end prevents the outsmarted side from presenting its best case, or it may secure special weight for a factor which will force a decision in favor of the more astute side. Full knowledge of the meaning of all proposed criteria and careful bargaining by the parties in advance are the necessary safeguards. Specific monetary limits often are criticized as likely to be artifically wide apart. It is alleged that if they were closer together they would represent too great a sacrifice of expectations, or might protect one side more than the other. It is also said that they are likely to lead the arbitrator to split the difference mechanically. They are, however, subject to less debate than are criteria, and they exert a firmer control on the award. The limited submission appears to work best when both parties have had some experience with arbitrations. Paradoxically, it is probably most needed by people who are

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using arbitration for the first time, and are most fearful of risk, and so need the protection offered by a limited submission. The limited submission does have the advantage of bringing the award more closely within the range of expectation and so of acceptability. Other ways of reducing risks may be mentioned: (1) choosing an arbitrator in which the parties have confidence to act without limitation, and (2) establishing a three-man board and letting the partisan members help the impartial man establish a workable award. Tighter control is exercised if the submission requires a majority award. The impartial chairman often feels that he can serve the ends of justice better if he is allowed to write the decision when he cannot secure a majority vote. The parties have to decide whether they want to give him this latitude. If the parties wish the arbitrator to do some mediation along with his arbitration they may not want to use the limited submission lest their prior agreement at some point, such as an effective date of the award, may affect a subsequent bargain that they might wish to have made. Some arbitrators are unwilling to act under a limited submission, fearing that it will prevent them from arriving at an answer that will seem best to them. Others, however, welcome the limited submission because it gives them a clue to what standards the parties think are important and as to what will be a workable and acceptable award. Some of the theoretical objectives which arbitrators might have in making their awards have been examined. Also surveyed were the comments of arbitrators on the question of whether they thought they should consider economic strength of the parties in their quest for awards that would promote the acceptability of voluntary arbitration as a longrun institution. In this connection, a distinction was made between the economic justification underlying the criteria usually considered in contract cases, and the factors which would measure staying power if the parties had resorted to a work stoppage. The latter are not usually expressed explicitly in arbitration hearings, but may indirectly influence [84]

the area of expectation, or might affect the placing of the specific monetary limits, if these were included in the submission. Staying power also affects willingness of the parties to accept arbitration in the first place and subsequently affects willingness to abide by the agreement to follow the award. W e do not urge either contract arbitration, or the limited submission as a panacea. Our purpose is to point out that there are situations in which contract arbitration has met a need, and has averted a work stoppage. W e feel that the costs of work stoppage need emphasis and that there are numerous cases in which the risks of arbitration are less than the risks of a work stoppage. In such cases when the parties cannot themselves reach agreement, we suggest unpremeditated contract arbitration. W e also suggest it when needed for interim corrections under reopening clauses. At present there seems little tendency to include in one contract provision for the arbitration of a succeeding contract, although there are some instances when that has been done. If the practice should become adopted more widely, it should be possible for the arbitrator to cancel that clause out of a succeeding contract, if the parties so desired, to preserve the voluntary character of the arbitration. Our examination of cases where limited submissions have been used shows that they have met a need in particular circumstances which could be met in no other way, since the parties would not agree to arbitrate without them. Their existence discounts the frequently heard argument that "if they could agree on criteria, they could agree on the terms of the contract." The cases show that parties have agreed on standards, but could not agree on the final answer. Sometimes, however, when the parties focus their attention on standards for a submission they are able to go further and reach agreement. One or two cases of this type were reported to us by people answering our questionnaire. W e consider this a desirable development. A few instances were also reported in which the limited submission was used for face saving or for correcting inequities impersonally.

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Our hope is to encourage the consideration of both voluntary contract arbitration and the device of the limited submission when deadlocks develop. We think that there may be fewer situations than is commonly supposed in which a strike is needed to clear the air, and many more where the parties would arbitrate if they could have the protection of a limited submission upon which they agreed after enlightened bargaining.

REFERENCE NOTES 1. See p. 13. 2. J. Noble Braden, "Current Problems in Labor-Management Arbitration," The Arbitration Journal, VI (Number 2, 1951), 101. 3. See n. 89, 90 for bibliography on the subject. 4. These are cited in footnotes Dy volume number and "LA" for Labor Arbitration Reports, followed by the page reference. 5. Lois MacDonald, "Selection and Tenure of Arbitrators in Labor Disputes," Proceedings of the First Annual Conference on Labor (New York: New York University, 1948), pp. 145-93, especially p. 190, which reproduces this part of the questionnaire. 6. This instrument is sometimes called "the arbitration stipulation." The terms are often used interchangeably by labor and management and by many arbitrators and are so used in the Labor Arbitration Reports of the Bureau of National Affairs. Mr. Benjamin Aaron of the Industrial Relations Center of the University of California at Los Angeles makes a distinction between the two terms. He follows customary legal language in defining a stipulation as simply "an agreement." An "arbitration stipulation," he states, "is an agreement to arbitrate, and need not set forth the terms under which arbitration will be undertaken. The latter are customarily set forth in the submission agreement." (Letter dated May 1, 1950.) 7. For samples of clauses of this type see United States Department of Labor, Collective Bargaining Provisions, Grievance and Arbitration Provisions, Bulletin 908-16 (Washington, D. C.: Government Printing Office, 1950). 8. Only in rare instances is the preceding contract drawn to provide arbitration of the terms of a succeeding contract in the event of dispute. See pp. 10-11. 9. Mr. Aaron termed the first agreement "the stipulation to arbitrate," and the second, "the submission." See n. 6. 10. For example, see p. 29, quotations from the submission in the Los Angeles Transit Lines case. See also Appendix II for a list of items which may be included in the submission agreement. 11. For further information on submissions and the state laws concerning labor arbitration see Prentice-Hall, Labor Course Covering Labor Legislation, Collective Bargaining and Arbitration, 1948, Section 13,077 (State laws on submission agreements), and Section 13,183 (on items to be included

