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CHAPTER V

ARBITRATION AND CONTRACT DISPUTES

MORRISON HANDSAKER*

Voluntary Arbitration of Primary Disputes

It is the purpose of this paper to discuss the use of voluntaryarbitration to determine disputed terms of new contracts, whendeadlocks develop in negotiations. Such disputes are often called"contract disputes" or "primary" or "interest" disputes. My thesisis that management and unions in the United States might profitablygive more consideration than they generally have in the past, tovoluntary arbitration as an alternative to a strike when negotiationsfail. As we all know, arbitration in this country is used extensivelyto settle deadlocks over grievances. On the other hand, it is usedat present only to a very limited extent to settle deadlocks overnew contract terms. The usual pattern is that if collective bargain-ing does not bring a settlement and if mediation fails, a continuingdispute is almost certain to result in a work stoppage.

I suggest that the parties have not adequately considered thepossibilities of using voluntary arbitration in this situation. Despiteseveral studies of contract arbitration, there is little general knowledgeof the cases in which the terms of new or reopened agreementshave been determined by arbitration. In this paper, I propose tolook at some of the recent figures on contract cases and to considerthe attitudes and views which labor and management have expressedconcerning contract arbitration.

Compulsory Arbitration a Threatened Alternative

Recent events make discussion of this topic of voluntary arbi-tration especially timely. The large number of recent, serious in-dustrial disputes has raised once again the proposals for compulsory

* Chairman, Department of Economics, Lafayette College.

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ARBITRATION AND CONTRACT DISPUTES 79

arbitration of major disputes. For example, both Governor NelsonRockefeller and former Governor Adlai Stevenson have advocatedthe passage of laws which, under certain circumstances, would imposecompulsory arbitration on the parties. These are only two of thenumerous advocates of this course of action. They are mentionedsimply because of the prominent position they both hold in nationalpolitics.

In common with, I feel sure, most of you in this room, I deplorelaws which outlaw strikes and which provide, in peacetime, for man-datory settlement by some government agency. The reasons moststudents of industrial relations hold this view with respect to com-pulsory arbitration are well known and we need not go into themhere. I fear, however, that unless we achieve better methods ofsettling deadlocked disputes, we may one day find an impatientCongress passing laws calling for compulsory arbitration. Both forthis reason and because of the economic loss occasioned by strikes,it is vital, I suggest, that all avenues for peaceful settlement ofindustrial disputes be scrutinized by unions and management. HenceI feel there may be value and timeliness in an analysis of the pos-sible greater use of voluntary arbitration.

Voluntary Arbitration Only After Failure ofNegotiation and Mediation

Past experience has taught me that it is very easy to be mis-understood when one is discussing this topic. In order to avoidsuch misunderstanding, may I make the following clear: I am notsuggesting that voluntary arbitration should replace direct negotia-tion or mediation. On the contrary, I would urge and insist thatthe parties enter collective bargaining negotiations with the aimand thought that it is their responsibility to conclude a settlementand with the idea that they will conclude such a settlement. Ifdirect negotiations do not bring a settlement, then mediation byFederal, State, or local agencies should be invoked and again shouldbe engaged in with the idea that it will bring a settlement.

Only if and when both direct negotiation and mediation havebeen carried on extensively and have failed should the parties con-sider voluntary arbitration.

It follows from the foregoing that I would not suggest that theparties write into one agreement that arbitration shall automaticallybe invoked if an impasse in negotiation on the subsequent agree-ment is reached. Such a procedure might well bring the parties

80 CHALLENGES TO ARBITRATION

initially to the bargaining table with their eyes unduly focusedon the arbitration which both parties rather expect. The resultmight be to discourage that compromise and accommodation whichis vital if agreement is to be reached in direct negotiations. Thismay come about since, if parties from the first expect the matterto be arbitrated, they may be loath to make concessions since theyfeel that the eventual arbitration will result in an award which issomewhere between the Company's last offer and the Union's lastdemand.

I would suggest that, rather than having arbitration of primarydisputes agreed upon in advance, recourse to the arbitral processshould be a last resort, available but not expected, possible but notlikely, since the parties expect that they will, by themselves or withthe help of a mediator, be able to reach a settlement.

With some notable exceptions, the general, conventional atti-tude of both unions and management in the United States is thatvoluntary arbitration is not a suitable and appropriate instrumentfor the settlement of disputes over the terms to go into new agree-ments. Suggestions that such disputes might be settled in this wayare often swept aside by union and management spokesmen as com-pletely impractical. For example, a friend, who is the industrialrelations director of a small firm, had the typical reaction when wewere discussing a strike in his plant. He told me that the plant hadbeen shut down for two weeks because they were unable to agree onthe terms of a new contract. I asked if there had been any considera-tion given to the possibility of arbitrating the dispute and his replywas: "Apparently you misunderstood me. This is not a strike overa grievance. This is a dispute over the new wage scale asked bythe union." Like my friend, many in labor and management have,I believe, never seriously considered the possibility of arbitratingcontract terms.

Frequently, when one discusses this possibility with representa-tives of labor or management, the response which one gets is: "Thesedisputes should be settled by the parties themselves." To this response,I would reply: "Without question you are right. These disputesshould be settled by the parties themselves. The question is, how-ever, if the parties are unable, without a prolonged and costly strike,to settle it themselves does not voluntary arbitration present analternative method of settlement which should be given seriousconsideration?"

While the general attitude is to hold that such arbitration isnot useful or suitable, it is interesting to note that in some of our


recent major disputes, one side or the other has suggested arbitrationof contract terms. In 1958, Walter Reuther suggested to the majorautomobile companies that their contract dispute be arbitrated andin 1959 the major steel companies proposed that the issue of workrules be submitted to arbitration. In both cases, the offer was refusedby the other side, but the offer was made. It has been suggested bysome that in each case the offer was made because it was felt thatthe other side would certainly refuse it and that therefore it wasnot made in good faith. Whether this is true, it is impossible to say.It is worth noting, however, that here we have, in importantdisputes, labor in one case and management in the other case sug-gesting arbitration. It might also be noted that a mid-NovemberAssociated Press dispatch from Boston reported than an eight-daystrike by the International Typographical Union against six Bos-ton newspapers ended when the workers voted to accept the pub-lishers' offer to arbitrate unresolved issues concerning wages andfringe benefits.

