The opinion
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Riverside School District :
:
v. :
: No. 159 C.D. 2021
Riverside Educational Association :
REA-PSEA-NEA, : Submitted: June 23, 2022
Appellant :
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE LORI A. DUMAS, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: August 1, 2022
Riverside Educational Association, PSEA-NEA (Association) appeals the
February 3, 2021 order of the Lackawanna County Common Pleas Court (trial court),
granting Riverside School District’s (District) motion to vacate an arbitration award
(Award) on the basis the claim is not arbitrable pursuant to the collective bargaining
agreement (CBA). For the reasons that follow, we reverse and remand to the trial court.
Factual and Procedural History
The relevant facts as found by the arbitrator are as follows.1
On May 17, 2016, the District and Association entered into a CBA
effective September 1, 2013, through August 31, 2020. (Award at 3.) On July 1, 2016,
1
“Under the essence test, the arbitrator’s findings of fact are binding on the courts, and the
reviewing court may not undertake any independent factual analysis.” Pennsylvania State System of
Higher Education, Lock Haven University v. Association of Pennsylvania State College & University
Faculties, 193 A.3d 486, 495 (Pa. Cmwlth. 2018).
two months after the CBA was signed, Highmark purchased Blue Cross and became
the healthcare insurance provider for the District and Association. (Award at 3, 8-9.)
The District did not provide notice to the Association of the change in providers.
(Award at 8-9.)
At the time of the dispute Susan Ludwikowski (Ludwikowski) was
employed as a science teacher at Riverside School District. For twenty years, Ms.
Ludwikowski had been receiving weekly psychiatric therapy sessions with the same
out-of-network therapist. Prior to July 2016, Ms. Ludwikowski’s out-of-pocket
expense each week was $51.80 with Blue Cross; however, after Highmark became her
insurance provider her out-of-pocket expense was $100.48 for the same service. This
was a result of a decrease in the Allowable Charge for Ms. Ludwikowski’s weekly
therapy from $154.00 with Blue Cross to $93.15 with Highmark. (Award at 8.)
On April 5, 2017, the Association, on behalf of Ms. Ludwikowski, filed a
grievance challenging the new health insurance. The District denied the grievance and
the parties proceeded to arbitration on November 5, 2019.
Arbitrator’s Award
At the outset, the arbitrator considered the arbitrability of the grievance.
(Reproduced Record (R.R.) at 172a.) To decide whether the grievance was arbitrable,
the arbitrator considered the text of the CBA and the underlying grievance. Pertinent
sections of the CBA include:
Article II, (B)(1): Insurance Program – The District agrees to pay
the premium, for each member of the bargaining unit on the
active payroll and their dependents, for a group Hospital and
Medical Service Plan in the form of a Blue Cross/Blue Shield of
Northeastern Pennsylvania PPO (Professional Provider
Organization) Plan which will have unlimited coverage for In-
Network (Preferred) and a maximum coverage of One Million
($1,000,000) Dollars for Out of Network (Non-Preferred). The
plan summary for such services is attached hereto and made a
part hereof.
2
....
Article II, (B)(5): Carrier – The District shall have the right to
select and change the insurance carrier or carriers provided there
are no decreases in benefits. The District will notify the
Association of any known tentative or actual alteration or
modification of any insurance program under consideration or
effected by the carrier.
....
Article II, (B)(10): Grievance of Insurance Benefits – A
grievance arising out of a claim for insurance benefits shall not
be arbitrable if the dispute involves a claim that the carrier is not
providing contracted benefits; recourse in such an event will be
with the carrier and through the courts, if necessary.
(R.R at 19a-20a.)
The arbitrator specifically relied upon Article II, Section (B)(10) and
stated, “the District’s unilateral change from Blue Cross to Highmark violates specific,
clear, and unambiguous language in the CBA which governs how and under what
conditions a change in providers can be made.” Id. According to the arbitrator, “it
would be a stretch to hide behind that language to bar certain insurance benefit
grievances from being adjudicated through the grievance procedure, especially if the
allegation is that the District violated the [CBA] causing a dispute in the delivery of
benefits.” Id. Thus, the arbitrator concluded the alleged violations in the instant
grievance are arbitrable and not barred under Article II, Section (B)(10), and
subsequently, addressed the merits of the case. (R.R. at 173a.) The arbitrator framed
the issue before him as follows:
Did the Riverside School District violate the [CBA] by accepting
a change in healthcare providers? If so, what shall be the
remedy?