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in submission agreements). See also Frances Kellor (Executive Vice-President of American Arbitration Association), Arbitration in Action (New York: Harper and Brothers, 1941), p. 62, on "What a Submission Should Contain," and Annex I, "Summary of the Statutes Covering Arbitration," covering commercial and labor arbitration, prepared by Professor Wesley A. Sturges, Yale University. See also Jules Justin, "Arbitration, Proving Your Case," Personnel, Vol. 24 (reprinted, American Management Association, 1948), especially pp. 5-7, and U. S. Department of Labor, Labor Arbitration Under State Statutes, 1943. For Pennsylvania, see Leon Ehrlich, "Labor Arbitration in Pennsylvania," Temple Law Quarterly, XXIV, No. 2 (October, 1950), 107-36. (The latter discusses the need for revision of the Pennsylvania labor arbitration laws to put arbitration of issues involving "personal services" on a firmer legal footing.) 12. See, for example, Yakima Cement Products Corporation (Yakima, Washington) and International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers, Local 524 ( A F L ) , June 21, 1946 ( 3 LA 7 9 3 ) , Paul Prasow, arbitrator, where there was confusion as to whether or not the submission of "what wage rates should be paid by the employer to employees coming under the contract with the union," meant that the arbitrator should determine "the prevailing rates for the various job classifications." In the San Joaquin Baking Co. case (see n. 18), the arbitrator ruled that the stipulation "to arbitrate 'wages' is construed to give the arbitrator authority to consider only wage rates for existing classifications and not, as contended by the union, to permit him to consider the union's demand for establishment of new classifications" (13 LA 115). 13. The respective advantages of open and limited submissions are discussed on pp. 63-66, 77 and 85. See also pp. 52-53 and n. 110 for a discussion of whether the arbitrator should help the parties in formulating a submission. See also p. 49 for the role of the mediator. 14. See p. 47 for the reasons. 15. Dr. L. Reed Tripp has made a study of reopening clauses which is published in the present series. 16. For example, see Pacific American Shipowners Association and Pacific Coast Marine Firemen et al. Association (Ind.), April 4, 1949 (12 LA 540). See also Campbell Soup Co. (3 LA 236), cited below, p. 19. 17. About 2 per cent of 1,237 agreements studied by the Bureau of Labor Statistics provided for arbitration of the terms of new or revised contracts. James C. Nix, "Arbitration Provisions in Union Agreements in 1949," Monthly Labor Review, LXX, No. 2 (February 1950), 160-65. 18. San Joaquin Baking Company et al. and Bakery and Confectionery Workers' International Union of America, Local 43 (AFL), Case No. 49A-3, July 20, 1949 (13 LA 115), arbitrator: Ronald W. Haughton. 19. See below p. 64, and n. 113. 20. Hawley S. Simpson, "Utility Rate Fixing by Labor Arbiters?" Public Utilities Fortnightly, XLVI, No. 12 (December 7, 1950), 804-10. 21. Roscoe Ames, "Utility Anti-Strike Laws," Public Utilities Fortnightly XL, No. 3 (July 31, 1947). 22. Letter from Woodruff Randolph, President of the International Typographical Union, April 18, 1951, states that the International Typographical Union and the American Newspaper Publishers' Association had a joint arbitration agreement from 1901 to 1922. The code provided that certain basic and established conditions in the printing industry were not arbitrable. Arbitration proposals of parties were screened by a joint board of the International Typographical Union and the Publishers' Association. Delays and

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disagreements over what was arbitrable ended the agreement. "Between 1922 and approximately 1945 the machinery for arbitration was kept intact in case local parties wanted to use it, regardless of the fact that it was not in effect internationally. It was not used very often between 1922 and 1945." 23. Publishers' Association of New York and International Typographical Union, International Mailers' Union ( A F L ) , August 3, 1949 (12 LA 1136). George W. Alger, Chairman of Arbitration Board. 24. (12 LA 946). The New York World-Telegram case, and a case, early in 1950, in which the wage rates of truck drivers delivering newspapers in New York City were determined by arbitration, are discussed by Stephen K. Galpin, in an article entitled "Labor Judges—Arbitrators Settle Many Wage Disputes when Negotiations Deadlock. Strike Stopping Technique Widely used in Textile, Transit and Retail Industries," Wall Street Journal, January 7, 1950. 25. Newspaper Publishers' Association of Philadelphia and International Printing Pressmen and Assistants' Union of North America, Philadelphia Pressmen's Union, No. 16 ( A F L ) , December 27, 1949 (13 LA 968 modifying 12 LA 4 4 8 ) . 26. R. H. Macy and Co., Inc., New York, Retail, Wholesale and Department Store Union Local 1-S ( C I O ) , December 15, 1947 (11 LA 450) and Bloomingdale Bros., Inc. (8 LA 194). Gimbels' reopening clause is quoted in Senate Hearings on H.R. I l l , 80th Congress, July 1948, p. 51. 27. Letter from Boris Stern, Chief, Division of Industrial Relations, Bureau of Labor Statistics (May 11, 1950). 28. Edgar L. Warren and Irving Bernstein, A Profile of Labor Arbitration (Los Angeles, California: Institute of Industrial Relations, Reprint No. 18, 1951), p. 202. Reprinted from the Industrial and Labor Relations Review, Vol. IV, No. 2 (January 1951). 29. Prentice-Hall Labor Course (New York: Prentice-Hall, Inc., 1948), paragraph 13,042, quotes these figures. 30. Letter from Joseph S. Murphy, Director of Panels and Regional Activities, American Arbitration Association, May 16, 1951, and statement by Frederick H. Bullen, Executive Secretary of the New York State Mediation Board, April 1950. 31. Hampton Modern, Inc., and United Furniture Workers of America, Local 92 ( C I O ) , Case No. 49-MST-60, January 16, 1950 (14 LA 79). Maurice S. Trotta, arbitrator. 32. Wesel Manufacturing Company (Scranton, Pennsylvania), and the International Association of Machinists, Lodge 1084, May 16, 1946 (3 LA 533). Maxwell Copelof, arbitrator. 33. Milwaukee Bedding Company, and Upholsterers' International Union of North America, Local 29 ( A F L ) , August 17, 1949 (13 LA 40). Hugo Sonnenschein, Jr., arbitrator. 34. Other clauses submitted for arbitration covered vacations and a bonus. May 1, 1949, was the date of the expiration of the previous contract. (An increase of five cents an hour was awarded.) 35. Liquid Carbonic Corporation (San Francisco), and International Brotherhood of Teamsters, Chauffeurs, etc., Local 860 ( A F L ) , May 15, 1950 (14 LA 655). (The award was an increase of ten cents per hour.) Ronald Haughton, arbitrator. 36. Mason Contractors' Association of Detroit et al. and Bricklayers', Masons', and Plasterer's International Union of America, Metropolitan Are:". Executive Committee ( A F L ) , June 10, 1949 (12 LA 909). Harry H. Piatt, chairman. (The award was $2.625i per hour, effective June 20, 1949.)

