Philadelphia Housing Authority v. American Federation of State, County & Municipal Employees

OPINION BY

Before this court on remand from our supreme court is the appeal of the Philadelphia Housing Authority (PHA) from the order of the Court of Common Pleas of Philadelphia County (trial court) denying PHA’s petition to vacate an arbitration award that reinstated Thomas Mitchell to his employment, with full back pay, after PHA had terminated Mitchell for violating PHA’s sexual harassment policy. Having reconsidered PHA’s appeal in light of the principles governing review of a grievance arbitration award under the Public Employe Relations Act (PERA),1 as recently articulated by our supreme court in West-moreland Intermediate Unit # 7 v. West-moreland Intermediate Unit # 7 Classroom Assistants Educational Support Personnel Association, PSEA/NEA, 595 Pa. 648, 939 A.2d 855 (2007), we again reverse.

I.

PHA’s sexual harassment policy (Policy) strictly prohibits discrimination or harassment on the basis of sex. The Policy defines sexual harassment to include unwelcome sexual advances, requests for sexual favors, and/or other conduct of a sexual nature that has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment. (R.R. at 99a.) The Policy directs any individual who feels that he or she has been a victim of sexual harass*479ment in connection with his or her employment to bring the problem immediately to the attention of the employees’ general manager or PHA’s Equal Opportunity Officer so that corrective action may be taken. The Policy further provides that

PHA will investigate all allegations of harassment in as prompt and confidential a manner as possible and will take appropriate corrective action when warranted. Any employee who is found, as a result of such an investigation, to have engaged in harassment or discrimination in violation of this policy will be subject to appropriate disciplinary action, up to an[d] including termination of employment.

(PHA’s EEO and Sexual Harassment Policy, R.R. at 100a.) In addition, a notice posted in PHA’s workplace advises that sexual harassment on the job violates Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2. The notice provides examples of prohibited conduct, including unwelcome sexual advances, suggestive or lewd remarks and unwanted touching, and warns that, upon finding that such harassment has occurred, the company might impose any of a range of disciplinary measures, including oral or written warnings, demotion, suspension or discharge. (R.R. at 102a.)

On October 23, 2002, Mitchell, a member of the American Federation of State, County, and Municipal Employees, District Council 33, Local 934 (the Union), was discharged from his job at PHA’s central warehouse facility following an investigation into a complaint of sexual harassment by co-worker Stephanie Broadnax. The Union filed a grievance on Mitchell’s behalf, alleging that PHA violated Article VIII of the parties’ collective bargaining agreement (CBA), which provides, in pertinent part, that “[n]o disciplinary action or discharge shall be imposed upon any employee without just cause.” 2 (R.R. at 63a.) The CBA does not define the term “just cause.”

The matter proceeded to arbitration, where the issue presented to the Arbitrator was “whether [PHA] had just cause to terminate [Mitchell’s] employment, and, if not, what would be the appropriate remedy.” 3 (Arbitrator’s op. at 27, R.R. at 41a.) Following hearings, the Arbitrator issued a decision setting forth the testimony of the various witnesses at length; we summarize the relevant portions of the testimony as follows.

*480Between May 2001 and July 2002, Broadnax was subjected to an ongoing course of sexual harassment by Mitchell. In one incident, Broadnax was changing clothes in the ladies’ room when Mitchell leaned against the door and fell partially into the room. (Arbitrator’s op. at 3-4.) On another occasion, while Broadnax was talking to Supervisor Jonas Shour, Mitchell sat down next to Broadnax and threw both arms around her neck. (Arbitrator’s op. at 5.) In yet another incident, in May 2002, while Broadnax was alone at the filing cabinet, Mitchell came up behind her and ground his penis into her for approximately fifteen seconds. Broadnax told another warehouse employee what Mitchell had done but did not file a complaint. (Arbitrator’s op. at 5, 9.) In addition to these incidents, Mitchell would have his zipper down in the presence of other employees and would “play with himself’ when speaking to Broadnax.4 (Arbitrator’s op. at 6.)