(Award at 3.)
3
The arbitrator noted the CBA explicitly lists Blue Cross as the healthcare
insurance provider, which the parties negotiated and agreed to during bargaining, Blue
Cross’s Plan Summary is made a part of and incorporated into the CBA in Article II,
Section (B)(1), and the District then accepted a change in health insurance carriers after
the CBA was negotiated. (Award at 6-7.) The arbitrator observed that Article II,
Section (B)(5) clearly states two criteria that must be met in the event of a change in
insurance carriers. (Award at 7.) First, the District “must ensure that such a change in
insurance carriers will not reduce any benefit levels that the negotiated plan provided
for[,] and second, the District is obligated to notify the Association of any perceived or
actual change in carriers, as evidenced by the word ‘will’ in the second sentence.” Id.
The arbitrator then reviewed the evidence to determine if the change in
health insurance carriers had decreased healthcare benefits. The arbitrator noted that
Highmark’s Allowable Charge for out-of-network mental health services is
significantly lower than Blue Cross’s Allowable Charge. (Award at 8.) Mr. William
Butler of Mergo Benefits Company testified on behalf of the District and conceded that
the plan allowance cover charge for out-of-network mental health services is lower
under Highmark’s Plan Summary, which caused an increase in out-of-pocket expenses
for employees using the medical service. (Award at 7-8.) Thus, the arbitrator
concluded this was a decrease in employee benefits and a breach of the CBA. Id.
Moreover, the arbitrator examined Article II, Section (B)(5) of the CBA,
which required that the District notify the Association of “any known tentative or actual
alteration or modification of any insurance program under consideration or effected by
the carrier.” (Award at 8.) The arbitrator found that this language required the District
to notify the Association of any changes in the negotiated healthcare plan, whether the
District sought to make these changes from Blue Cross to Highmark or not. Id.
Further, the arbitrator noted that “a total change in health[]care provider” qualified as
a “major modification of the insurance program,” which required the District to give
4
notice to the Association. Id. The arbitrator found no notice was provided to the
Association. Id.
On April 15, 2020, the arbitrator sustained in part the grievance and made
the grievant, Ms. Ludwikowski, “whole” for the out-of-pocket expenses from April 5,
2017, to April 15, 2020, that she suffered due to the change in insurance plans. (Award
at 9-10.)
Trial Court’s Decision
On May 13, 2020, the District filed a petition to vacate the Award with
the trial court. On February 3, 2021, after a hearing and briefing, the trial court granted
the petition to vacate the Award on the basis that the underlying issue of the grievance
was not arbitrable. (R.R. at 182a-183a.) The trial court disagreed with the arbitrator’s
characterization of the grievance as a violation of the CBA due to the decrease in
healthcare coverage without notice. (R.R. at 182a.) The trial court re-examined the
evidence and determined the underlying dispute involved “a claim by Ms.
Ludwikowski that the insurance carrier [Highmark] is not providing benefits.” (R.R.
at 182a-183a.) The trial court found there was no change or reduction in the health
insurance benefits when Blue Cross changed to Highmark. Id. The trial court relied
heavily upon the testimony of Mr. Butler, who stated there were no changes or
reductions to insurance benefits when Blue Cross changed to Highmark. (R.R. at
182a.) The trial court labeled Highmark as “a successor in interest to the District’s
contract with [Blue Cross].” Id.
Further, the trial court noted Ms. Ludwikowski had “various channels with
the insurance carrier with which she could seek recourse” and could also “avail herself
of her rights in federal and state courts.” (R.R at 178a, 182a-183a.) The trial court
concluded that “[t]he present [CBA] contains clear and unequivocal language that
should have provided the arbitrator with a basis for deciding that the parties agreed not
5
to arbitrate this dispute,” and thus, granted the District’s petition to vacate the Award.