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37. Baker and Co., Inc. (Newark, New Jersey), and the International Union of Mine, Mill and Smelter Workers, Precious Metal Workers Union, Local 668 (CIO), March 21, 1947 ( 7 LA 3 5 0 ) . Benjamin S. Kirsh, arbitrator. (The award was a further increase of 3 cents.) 38. See p. 60. 39. Puget Sound Navigation Company, and Inland Boatmen's Union of the Pacific, Puget Sound Division ( C I O ) and National Organization of Meters, Mates and Pilots, Local 6 ( A F L ) , July 3, 1947. From the files of Judge Harold A. Seering, arbitrator. Also reported ( 8 LA 5 6 3 ) . 40. Letter from Judge Seering, April 12, 1951. 41. International Chemical Workers' Union, Local 195 ( A F L ) and Baxter Laboratories, Inc., October 27, 1947. From the files of Prof. Charles O. Gregory, arbitrator. 42. San Diego Retail Grocery Industry (San Diego, Calif.) and Retail Clerks' International Association, Local 1222 ( A F L ) , November 26, 1948 (11 LA 880). Walter Burr, chairman. 43. See p. 60 and n. 109. 44. A. M. Kidder and Company, New York Stock Exchange, the New York Curb Exchange, and United Financial Employees, Local 205 ( A F L ) , April 22, 1947. The arbitration affected only certain employees of A. M. Kidder and Company, where the union had been certified as the collectivebargaining agent on October 1, 1946. After extended negotiations, in which the New York State Mediation Board had mediated without success, the union rescinded its contracts (which had 30 day termination clauses) with the New York Stock Exchange and the New York Curb Exchange, and threatened a strike. A special committee appointed by the Hon. John J. Bennett, Deputy Mayor, arranged for these contracts to be reinstated, and for arbitration of the A. M. Kidder and Company case, with a limited submission. 45. Quoted from the Special Committee report, April 22, 1947, signed by Grover A. Whalen, Chairman and Public Representative; Arthur A. Whiteside, Management Representative, and William A. Galvin, Labor Representative. Efforts to secure information on the reaction of management and union to the use of the limited submission were without success. A. M. Kidder and Co. in a letter, January 29, 1951, stated that they no longer had a union contract. 46. Consolidated Edison System Companies of New York and Utility Workers Union of America (CIO), March 12, 1947 ( 6 LA 830). George W. Taylor, chairman. 47. The arbitration board was asked to determine: ( 1 ) The total amount of money to be provided by the companies to be applied to further wage increases for eligible employees for the year 1947. ( 2 ) The distribution of the sum between the following purposes: ( a ) Increases in rates of pay, with jurisdiction and power to determine the particular job titles and classifications to which such increases jhall be applicable, and in what amounts to each job title and classification. ( b ) Reclassifications and changes in the rates and ranges of pay to conform to prevailing job rates for like operations under similar conditions. ( c ) Increases under a wage-progression plan. ( d ) The payment of premium rates for work on Sundays and for night work, and equal treatment in respect to holidays. 48. Campbell Soup Company (Camden, New Jersey), and the Food, Tobacco, Agricultural and Allied Workers of America, Local No. 80 ( C I O ) ,