Number of Contract Cases Arbitrated

Although the general attitude of unions and management is anegative one, often including even the view that "You just can'tand don't arbitrate contract cases," there has been, nevertheless, overthe years a small but, it seems to me, fairly significant number ofcontract cases being arbitrated. Many of these were in transit andpublic utilities, but significant numbers occurred also in retail trade,printing and publishing, and textiles.1 It is noted that contractarbitration has been most used in industries where the product istransitory and where the loss of markets brought about by strikesis often irretrievable.2 Although there has been a decline in recentyears in its use in transit and in printing, there are nevertheless afair number of cases in these and a variety of other industries.

Mr. George Strong advises me that during the fiscal year endingJune 30, 1959, the Federal Mediation and Conciliation Service ap-pointed arbitrators for 27 contract cases. These cases involved thefollowing industries: petroleum, aviation, chemicals, automotive,electrical equipment, retail trade, construction, dairy products, furni-ture, leather, machinery, printing and publishing, steel, and trans-

1Irving Bernstein, Arbitration of Wages (Berkeley and Los Angeles: Universityof California Press, 1954), p. 15.

2 Eli Oliver, Paper given at session on "Arbitrating Wages and Working Condi-tions," Cornell University Conference on Current Problems in Labor Relations,1954, pp. 17-19.


portation. Mr. Strong states: "Voluntary arbitration of new con-tract matters is not showing anything like the gain which is occurringin grievance arbitration. During the time the present Director hasheld office we have experienced an increase of nearly a hundredper cent in requests for assistance in obtaining arbitrators. Twenty-seven new contract cases would represent only slightly more thanone per cent of the cases arbitrated." 8

Statistics secured from the New Jersey State Board of Media-tion indicate the same general trend. In each of the last three years,they have handled through their office exactly 14 contract cases(including some contract reopening cases). In the most recent year,this was about three per cent of the total of 414 arbitration caseshandled. While their total number of arbitrations has increasedsteadily, the number of contract cases has been constant.

The American Arbitration Association has supplied figures whichshow the same situation. In 1954, the AAA handled 1,728 casesnationally, of which 46 were contract wage cases. In 1958, theirtotal was 2,293 and the number of contract wage cases was 45.*

The New York State Board of Mediation reports 141 contractcases out of a total of 1,245 for the calendar year 1958.5 Theyhave had a slight decline in the number of contract cases, and anappreciable gain in the number of grievance cases since 1956.

From the foregoing figures, it is clear that although small intotal amount and a declining percentage of the total of all arbi-tration cases, there is some recourse to arbitration in contract casesin the U.S.A. This fact is in itself significant in view of the attitudewhich is so common that "It just can't be, or isn't done."

'Letter from George Strong, General Counsel, Federal Mediation and Concilia-tion Service, December 1, 1959.

' American Arbitration Association, Procedural and Substantive Aspects ofLabor-Management Arbitration, an AAA Research Report (New York: AmericanArbitration Association, 1957), p. 24 and p. 33, and unpublished data from theAmerican Arbitration Association. A substantial portion of these contract wagecases were reopening cases.

6 Of the total of 141 contract cases, 7 cases involving a total of 65 workerswere initial contracts; 54 cases involving 28,776 workers were renewed contracts;and 80 cases involving 3,668 workers were reopened contracts. The New York StateMediation Board reported 146 contract cases out of a total of 1,184 cases in 1957,and 155 contract cases out of a total of 929 arbitration cases in 1956. Further studyof tables shows that not: only basic wage rates, but hours, various fringe benefits,and even clauses concerning seniority and discharge and discipline have been sub-mitted to arbitration. Division of Research and Statistics, State of New York,Dept. of Labor, Statistics on Operations, Series H, New York State Board of Media-tion, Vol. 9, No. 4, 1956; Vol. 10, No. 4, 1957, and Vol. 11, No. 4, 1958.


Arbitration of Major Disputes in Great Britain

Parenthetically, I would like to include at this point a shortnote concerning the English attitude and experience with voluntaryarbitration of contract terms. Two years ago, while teaching inan English university, I had an opportunity to study arbitration inthe United Kingdom. Not all unions and all managements in GreatBritain favor voluntary arbitration as an alternative to strikes overthe terms of a new agreement, but many do. Time does not permitan exhaustive discussion of this topic here but I would note inpassing that the cost of strikes is considered seriously by the Britishtrade unions. The head of one of the large national unions remarkedto me, in a discussion of this subject, "Perhaps if the men went onstrike for a month they could get tuppence an hour more from theemployers than they could from an arbitrator, but how long wouldit take, at tuppence an hour, to make up a month's wage loss?"There appears also to be more responsiveness to public opinion onthe part of the parties to a dispute in Great Britain than there isin the United States. The managing director of a large metalworking plant stated: "If the Union is willing to arbitrate and Irefuse to arbitrate, the public would think that I am most un-reasonable and I should find myself in an embarrassing situation."

As a result of these and other factors, it is not uncommon tohave major contract disputes settled in Britain by voluntary arbi-tration.6

It is worthy of note, incidentally, that the British have, as ofFebruary 28, 1959, ended their compulsory arbitration under theIndustrial Disputes Tribunal, but are continuing to make ratherextensive use of voluntary arbitration.7

* The Industrial Court, which provides voluntary arbitration under the Ministryof Labour, made 36 awards in 1958. The majority of these concerned claims forincreases in wages and salaries, many of them on a national scale. Annual Reportof the Ministry of Labour and National Service, 1958 (London: Her Majesty'sStationery Office), pp. 91-92. Machinery for voluntary arbitration of unsettleddisputes (including terms of new agreements) is also provided in a number ofindividual industries. See M. Turner Samuels, Industrial Negotiation and Arbi-tration (London: The Solicitors' Law Stationery Society, Ltd., 1951).

