Hennepin Healthcare System, Inc., Appellant,

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-1079

Hennepin Healthcare System, Inc.,
Appellant,

vs.

AFSCME Minnesota Council 5, Union,
Respondent.

Filed April 25, 2022
Reversed and remanded
Ross, Judge

Hennepin County District Court
File No. 27-CV-21-1831

Michael O. Freeman, Hennepin County Attorney, Martin D. Munic, Senior Assistant
County Attorney, Katlyn J. Lynch, Assistant County Atto rney, Minneapolis, Minnesota
(for appellant)

Josie Hegarty, Staff Attorn ey, AFSCME Council 5, South St. Paul, Minnesota (for
respondent)

Considered and decided by Ross, Presid ing Judge; Larkin, Judge; and Klaphake,
Judge.
*
SYLLABUS
An arbitration award does not draw its e ssence from the parties’ agreement if the
arbitrator exceeds the expressly limited power conferred in the agreement.

* Retired judge of the Minnesota Court of A ppeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
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OPINION
ROSS, Judge
A hospital that employs unionized workers subcontracted with a staffing agency to
provide other workers who would perform the same work. The union objected based on a
collective-bargaining-agreement provision th at prohibits the hospital from employing a
“temporary employee” longer than six months. An arbitrator sided with the union, and the
district court agreed, reasoning that the hospital’s right to su bcontract is restrained by the
six-month restriction. We reve rse and remand for the district court to vacate the award
because the arbitrator exceeded the expressl y limited power conferred in the collective
bargaining agreement, which prohibits an arbitrator from nullifying any contract provision
and which expressly affords the hospital power to subcontract for work by nonemployees
without temporal restriction.
FACTS
The appellant hospital (Hennepin Healthcar e System, Inc.) employs clerical and
general healthcare workers who are memb ers of the respondent union (AFSCME
Minnesota Council 5, Union). Separate collective bargaining agreements cover the clerical
and general healthcare employees, but because their terms are substantively identical, we
will refer to these agreements singularly. The dispute in this case arose between the union
and the hospital over the hospital’s use of nonunion workers employed by a staffing agency
with which the hospital subcontracted, and its resolution depends on provisions in the
parties’ collective bargaining agreement.
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In October 2018 the hospital renewed multip le three-year service contracts with
staffing agencies to provide the hospital with workers. These workers are not members of
the union, and the arrangement did not cause any union member to lose his or her job. The
union filed a grievance objecting to the hospital’s use of the wo rkers, asserting that they
were performing the same work as its member employees for too long a period and that the
collective bargaining agreement prohibited the arrangement.
The parties arbitrated the dispute. The arbitrator agreed with the union. He purported
to harmonize two articles of the collective bargaining agreem ent he perceived to be in
conflict. One of the articles allows the hospi tal to employ any “temporary employee” no
longer than six months, and the other allows the hospital to subcontract for work with no
temporal limit. He recognized that the staffing agency workers are not “temporary
employee[s]” as that term is defined in the collective bargaining agreement but nonetheless
concluded that the hospital must apply to its subcontracts the six-month employment limit
that applies to its temporary employees. The district court confirmed the arbitration award,
and the hospital appeals.
ISSUE
Did the district court err by co nfirming the arbitration award?

