Plaintiff, City of Saginaw, and defendant, Michigan Law Enforcement Union, Teamsters Local 129, are parties to a collective-bargaining agreement. Defendant is the exclusive bargaining representative for all full-time, sworn police officers (excluding the chief of police, captains, lieutenants, and sergeants) employed by *546 plaintiff. Plaintiff appeals as of right from a court order confirming an arbitration award which granted defendant’s grievance and held plaintiff in violation of the parties’ collective-bargaining agreement by requiring bargaining-unit members to forfeit one paid workday each month. 1
In 1981, the City of Saginaw encountered serious problems in balancing the fiscal 1981-1982 budget. Even after elimination of 91 employment positions, the city found it necessary to further reduce salary costs. Therefore, in May, 1981, the city proposed the "unpaid-day-off” program as a way to generate a reduction in salary costs. Under this program, the work hours of all city employees would be reduced by one day each month. In a letter dated May 15, 1981, the city informed defendant’s president of the serious financial problems facing the city and that it was necessary to reduce salary costs in defendant’s bargaining unit by $215,364. The city proposed the unpaid-day-off program as a method to effectuate the salary reduction and invited defendant to suggest viable alternatives. A number of meetings were held, at which various proposals, such as outside employment and early retirement, were discussed, the city determined that implementation of the proposed unpaid-day-off program was the best alternative to reduce salary costs. On June 23, 1981, the city sent all bargaining-unit employees a letter notifying them that their hours of employment would be reduced pursuant to the implementation of the unpaid-day-off program. Defendant, contending that the reduction of hours was a violation of the collective-bargaining agreement, filed a grievance protesting the program._
*547 Article III of the bargaining agreement includes among the employer’s retained prerogatives the right to lay off and schedule the work of bargaining-unit members, except where limited by express provisions of the agreement. Article VI, § 1, establishes the normal workweek as five consecutive days on duty and two consecutive days off duty. Article VI, § 3, provides that an employee is entitled to overtime pay if the employee works more than 8 hours in any 24-hour period or more than 40 hours in any weekly pay period. Article VI, § 5, which establishes the basic shifts for patrol officers, states: "The basic shift hours shall not be changed except by mutual agreement of Employer or Union except in the event of emergencies.” Members of the bargaining unit are paid on an annual-salary basis. The salary schedules, attached to the agreement, result from statutory arbitration pursuant to MCL 423.238; MSA 17.455(38).
Article VII mandates that layoffs "shall be made under the provisions of Act 78 of the Public Acts of 1935, as amended”. "Act 78”, as referred to by the parties, is the firemen and policemen civil service act, MCL 38.501 et seq.; MSA 5.3351 et seq. Section 14 of this act provides in part:
"If for any reasons of economy it shall be deemed necessary by a city, village or municipality to reduce the number of paid members of any fire or police department, then said municipality shall follow the following procedure:
"Such removals shall be accomplished by suspending in numerical order commencing with the last man appointed to the fire or police department, all recent appointees to said fire or police department until such reductions shall have been accomplished: Provided further, however, That in event the said fire or police department shall again be increased in numbers to the strength existing prior to such reductions of members *548 the said firemen or policemen suspended last under the terms of this act shall be first reinstated before any new appointments to said fire or police department shall be made.” MCL 38.514; MSA 5.3364.
Finally, Article XIII provides for a multi-step grievance procedure culminating in final and binding arbitration for "matters involving the interpretation, application or enforcement of the terms” of the agreement. Under Step 4, the grievant must elect whether to proceed under Act 78 or to binding arbitration under Step 5. Section 3 of Article XIII states that "the arbitrator shall have no power to modify or detract from the terms” of the agreement.
The parties’ dispute over the unpaid-day-off program was submitted to arbitration in accordance with Article XIII, Step 5, of the collective-bargaining agreement. Arbitrator Allan Walt was selected by the parties through the Federal Mediation and Conciliation Service and the hearing was held on September 16, 1981. In an opinion and award dated October 23,1981, the arbitrator held:
"The grievance is granted.
"The employer violated the express provisions of Article VII of the collective-bargaining agreement in requiring bargaining-unit members to forfeit one paid workday each month.
"The employer shall cease and desist from such scheduling, and each member of the bargaining unit forthwith shall be paid 8 hours pay at the appropriate contractual rate for each workday lost since implementation of the program on July 1, 1981.”
The arbitrator found that a one-day-per-month reduction in work for each member of the bargaining unit was tantamount to a work-force reduc *549 tion. The arbitrator based this finding on the "submitted evidence” which established that a loss of one work day per month per man resulted in the equivalent of 5.22 officers lost to the department. Thus, while the total number of officers in the department would remain the same, it followed that there would be fewer officers scheduled for work each month, at least on some shifts. The arbitrator concluded that, by requiring bargaining-unit members to forfeit one paid workday each month, the city had reduced the number of paid members of the police department, for reasons of economy, within the meaning of § 14 of Act 78. Therefore, the city had violated Article VII of the collective-bargaining agreement by failing to follow the procedure mandated by § 14 of Act 78, i.e.: "[Removals shall be accomplished by suspending in numerical order commencing with the last man appointed to the * * * police department, all recent appointees to said * * * police department until such reduction shall have been accomplished.” MCL 38.514; MSA 5.3364.