See also Adolf Sturmthal, ed., Contemporary Collective Bargaining in SevenCountries (Ithaca, New York: Cornell University, 1957), pp. 30-31.

'The Industrial Disputes Tribunal, a government agency which had provideda special type of compulsory arbitration, inherited from the World War II period,came to an end on February 28, 1959. (Ministry of Labour Gazette, November,1958, p. 414, and March, 1959, p. 119.) The Terms and Conditions of EmploymentAct, effective May 30, 1959, gave the Industrial Court one of the powers of theformer Industrial Disputes Tribunal, but this minor exception does not affect thetype of cases with which we are concerned here.


Criticisms of Contract Arbitration and Possible Answers

Let us turn now to a consideration of the major objectionswhich labor and management in the United States level at volun-tary arbitration as a method of settling contract cases.

Risks of Contract Arbitration

Probably the most frequent contention made against the useof arbitration in primary cases is that it is too risky. The conten-tion is made that labor and management cannot safely entrust toan outside neutral the major, fundamental questions involved indetermining, for example, what the wage scale for the next yearshould be. An error on the part of the neutral might, it is con-tended, so increase the wage costs of the employer as to bankrupthim. Conversely, an error in the other direction might doom theworkers to a seriously substandard wage for the life of the agreement.

The issues involved in grievance arbitration, it is maintained,are relatively small and if an error is made it is not of major con-sequence. An error, however, in a contract case would be of tre-mendous significance and therefore contract arbitration is not tobe seriously considered. Let us examine this contention carefully.

It is true, of course, that in the nature of the case an arbitratorin a contract dispute is being asked to make an award on broad,basic and major points. He is, clearly, clothed with considerableauthority. If he makes a serious error the results would be un-fortunate. The parties are, certainly, entrusting him with majorresponsibility. In so doing they are, undeniably, running some risk.We must consider, however, how much risk, whether there are waysin which the risks can be reduced, and what the alternatives are.Let us take up the latter point first.

I would suggest that if direct negotiations do not result in asettlement, and if mediation does not bring about a settlement, thenthe parties to a dispute are inescapably faced with a choice of risks.If they elect to use voluntary arbitration there are risks. If theyelect not to use voluntary arbitration there are risks. The latterrisks are of course all the costs and losses incident to a strike ofuncertain duration. It is not uncommon for each party in an indus-trial dispute to underestimate the other's willingness to fight and tohold out. Neither party can know, therefore, at the beginning of awork stoppage whether a day's shutdown or three months suspensionof work is involved. A prolonged shutdown, as I hardly need toemphasize, means tremendous loss of wages to workers, loss of pro-


duction and profits to the employer, in some cases more or lesspermanent loss of customers and markets, etc., etc. Since the dura-tion of the stoppage is uncertain, there is no way to compute inadvance the loss to both parties, and the amount they are riskingby not using arbitration.

In short, the parties faced with a work stoppage do not havethe choice between the risks of arbitration and a riskless situation.They can ignore arbitration and incur the risks that the stoppagewill bring. Or they can invoke arbitration and incur the risks whichcome with it. This choice between risks is inevitable and inescapable.

Methods of Reducing RisksExperienced Arbitrators

How great are the risks of arbitration? Will arbitration ofprimary disputes result in extreme, impractical, unworkable awards?Is there, in short, likelihood of a "screw-ball" decision which wouldwork great hardship on either company or workers? I suggest thatthe chances of getting a screw-ball decision can be virtually elim-inated by the parties if they wish to do so. In the first place, theselection of an experienced arbitrator will clearly reduce the chancesof an impractical award. If our friends in the audience from industryand labor have any doubts that such men are available, they haveonly to look around today. The room is full of such men!

Tri-partite BoardsIn the second place, the risks of an unworkable decision may

be further reduced, if the parties so desire, by the use of a tri-partiteboard. Tri-partite boards are disappearing in grievance arbitrationcases, and desirably so in my view. In contract cases, however,where the issues are greater, the executive session of a tri-partiteboard may serve a most useful function. If the neutral member ofthe board proposes some award which is extreme or unworkable,this fact will be brought into the open in this executive sessionand corrective action may be taken before the award is issued.

The Limited SubmissionThere is still a third method whereby the parties, if they wish,

may further reduce the risks of an impractical decision in a contractcase. This involves the submission agreement. In the agreementto arbitrate and in the formulation of the question for the arbi-trator, his jurisdiction may be so limited that an unworkable deci-sion can scarcely result. The use of the limited submission in contract


cases was the subject of a monograph which my wife and I wrotea few years ago. Time does not permit an extended discussion ofthe subject here. Suffice it to say that the parties in a wage disputecan specify, for example, that the award of the arbitrator shall callfor an increase of not less than x cents nor more than y cents perhour. Another method for limiting the authority of the arbitratoris to have the submission spell out the criteria to be considered inmaking the award. Limited submissions of this type have on occa-sion been used.8 Clearly with the scope of the arbitrator thus lim-ited, the risks of arbitration are greatly reduced. It is sometimesobjected that if the parties could agree upon these limits they couldgo further and reach complete agreement on a new wage scale.The facts, however, do not seem to bear out this contention. It isnot unusual for parties to be able to approach an agreement withoutbeing able completely to reach a meeting of minds. In such situa-tions, limited submissions may give the parties a feeling of confidencein the arbitration process by limiting the scope of the arbitratorand thereby reducing risks.

