Contract Interpretation Standards
Revised by Douglas Swanson, June 2022
Original author: Paul Rainsberger, JD
Definition of Terms
Contract interpretation involves a process of determining, or giving meaning to, words in a collective bargaining agreement. Grievances involving contract interpretation may end up in arbitration where collective bargaining agreements are silent, ambiguous, or with conflict between two or more provisions in the agreement. Arbitrators, therefore, are injected into the role of determining the mutual intent of the parties through the process of arbitration. The following information is designed to acquaint trade unionists with general arbitration standards of contract interpretation.
In its 1960 Enterprise Wheel decision, the US Supreme Court established a doctrine to limit an arbitrator's role in interpretation of collective bargaining agreements. The central issue defined in the Enterprise Wheel doctrine is summed up in the following excerpt from the decision of the court.
"An Arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When an arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award."
Accordingly, arbitrators and the courts have established over time a set of standards and guidelines to ensure that decisions fall within the parameters of the Enterprise Wheel doctrine. Union representatives, therefore, should consider some of the relevant guidelines when handling grievances involving:
- If the wording of the contract is clear and definite, the clear language should be enforced. This is the so-called "plain meaning rule" of labor arbitration. In cases where the language in dispute is deemed clear and unambiguous, arbitrators are unlikely to consider extrinsic forms of evidence such as the intent of the parties, bargaining notes or history, or practices. Words should be given their ordinary and popularly accepted meaning in the absence of anything indicating that they were used in a different sense or that the parties intended some special or technical meaning. Language should be crafted so that an uninvolved 3rd party can clearly understand the meaning of the passage weeks or months later. A reliable dictionary definition will generally be used. Punctuation is also important as the placement of punctuation can change the meaning of sentence or phrase.
- The contract should be interpreted as a whole. When both general provisions and special provisions concern the same thing, the special provisions will generally prevail. When both general provisions and special provisions concern the same thing, the special provisions will generally prevail. Written provisions imply the exclusion of everything not mentioned. Unwritten provisions may exist if they are consistent with the written provisions. When a provision in the contract has been modified, the version of the agreement that was in effect at the time of the incident should be used when mediating the dispute. When the timing of the change does not create an issue, the most recent version applies.
- If the wording of the contract is unclear, vague, and indefinite, the interpretation of the parties and their practices will carry considerable weight. Extrinsic aids to interpretation may be useful in determining the intent of the parties who drafted the language. Such aids may include bargaining history, customs or practices, industry customs or practices, and prior settlements involving the same language.
- Arbitrators may look deeply into the origins of the contract provision in dispute if the meaning is not clear. Who proposed the language may have considerable weight with an arbitrator if the language comes into dispute? What was the problem that they were trying to address? What benefit they were trying to create? Was the language originally proposed countered? Were other proposals made before the final language was agreed upon? Who made them, and what was said about those drafts? All these same questions may be asked when language is changed. Why was it changed? Who was the moving party, and what was their purpose for changing the existing provision?
- Lastly, the interpretation considered by the arbitrator must be a reasonable one. Arbitrators will generally look for a reasonable and equitable interpretation. Whenever two interpretations are possible, one making the agreement valid and lawful and the other making it unlawful, the former will be used.
Always remember that neither unions nor management should expect to achieve through arbitration what it could not through negotiations. In cases where arbitrators have interpreted contract language, they have erred only on the side of reasonableness and equity, and they have rarely endeavored to administer "industrial justice."