On June 28, 2002, Broadnax telephoned Supervisor Joseph Brunetti and asked that Mitchell not be assigned a desk next to hers; Broadnax explained that Mitchell previously had touched her in an “inappropriate manner” but gave no further details.5 (Arbitrator’s op. at 5, 13-15.) Brunetti spoke with Mitchell following the conversation with Broadnax. The following day, after having to break up a shouting match between Broadnax and Mitchell, Brunetti took Mitchell outside and explained what he knew of the alleged touching. Although Mitchell denied any misconduct, Brunetti told Mitchell that “he had to stop touching her — she didn’t want to file a complaint.” (Arbitrator’s op. at 14.) Brunetti believed he had done a “good job” counseling Mitchell, and there would be no more “touching or yelling.” However, Brunetti had to break up another loud argument between Mitchell and Broadnax approximately ten days later. Concerned about an “out of control situation,” Brunetti reported the incident to his superior, James Forbes, who referred the matter to PHA’s Equal Employment Opportunity (EEO) Office. (Arbitrator’s op. at 14-15.)

When subsequently questioned by Rosanna Grdinich, PHA’s EEO Officer, Broadnax recounted the various incidents of sexual harassment involving Mitchell, and, on July 16, 2002, she filed a formal complaint. (Arbitrator’s op. at 5-6, 8.) Broadnax told Grdinich that she did not complain earlier because she thought she could handle the situation on her own, but she decided to contact management when she learned that Mitchell would be sitting next to her. Grdinich investigated Broad-nax’s allegations and interviewed potential witnesses to the alleged incidents; Grdi-nich also interviewed Mitchell, who denied most of the allegations. Grdinich con-*481eluded that Broadnax and the other corroborating witnesses were credible, but Mitchell was not. Based on PHA’s zero tolerance Policy concerning sexual harassment, Grdinich recommended that PHA take “immediate administrative action” against Mitchell. (Arbitrator’s op. at 18-19.)

PHA ultimately determined that Mitchell should be discharged based on: (1) the pattern of sexual harassment; (2) the unwanted touching; (8) his touching himself; (4) PHA’s Policy prohibiting sexual harassment and providing for termination where such harassment took place; and (5) the fact that there was no way to accommodate Mitchell without placing others at risk for sexual harassment. (Arbitrator’s op. at 19.)

The Arbitrator found that Mitchell was adequately informed about the prohibition against sexual harassment and that the record contained substantial and convincing evidence that Mitchell engaged in inappropriate sexual behavior directed at Broadnax. The Arbitrator rejected Mitchell’s blanket denials of wrongdoing as lacking credibility and found that Mitchell committed the alleged misconduct.6 (Arbitrator’s op. at 32-34.) The Arbitrator stated that, if Broadnax’s testimony concerning Mitchell’s alleged misconduct is fully credited, then his behavior prior to July 15, 2002, is properly characterized as “lewd, lascivious and extraordinarily perverse.” (Arbitrator’s op. at 33.) The Arbitrator then specifically concluded that Broadnax told the truth “concerning the rubbing incident, the hugging incident and [Mitchell’s] articulating his desire to engage in sexual acts with her.” (Arbitrator’s op. at 33-34.)

Despite these findings, the Arbitrator determined that PHA did not establish just cause to terminate Mitchell on October 23, 2002. Stating that the timeline was critical, the Arbitrator emphasized that management at the warehouse knew of and condoned horseplay of a sexual nature, and, prior to Mitchell’s discharge, the only action taken in terms of counseling or disciplining him was the June 29, 2002, warning from Brunetti. Although finding that Mitchell was not justified in engaging in his inappropriate sexual misconduct prior to receiving this warning, the Arbitrator concluded that PHA did not present clear and convincing evidence that Mitchell engaged in further acts of sexual harassment after he was warned. (Arbitrator’s op. at 35-36.) On this basis, the Arbitrator sustained Mitchell’s grievance and awarded a “make whole” remedy, which provided for Mitchell’s unconditional reinstatement with back pay. (Arbitrator’s op. at 37.)