Award Approximating Negotiated Settlement

Probably the most useful way of assessing the degree of riskinvolved in contract arbitration is a look at the record in suchcases. There are sufficient contract cases being arbitrated to giveus some insight into the probability of the issuance of an extremeor impractical award. One of the best studies of contract arbitrationis that made by Academy member Irving Bernstein and publishedin 1954.9 From his own study and from the study of Alfred Kuhn,Arbitration in Transit,10 Bernstein concludes, "The employer needseldom fear an award that is out of line on the high side and . . .the union has little reason to anticipate one that is unacceptablylow." n The reasons for this, I suggest, are not far to seek. First,decision, he, nevertheless, cannot completely disregard the idea ofacceptability of the award to the two parties. Secondly and evenan arbitrator realizes the importance of acceptability of his award.While the parties, it is true, have agreed in advance to accept his

8 Cases using limited submissions of both types are described in our monograph.Morrison and Marjorie Handsaker, The Submission Agreement in Contract Arbi-tration (Philadelphia: University o£ Pennsylvania Press, 1952).

"Irving Bernstein, op. cit. Bernstein analyzed 209 wage awards made between1945 and 1950.

10 Alfred Kuhn, Arbitration in Transit, an Evaluation of Wage Criteria(Philadelphia: University of Pennsylvania Press, 1952). Kuhn analyzed wagechanges in 394 cases occurring between 1919 and 1948.

11 Bernstein, op. cit., p. 113.


more importantly, in wage arbitrations one of the main determinants,and often the chief determinant, is the wage comparison criterion.What is being paid elsewhere in the industry or in the area is alwaysa factor to which much weight is given both by the parties and bythe arbitrator. Bernstein concludes, in this connection that "in gen-eral and in the long run there tends to be little difference in effectif wages are arbitrated rather than negotiated." 12 This does notsound as if the risks of arbitration were so great as to require rejec-tion of the process.

Criticism: Contract Arbitration is"Legislative/' not "Judicial"

We turn now to a second broad objection to the use of arbi-tration in contract cases. It is argued that the arbitration of griev-ances is acceptable to the parties because the arbitrator is actingin a judicial capacity, and within the framework of the collectivebargaining agreement. He must, in the usual language, be con-cerned with "interpretation and application of the agreement" andmust not "add to, subtract from or amend the agreement." All ofthis, in grievance cases, it is maintained, gives a definite frame ofreference for the arbitrator. Within the four walls of the contract,he must interpret and apply its terms.

In primary disputes, however, it is contended, there is no frameof reference. The arbitrator is acting not as a judge who interpretsand applies the law made by some other party but rather as the legis-lative body which makes the law. Thus it is argued, the whole processis different and puts too much power in the hands of the arbitrator.

What is to be said in evaluating this argument? We would pointout, first, that, as George Taylor has said on various occasions, it isnot too many years since parties were arguing that the arbitration ofgrievances puts too much power in the hands of arbitrators and thatthis delegation of power just could not be tolerated by the parties.Yet today we find the arbitration of grievances well accepted by vir-tually all labor and mangement groups. The parties have found thatthey could safely give arbitrators that much power. Indeed they havefound that the alternative, strikes over grievances, is intolerable in-terruptions to production and that arbitration is greatly to be pre-ferred, even though they may, in particular cases, vigorously disagreewith the award of the arbitrator. Perhaps, as Dr. Taylor has suggested,

"Ibid., p. 112.


in the future the parties may find that they can safely, and to theiradvantage, give arbitrators power to settle more contract cases.13

Now, let us look carefully and specifically at this alleged funda-mental difference between the judicial nature of grievance arbitrationand the legislative nature of contract arbitration.

That there is a considerable element of truth in this cannot bedenied. The arbitrator, in contract cases, is writing the rules of thegame, not interpreting them. In spite of this, however, when oneinspects the two processes closely the apparently completely dissimilarnature of the two becomes somewhat blurred. As has been pointedout by numerous other writers, grievance arbitration frequently in factdoes involve establishing the terms of the agreement. Every arbitratorwho has handled any considerable number of cases, has had cases ofthe following type: A situation arises which neither party had antici-pated when the contract was negotiated. The union says article 27covers this case. The company says that article 15 is clearly the con-trolling section. The arbitrator is quite sure from the evidence thatneither section was drawn up to cover the instant case. He attemptsto ascertain what the intent of the parties was when they agreed uponarticles 15 and 27. In the end, since he must make a decision, he usesthe best common sense that he can and makes a ruling. Is he inter-preting the agreement or is he filling in a gap and really writing apart of the agreement?

Similarly, we may take the typical discharge case. In this con-nection it should be borne in mind that discharge and discipline casesmake up a very sizeable percentage of all grievance arbitrations.Typically, the contract says that there must be "good cause" for thedischarge. The arbitrator is called upon to interpret this language inthe light of the facts in the particular case. Is he interpreting or ishe really re-writing and amplifying the agreement when he rules thata particular set of circumstances do or do not constitute good cause?As I have suggested, what appeared to be a clear-cut distinction be-tween contract arbitration and grievance arbitration becomes defi-nitely blurred.

Further, is the arbitrator completely without conventional guidesin contract cases? Clearly, it seems to me, the answer must be "no."His problems come not because there are no such guides, but becauseof a plethora of conventional standards, some of which may point incompletely different directions. The arbitrator is given reams of

"George Taylor, Paper given at session on "Arbitrating Wages and WorkingConditions," Cornell University Conference on Current Problems in Labor Rela-tions, 1954, pp. 13-15.


statistics concerning comparable wages, concerning ability or inabilityto pay, concerning changes in cost of living and changes in produc-tivity. It is true that there is usually no agreement among the partiesas to how much weight shall be given to each of these factors andespecially concerning what shall be done if one criterion points in onedirection and another points in the opposite direction.14 But to saythat he has no frame of reference or no standard by which to judgeis to overlook all the customary criteria cited by the parties to eachother in direct negotiation. These criteria give him considerableguidance but of course do not do the whole job for the arbitrator.

In general, as Bernstein and others have noted, arbitrators will ina particular case usually do what is being done by the parties them-selves throughout the economy or the industry. The great weightgiven both by the parties and by arbitrators to comparable wages tendsto insure this.