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May 2, 1946 ( 3 LA 236). Maxwell Copelof, Chairman, appointed by the U. S. Conciliation Service. 49. H. Boker and Company, Incorporated, New York, N. Y. (cutlery and edged-tool manufacturer), and United Mine Workers of America, District 50, Local 13325 (Ind.), April 14, 1949 (12 LA 608). I. Robert Feinberg, arbitrator. 50. Letter dated August 18, 1950. 51. San Diego Gas and Electric Company (San Diego, Calif.) and the International Brotherhood of Electrical Workers, Local B-465 ( A F L ) , February 21, 1949 (12 LA 245). Benjamin Aaron, chairman. 52. See p. 57 for comments on this case by E. D. Sherwin, Vice-President in Charge of Operation of the San Diego Gas and Electric Company. 53. Los Angeles Transit Lines, a corporation, and Los Angeles Transit Lines and Pacific Electric Railway Company, operating certain lines known as the "Los Angeles Motor Coach Lines' (Los Angeles, California), and the Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America, Transportation Union, Division 1277 ( A F L ) , Case No. 48-A-304, August 19, 1948. Board of Arbitration: Benjamin Aaron, Chairman, appointed by the parties from a list supplied by the Federal Mediation and Conciliation Service; T. J. Manning (employer-appointed arbitrator), concurring with opinion; and H. P. Melnikow (union-appointed arbitrator), dissenting with opinion (11 LA 118). For the Bay Cities Transit Co. case (11 LA 747), see p. 33. 54. Letter from Robert W. Gilbert, union-appointed arbitrator in the related Bay Cities Transit Co. case, November 27, 1950. A letter from Sam B. Berrong, Executive Vice-President of the Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America (dated April 11, 1951), disagrees with this, however. He refers to the "limited and restrictive arbitration stipulations entered into," and says "the officers of our local division were inexperienced in such matters and entered into the stipulation without the knowledge, consent, or authority of this office." 55. Information on events preceding arbitration from: a letter from William French Smith, of the firm of Gibson, Dunn and Crutcher, October 31, 1950; and from the opinion of Mr. Aaron (11 LA 120). 56. Letter from Henry P. Melnikow dated November 15, 1950. 57. Letter from William French Smith, October 31, 1950. 58. In a letter to the authors Mr. Melnikow developed further his point that the limited submission in this case had failed to provide a full and fair hearing on all the issues. (Letter dated November 15, 1950.) Robert W. Gilbert, union-appointed arbitrator in the Bay Cities Transit Company case, referred to "the extreme dissatisfaction (of the Union) with the L. A. Transit Lines award of three cents an hour, in the face of a finding by Arbitrator Aaron that at least six cents an hour was justified on the merits." (Letter, November 27, 1950.) Mr. Berrong of the International Union referred to the experience with the limited submission in both cases as "very unsatisfactory." 59. Bay Cities Transit Company (Santa Monica, California), and the Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America, Transportation Union, Division 1277 ( A F L ) , November 30, 1948. Board of Arbitration: Clark Kerr, Chairman; F. Walter French (employer-appointed arbitrator); and Robert W. Gilbert (unionappointed arbitrator), dissenting on issues 2 and 3 (11 LA 747). 60. Letter from Robert W. Gilbert, union-appointed arbitrator in the Bay Cities case, dated November 27, 1950. See n. 54.

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61. Quoted from the full text supplied by Robert Gilbert. Only part of the submission is quoted in 11 LA 747. 62. The hearings on the Los Angeles Transit Lines case had been held in July, but the award, with opinion, was not handed down until August 19, 1948. 63. Letter dated November 27, 1950. 64. Letter dated May 10, 1950. Attempts by the authors to learn management's reactions in this case were without success. 65. National Silver Deposit Ware Co., Inc. (44 West 18th Street, New York, N. Y.), and the Wholesale and Warehouse Workers Union, Local 65. Sidney A. Wolff, arbitrator. June 7, 1948. Case No. A 8631, New York State Board of Mediation files. 66. Letter to the authors, December 19, 1950. 67. Letter dated January 23, 1951. No reply was received from the union in response to our request for information on their experience with this case. 68. This was the experience of the senior author in one case in Los Angeles during World War II. 69. See Thomas Kennedy, "The Handling of Emergency Disputes," Proceedings of the Industrial Relations Research Association (New York, December 1949), 14-27. 70. James C. Nix, of the United States Bureau of Labor Statistics, found, in his study cited n. 17, that 1,237 or 83 per cent of 1,482 collectivebargaining contracts (for the year 1949) had arbitration provisions for grievances. 71. See pp. 63, 64. 72. Some of these attitudes are well summarized in a statement by Mr. John F. E. Hippie, of Edmonds, Obermayer and Rebmann of Philadelphia, quoted in the Proceedings of the Second Conference on Labor Arbitration (Philadelphia, Pa.: Labor Relations Council of the University of Pennsylvania, November 17, 1950), pp. 48-49. "I want to sit in when I'm making the rules of my game. I want to determine as a management man what I can afford to pay. God knows, I determine more than I can afford to pay lots of times, but I want to still determine, and I don't want any arbitrator, no matter how well intentioned he is, or any third person, no matter how well he thinks he has grasped the facts, to tell me what I'm going to pay out in the way of wages, and what my costs are going to be. I'm just afraid that sometime if I consented to that I might be arbitrated out of business. "I don't think that is the proper function of an arbitrator. . . . Gentlemen, I don't think a man who hands down decisions . . . who does what he thinks is best for the industry, better for the employees, better for everybody in general, is truly an arbitrator. I think he is more along the lines of a Happy Chandler or Judge Landis or somebody else. He is a Czar; he is running the industry to the industry's best interests. And gentlemen, I have to determine what is for my best interests, and if I don't like it, all right, let's have it out. But I certainly don't want an arbitrator to regulate my affairs." 73. See p. 68 to p. 69. 74. The President's National Labor-Management Conference, November 5-30, 1945, Summary and Committee Reports (Washington, D. C.: the Division of Labor Standards, U. S. Department of Labor, 1946), p. 47, agreed that if "negotiations should fail, the parties should make early use of conciliation, mediation, and, where mutually agreed to, arbitration." 75. See pp. 70-71. 76. See p. 67. 77. See pp. 48, 62, 82.