PHA filed a petition to vacate the Arbitrator’s award, which the trial court denied. On further appeal, this court reversed, holding that PHA’s legal obligation to protect its employees from sexual harassment in the workplace constituted a “core function” of the agency that PHA could not bargain away,7 and, therefore, the Arbitrator’s award requiring Mitchell’s reinstatement was not rationally derived *482from the CBA and could not be enforced. Philadelphia Housing Authority v. American Federation of State, County and Municipal Employees, District Council 33, Local 934, 900 A.2d 1043 (Pa.Cmwlth.2006), vacated, 596 Pa. 207, 941 A.2d 1257 (2008) (Philadelphia Housing I). The Union petitioned for allowance of appeal, and by order dated January 2, 2008, our supreme court granted the Union’s petition, vacated this court’s order and remanded with instructions to reconsider PHA’s petition to vacate in light of West-moreland.

II.

In Westmoreland, our supreme court reaffirmed that the highly circumscribed “essence test,” as articulated in State System of Higher Education (Cheyney University) v. State College University Professional Association (PSEA-NEA), 560 Pa. 135, 743 A.2d 405 (1999), is the proper standard to be employed by courts in reviewing grievance arbitration awards arising under PERA.8 However, the court determined that the previously accepted “core function” exception to the essence test was insufficiently precise and prone to unwarranted expansion. Thus, the court abandoned it, adopting instead the public policy exception to the essence test applied in federal courts.9 Id. Specifically, the court stated:

We conclude, however, that the essence test should be subject to a narrow ex*483ception by which an arbitrator’s award will be vacated if it is violative of the public policy of the Commonwealth.... More specifically, we hold that upon appropriate challenge by a party, a court should not enforce a grievance arbitration award that contravenes public policy. Such public policy, however, must be well-defined, dominant, and ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests.

Westmoreland, 595 Pa. at 665-66, 989 A.2d at 865-66.

It now is well established that there is an explicit, well-defined, and dominant public policy against sexual harassment in the workplace. See, e.g., Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 106 S.Ct. 2399, 91 L.Ed.2d 49 (1986); Stroehmann Bakeries, Inc. v. Local 776, International Brotherhood of Teamsters, 969 F.2d 1436 (3d Cir.), cert. denied, 506 U.S. 1022, 113 S.Ct. 660, 121 L.Ed.2d 585 (1992); Chrysler Motors Corporation v. International Union, Allied Industrial Workers of America, AFL-CIO, 959 F.2d 685 (7th Cir.) (Chrysler I), cert. denied, 506 U.S. 908, 113 S.Ct. 304, 121 L.Ed.2d 227 (1992); Newsday, Inc. v. Long Island Typographical Union, No. 915, CWA, AFL-CIO, 915 F.2d 840 (2d Cir.1990), cert. denied, 499 U.S. 922, 111 S.Ct. 1314, 113 L.Ed.2d 247 (1991). Title VII of the CM Rights Act of 1964 prohibits employment discrimination on the basis of sex. 42 U.S.C. § 2000e-2. The Equal Employment Opportunity Commission (EEOC), which administers and enforces this provision, has promulgated regulations that define sexual harassment under Title VII and provides that unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment (a form of sex discrimination) when such conduct has the purpose or effect of unreasonably interfering with an individuars work performance or creating an intimidating, hostile, or offensive working environment. 29 C.F.R. § 1604.11(a).

Because Title VII charges employers with the responsibility to maintain a workplace environment free of sexual harassment, there also exists a well-defined, dominant public policy favoring voluntary employer prevention of sexual harassment in the workplace and application of sanctions against those who commit such conduct. Stroehmann. EEOC regulations on voluntary employer compliance make employers liable for acts of sexual harassment in the workplace between fellow employees where the employer knew or should have known of the conduct, “unless it can show that it took immediate and appropriate corrective action.” 29 C.F.R. § 1604.11(d). In order to eliminate sexual harassment, Employers must take all necessary steps to prevent sexual harassment *484from occurring, such as affirmatively raising the subject, expressing strong disapproval, developing appropriate sanctions, informing employees of their right to raise and how to raise the issue of harassment under Title VII, and developing methods to sensitize all concerned. 29 C.F.R. § 1604.11(f).