We may conclude that while there are important differences be-tween contract arbitration and grievance arbitration, the differencesare not so great or so clear cut as they are often felt to be. In eachcase the arbitrator has some standards to guide him and in neithercase does he have completely clear and unambiguous standards. Ineach type of arbitration he is called upon to use judgment. Indeed, ifthere was not necessity of judgment, there would be no dispute andno need for an arbitrator.

Criticism: Arbitration May Be a Deterrent toGenuine Collective Bargaining

Another objection to the use of voluntary arbitration in contractcases is that the prospect of it prevents genuine collective bargaining.This argument has been touched upon earlier. It has validity, if atall, only when the parties enter collective bargaining with their eyeson possible future arbitration and hence are unwilling to make con-cessions because they feel this may put them in a poor strategic posi-tion before the arbitrator. If, as we have suggested, the parties do notconsider the use of arbitration until after direct negotiation and medi-ation have been tried extensively and have failed, this possible prob-lem would be avoided.

Criticism: Arbitration Confined to "Follower" Cases

Another difficulty often cited in the use of voluntary arbitrationin contract cases relates to so-called "leadership" situations. It is said

14 Although weights have on occasion been indicated in a limited submission.


that when new areas are being explored in the collective bargainingrelationship, when new subjects for collective bargaining are beingnegotiated, arbitration of disputes is not feasible. Examples of suchsituations are the disputes over pensions ten years ago, the argumentsover supplemental unemployment benefits five years ago, and perhaps,arguments over working rules today. If a union is attempting toestablish a new wage scale with an employer who is typically a "wageleader," arbitration is not likely to be accepted, it is commonlythought.

These arguments undoubtedly have considerable validity. Arbi-tration is more likely to be used in "follower" rather than in "leader"situations.

A further and related point that has been raised is this: The areaof disputes in the industrial relations field appears to be a changingone these days. Some years ago disputes were relatively simple, it issometimes argued. They revolved around the question of by howmany cents per hour a wage rate should be increased. Now they aremore intricate. We think today in terms of costs of packages includinginvolved fringes. We are becoming involved with complex questionsof working rules, problems of foreign competition, the inflationaryimpact of wage increases and difficult questions involving the measure-ment of productivity changes. Are questions of this sort suitable forreference to arbitration?

Arbitration in Leadership Cases:Advantages and Requirements

The problems involved in pattern-setting leadership situations areclearly some of the most crucial that are faced in industrial relationstoday, precisely because of their pattern-setting implications. Notonly are they often the most difficult, but they are also frequently thesituations which lead to the longest, biggest and most costly strikes.The recent steel dispute is a case in point.

Bernstein and others have contended that the parties should notexpect an arbitrator to rule on these leadership situations. Must weconcur with this opinion and rule out the use of arbitration preciselyin those areas where it may be the most needed and in which theabsence of peaceful settlement will be most costly? Perhaps this is anexample of an act of faith, but I would suggest that even in thesedifficult situations, arbitration is possible and, because of the lossesimplicit in these strike situations, is desirable.

It cannot, I believe, be too strongly emphasized that any question


which the parties will submit to arbitration can be arbitrated. Sinceit is precisely in the leadership situations that long strikes may result,these are the situations which may lead to demands for governmentintervention and for compulsory arbitration.

I would urge, therefore, that even in these pattern-setting, ground-breaking situations, the parties might well consider the use of arbitra-tion. It is true that to some extent somewhat different standards andcriteria would have to be used in such cases. What is being done else-where is not a sufficient basis for the decision, as it often is in "fol-lower" cases. Some of the conventional standards, however, wouldstill apply.15 Ability or inability to pay, and changes in productivitywould still be pertinent and might play a larger role than in the past.Such considerations as the effect on ability to compete internationally,the inflationary impact and appropriate sharing between labor, man-agement and the public of long-term productivity increases would beamong the factors to which consideration would have to be given ifarbitrators were called upon to rule on pattern setting cases. Just asin the follower cases, the objective for pattern setting cases would stillbe an acceptable and workable decision, and one which would approxi-mate the answer the parties would eventually have found for them-selves.

Other Types of Third Party Dispute Settlement

I would not want to leave you with the impression that I believethat voluntary arbitration is the only device for peaceful settlement ofdisputes which should be carefully explored by companies and unions.

Other recent developments merit careful study and consideration.There is some use being made today of private fact finders and medi-ators who make non-binding recommendations to parties involvedin a dispute. There is real merit in this development, I believe, andthe possible uses of it might well be considered.

As a part of the Kaiser Steel Company agreement with the SteelWorkers Union, a novel and quite possibly very useful device is beingestablished. Three top company leaders, three top union leaders andthree of the top industrial relations neutrals in the country (all mem-bers of the National Academy of Arbitrators, I might add) will

"The limitations of the present criteria have been discussed by Alfred Kuhn(op. cit.) and by Jules Backman in his recent book. See Jules Backman, WageDetermination—An Analysis of Wage Criteria (Princeton: Van Nostrand Co., 1959)."Social inventiveness" in improving criteria is needed to give negotiators andarbitrators better standards. They need also to know the "rational" factors andalso the "economic staying power" of the parties.


attempt to formulate long-range policies for the sharing of productivitygains among workers, stockholders and the public. Here is anotherimportant example of social inventiveness which we shall all watchwith much interest.

Conclusion

We have not, I maintain, sufficiently considered the possibilitiesinherent in voluntary arbitration. When compulsory arbitration byact of Congress has been actively discussed, it is more urgent than everthat all possible alternatives be given careful consideration. In volun-tary arbitration, the parties select their own arbitrator. They use thisdevice only if they elect to. They formulate the submission and putbefore the arbitrator only those questions which they mutually agreeto submit. They can limit his jurisdiction in any way which theywish. With compulsory arbitration all this is changed. The tribunalbefore whom the case will be heard is appointed by government.Political considerations may enter the picture. The parties have novoice in the selection of their judge. Nor do they limit his jurisdic-tion or set his frame of reference.