The arbitrator also concluded that other provisions of the collective-bargaining agreement supported his findings that the unpaid day off was in fact a reduction in the work force. Article VI, § 1, established that the normal work week was five consecutive days on duty and two consecutive days off. The unpaid day off would create a variance in the normal workweek and avoidance of that variance could only be accomplished by following the procedure of Act 78. The unpaid workday would also effectuate losses in Article VII, § 3, overtime pay, a unilateral change in the basic shift provisions of Article VII, § 5, and a unilateral reduction of the annual salary reflected in Article XXIV, § 1, Appendix A. Thus, the arbitrator granted the relief requested in defendant’s grievance.
*550
Meanwhile, during the pendency of the arbitration proceeding, Saginaw County Prosecutor Robert L. Kaczmarek filed a complaint in Saginaw Circuit Court for an injunction against the city.
Kaczmarek Prosecuting Attorney ex rel Teamsters Local 129 v City of Saginaw
(Docket No. 81-16555-AZ-FY-1) (hereinafter
Kaczmarek).
The complaint, filed on August 27, 1981, requested that the city be enjoined from implementing the unpaid-day-off program in violation of
Thereafter, on November 12, 1981, the city filed a complaint in Saginaw County Circuit Court to vacate the arbitration award. The case was assigned to Judge Gilbert. In an opinion dated December 30, 1982, Judge Gilbert held that the arbitration award must be confirmed. Regarding the applicability of the court’s previous decision in Kaczmarek, Judge Gilbert stated:
"In Article XIII, § 1, Step 5 the parties hereto agreed that the award of the arbitrator should be final and binding. Based upon this agreement this court cannot substitute its own view of Act 78 for that of the arbitrator. The court is of the opinion that even though its view of Act 78 is different than that of arbitrator Walt *551 it is incumbent upon this court to confirm the award, there being no showing of fraud or mistake.”
The court further held that the arbitrator did not exceed his jurisdiction, as the decision was drawn from the essence of the contract and did not demonstrate a manifest disregard of the law or of any strong public policy. Accordingly, an order was entered confirming the arbitrator’s award, from which the city appeals as of right.
On appeal, plaintiff first maintains that the circuit court failed to apply an appropriate standard of review to the arbitrator’s decision. According to plaintiff, the court should not have deferred to the arbitrator’s interpretation of MCL 38.514; MSA 5.3364.
The United States Supreme Court set forth the parameters for judicial review of arbitrators’ decisions in the
Steelworkers
trilogy.
United Steelworkers of America v American Mfg Co,
"Questions concerning the scope of judicial review of arbitrability and the awards made by arbitrators in labor disputes have been almost a plague on both state and Federal courts for years, but the eminently proper *552 attitude that we have taken is one of 'hands off. The party that ends up holding the short end of the arbitrator’s award may try desparately to fit the facts within the narrow doorway to the courts, but the judicial policy is clear. In the Steelworkers trilogy, the United States Supreme Court held that the merits of either the grievance or the arbitration award are irrelevant when a Federal court is asked to enforce an arbitration agreement or award thereunder. Judicial review is limited to whether the award 'draws its essence’ from the contract, whether the award was within the authority conferred upon the arbitrator by the collective bargaining agreement. Once substantive arbitrability is determined (as it was in the court below) judicial review effectively ceases. The fact that an arbitrator’s interpretation of a contract is wrong is irrelevant.” (Footnotes omitted; emphasis added.)
Citing
DAIIE v Gavin,
Plaintiff next argues that because the arbitrator was interpreting a statute, the arbitrator’s interpretation does not prevail over a court’s interpretation of the statute. Plaintiff relies on
Alexander v Gardner-Denver Co,
Plaintiff argues that
Gardner-Denver
stands for the proposition that a court’s interpretation of a statute prevails over an arbitrator’s interpretation, citing the Supreme Court’s statement: "If an arbitral decision is based 'solely upon the arbitrator’s view of the requirements of an enacted legislation’ rather than on an interpretation of the collective bargaining agreement, the arbitrator has 'exceeded the scope of his submission,’ and the award will not be enforced.”
The differences between the instant case and Gardner-Denver are readily apparent. In the instant case, plaintiff did not initiate an independent civil action, pursuant to a statutory scheme, for *554 judicial consideration of its rights; rather, it filed a complaint to have a binding arbitration award vacated. Thus, plaintiff was not seeking judicial consideration of rights separate from those considered by the arbitrator in resolving the contractual dispute. Additionally, unlike the collective-bargaining agreement in Gardner-Denver, the instant agreement incorporates the terms of that statute. By specifically incorporating the terms of the statute into the contract, the parties empowered the arbitrator to interpret the statute. Statutory interpretation became integrated with contractual interpretation.
Also distinguishable is
Detroit Fire Fighters Ass’n v Detroit,
The circuit court employed the correct standard of review, and plaintiff’s efforts to expand or circumvent this standard are ineffectual.