In addition, the EEOC has issued policy guidance with regard to preventative and remedial action, which further provides that an employer should create and effectively implement an explicit policy against sexual harassment that encourages alleged sexual harassment victims to come forward and includes a procedure for resolving sexual harassment complaints. The EEOC reminds employers that, under Title VII, they have an affirmative duty to eradicate hostile or offensive work environments, and, therefore, Title VII obligates employers to investigate complaints of sexual harassment and deal appropriately with the offending personnel. EEOC advises that when an employer receives a complaint, or otherwise learns of sexual harassment in the workplace, the employer should investigate promptly and thoroughly, then take appropriate corrective action by doing whatever is necessary to end the harassment, make the victim whole and prevent the misconduct from recurring. EEOC notes that, while a range of disciplinary actions may be necessary, generally, the corrective action should reflect the severity of the conduct. EEOC Policy Guidance on Current Issues of Sexual Harassment.10

Pennsylvania has similar legislation and rules.11 Section 5(a) of the Pennsylvania Human Relations Act (PHRA)12 also prohibits discrimination on the basis of sex and has been interpreted to include sexual harassment that is severe or pervasive enough to create a hostile work environment. 43 P.S. § 955(a). Moreover, pursuant to its statutory authority to adopt rules and regulations to effectuate the policies and provisions of the PHRA, the Pennsylvania Human Relations Commission has adopted guidelines on sexual harassment that are very similar to those promulgated by the EEOC.

III.

In the context of arbitration, federal decisions addressing the public policy against sexual harassment in the workplace have focused on an employer’s obligation, as set forth in these various laws and regulations, to provide a safe work environment by eliminating such conduct. In Stroehmann, the employer discharged an employee after investigating a report that he sexually harassed a customer. Without deciding the merits of the charge, the arbitrator ordered the employee’s reinstatement without back pay, concluding that the employer failed to investigate sufficiently and, thus, did not give the employee a- full opportunity to refute the charge before *485terminating him. On appeal, the district court vacated the award, holding that an award reinstating an employee accused of sexual harassment without a determination that the harassment did not occur violates the well-established public policy in favor of employer sanctions against employees who commit sexual harassment. The Third Circuit affirmed, noting that such an award would allow a person who may have committed sexual harassment to continue in the workplace. The court stated, “Certainly, it does not discourage sexual harassment. Instead, it undermines the employer’s ability to fulfill its obligation to prevent and sanction sexual harassment in the workplace. For these reasons, we conclude that reinstatement of this employee without a determination of the merits of the allegation violates public policy.” Stroehmann, 969 F.2d at 1442.

In Newsday, the employer discharged an employee for sexually harassing female co-workers. Athough the arbitrator found that the employee had committed sexual harassment more than once, the arbitrator concluded that progressive discipline was called for and that discharge was too strong a sanction; the arbitrator reinstated the employee, but without back pay. The district court vacated the award and the Second Circuit affirmed, reasoning that the award violated public policy because it returned a known sexual harasser to the workplace, thereby perpetuating a hostile and offensive work environment and inhibiting the employer from carrying out its legal obligation to eliminate such conduct. Newsday.

In cases where courts have upheld arbitrators’ awards reinstating employees who have committed sexual harassment, there still has been some significant sanction against the offending employee. In Chrysler I, the employer discharged an employee for sexually assaulting a co-worker. Before the arbitrator, the employer presented evidence of four additional incidents of sexual misconduct, discovered after the employee was terminated. However, the arbitrator refused to consider anything other than the single incident upon which the discharge was based and concluded that severe discipline short of discharge would be adequate to deter him from further misconduct and demonstrate the employer’s opposition to sexual misconduct. Thus, the arbitrator reduced the penalty to a thirty-day suspension and directed reinstatement with back pay. The Seventh Circuit upheld the award, noting that the arbitrator had considered that, under the circumstances, a modified discipline would be adequate to deter further misconduct.13

In Communication Workers of America v. Southeastern Electric Cooperative of Durant, Oklahoma, 882 F.2d 467 (10th Cir.1989), the employer discharged an employee after a customer reported that he had sexually harassed her. In modifying the discipline imposed, the arbitrator recognized this as a one-time offense and noted the employee’s otherwise unblemished record and his penitent and apologetic attitude.14 The arbitrator concluded *486that the single offense, albeit serious, should not lead to discharge and that a one-month suspension without pay was commensurate with the improper conduct. The Tenth Circuit upheld the award, expressly noting that the arbitrator imposed corrective discipline and had fully incorporated the important public policy against sexual harassment into his reasoning.15

IV.