The greater use of voluntary arbitration can save companies andworkers from incurring great profit and wage loss. It may obviatethe possible coming of compulsory arbitration. It may therebystrengthen the process of free collective bargaining in the UnitedStates.

Discussion—

JOHN WADDLETON*

Dr. Handsaker's presentation gives us much food for thought andmany springboards for discussion.

The first argument he advances is that unless the parties adoptsome better method to resolve their deadlock, than striking or de-ciding to take a strike, they may find an impatient Congress pre-scribing compulsory arbitration for them, and I must agree tha thispoint has impact. It highlights the incongruent fact that almosteveryone conversant with the problem agrees that compulsory arbi-tration is one of the most undesirable remedies available. Yet thesesame people will also agree that if any remedy beyond what we alreadyhave is adopted, it will most probably be compulsory arbitration.

* Chief Counsel, Industrial Relations Department, Allis-Chalmers Corporation.


However, I should like to suggest that the assumed threat ofcompulsory arbitration is not a sound argument for voluntary arbi-tration. I suggest that the issue of compulsory arbitration should beresolved on its own merits, and that the issue of voluntary arbitrationshould be resolved, in turn, on its own merits, rather than on aSword of Damocles' type of approach: Which would you rather have,voluntary or compulsory arbitration?

On the merits, Dr. Handsaker attacks a number of the statedbases upon which contract arbitration is rejected. The first is thatthe process exposes the parties to the risk of a "screwball" decision.Here he suggests that such a result can be virtually eliminated, first,by selecting experienced arbitrators; second, by using the tri-partiteboard technique in which the chairman would first test his proposalswith his management and union board co-members; and, third, bylimiting the submission itself and by spelling out the criteria to beconsidered in arriving at the result.

To test this idea let's leave aside the difficulties that would beinvolved in agreeing upon an experienced arbitrator, a tri-partiteboard, or on limiting the submission or confining it with criteria.Let's assume we have a submission and go on from there.

Once submitted, the arbitrator's latitude of decision is the areafrom zero to one hundred per cent between the parties. Should headopt in his decision the full or any substantial portion of the positionof either party on a certain issue, his decision on that score wouldobviously not be "screwball" to that party nor, incidentally, to himself.But it well might be the supreme example of a "screwball" decision tothe other party.

Yet the latter joined in the submission of the issue knowing sucha result was at least technically or theoretically possible. Perhaps herelied too much on the experience of the arbitrator. But did he haveany right to? Does he have any basis now to complain? Of coursenot. The decision is no more "screwball" than the position of theprevailing party.

The only real protection against what one party might classifyas a screwball result is to limit the submission to preclude it. Butthat would most likely be the very way of insuring that there would beno agreement to submit in the first place.

I'm afraid what Dr. Handsaker might be suggesting is that experi-enced arbitrators be relied upon to discard those proposals from eachparty's position which the other party feels are "screwball." Thiswould be a large order indeed.


Now before proceeding to the Doctor's treatment of the secondbroad objection, a word on "criteria." Throughout his paper Dr.Handsaker stresses the many criteria and other considerations thatan experienced arbitrator would use, whether or not they would beexplicitly imposed. In practically all cases, however, he is addressinghimself to the criteria followed or available on economic issues.

Again, assuming for the purpose of this discussion that he is right,what about non-economic issues? What compulsory unionism pro-visions shall there be, if any? Shall the no-strike clause be a full oronly a limited prohibition? To what extent shall seniority vis-a-visability dictate the reassignment of the work force? Shall overtime becompulsory or voluntary?

In these areas of non-economic issues individual managementsand individual unions have very firm convictions and often these con-victions do not conform to those of managements or unions generallybut are founded on particular desires or experiences.

Can there be here the type of criteria that Dr. Handsaker refersto? If so, should the parties be shoehorned into practices and solutionsused by others? If you answer "Yes," it seems to me you disregardthe personal and particular nature of their problem. If you answer"No," then from where springs the predictability of the outcomewhich is urged as the basis for embracing arbitration as the solutionto that impasse?

Finally, a few words on Dr. Handsaker's answers to the secondbroad objection to contract arbitration which he says is the mistakenidea that there is a vast difference betweeen contract arbitration,which would be of a legislative nature, and grievance arbitration,which is a judicial nature.

Dr. Handsaker suggests that the difference is not as great as itappears, that actually a fair amount of legislating goes on in grievancearbitration and, therefore, it should not be such a giant step for theparties acclimated to grievance to embrace contract arbitration.

With these premises, I am sure that many management peoplewould disagree, at least those who subscribe to the judicial approachto grievance arbitration. To me the difference between the two isquite real, but there is also another compelling difference. In griev-ance arbitration the arbitrator is confined to determining whether, inrelation to a specific, detailed set of facts, the relevant contract pro-vision, be it broad or narrow, has been correctly applied. The de-cision is res adjudicata only as to that case and becomes controllingon future cases of the same type only by agreement of the parties,


because either party is always free to raise the question of contract ap-plication on a reoccurrence of like facts. In our own experience wehave seen a referee reverse a predecessor's decision and not only we,but the unions with which we deal, have, on occasion, persuaded areferee to reverse his own earlier decision.

So conceding only for the purpose of this argument that arbi-trators do legislate in grievance arbitration cases, there is still a vastdifference between letting them do it on a case-by-case basis andasking them to do it on a broad basis. I can't help adding here, toemphasize what I have in mind, that if you think it's difficult some-times to interpret a contract clause in relation to a specific set offacts, you ought to try your hand at writing one without the anchorpoint of any particular factual details to tie to — and don't forgetthat the grass isn't always greener on the other side of the fence.

In short, the contract arbitrator would in fact legislate in wideareas and in so doing would take over — by voluntary default, if youwill — the prime responsibility of the parties. No amount of reap-praisal will convince many unions or managements to accept this.