Plaintiff next claims that the arbitrator’s award should be vacated because the unpaid-day-off program was not an arbitrable issue under the terms of the contract.
Plaintiff first argues that the dispute was not arbitrable because defendant waived arbitration by electing to proceed under Act 78. Article XIII, Step 4, provides: "Prior to submission of the grievance at this level, the grievant shall elect whether he desires to proceed under Act 78 or, under the grievance article, to arbitration”. Both the circuit
*555
court and defendant state that the parties agreed to submit the dispute to arbitration on June 12, 1981. The arbitrator’s decision does not indicate when defendant decided to proceed to Step 5 and request arbitration. However, plaintiffs post-hearing arbitration brief also indicates that on June 12, 1981, the parties agreed to submit the matter to arbitration pursuant to the terms of the collective-bargaining agreement. This indicates two things. First, defendant did elect to proceed under the collective-bargaining agreement and any further action by defendant under Act 78 would have merely been a defense in the
Kaczmarek
action. Second, it appears that plaintiff participated in the arbitration hearing without raising the issue of the substantive arbitrability of the dispute. This may constitute a waiver of plaintiffs right to subsequently challenge arbitrability after the ultimate resolution of the dispute.
Saginaw v Saginaw Firefighters Ass’n,
The next issue is whether the circuit court correctly determined that the dispute over the unpaid-day-off program was a proper subject for arbitration under the collective-bargaining agreement. Once this question is answered affirmatively, "judicial review effectively ceases”.
Ferndale, supra,
p 643. While a question concerning the substantive arbitrability of a dispute is a matter for a court, "the judicial inquiry 'is confined to ascertaining whether the party seeking arbitration is making a
claim which on its face
is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator.’ ”
Kaleva-Norman-Dickson, supra,
p 591, quoting
American Mfg Co, supra,
*556 Under this standard, the dispute in the instant case is "on its face” governed by the contract. Article XIII provides for a multi-step grievance procedure culminating in final and binding arbitration for "matters involving the interpretation, application or enforcement of the terms” of the agreement. Article VII mandates that layoffs shall be made under the provisions of Act 78. Section 14 of Act 78 provides that "[i]f for any reasons of economy it shall be deemed necessary by a city, village or municipality to reduce the number of paid members of any fire or police department, then said municipality shall follow the following procedure”. (Emphasis added.) MCL 38.514; MSA 5.3364. Under the unpaid-day-off program, the work hours of the employees were reduced by one day each month. The question of whether the unpaid-day-off program was a "reduction” or a "layoff” in violation of Article VII, which incorporated by reference the provisions of Act 78, was a proper subject for arbitration, as the claim "on its face” is governed by the contract. Further, since there was no express provision excluding defendant’s grievance from arbitration, the circuit court correctly determined that the dispute was arbitrable. Kaleva, supra, p 592.
Plaintiff also maintains that the award should have been vacated because the arbitrator exceeded his jurisdiction, and because the award offended public policy. We reject both arguments. The crux of plaintiff’s "jurisdictional” argument is that, since the arbitrator did not follow Judge Gilbert’s decision in Kaczmarek, he ignored judicial interpretation of Act 78 and therefore altered the established meaning of the contract. As we have observed, however, the arbitrator’s interpretation of Act 78 was an integral part of his construction *557 of the contract; and, under the proper scope of review as discussed supra, the courts are not free to substitute their judgment for that of the arbitrator in this matter. Because Act 78 was incorporated into the contract, the arbitrator was not bound by Judge Gilbert’s interpretation of the statute. The arbitrator found that, as utilized in the labor agreement, the word "layoff” extends to all work-force reductions which are not disciplinary, that is, those which are not imposed "for cause” and are the result of economic need. Therefore, in the arbitrator’s opinion, the unpaid-day-off program was a work-force reduction within the meaning of § 14 of Act 78. In reaching this decision, the arbitrator interpreted all the provisions of the collective-bargaining agreement. The arbitrator also found that the unpaid day off would create a variance in the normal workweek as established by Article VII, § 1, would result in losses in overtime pay as established in Article VII, § 3, and would result in a unilateral change in the basic shift provisions of Article VII, § 5, and a unilateral reduction in the annual salary reflected in Article XXIV, § 1. It is not our function, nor that of the trial judge, to deliberate upon whether this interpretation was erroneous. Because the award clearly drew its essence from the contract, the trial court properly declined to disturb it.
The second prong of plaintiffs argument is that the award violated public policy, because it essentially requires plaintiff to lay off police officers in order to survive its financial crisis.
An exception to the general rule of judicial deference to arbitrators’ awards is that a court may decline to enforce an award that is contrary to public policy.
Fraternal Order of Police v Bensinger,
Finally, plaintiff’s contention that the arbitration proceeding was barred by the circuit court’s proceeding in
Kaczmarek
on the grounds of res judicata is meritless. See
Auto-Owners Ins Co v Higby,
Affirmed.
Notes
Defendant initially filed a claim of cross-appeal with this Court. However, pursuant to the parties’ stipulation, an order was entered March 26, 1984, dismissing the cross-appeal.