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decided: February 6, 1989.


Appeal from Order of the Commonwealth Court dated September 3, 1986 at No. 2468 C.D. 1985, affirming arbitration award. Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos, and Stout, JJ. Papadakos, J., files a concurring opinion in which he joins this opinion. Larsen, J., files a dissenting opinion. Zappala, J., files a dissenting opinion in which Larsen, J., joins.

Author: Nix

[ 520 Pa. Page 268]


This appeal concerns a labor arbitration award reversing the dismissal of an employee of the Pennsylvania Liquor Control Board ("LCB"). When the award was affirmed by the Commonwealth Court, the LCB petitioned this Court for an allowance of appeal, which we granted because of the importance of the issues involved.

The subject of the arbitration award was a Mr. Albert McCardle, who, until July of 1984, was employed by the LCB as a General Manager 1B, a first-level supervisory

[ 520 Pa. Page 269]

    position. Mr. McCardle was assigned to an LCB store located in Bridgeville, Pennsylvania, and, in accordance with his job classification, was responsible for the store and the direction of its personnel. On July 13, 1984, McCardle was suspended from his position, in the course of an LCB investigation relating to the falsification of store documents and the disappearance of moneys or other property from the Bridgeville store.

The LCB investigation brought forth evidence that Mr. McCardle had falsified store business records and had misappropriated funds belonging to his employer. As to the business records, the investigation revealed that McCardle had committed numerous improprieties, including the following:

(a) On four occasions falsified store records so as to indicate the non-receipt of merchandise which had in fact been received by the store.

(b) On one occasion manipulated store records to conceal the receipt of a customer's cash deposit.

(c) On one occasion falsified the inventory count.

(d) On two occasions voided records of retail sales that had in fact been made.

(e) On more than ninety occasions rang improper product codes or improper product prices on cash registers operated by him.

An audit disclosed that $2,981.38 in store funds was missing; of that amount, $1,384.91 was directly attributed to McCardle. The LCB proceeded to recover the latter amount from his salary.

On July 31, 1984, about two weeks after McCardle's suspension, and apparently while the LCB investigation was still in progress, McCardle entered a Veterans Administration Hospital. Shortly thereafter, McCardle's union told the LCB that he was suffering from mental illness. In response to that assertion, the employer asked that it be supplied with substantiating information by August 17, 1984. When no such information was provided, the LCB, by a decision dated August 23, 1984, terminated McCardle's

[ 520 Pa. Page 270]

    employment. The stated basis for the discharge was that he had manipulated LCB documents, had misappropriated Commonwealth funds, and had failed to perform the duties of his position.*fn1

As a General Manager 1B, McCardle was represented by the Independent State Stores Union ("Union"). On August 28, 1984, the Union advised the LCB of its intention to grieve his dismissal. The Union alleged that McCardle's misconduct was caused by "severe psychological problems which resulted in bizarre and unexplainable behavior." Together with that contention, the Union asked that McCardle be placed on sick leave until he was able to resume his duties. After the grievance was denied at the prescribed preliminary stages of consideration, the Union took the matter to arbitration, pursuant to a labor agreement in force between the Union and the Commonwealth of Pennsylvania.

The labor agreement, styled "Memorandum of Understanding," is relatively laconic in its treatment of the employer's disciplinary powers. The central provision on that subject states: "The Commonwealth shall not demote for disciplinary reasons, suspend, discharge or take any other disciplinary action against any manager without just cause." (Emphasis added.) Although the Memorandum itself does not give a definition of "just cause," such is provided in the Work Rules and Regulations published by the LCB. In those Rules the agency set forth a list of offenses which could result in "disciplinary action" against an employee. The Rules also specify a class of offenses which may provide "just cause" for immediate dismissal. Included in the latter group of designated infractions are: "Theft of Commonwealth funds or property" and "Serious violation of counter procedures."

Regarding the arbitration of grievances, the Memorandum of Understanding provides, inter alia, that "[t]he

[ 520 Pa. Page 271]

    decision of the arbitrator shall be final and binding on both parties." In the matter of McCardle's grievance, the parties stipulated that only two questions were present for the arbitrator's consideration: "Was the [g]rievant dismissed for just cause, and if not, what shall the remedy be?"

At the hearing before the arbitrator, the grievant did not contest the charges that were the basis for his dismissal. Indeed, Mr. McCardle admitted his guilt. The Union, however, renewing its contention that McCardle's breach of trust was the product of mental illness, argued that he was not responsible for his actions and thus should have received a penalty less severe than discharge.

As to McCardle's mental condition, the Union established that he had undergone psychiatric treatment at the Veterans Hospital for approximately seven months following his termination by the LCB. His period of treatment included both in-patient and out-patient care. The Union also put into evidence the opinions of a psychologist and a psychiatrist from the hospital, both of whom stated that the grievant was suffering from a stress-related mental disorder. The employer offered no evidence to ...

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