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decided: February 1, 1983.


Appeal from the Order of the Court of Common Pleas of Philadelphia County in the case of Board of Education of the School District of Philadelphia v. International Brotherhood of Firemen and Oilers, Local 1201, AFL-CIO, No. 182 November, 1981.


Vincent J. Salandria, Assistant General Counsel, with him, Eugene F. Brazil, General Counsel, for appellant.

Michael Brodie, with him, Mark P. Muller, Freedman and Lorry, P.C., for appellee.

President Judge Crumlish, Jr. and Judges Rogers, Blatt, Craig and Doyle. Opinion by President Judge Crumlish, Jr. Judges Rogers and Blatt dissent.

Author: Crumlish

[ 71 Pa. Commw. Page 498]

The Philadelphia County Common Pleas Court, by order, affirmed a grievance arbitration award favorable to the International Brotherhood of Firemen and Oilers, Local 1201, AFL-CIO (Union).*fn1 The Board of Education of the School District of Philadelphia (District) appeals. We vacate and remand.

Following a three-day strike in February of 1981, the Union and the District entered into a collective bargaining agreement (Agreement) for the period from September 1, 1980 to August 31, 1982. This Agreement provided, inter alia, for: (1) no wage increase from September 1, 1980 to August 31, 1981; (2)

[ 71 Pa. Commw. Page 499]

    a four percent lump sum bonus payable by September 1, 1981; (3) an additional ten percent wage increase effective September 1, 1981; and (4) increased contributions by the District to the Union's hospitalization, health and welfare, and legal services funds.

Since its proposed budget for the 1981-1982 school year did not receive full funding approval from the Philadelphia City Council, on May 29, 1981, the District adopted a revised budget reflecting a $60 million funding deficit. In order to balance its budget as required by law,*fn2 the District negated certain benefit commitments made to the Union, including the ten percent wage increase and the additional contributions to the Union's medical and legal funds. As a result, the District realized a saving (and the Union members a corresponding loss) of approximately $7.3 million.*fn3

The Union, alleging that the District had violated the Agreement, filed a grievance. The District argued that, since City Council had failed to appropriate the entire amount requested for its originally-proposed budget, full satisfaction of its contractual promises was legally impossible. The arbitrator, although recognizing

[ 71 Pa. Commw. Page 500]

    that proven impossibility of performance may excuse a party from meeting its negotiated commitments, found that the District had failed to demonstrate that its obligations to the Union could not be met out of existing revenues. Accordingly, the arbitrator upheld the Union's grievance and ordered that, "unless and until such proof [of impossibility of performance] is presented and/or the District bargains with the Union for the elimination, modification or deferral of the contractual commitments [such commitments] must be met by the School District." The common pleas court affirmed, and this appeal followed.

Initially, we note that, our review of an arbitrator's decision being highly circumscribed, an award will not be overturned if it draws its essence from the collective bargaining agreement. Greater Johnstown Area Vocational-Technical School v. Greater Johnstown Area Vocational-Technical Education Association, 69 Pa. Commonwealth Ct. 208, 211, 450 A.2d 787, 789 (1982). As stated by our Supreme Court in Leechburg Area School District v. Dale, 492 Pa. 515, 520-21, 424 A.2d 1309, 1312-13 (1981):

The essence test requires a determination as to whether the terms of the agreement encompass the subject matter of the dispute. Where it is determined that the subject matter of the dispute is encompassed within the terms of the agreement, the validity of the arbitrator's interpretation is not a matter of concern to the court.

Thus, if the arbitrator's award "can in any way be derived from the agreement, viewed in light of its language, its context, and any other indicia of the parties' intention . . . ," it will be respected by the judiciary. Community College of Beaver County v. Community College of Beaver County, Society of the Factulty (PSEA/NEA), 473 Pa. 576, 594, 375 A.2d

[ 71 Pa. Commw. Page 5011267]

, 1275 (1977) (quoting Ludwig Honold Manufacturing Co. v. Fletcher, 405 F.2d 1123, 1128 (3rd Cir. 1969)).

The subject matter of this dispute (i.e., the District's refusal to honor the duly-negotiated wage and benefit increases) is clearly encompassed within the terms of the Agreement, which specifically provides for such increases. The District, however, contends that the arbitrator exceeded the scope of his authority and that, consequently, the award does not draw its essence from the Agreement. Citing Article IV, ยง 2(i) of the Agreement,*fn4 the District argues that the arbitrator's award conflicts with the Court's decision in Philadelphia Federation of Teachers v. Thomas, 62 Pa. Commonwealth Ct. 286, 436 A.2d 1228 (1981) (hereinafter Philadelphia Teachers Case).*fn5 In the Philadelphia Teachers Case,*fn6 we held that each year of a collective bargaining agreement negotiated under the

[ 71 Pa. Commw. Page 502]

Public Employe Relations Act*fn7 (PERA) is "subject to a condition precedent . . . that the funding of the contract by the independent legislative bodies . . . would be forthcoming." Id. at 296, 436 A.2d at 1233. If that contingency does not occur, mutual obligations do not arise and reciprocal duties are not created. Id. at 297, 436 A.2d at 1233.

The arbitrator was unconvinced, based on the evidence, that the District had insufficient funds to satisfy its contractual obligations to the Union. Since the District was seeking to avoid the liabilities of a previously-negotiated pact, the arbitrator imposed on the District the burden of demonstrating, by adequate proof, exculpatory impossibility of performance. Based on our holding in the Philadelphia Teachers Case, however, we conclude that, in fact, the Union is required to establish occurrence of a condition precedent,*fn8 rather than the District being compelled to demonstrate impossibility of performance.*fn9 Since the burden

[ 71 Pa. Commw. Page 503]

    of proof was imposed on the wrong party and since, in any event, an incorrect element to be established (to wit, impossibility of performance) was set forth by the arbitrator, we are compelled to conclude that the arbitrator's decision is inconsistent with the law and, consequently, that the award does not draw its essence from the Agreement.*fn10

We are, however, particularly sensitive to the Union's dilemma. Although the public employee unions who contract with the School District knowingly incur certain risks,*fn11 they should not be made to suffer unfairly and without due consideration if the anticipated funding for their respective bargaining agreements is not forthcoming. The integrity of the negotiated commitments must be maintained if possible. The Union, then, must be given the opportunity to establish the occurrence of the condition precedent

[ 71 Pa. Commw. Page 504]

(i.e., the receipt of funding necessary to enable the District to meet fully its contractual obligations with the Union). Accordingly, we remand for a rehearing by the arbitrator for proceedings not inconsistent with this Opinion.

Vacated and remanded.


The Philadelphia County Common Pleas Court order, No. 182, November, 1981, dated July 27, 1982, is hereby vacated and remanded for proceedings not inconsistent with this Opinion.

Judges Rogers and Blatt dissent.


Vacated and remanded.

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