(R.R. at 183a.) Subsequently, the Association appealed to this Court.
Analysis
On appeal, the Association advances fives arguments; however, these
arguments can be summarily reviewed by addressing whether the trial court applied
the applicable standard of judicial review to determine whether a case should be
submitted for arbitration in the first place.2 Based on our review, we are compelled to
reverse the trial court’s order vacating the Award on this basis.
We begin with a brief survey of this Court’s narrow standard of review of
a grievance arbitration award under the Public Employe Relations Act.3 Our Supreme
Court has held that a reviewing court must accord great deference to the award of an
arbitrator chosen by the parties. State System of Higher Education (Cheyney
University) v. State College University Professional Association (PSEA-NEA), 743
A.2d 405, 413 (Pa. 1999). In the vast majority of cases, an arbitrator’s decision is final
and binding upon the parties. Id. The narrow exception to this finality doctrine is the
so-called “essence test.” Id. In applying the essence test, a reviewing court conducts
the following two-prong analysis:
First, the court shall determine if the issue as properly defined is
within the terms of the collective bargaining agreement. Second,
if the issue is embraced by the agreement, and thus, appropriately
before the arbitrator, the arbitrator’s award will be upheld if the
arbitrator’s interpretation can rationally be derived from the
2
Specifically, the issues raised by the Association are: (1) whether the trial court properly
applied the applicable standard of judicial review for arbitration awards, which is the essence test; (2)
whether the essence test applies to the issue of arbitrability; (3) whether the trial court exceeded its
authority by making factual findings contrary to the arbitrator’s findings; (4) whether the trial court
exceeded its authority by imposing its own interpretation of the CBA; and (5) whether the trial court
failed to address all the issues of the CBA dispute that were raised at the arbitration hearing and
addressed by the Award.
3
Public Employe Relations Act, Act of July 23, 1970, P.L. 563, as amended, 43 P.S. §§
1101.101-1101.2301.
6
collective bargaining agreement. That is to say, a court will only
vacate an arbitrator’s award where the award indisputably and
genuinely is without foundation in, or fails to logically flow
from, the collective bargaining agreement.
Id. In conducting this analysis, a reviewing court does not review the merits of an
arbitration award under a de novo standard of review. Westmoreland Intermediate Unit
#7 v. Westmoreland Intermediate Unit #7 Classroom Assistants Educational Support
Personnel Association, PSEA/NEA, 939 A.2d 855, 863 (Pa. 2007). Indeed, a court may
not disturb an award even if it is “manifestly unreasonable.” Id. Instead, a reviewing
court may only vacate an arbitrator's award if it violates the essence test. Marion
Center Area School District v. Marion Center Area Education Association, 982 A.2d
1041, 1045 (Pa. Cmwlth. 2009).
At the outset, the arbitrator addressed whether the issue of the underlying
grievance was arbitrable. It is well established that the arbitrator has sole jurisdiction
to decide the arbitrability of an issue in the first instance. Wattsburg Area School
District v. Wattsburg Educational Association PSEA/NEA, 884 A.2d 934, 937 (Pa.
Cmwlth. 2005). Furthermore, the broad deference given to the arbitrator’s decision
applies equally to his determinations regarding the arbitrability of the subject matter of
the grievance. Scranton Federation of Teachers, Local 1147 v. Scranton School
District, 444 A.2d 1144, 1147 (Pa. 1982). See also County of Allegheny v. Allegheny
County Prison Employees Independent Union, 381 A.2d 849 (Pa. 1977). Moreover,
when reviewing the issue of arbitrability, the trial court could inquire only whether the
arbitrator’s conclusion is “completely unsupported by the principles of contract
construction.” See Williamsport Area School District v. Williamsport Education
Association, 686 A.2d 885, 887 (Pa. Cmwlth. 1996) (citing Pennsylvania Turnpike
Commission v. Teamsters Local Union No. 250, 639 A.2d 855, 972 (Pa. Cmwlth.
1994)).