So to conclude, the route to elimination of the strike as the meansof resolving bargaining impasses is free collective bargaining char-acterized by a willingness by each party to give thoughtful consider-ation to the legitimate aims, desires, and needs of the other. Thecynic may discard this as being a pious cliche, but the fact is that inlarge and significant areas of our economy free collective bargainingworks and where it works it does so because this spirit prevails. Whereit does not work it will be most difficult to overcome by legislation,either formal or informal, the problems that arise where the partiesare not so motivated.

Because I am of this conviction you will understand my remainingof the opinion that voluntary arbitration of bargaining impasse rep-resents the road to abandonment, rather than preservation and en-hancement, of the process of free collective bargaining.

But I am sure that you are not too interested in personal opinions.So let me quickly add that it must be recognized that there might wellbe instances in which the nature of the issues and the negotiatingclimate—I'm sure you will agree that that is a critical element—willcombine to create a situation peculiarly adapted to settlement byvoluntary arbitration.

All that Dr. Handsaker is really asking is that when unions andmanagements find themselves in these circumstances, they more ad-vertently and objectively appraise their positions to the end that they


do not reject out of hand the possibility that voluntary arbitrationis the key to the solution of their difficulties. I can only add that noone, management or union, especially people who are supposed tohave acquired the habit of keeping an open mind, can quarrelwith Dr. Handsaker's advice.

Discussion—

BERNARD CUSHMAN*

Professor Handsaker has written a very thoughtful paper. Ithink it is true that the full potential of voluntary arbitration forpurposes of establishing the terms of new or renewal contracts whennegotiations and mediation have failed has not been tapped. I wouldagree with Professor Handsaker also that voluntary arbitrations canbe useful in major disputes such as those we have recently had inthe steel industry.

Arbitration of new contract disputes is neither unusual nor rare.Indeed, arbitration in that area has a long and honorable history.Historically, arbitration of such disputes generally preceded arbitra-tion of grievance disputes. The practices of arbitrating new contractdisputes goes back to the 19th century.1 Unions and employers, par-ticularly in public utilities, have been arbitrating such disputes formany years. This practice is, of course, particularly well developedin the local transit industry and the printing industry.2 And in thelatter part of the nineteenth and the early part of this century, arbi-tration of contract terms or wages was not unusual in the coal andclothing industries. Kuhn says, in his study of arbitration in thetransit industry, Foreword, p. vii, "The transit industry has engagedin more than six hundred new contract wage arbitrations between1900 and 1949, inclusive." Arbitration of disputes over new contractson the railroads has a long history and has often been used in recentyears despite the availability of presidential emergency boards. Asyou know, the Railway Labor Act requires the National Mediation

* Labor Bureau of the Middle West.1 Witte, Historical Survey of Labor Arbitration, University of Pennsylvania

Press, 1952, pages 10-15.2 See, Schmidt, Industrial Relations in Urban Transportation (1935) pp. 193-

207; Witte, op. cit., p. 15; Kuhn, Arbitration in Transit, University of Pennsyl-vania Press, 1952; Loft, The Printing Trades, pp. 234-237, 239 ff; Written TradeAgreements in Collective Bargaining, National Labor Relations Board, BulletinNo. 4 (1939), p. 53.


Board to proffer arbitration as its final step before ending its mediatoryefforts.3 Indeed, Section 7 of the Act has specific and detailed pro-visions for the voluntary arbitration of any controversy.

My own experience corroborates the notion of most students inthe field of labor relations that voluntary arbitration is far superiorto compulsory arbitration as a means for the determination of un-settled labor disputes. My own experiences with the Florida com-pulsory arbitration law were somewhat traumatic. In 1949 I servedas counsel for one of the locals of the Amalgamated Association ofStreet, Electric Railway and Motor Coach Employes of America, in acompulsory arbitration proceeding in Pensacola, Florida. The Gov-ernor appointed as chairman of the board a local Kaiser-Frazier auto-mobile dealer who himself ran a non-union enterprise. He had noexperience as an arbitrator and seemed not to know how to conductthe proceedings or how to approach the issues. While the fact thathe chewed tobacco is probably irrelevant, I have an unforgettable pic-ture of the chairman spraying the meticulously dressed late HerbertSyme with tobacco juice as he shot for the cuspidor near which Mr.Syme was sitting. Midway through the proceedings the chairman re-signed. Ultimately, he was replaced by another gentleman with noexperience as an arbitrator, apparently qualified for his position, inthe mind of the Governor, by the fact that he was the local sandwichman. The new chairman denied any increase whatsoever to theemployees whose wage rate was very low and at a time when the wagelevel in American industry and the transit industry was rising ratherrapidly. Shortly thereafter I participated in an arbitration proceed-ing in Jacksonville, Florida, involving a local transit system there. Inthat case the Governor appointed an arbitrator who had had no expe-rience but who was an accountant. He granted an increase of onepenny. The company proceeded to supplement the award by an addi-tional 3̂S to alleviate a hardship that the award created. These are,of course, extreme examples. But they do illustrate some of the darkplaces into which compulsory arbitration can travel.

I was asked to indicate a tentative conclusion as to whetheremployees have fared better in strikes than in arbitration of contractdisputes. It is doubtful that such a question can be answered. Sincethe results of any strike at any given time are conjectural dependingon so many complex factors, there is no insulated laboratory in whichone can isolate controlled factual situations and compare results andarrive at a fair conclusion as to whether employees do better in strikesthan they do in arbitration. Whether a particular award would have

3 Section 5 First, Title 45 U.S. Code Chapter 8.


been bettered, improved upon, or worsened had the employees goneon strike is often debatable. The results of both strikes and awardsdepend so much on so many factors and, not in the least, on the humanequation. Union leadership in one place may be outstanding and inanother mediocre. The same thing is true of management leadership,or, indeed, of the mediators who may be assigned to a particulardispute, or the community leaders who may interest themselves insuch a dispute. What I do think can fairly be said about the arbitra-tion process, as I have experienced it in new contract disputes on rail-roads, in transit and in electric light and power, and elsewhere, isthat when the process brings together parties who are desirous ofmaking it work and when the chairman of the arbitration board ispossessed of experience and insight, and a sense of timing, the civilizedprocess of arbitration works better than a strike for all concerned —the management, the employees and the public. On the basis of thatexperience, there is a part for voluntary arbitration to play in thefield of major contract disputes.

