          IN THE COMMONWEALTH COURT OF PENNSYLVANIA


School District of Philadelphia,         :
                          Appellant      :
                                         :
                   v.                    :
                                         :
Philadelphia Federation of Teachers,     :   No. 2301 C.D. 2015
AFT, Local 3, AFL-CIO                    :   Argued: October 17, 2016


BEFORE:      HONORABLE RENÉE COHN JUBELIRER, Judge
             HONORABLE JOSEPH M. COSGROVE, Judge
             HONORABLE JAMES GARDNER COLINS, Senior Judge


OPINION
BY JUDGE COSGROVE                            FILED: June 8, 2017

             The School District of Philadelphia (District) appeals from an order of
the Court of Common Pleas of Philadelphia County (trial court) which denied the
District’s Motion to Vacate an Arbitration Award (Award) that sustained the
grievance of the Philadelphia Federation of Teachers (Union). Upon review, we
affirm.
                               I. BACKGROUND

             Anticipating a funding deficit for the 2013-2014 academic year, the
District laid off several thousand employees in June of 2013 and closed 31 schools.
Every school counselor was laid off. During the summer of 2013, the District
received additional funds which were enough to recall some, but not all, of the
counselors laid off.    Due to the District’s financial constraints, it believed
insufficient funds existed to place a full-time counselor in the smallest schools. By
late fall of 2013, every school had a counselor assigned to it, with the smaller
schools in the District sharing a counselor.         The District recalled counselors
without preference for seniority and placed them in the schools they served the
prior academic year.
               The Union filed a grievance alleging the collective bargaining
agreement (CBA), which expired on August 31, 2013, required the recall of
counselors in order of seniority and they be given their pick of school on the same
basis. The Union grievance also alleged the CBA required the recall of counselors
in sufficient numbers to place a counselor full-time in each school, regardless of
school size. The matter went to arbitration, and hearings were held on September
10, 2014 and January 20, 2015. Arbitrator Ralph Colflesh, Jr. (Arbitrator) issued
his Award on June 29, 2015, sustaining the Union’s grievance in its entirety.
               The District filed a timely Petition to Vacate or Modify the Award
with the trial court, which the trial court denied on November 10, 2015. The
District appealed to this Court.

                                      II. ISSUES

      As set forth in its brief, the District raises two questions on appeal:

      (1) [w]hether the essence test and Section 7302(d)(2) of the Uniform
          Arbitration Act[1] [UAA] require[s] the [] Award to be vacated in
          its entirety because, once the parties’ [A]greement expired, Act 46
          [][2] and decades of precedent gave the School District the right to
          recall and reassign counselors without regard to numerical quotas


      1
          42 Pa. C.S. § 7302(d)(2).

      2
         Act of April 27, 1998, P.L. 270, 24 P.S. § 6-696. Act 46 added Section 696 to the
Public School Code of 1949, Act of March 10, 1949, P.L. 30, as amended, 24 P.S. §§ 1-101 –
27-2702.



                                            2
             or seniority, such matters having become non-mandatory subjects
             of bargaining by virtue of Section 696(k)(2)[3] of [Act 46]; and
      (2) [w]hether the Award as to the two seniority-based grievances
          should be vacated under the essence test where the [A]greement
          was devoid of language creating any such seniority rights, no
          cognizable past practice existed, and the Arbitrator rewrote the
          [A]greement rather than interpreting it.
(Appellant’s Br. at 1-2.)

                                      III. DISCUSSION

                                          A. Act 46

                The District argues Section 696(k)(2) of Act 46, when viewed in light
of prior decisions of our Supreme Court, mandates that this Court vacate the
Award because once the CBA expired, the provisions of Act 46 controlled, thereby
enabling the District to impose new non-mandatory terms unilaterally, without
engaging in prior bargaining under the CBA. (Appellant’s Br. at 21.)

      Section 696(k)(2) of Act 46 provides in pertinent part:

                (2) No distressed school district of the first class shall be
                required to engage in collective bargaining negotiations or enter
                into memoranda of understanding or other agreements
                regarding any of the following issues:
                …
                       (ii) Decisions related to reductions in force.
                      (iii) Staffing patterns and assignments, class schedules,
                academic calendar, places of instruction, pupil assessment and
                teacher preparation time.