As observed in Eastern Associated Coal Corporation v. United Mine Workers of America, District 17, 531 U.S. 57, 121 S.Ct. 462, 148 L.Ed.2d 354 (2000), an arbitrator exercises powers delegated from the parties. Both PHA and the Union have bargained for the Arbitrator’s construction of the CBA, and they have granted him the authority to interpret the meaning of its language, including the term “just cause.” The arbitrator acts on the parties’ joint behalf, and the resulting award is effectively the parties’ joint decision, to be treated as if it represented an agreement between the parties themselves; there is no distinction between the award and the contractual agreement. Id. Consequently, in considering the issue before us, we must assume that the CBA itself calls for the remedy set forth in the Arbitrator’s award; the question to be asked is does a CBA requirement to reinstate Mitchell without conditions and make him whole run counter to the identified public policy against sexual harassment in the workplace. See id. In light of the cases discussed above, we conclude that the Arbitrator’s interpretation of the CBA so undermines the stated public policy that it cannot be enforced.

The Arbitrator here found that Mitchell repeatedly and egregiously sexually harassed Broadnax by engaging in behavior that the Arbitrator described as lewd, lascivious and extraordinarily perverse. Nevertheless, the Arbitrator ordered PHA to reinstate Mitchell with back pay, reasoning that Brunetti’s counseling/warning on June 29, 2002, put an end to the sexual harassment and, thus, adequately and effectively addressed Mitchell’s conduct.16 However, PHA’s Policy directs those who are aware of incidents of sexual harassment to bring the matter to the attention of their general manager or to PHA’s EEO Officer so that investigation and corrective action might be undertaken. (R.R. at 99a.) Brunetti, a low-level warehouse supervisor, did not sanction or reprimand Mitchell in accordance with that Policy; he merely directed Mitchell to stop touching *487Broadnax or risk her filing a complaint. Most important, at the time, Brunetti was unaware of the nature and extent of Mitchell’s behavior, which did not come to light until PHA’s EEO Officer completed an investigation of Broadnax’s complaint.17

Because Title VII is designed to encourage the creation of anti-harassment policies and effective complaint mechanisms for reporting harassing conduct, an employer’s investigation of a sexual harassment complaint is not a gratuitous or optional undertaking under federal law, and appropriate corrective action is required following such investigation. Mulvihill v. Top-Flite Golf Company, 335 F.3d 15 (1st Cir.2003). By ordering reinstatement on the basis of Brunetti’s pre-investigation “warning,” the Arbitrator effectively precludes PHA from following its Policy and thereby satisfying its legal obligations to protect against sexual harassment in the workplace. If forced to honor the arbitration award, PHA will not be complying with Title VII and the PHRA, each of which requires that an employer impose appropriate discipline for proven cases of sexual harassment in order to ensure a safe work environment free of sexual harassment.

Although the Union correctly states that the law does not require termination of employees in every case of sexual harassment, the concept of just cause demands a close, albeit not exact, correlation between the employee’s conduct and the employer’s response. Here, the Arbitrator essentially interpreted the CBA as requiring unconditional reinstatement of an employee who committed numerous acts of sexual harassment. To find substantial evidence supporting some type of disciplinary action for Title VII purposes but not for purposes of a “just cause” provision in the CBA would frustrate the important, well-established public policy against sexual harassment in the workplace.18 Thus, in accordance with Stroehmann and the other federal decisions discussed herein, we hold that such an award cannot be enforced.19

For the foregoing reasons, we reverse.20

ORDER

AND NOW, this 15th day of September, 2008, the order of the Court of Common *488Pleas of Philadelphia County, dated September 22, 2004, is hereby reversed.