Professor Handsaker has suggested that there may be a questionas to whether voluntary arbitration can be used effectively in thedetermination of working rules. The lessons of experience are thatarbitration can be successfully utilized in that area dispite the pro-testations of both labor and management to the contrary. In therailroad industry where at the moment there is considerable heatabout working rules, arbitration has been successfully used for thedetermination of such rules and on a nation-wide basis. For example,in 1952 the Class I carriers of the United States and the Brotherhoodof Locomotive Engineers, Brotherhood of Locomotive Firemen andEngineers and the Order of Railway Conductors arbitrated a disputeas to the rule to apply to road employees performing more than oneclass of road service.* The arbitration agreement provided that "Thearbitrators shall have the right to consider whether or not any rulecovering more than one class or road service shall be granted, and ifso, the language of such rule." The arbitration board's award pro-vided that road employees employed in any class of road service maybe required to perform two or more classes of road service in a day ortrip subject to certain terms and conditions with payment for theentire service to be made at the highest rate applicable to any classof service performed. The overtime basis for the rate was to applyfor the entire trip subject to certain conditions outlined in the awardand not less than one minimum day was to be paid for the combinedservice.

* Cases Nos. A-3437 and A-3546, ARB 168.


It is not uncommon in local transit to arbitrate working rules.For example, the operations of the extra board and the method bywhich assignments are to be made is not infrequently one of the issuesarbitrated.5 The size of the crew to be used to man printing presseshas often been arbitrated in the printing industry.6

Nor is it a barrier to voluntary arbitration that the dispute in-volved is a pattern-setting one or one which involves pioneering infields in which precedents are few or lacking. In the transit industryarbitration played an important role in the introduction of vacationsand the subsequent evolution of the vacation provisions. Arbitrationhas played an important role also in the development and growth ofcontributory, actuarially sound, pension plans in the transit industry.Arbitrators have recognized that if arbitration is to be a viable process,it must be a dynamic process. George Taylor's often-quoted phrase inhis opinion in the Public Service Coordinated Transport case of 1947,7

to the effect that holidays had been awarded in that case in order todemonstrate that new ground may be ploughed through arbitrationas well as through strikes, is illustrative.

In a recent arbitration award in Pittsburgh, arbitrator Sembowerrecognized the dynamic nature of the arbitration process. In that case,the Pittsburgh transit company which had been a leader in the fieldof pension benefits insisted that no further progress should be madesince it was still a leader in the industry. He said: "There is a specialand unique problem which arbitrators have recognized when they haveencountered the comparatively rare instances of bellwethers of wageor pension patterns. With respect to them, the conventional andwholly justified methods of comparison with the criteria already men-tioned leads to a stalmate. To use such criteria in these exceptionalinstances is indeed like trying to pull one's self up by his bootstraps.Their literal application would lead only to the erstwhile front-runnerbeing required to drop far back in the pack before he could moveagain."

In these major disputes which lead to serious strikes each partyis apt to be seeking what it calls progress. It should be rememberedthat two of the basic social trends of our time are: (1) the continuingimprovement in the position of the working man; and (2) continuingtechnological change. The employees reflect their view of progress intheir demands for contract changes — a guaranteed annual wage or a

6 New England Transportation Company, August 7, 1950.'Miami Herald Publishing Company, 24 LA 8S5, Times Publishing Company,

10 LA 195.' 8 LA 530, at p. 537.


shorter work week or providing medical care for pensioners. Theemployer may see progress in his demand for crew reductions due tonewly automated processes. Voluntary arbitration cannot be a "fol-lower" process if it is to be useful in meeting the imperatives of suchproblems. Arbitration must have a degree of what George Taylorcalls "social inventiveness" if it is to respond to the needs which leadto resort to its processes.

Experience has shown that questions of working rules, of theestablishment of wage patterns, of the introduction of new answers tonew problems, are not beyond the capabilities of the arbitrationprocess. There is ground for belief, therefore, that voluntary arbi-tration could have been used in the steel dispute and at an early timeand avoided a strike. There are few who doubt that a viable solutionwould have been found in the steel dispute if steel management andsteel labor had submitted their dispute to a board of arbitrationheaded by George Taylor. It is in this direction that we must turnif we are to make collective bargaining work. Arbitration is, after all,an extension of the collective bargaining process. When it is soregarded and when arbitrators of the stature of the late Dr. Leiserson,or William Davis, or George Taylor, are employed, the process willhave a far more extensive use than it does today. Surely it is a processwhich is far more compatible with the genius of American institutionsthan is that of compulsory arbitration.

There will be other major disputes affecting the public interestwhich will come upon the American labor relations scene. I thinkit would be well if the Taft-Hartley Act were amended to require theFederal Mediation and Conciliation Service and/or the Secretary ofLabor, in such disputes, prior to any work stoppage, to propose vol-untary arbitration. I think it should be further provided that theanswers of the participants in the dispute to the proposal be publicized.At this stage in our history, it should be considered presumptively in-defensible in such major disputes to refuse to arbitrate all the issuesin dispute. I would leave to the participants the fashioning of theirown arbitration machinery and would allow them the option of arefusal to arbitrate. I do not think, however, that we have reacheda point when it is appropriate to brand those who refuse to utilize theprocess in these disputes of national emergency proportions as ignoringthe public interest. Indeed, if we are to become more civilized, thisseems a logical result. The whole history of the progress of mankindis marked by a gradual transfer from the use of force to the use ofpersuasion. As Alfred North Whitehead said: "The worth of menconsists in their liability to persuasion."

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