24 P.S. §6-696(k)(2)(ii),(iii).

      3
          24 P.S. §6-696(k)(2)(i)-(vi).

                                              3
               In support of its argument, the District cites City of Pittsburgh v.
Pennsylvania Labor Relations Board, 653 A.2d 1210 (Pa. 1995), which held that a
public employer is entitled to act unilaterally after expiration of a collective
bargaining agreement with respect to an issue that is a non-mandatory subject of
bargaining.
               In City of Pittsburgh, the city, a party to the collective bargaining
agreement with the labor union, enacted an ordinance establishing a revised
pension benefit plan. Such action was required for participation in the Municipal
Pension Plan Funding Standard and Recovery Act (Act 205),4 which provided state
financial assistance to municipalities whose pension systems were determined to
be financially distressed. The union filed a charge alleging the city violated the
Public Employe Relations Act (PERA)5 in implementing a revised pension benefit
plan without first entering into mandatory negotiations with the union.
               The essential issue raised by City of Pittsburgh was whether the
provisions of Act 205 conflicted with PERA and, if a conflict existed, how must it
be resolved. City of Pittsburgh, 653 A.2d at 1212. Section 607(e) of Act 205
explicitly provides that “[a] revised benefit plan for newly hired municipal
employees shall be developed with consultation with representatives of the
collective bargaining unit applicable to the affected type of municipal employee, if
any, and shall be within the scope of collective bargaining pursuant to the
applicable law subsequent to the establishment of the revised benefit plan.” 53
P.S. §895.607(e).

      4
          Act of December 18, 1984, P.L. 1005, as amended, 53 P.S. §§895.101-895.1003.

      5
        Public Employe Relations Act, Act of July 23, 1970, P.L. 563, as amended, 43 P.S.
§§1101.101-1101.2301.

                                              4
             Section 701 of PERA mandates bargaining “with respect to wages,
hours, and other terms and conditions of employment.” 43 P.S. §1101.701. The
parties did not disagree that pensions were included within this mandated
bargaining. City of Pittsburgh, 653 A.2d at 1212. Section 702 of PERA provides
that public employers need not bargain over matters of inherent managerial policy.
43 P.S. §1101.702.         Participation in the Act 205 recovery program is not
mandatory. City of Pittsburgh, 653 A.2d at 1214.
             The Supreme Court read Section 607(e) of Act 205 together with
Section 702 of PERA and concluded the city’s decision to avail itself of the
assistance provided by Act 205 constituted an inherently managerial decision. Id.
at 1213-1214. Because Section 607(e) of Act 205 allowed the city to establish a
revised plan without mandating labor negotiations, the legislature effectively
brought that activity within the ambit of Section 702 (inherent managerial activity).
Id. at 1214. The legislative creation of the opportunity to participate gave the city
authority to participate fully, even when doing so expanded the scope of inherently
managerial activity. Id.
             Here, the District argues City of Pittsburgh is analogous because that
decision similarly concerned a financially-distressed entity and a specialized
financial distress statute. (Appellant’s Br. at 29.) The labor contract at issue in
City of Pittsburgh was set to expire December 31, 1987.
             Similarly, the District here reasons that its CBA with the Union
likewise expired and the decision to recall counselors out of seniority order, assign
them to schools without regard to seniority, and require smaller schools share a
single counselor constituted non-mandatory subjects of bargaining within the
District’s inherent managerial authority. (Appellant’s Br. at 25-26.)


                                          5
                 City of Pittsburgh is distinguishable from the present matter. The
provisions of Section 696 of Act 46 become operative upon the declaration that a
school district of the first class is distressed.6 The District has no ability to opt in
or out once it has been declared distressed. The District was so declared in 2001.
The city of Pittsburgh’s decision to “avail itself of the assistance offered by Act
205 [was] an inherently managerial decision.” City of Pittsburgh, 653 A.2d at
1213. By acting within the mandatory constraints of Section 696 of Act 46, the
District cannot be said to have made an inherently managerial decision.
                 More compelling than City of Pittsburgh is this Court’s decision in
Philadelphia Federation of Teachers v. School District of Philadelphia, 109 A.3d
298 (Pa. Cmwlth. 2015) (PFT),7 which addressed the very argument presented by
the District here.
                 In PFT, this Court noted that “there is no language in section
693(a)(1) 8 or [section] 696 empowering the [School Reform Commission] to
unilaterally impose new economic terms and conditions of employment on a

       6
           Section 696(a) of Act 46 states in pertinent part:

       Within thirty (30) days of a declaration by the Secretary of Education that a
       school district of the first class is distressed under section 691(c), a School
       Reform Commission shall be established consisting of four members initially
       appointed by the Governor and one member initially appointed by the mayor of
       the city coterminous with the school district.