7
Here, the arbitrator concluded that the Association’s grievance is
premised on the District’s change in healthcare insurance providers in violation of
Article II, Section (B)(5) of the CBA. (Award at 6.) The District argues that arbitration
is barred by Article II, Section (B)(10). Indeed, the plain language of Section (B)(10)
provides that “[a] grievance arising out of a claim for insurance benefits shall not be
arbitrable if the dispute involves a claim that the carrier is not providing contracted
benefits. . . .” (R.R. at 19a-20a.) However, the arbitrator determined Article II, Section
(B)(5) includes a two-step process should the District change healthcare insurance
providers, and the Blue Cross Plan Summary was incorporated into the CBA. (Award
at 7.) Under Article II, Section (B)(5), the District has the right to change healthcare
insurance providers but must ensure there is no decrease in benefits. Id. The District
must provide notice to the Association of any perceived or actual changes to the
healthcare insurance provider (whether or not the District sought to make the changes).
Id. In this case, the arbitrator found that the Association’s grievance is premised on
Ms. Ludwikowski’s increase in her out-of-pocket expenses for her weekly therapy
session. (Award at 6.) Based on these provisions of the CBA, we cannot conclude that
the trial court had legal justification to reverse the arbitrator’s conclusion that the
“alleged violations outlined in the grievance and argued at the arbitration hearing are
separate and apart from the issue excluded from arbitration in Article II, Section
(B)(10).” (Award at 7.)
When reviewing the Award, the trial court exceeded its limited standard
of review and erroneously rejected the arbitrator’s determination that the issue was
arbitrable and substituted its own interpretation of the underlying grievance. The trial
court determined that the arbitrator mischaracterized the matter “as a general dispute
of the collective bargaining unit members’ receiving less than the contracted overall
benefit package.” (Award at 6.) The trial court then substituted its own determination
that the underlying grievance “involves a claim by Ms. Ludwikowski that the insurance
8
carrier is not providing benefits.” (R.R. at 182a-183a.) The trial court concluded
Article II, Section (B)(10) provides for this exact grievance claim and directed the
grievant to the insurance carrier or the courts. Id. Further, the trial court cites to Mr.
Butler’s testimony of the avenues by which Ms. Ludwikowski could have sought relief,
which are not located in the Award. Id. It is of no moment that the trial court would
have found differently in determining whether the case was arbitrable. The arbitrator’s
decision and interpretation are what the parties bargained for and to which they agreed
to be bound. Ridley School District v. Ridley Education Association, 479 A.2d 641
(Pa. Cmwlth. 1984). A reviewing court’s standard of review is limited. Westmoreland,
939 A.2d at 863. When the trial court re-assessed the testimony of Mr. Butler and made
its own findings of fact, it exceeded the authority reviewing courts have in arbitral
review and improperly acted as a “super-arbitrator.”
Accordingly, we conclude that the trial court erred in disturbing the
arbitrator’s determination that the grievance was arbitrable and had foundation in the
CBA. Thus, the underlying issue of the grievance is as the arbitrator stated, i.e.,
whether the District violated the CBA by accepting a change in healthcare providers,
and it is an issue that the trial court should have addressed under the above-mentioned
“essence test,” but never did. Because the District’s assertions that the Award itself
contravene the essence test were not addressed below, we decline to address them here
on appeal and remand the matter to the trial court with specific instructions to consider
and dispose of the District’s arguments that the Award violates the tenets of the
“essence test.” For these reasons, we reverse the trial court’s order and remand the
matter to the trial court for further proceedings.
________________________________
PATRICIA A. McCULLOUGH, Judge
Judge Wallace did not participate in the decision for this case.
9
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Riverside School District :
:
v. :
: No. 159 C.D. 2021
Riverside Educational Association :
REA-PSEA-NEA, :
Appellant :
ORDER
AND NOW, this 1st day of August, 2022, the order of the Court of
Common Pleas of Lackawanna County dated February 3, 2021, is REVERSED, and
this matter is REMANDED to the trial court to address the merits of the arbitration
award. Jurisdiction relinquished.
________________________________
PATRICIA A. McCULLOUGH, Judge