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78. This distinction between judicial and legislative functions of arbitrators is developed by Jesse Freidin in: "Legal Status of Labor Arbitration," First Annual Conference on Labor (New York: New York University, 1948), pp. 233-55, especially p. 234. See also Charles O. Gregory, Labor and. the Law (New York: W. W. Norton and Co., Inc., 1946), pp. 402-5. 79. Herman A. Gray, "Nature and Scope of Arbitration and Arbitration Clauses," First Annual Conference on Labor (New York: New York University, 1948), pp. 197-232, especially pp. 206-7, and pp. 223-24. See also: David L. Cole, "Fixed Criteria in Wage Rate Arbitrations?" The Arbitration Journal, III (Fall, 1948), 169-75, especially p. 170 on the "erosion theory" of correction under reopening clauses. 80. George W. Taylor, "Is Compulsory Arbitration Inevitable?" a paper given at the session on "Disputes That Create a Public Emergency,' Proceedings (Industrial Relations Research Association, Cleveland, Ohio, December 29-30, 1948), pp. 64-77, especially pp. 68-71. 81. Letter, April 22, 1951. 82. A recent study of labor arbitration, which parallels our study at several points, but has a different scope, is that of Edgar L. Warren and Irving Bernstein, A Profile of Labor Arbitration (Los Angeles, California: Institute of Industrial Relations, University of California, 1951, Reprint 18). Reprinted from the Industrial and Labor Relations Review, IV (January 1951), 200-22. They received 528 replies from management, unions, and arbitrators, to a questionnaire covering 27 items. In addition to the "yes" or "no" answers, they got additional comments from about half the respondents, "manifesting," as they said, "a need to go beyond simple answers." Their summary of comments about voluntary arbitration of contracts was similar to ours in tenor. In summarizing comments they say that . . . "clashing viewpoints and complexities of contract arbitration provoked extensive comment. Even those who approve [of voluntary contract arbitration] leave no doubt that they wish to use it only rarely." However, the statistical tabulations of the affirmative checks on topics of voluntary arbitration of contracts give a quantitative picture which seems to us to be misleading. In reply to the question: "Should contracts contain provision for voluntary contract arbitration?" they report affirmative answers by 31 per cent of management, 47 per cent of unions and 62 per cent of arbitrators. A breakdown of figures showed somewhat greater support in the Middle West and South than in other parts of the country. Only 43 per cent of respondents in New York City answered in the affirmative. These percentages seem high to us. We wonder if some of the respondents thought that the question referred to provisions for interpretation of existing contracts by voluntary arbitration, even though there was a companion question about provisions for voluntary arbitration of grievances. We found in our experience that we had to spell out "voluntary arbitration of the terms of new or renewed contracts," and also to make a separate category for the voluntary arbitration of revised terms under reopening clauses to avoid confusion. While we found support for contract terms providing arbitration under reopening clauses, very few approved of a provision in one contract to arbitrate the disputed terms of a succeeding contract. The figures of James Nix cited n. 17 show that only a small proportion of contracts carry either type of provision for arbitration of contract terms. 83. Boris Shiskin points out that arbitration of principles is much less frequent than arbitration of questions involving changes in wage rates or hours, in his article, "Contract Negotiation Disputes: a Labor Viewpoint."

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Law and Contemporary Problems (Duke University), X I I (Spring, 1 9 4 7 ) , pp. 357-66, especially p. 364. 84. See p. 71 to p. 76 for a more detailed discussion of issues involving economic strength of the parties. 85. The Federal Mediation and Conciliation Service also recommends arbitrators for voluntary arbitration. 86. For example, see Sumner H. Slichter, "Good Bargains and Bad Bargains," Collective Bargaining Contracts (Washington, D. C.: Bureau of National Affairs, 1 9 4 1 ) , pp. 46-48. Also quoted in: E. Wight Bakke and Clark Kerr, Unions, Management and the Public (New York: Harcourt Brace and Co., 1 9 4 8 ) , pp. 205-7. 87. See pp. 74-76 for a discussion of the role these rough estimates by the parties of what a strike might have cost play in the subsequent "acceptability" of an arbitration award. 88. Letters from Robert A. Cronin of the Connecticut Board of Mediation and Arbitration, November 17, 1950, and from Mr. Chester T. Skibinski of the Massachusetts Board of Conciliation and Arbitration, March 20, 1951. See also cases in Chapter 2, pp. 14-38. 89. George W. Taylor, " T h e Arbitration of Labor Disputes," The Arbitration Journal, I (Winter, 1946, No. 4 ) , pp. 409-14, especially 410 and 411, and "Is Compulsory Arbitration Inevitable?" Proceedings of the First Annual Meeting of the Industrial Relations Research Association (Cleveland, Ohio, December, 1 9 4 8 ) , pp. 64-77, especially pp. 68-71; and discussion by Harry Mayer, pp. 89-94, especially pp. 92-93; also "Criteria in the Wage Bargain," Proceedings of New York University First Annual Conference on Labor ( 1 9 4 8 ) , pp. 65-83, especially pp. 80-83. See also, "Criteria for Wage Arbitration," Dr. Taylor's address before the Special Conference of the National Industrial Conference Board, New York, February 2, 1949. 90. For example, Alexander Hamilton Frey, " T h e Logic of Collective Bargaining and Arbitration," Law and Contemporary Problems (Durham, North Carolina: School of Law, Duke University), X I I (Spring, 1947, No. 2 ) , 264-80, especially p. 279. Harold W. Davey, "Hazards in Labor Arbitration," Industrial and Labor Relations Review, I (April, 1 9 4 8 ) , 386-405, especially pp. 397-98. Robert Satter, "Principles of Arbitration in Wage Rate Disputes," ibid., pp. 363-85, especially p. 385. David Cole, "Status and Expendability of the Labor Arbitrator," Proceedings of the Third Annual Meeting, National Academy of Arbitrators, Washington, D. C. (January, 1 9 5 0 ) , pp. 1-6 (comments on lack of standards in submissions). Jesse Freidin, "Status and Expendability of the Labor Arbitrator," ibid., pp. 7-12 (comments on weaknesses of use of standards in submissions). Emmanuel L. Gordon, "Arbitration of Wage Levels," Lawyer's Guild Review, VIII, No. 6 (Nov.-Dec., 1 9 4 8 ) , comments on lack of limitations on arbitrators in submissions. Edgar L. Warren and Irving Bernstein, op. cit., p. 211 (raises the question of the arbitrator helping the parties write standards). See n. 10. The President's National Labor-Management Conference, November 530, 1945, Summary and Committee Reports (Washington, D. C.: the Division of Labor Standards, U. S. Department of Labor, 1 9 4 6 ) , p. 43, quotes the agreement of the Conference on the statement: "If direct negotiations and conciliation have not been successful, voluntary arbitration may be considered by the parties. However, before voluntary arbitration is agreed upon as a means of settling unsettled issues, the parties themselves should agree