ANALYSIS
The hospital challenges the district cour t’s judgment confirming the arbitration
award and denying its motion to vacate the award. We review de novo the district court’s
decision confirming an arbitration award. Seagate Tech., LLC v. W. Digit. Corp. ,
854 N.W.2d 750, 760 (Minn. 2014). The dist rict court must make “every reasonable
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presumption” favoring an arbitration award’s validity. Id. at 761. Even with that weighty
presumption, we reverse the district court’s decision here because the arbitrator exceeded
his power.
An arbitrator is typically the final judg e of law and facts in disputes over how a
collective bargaining agreement applies. See Cournoyer v. Am. Television & Radio Co., 83
N.W.2d 409, 411 (Minn. 1957). Relying on that power, the arbitrator here read two articles
of the collective bargaining agreement—articles 3 and 42—as conflicting and needing to
be reconciled. Article 3 allows the hospital to employ nonunion members on a temporary
basis only. It specifically defines a “temporar y employee” as “[a]n individual designated
by the EMPLOYER as temporary” and states th at this “employment is not to exceed six
(6) months duration in temporary status in a calendar year.” By contrast, article 42
provides, “Nothing in this AGREEMENT shall prohibit or restrict the right of the
EMPLOYER from contracting with vendors or others for ma terials or services.” The
arbitrator reasoned that the hospital’s power under article 42 to subcontract for workers to
perform work with no temporal restriction conflicts with the restriction in article 3, which
limits the term of a temporary employee to six months. Based on this conflict, the arbitrator
determined that “[c]ontinuing a temporar y worker supplied by a staffing agency
performing bargaining unit work for over six months in a calendar year” violates the
agreement and requires the hospital to so limit its subcontracts.
But the arbitrator lacked the power to limit the hospital’s right to subcontract in this
fashion. Under the Uniform Arb itration Act as codified in Minnesota, the district court
must vacate an arbitration award if the arbitrator exceeded hi s power. Minn. Stat.
5
§ 572B.23(a)(4) (2020); Seagate Tech., LLC, 854 N.W.2d at 760–61. An arbitrator exceeds
his power if his award does not “draw[] its essence from the parties’ agreement.” Wolfer v.
Microboards Mfg., LLC , 654 N.W.2d 360, 366 (Minn. App. 2002), rev. denied (Minn.
Feb. 26, 2003). An award does not draw its essence from the parties’ agreement if it is not
rationally based on the contract’s langua ge, content, and indicia of intent. Id. For the
following reasons, we conclude that the arbitr ator’s award is not rationally based on the
collective bargaining agreement’s language.
The collective bargaining agreement restrains the scope of the arbitrator’s power in
article 7, which provides that “[t]he arbitrat or shall not have the right to amend, modify,
nullify, ignore, add to, or subtract from th e provisions” of the collective bargaining
agreement. The arbitrator’s decision would essentially am end the collective bargaining
agreement by adding to one of its provisions a restriction that, by its express terms, applies
only to a different provision. More precisel y, the arbitrator nullified the hospital’s
bargained-for right to subcontract for services without the tem poral restriction that exists
only in the union’s bargained-for limit on temporary employment. Article 3 unambiguously
defines who is a “temporary employee” of the hospital, and article 42 governs
subcontracted workers, who are not employees of the hospital at all. There is therefore no
literal, substantive conflict between articles 3 and 42; each article regards different rights
as to different classes of workers, and each stands independent of the other. Given this
distinction and the union’s acknowledgment that the subcontracted workers in this case do
not meet the temporary-employee definiti on, the arbitrator had no power under the
collective bargaining agreement to temporally restrain the hospital’s subcontracts.
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The arbitrator’s decision im plicitly sought to remedy a circumstance the union
might fashion as an injustice, which is th e hospital’s use of subcontracted workers who
allegedly perform duties that union memb ers would otherwise perform. The factual
problem with this approach is that the subcontracts have not cost the union members any
jobs. The legal problem with this approach is that an arbitrator has no power to overlook a
collective bargaining agreement’s terms to dispense his “own brand of industrial justice.”
Ramsey County v. AFSCME, Council 91, Loc. 8 , 309 N.W.2d 785, 790 (Minn. 1981)
(quotation omitted). And any theoretical, justice-impacting conflict the arbitrator discerned
is plainly abolished by the emphatic, conflict-resolving in terpretive cue included in
article 42: “Nothing in this AGREEMENT shall prohibit or restrict the right of the
EMPLOYER . . . .” In short, despite th e parties having expressly agreed that
“[n]othing . . . shall prohibit or restrict” the hospital’s right to subcontract for services, the
arbitrator issued an award that would directly prohibit or restrict the hospital’s right to
subcontract for services. The arbitrator lacked the power to so restrain the hospital.
We add that the collective bargaining agreement elsewhere clearly contemplates the
hospital’s right to subcontract for services lasting longer than six months. It establishes the
procedure for unionized-employee layoffs resulting from union work being performed by
subcontracted workers—layoffs which would not realistically occur if service subcontracts
were limited to six months. The arbitrator’s analysis did not address the discord between
the award and this implication.
The hospital presents additio nal arguments challenging th e arbitrator’s award, but
our holding that the arbitrator exceeded his power eliminates the need to address them.
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DECISION
The arbitrator issued an award that does not draw its essence from the parties’
agreement by exceeding the expressly limited power conferred in the agreement and
purporting to resolve a purely theoretical conflict in a manner that nullifies a bargained-for
term. The district court erred by confirming the arbitration award, which applied the
collective bargaining agreement’s six-month, temporary-employee restriction to the
hospital’s staffing-agency subcontracts. We reverse the district court’s judgment
confirming the arbitration award, and we remand for the district court to vacate the award.
Reversed and remanded.