24 P.S. §6-696(a).

       7
        Petition for Allowance of Appeal was granted in PFT by the Pennsylvania Supreme
Court on August 10, 2015. The Court affirmed on other grounds. Philadelphia Federation of
Teachers, AFT, Local 3, AFL-CIO v. School District of Philadelphia, 144 A.3d 1281 (Pa. 2016).

       8
        Section 693 of the Public School Code was added by the Act of December 15, 1959,
P.L. 1842, as amended, 24 P.S. § 6-693.

                                                   6
bargaining unit.” PFT, 109 A.3d at 319. PERA was only repealed to the extent it
was inconsistent with the Act 46 provisions, otherwise, it remains intact. Id. at
320. “To effectuate its desired means, the [District] must look to the General
Assembly to enact legislation providing it with the authority to proceed with
unilateral modifications that alter an expired CBA (or the status quo) in the
absence of an impasse.” Id.
              Here, the District attempts to distinguish the current matter from PFT
by stating that the terms at issue are not economic terms or conditions of
employment. We disagree. The Arbitrator found there could be no argument that
the requirement to employ one counselor on a full-time basis in each school was an
economic provision. (R.R. at 178a.)
              Both Naomi Wyatt (Wyatt), the District’s chief talent officer, and
Matthew Stanski, the District’s chief financial officer, testified extensively about
the District’s dire financial condition and the resultant need to layoff all counselors
in the District. (R.R. at 145a-150a.) According to Wyatt, the District lacked
sufficient funding to call back all the counselors previously employed and the
“decision was made to make sure that the schools had counseling service that
would be the most effective in a limited staffing environment.” (R.R. at 148a.)
Wyatt testified that principals were permitted to select from those counselors
previously assigned to that school. Id. That testimony does not render the decision
regarding which counselors would be recalled purely managerial. If that decision
had no economic component to it, all counselors on layoff would have been
recalled.
              In sustaining the Union’s grievance, the Arbitrator in part relied on
Coatesville    Area     School     District   v.    Coatesville    Area     Teachers’


                                          7
Association/Pennsylvania Education Association, 978 A.2d 413 (Pa. Cmwlth.
2009), a decision which the District urges us to overturn.
             In Coatesville, the school district tried to unilaterally reduce the
number of extracurricular positions set forth in a nominally-expired contract while
the parties were in the process of negotiating a new contract. The district argued
the status quo doctrine did not apply to non-mandatory subjects of bargaining
because they were matters of inherent managerial discretion.             This Court
concluded that, although the district was free to negotiate extracurricular activities
in the subsequent contract, it could not change the status quo by unilaterally
stripping the bargained-for provisions from the expired contract. Coatesville, 978
A.2d at 418. While a public employer is not statutorily required to negotiate
matters of inherent managerial rights, if it chooses to do so, it is bound by the
terms of the CBA. Id. at 417.
             Here, Section 696(k) of Act 46 provides that “[c]ollective bargaining
between employes and the school district of the first class shall be conducted in
accordance with this subsection…”             24 P.S. §6-696(k).      While Section
696(k)(2)(iii) clearly provides that the District is not required to engage in
collective bargaining negotiations on the issue of staffing patterns and assignments,
there is no express prohibition against it. The District has not persuaded us that
Coatesville should be overturned and we reiterate its conclusion that an employer
must maintain the status quo of an expired contract until a new contract has been
negotiated. Coatesville, 978 A.2d at 419. As such, the parties have a duty to
maintain the status quo after the contract expires where no new contract is in place.
See Luzerne Intermediate Unit No. 18 v. Luzerne Intermediate Education
Association, 89 A.3d 319, 328 (Pa. Cmwlth. 2014). Only once the parties have


                                          8
reached an impasse is the burden to maintain the status quo eliminated. Textron
Lycoming v. Unemployment Compensation Board of Review, 604 A.2d 1216, 1220
(Pa. Cmwlth. 1992).
             At present, the parties have not declared an impasse; therefore, the
CBA cannot be set aside and new terms put in place by the District. We conclude,
therefore, that the status quo must be maintained with regard to the terms of the
expired CBA and we turn to the question of whether those items in dispute can be
found within the terms of the CBA and the Award passes the essence test.