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on the precise issues, the terms of submission, and the principles or factors by which the arbitrator shall be governed." 91. The respective merits of criteria vs. monetary limits (or their joint use) is discussed on pp. 65-66. 92. This criticism is given, for example, by Mr. Jesse Freidin in his article "The Status and Expendability of the Labor Arbitrator," Proceedings of the Third Annual Meeting of the National Academy of Arbitrators, Washington, D. C. (January, 1950), pp. 7-12. 93. For example, in the Bay Cities Transit Company case, Dr. Clark Kerr reluctantly ruled against the union demand for heaters in buses because the submission gave predominant weight to the company's ability to pay (11 LA 747). 94. This was the view of the arbitrator in the H. Boker and Company case. "The use of the submission agreement created in itself a particular problem, since, while it established the criteria, it did not establish the relative weight to be given to each criterion. I concluded that, while I was obligated to follow the criteria established by the parties, I was not obliged to give them all equal weight. This preliminary determination permitted me to reach what I considered a more equitable result in the particular case than would have been the situation were I required to give each criterion equal weight with any other." (Letter from I. Robert Feinberg, August 18, 1950.) 95. This was the view of a company lawyer in the Los Angeles Transit Lines case. 96. See pp. 70-71; 75-76. 97. See p. 70. 98. Letter, April 6, 1951. He made a similar point in his discussion of Dr. George W. Taylor's paper, "Disputes that Create a Public Emergency," Proceedings of the First Annual Meeting of the Industrial Relations Research Association, Cleveland, Ohio, 1948, pp. 92-93. 99. The president of an international union said "the losing party feels chagrined that he was not sufficiently astute in drafting the submission. An open submission eliminates the possibility of the development of a sense of frustration that injures the relationship." 100. For articles on wage criteria see David L. Cole, "Fixed Criteria in Wage Rate Arbitration?" The Arbitration Journal, III, No. 3 (Fall, 1948), 169-75; Jules Justin, "Arbitrating a Wage Dispute Case," Arbitration Journal, III, No. 4 (Winter, 1948), 228-31; John T. Dunlop, "The Economics of Wage Dispute Settlement," Law and Contemporary Problems (Duke University), XII, No. 2 (Spring, 1947), 281-96; George W. Taylor, "Criteria in the Wage Bargain," Proceedings of New York University First Annual Conference on Labor (1948), pp. 65-83; "Factors Relied on bv Arbitrators in Determining Wage Rates," 47 Columbia Law Review (September, 1947), p. 1026 ff. 101. See pp. 23-27. 102. Letter from E. D. Sherwin, Vice-President in Charge of Operation, San Diego Gas and Electric Co., February 1, 1951. 103. See p. 32. 104. See pp. 16-17; and Appendix I, pp. 96-99. 105. See p. 51. 106. This comes back to the sacrifice-of-expectations argument mentioned on p. 58. 107. See p. 16.

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108. Letter from Albert Pezzati, Executive Board Member, International Union of Mine, Mill and Smelter Workers, District 6, April 5, 1951. 109. In a letter to the authors (December 14, 1950) Robert W. Gilbert suggested specific limits representing the first demand of the union and the last offer of the company so that the union would be safeguarded in the event of another mechanical splitting of the difference. 110. Edgar L. Warren and Irving Bernstein, op. cit., included a question: "Should the arbitrator at the outset assist the parties in establishing standards to govern his decision?" The replies (based on 528 returns) showed 85 per cent of management, 81 per cent of union and 78 per cent of arbitrators checking "yes." At first glance, this might appear to show much greater support for the "limited submission" than we found in our study. This question, however, is much broader than the "limited submission," as we have used it, since both grievance and contract cases were included. Of course, the "standard" in a grievance case is usually the contract, so it would seem that the question applied more directly to contract cases. Some of the respondents appear, however, to have interpreted the question to mean that they approved of the arbitrator helping the "parties reach an agreement on the precise points in issue." This means marking out the boundaries of the problem before the arbitrator, rather than providing criteria to guide him in reaching an answer. Some of those who replied to our questionnaire also indicated by their remarks that they interpreted "limited submission" as limiting the area under discussion, rather than as providing standards (even though we included illustrations of the limitations we were discussing). Since the concept of the limited submission with criteria to restrict the power of the arbitrator is so little known, it seems unlikely that many of those who checked the questionnaire had "standards" of that type in mind. The supplementary comments quoted by Warren and Bernstein could apply to either the arbitrator's help on a definition of the problem, or in providing criteria as standards. One arbitrator quoted referred to the danger which might arise if the "arbitrator who is not aware of all the critical facts of the case unwittingly assists in drafting a submission agreement which is unfair to one side," and a union consultant warned that the arbitrator may prejudge the case. "Standards" might also have been interpreted by some replying to the Warren and Bernstein questionnaire to mean "Procedural Standards." 111. Seep. 45; n. 78. 112. See Edgar L. Warren and Irving Bernstein, op. cit., p. 211. 113. After the manuscript was completed, a case illustrating this point came to our attention. This was the case of the Federation of Jewish Welfare Organizations (composed of 13 charitable organizations) [Los Angeles, California], and Distributive, Processing and Office Workers of America, Local 95 (Ind.), Dec. 28, 1950 (15 LA 847). Board of Arbitration: Edgar L. Warren (chairman, selected by parties' arbitrators); Creston M. Harnois and A. L. Lathrop (employer-appointed arbitrators); and Sidney Young and Helen Rubenstein (union-appointed arbitrators), dissenting. Here the amount of the wage increase, if any was to be granted, was fixed in the submission agreement (dated March 20, 1950), and specified in a previous "memorandum of understanding," dated January 20, 1950. The arbitration board was called a "fact finding committee," but its decision was to be binding. It was asked to determine if wages were "fair and equitable," or "unfair and inequitable." "If all wages are found to be fair and equitable, [the] Federation shall make no wage increases. In those categories where the fact-finding committee finds wages to be unfair and inequitable, [the]

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Federation shall make a wage increase of ten dollars ($10) a month for each employee in such categories. If all wages are found to be unfair and inequitable, [the] Federation shall make a wage increase in amount of ten dollars ($10) a month for each employee." Any wage increases were to be retroactive to three months preceding December 5, 1949, at the rate of ten dollars a month. After 11 days of hearings, the first on August 27, and the last on December 8, 1950, the board found wages below the "fair and equitable rate," in 8 out of 12 clerical categories, one out of 10 professional categories, and 4 out of 5 maintenance categories. 114. See, for further discussion of "acceptability," pp. 67-76. 115. In one instance, however, a reopening clause said that the arbitrator should be limited as a maximum to the percentage increase in cost of living between a specified date and the date of reopening. Criteria were also specified. 116. For an example, see the A. M. Kidder & Co. case, p. 18, and for a modified version of this, see the Consolidated Edison Companies case, n. 46, 47. 117. These were discussed above under the heading of conditions likely and other conditions unlikely to lead to arbitration, pp. 46-49. 118. The Council on Industrial Relations for the Electrical Contracting Industry (1200 Fifteenth Street, N. W., Washington, D. C.), in a pamphlet entidea Voluntary Arbitration (4th ed., 1947), describes a bipartite board for voluntary arbitration of disputes between the International Brotherhood of Electrical Workers, afiiliated with the American Federation of Labor, and the National Electrical Contractors' Association. Wage changes as well as other issues are listed for consideration. The pamphlet states: "The Council differs from so-called arbitration boards in that it professes to be a court of justice and not merely a court of arbitration. It proceeds from the theory that arbitration involves compromise, which seems to mean in some minds adding up the claims of both sides of a dispute and dividing the sum by two; while judicial settlement involves the application of definite and certain principles without any accommodation between parties. Emphasis should be laid upon the Council's abandonment of the philosophy of power and struggle." 119. We have considered this issue, pp. 40, 44, 49-51. 120. Others, however, do not find a limited submission incompatible with the "judgment" approach.

APPENDIX I

(Summery of Preliminary Findings and Request for T H E S U B M I S S I O N IN C O N T R A C T

Comments)

ARBITRATION

T h i s study is one of a group of studies of arbitration sponsored b y the L a b o r Relations Council of the University of Pennsylvania. Dr. G e o r g e W . Taylor is the general editor. I should appreciate it very m u c h if you would give m e your comments on this summary of preliminary findings. T h e study is concerned with the use of voluntary arbitration

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to determine the terms of a new or renewed contract (or revised terms under the reopening clause of a current contract). This is in contrast to the more usual type of arbitration which involves grievance cases under an established contract. The aim is to see if there could be greater use of voluntary arbitration in preference to a work stoppage when the parties are deadlocked over contract terms. I have found numerous instances in which companies and unions accept grievance arbitration as a matter of course but either do not realize that it is possible to arbitrate the disputed provisions of a contract being negotiated or summarily dismiss the idea of determination by a third party as too risky or unlikely to yield a workable result. I am giving special attention to the question of whether the parties would be more willing to accept arbitration if they realized that they could reduce the risks of arbitration by writing certain limitations and standards into the submission. A survey of the cases in the Labor Arbitration Reports of the Bureau of National Affairs, supplemented by numerous other sources, has disclosed a larger number of cases of contract arbitration than seems to be realized by the general public. However, only a few cases were found in which the submission contained limitations to guide the arbitrator in making his award. Of the cases with limited submissions found so far, all were concerned with the wage issue, although some had additional issues. The limitations were of two types: (1) Specific Monetary Limits. Here the submission set up a maximum (and sometimes a minimum) rate beyond which the arbitrator's award could not go. For example, in one case the arbitrator was asked to determine an increase of not less than 13.5 and not more than 18.5 cents per hour. These figures represented the difference still remaining after continued negotiations. (2) Criteria. Here the submission listed criteria such as cost of living, comparable rates paid in the area, ability to pay, etc. (Some cases had both types of limitations.) In a number of cases the parties stated that they were willing to arbitrate only with the protection of a limited submission. From the cases which I have seen so far, I am inclined to the view that specific monetary limits are more effective in reducing risk than are criteria, because the results are more predictable. It appears that a mediator has the opportunity to persuade the parties in a deadlocked wage dispute to choose arbitration, by suggesting that they specify in the submission maximum and minimum rates which represent the difference remaining after continued negotiations. The more common practice seems to be

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to abandon all the progress made during negotiations and revert to the original positions. If the case does go to arbitration, the submission usually leaves the wage issue wide open. Parties considering arbitration think in terms of these wide-open submissions, and tend to reject arbitration. Some parties have made one criticism of monetary limits: that they lead the arbitrator to "split the difference" mechanically. It does not appear that this should be the inevitable result, however. When criteria were used there have been disagreements as to the ways of measuring them, and as to the relative weights to be assigned to them. When one side was better informed and more foresighted than the other, the second party sometimes felt that the limited submission prevented it from making its best case. If the parties can reach an agreement upon the terms of the contract by collective bargaining, this is, of course, the best way. If, however, after extensive negotiations there is a deadlock over a few issues still unsettled, the parties have a choice between a work stoppage and voluntary arbitration. It is my view that often much can be gained by recourse to voluntary arbitration. If the parties have bargained in good faith and arbitration was not initially contemplated, results will be more satisfactory than if arbitration had been anticipated when negotiations began. If the parties would choose a submission which defines the problem only, this would probably be the best type of submission. If, however, they will accept arbitration only with the protection of a limited submission, the parties can avoid difficulties by studying the proposed limits thoroughly in advance and by bargaining about their inclusion. This summary indicates the line my investigation has taken. Your evaluation of these observations in the light of your experience will be most helpful to the study. Would you comment on both contract arbitration in general, and on the limited submission, touching on the following questions? 1. Is contract arbitration (as opposed to grievance arbitration) desirable in your view? If so, under what conditions? 2. Do you think that the parties, when deadlocked in a dispute over new contract terms, give serious and thoughtful consideration to arbitration as an alternative to a work stoppage? 3. Do you think there is a greater willingness to arbitrate revised terms under reopening clauses than when new or renewed contract terms are in dispute? If so, why? (Please distinguish between ( a ) arbitration provided in reopening clauses, ( b ) ad hoc arbitration of the terms of the next contract, arbitration not

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having been expected when the parties b e g a n negotiations, and (c) arbitration of next contracts provided in the expiring contract.) 4. D o you think the parties would b e more willing to arbitrate when deadlocked, if a mediator pointed out that t h e risk could be reduced by using a limited submission? 5. Do you know of cases w h e r e a limited submission was used? W h a t was the experience with this device? 6. W h a t do you think of the relative merits of criteria versus specific monetary limits as devices for reducing risk through the submission? 7. Do you think that the award u n d e r a limited submission would b e more acceptable to the parties than one issued u n d e r an open submission? 8. If the arbitration of a wage issue is viewed as an extension of collective bargaining, should the arbitrator b e guided in whole or in part by the economic strength of the parties, in determining his award? Any help which you can give me on this topic will b e greatly appreciated. MORRISON HANDSAKER

Lafayette College Easton, Pennsylvania March 19, 1951.

APPENDIX II I T E M S FOR A S U B M I S S I O N A G R E E M E N T I N C O N T R A C T A R B I T R A T I O N A CHECK LIST

The following items may find a useful place in a submission agreement. T h e decision on their inclusion depends ( a ) on whether any arbitration machinery is provided in the reopened contract (or in the expiring contract), ( b ) w h e t h e r there is a preceding signed agreement to arbitrate the particular case covering some of these items, ( c ) on t h e nature of the issue or issues submitted to arbitration, ( d ) on the law of the state, and ( e ) on the parties' decision about t h e inclusion of "guides for the arbitrator." ( 1 ) Agreement to arbitrate, and abide b y t h e award, signed by the parties. ( 2 ) Agreement that there shall b e no strike or lockout pending the award. 199]

(3) Name of the arbitrator or of the chairman, and partisan members of an arbitration board. (Method of selection has usually been agreed upon either in the contract or in a preceding agreement.) (a) If a board is used, a definition of what constitutes a "majority." Is the chairman to determine the award, or must he secure agreement from at least one of the partisan members? (4) Place hearings are to be held. (5) A time schedule for holding hearings, filing briefs, and receiving the award. (It is sometimes necessary to amend this by mutual agreement if unavoidable delays are encountered. Some arbitrators feel a specified award date gives them insufficient time to study the evidence.) (6) Provision for meeting the impartial arbitrator's fees, cost of record, and other costs of arbitration. (These are usually jointly shared, except for expenses of partisan members of arbitration boards. The latter are usually met directly by the parties concerned.) (7) Rules for the conduct of the hearing: swearing witnesses, taking evidence, etc. (American Arbitration Association rules are frequently specified.) (8) Definition of the issue. (a) Reference to pertinent clauses of contract (if any); or to any previous agreement bearing on the case. (b) Statement of the question (or questions) which the arbitrator is to answer. (9) Conformity to state law. (a) Written submission of "existing dispute." (b) Notarization or registration with proper court, if required by state law. (10) Specification of guides for the arbitrator: (a) Criteria. (b) Monetary limits. (c) Effective date of award. (d) Expiration date or reopening date. (e) The way the award in a wage case is to be integrated into the wage structure. ( f ) Company figures to be used to measure wage changes, i.e., a "basic rate," or average hourly earnings (with or without overtime, or "fringe benefits"). (g) The statistical series to be used to measure cost of living (regional or national index from Bureau of Labor Statistics; other indexes, budget data, etc.).

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( h ) Specification of period of calculation ( b a s e date, and most recent month). ( i ) Definition of comparable industries for level and "pattern" comparison. ( j ) Whether arbitrator is to consider cost of other contract benefits previously granted. 1 1 Jules Justin has termed items of the type listed ( c ) to ( j ) above as "qualifying factors," as contrasted with "controlling factors" (items a and b ) . (Letter to the authors, March 30, 1951.) See also his article on "Arbitrating a W a g e Dispute C a s e , " The Arbitration Journal, III, No. 4 (Winter, 1948), 228-31.

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