                                   B. Essence Test

             The District argues that the CBA does not contain any language
granting laid-off counselors a right to be recalled or assigned to a school in
seniority order. The District asserts that the Union President admitted this lack of
seniority-based language in the CBA at the arbitration hearing. Thus, the District
asserts the seniority-based grievances are not arbitrable and the Arbitrator’s reason
for granting these grievances cannot rationally be derived from the CBA.
             An arbitrator’s award must draw its essence from the collective
bargaining agreement, giving rise to what is recognized as the “essence test.” The
essence test is the standard by which courts will review grievance arbitration
awards arising under Section 401 of the PERA. Westmoreland Intermediate Unit
#7 v. Classroom Assistants Educational Support Personal Association, PSEA/NEA,
939 A.2d 855, 863 (Pa. 2007).
             The reviewing court must conduct a two-pronged analysis: (1) the
court determines if the issue, as properly defined, is within the terms of the
collective bargaining agreement; and (2) if the issue is embraced by the agreement,


                                         9
and thus appropriately before the arbitrator, the arbitrator’s award will be upheld if
the arbitrator’s interpretation can rationally be derived from the collective
bargaining agreement. State System of Higher Education (Cheyney University) v.
State College University Professional Association (PSEA-NEA), 743 A.2d 405,
413 (Pa. 1999). The court will only vacate an arbitrator’s award where the award
indisputably and genuinely is without foundation in, or fails to logically flow from,
the collective bargaining agreement. Id.
             The first prong of the essence test requires a determination of whether
the issue, as properly defined, is within the terms of the CBA. The Union presents
a grievance regarding the District’s failure to recall counselors by order of
seniority, to allow assignment by seniority, and to ensure that there was one
counselor assigned to each of the District’s schools.
             The District argues the CBA is devoid of language creating any right
of school counselors to be recalled or to be reassigned in seniority order.
(District’s Br. at 41.) In light of this fact, it is argued, the Award cannot pass the
essence test because the issues as defined are not within the terms of the CBA and
the Arbitrator’s interpretation cannot rationally be derived from the CBA. Id.
             Article IX of the CBA governs employment security. This article
provides in pertinent part:

      A. Seniority
      …
             3. Wherever, in this Agreement, reference is made to seniority
      as the basis for decision, it shall mean that the person with the highest
      seniority of the type of seniority shall receive preference.
      …

      B. Layoff/Recall
                                           10
      …
             3. When and if layoffs are effected, it is agreed that senior
      employees in a position and/or classification shall have the right to
      take layoff in lieu of an employee with less seniority in the position
      and/or classification.

(R.R. at 162a.)

             After concluding Sections A and B of the CBA survived the
expiration of the CBA, the Arbitrator analyzed those provisions and determined
that recall was necessarily included in the provision for layoffs. (R.R. at 179a-
180a.) The Arbitrator found that “[b]y allowing more senior employees to take
layoff, Section B, in effect, covers recalls when they occur and permits more senior
employees when they are on layoff to continue to choose layoff in deference to
more junior employees” or to accept the recall. Id. at 180a. The allowance for
employees to choose to take a layoff is done by seniority therefore it rationally
follows that when recalling those same employees from layoff, senior employees
would be given first choice to accept the recall or remain on layoff. Id. The
arbitrator was thus persuaded that recalls, like layoffs, were controlled by seniority
as were assignments following recall. Id. at 181a.
             It is true the CBA does not expressly state that recalls are to be made
by seniority and those recalled given preference of assignment in the same manner.
Jerry Jordan (Jordan), president for the Union, admitted in his testimony before the
Arbitrator that language regarding recalls was not in the contract. (R.R. at 104a-
105a, 110a.) This omission does not, however, represent the death knell to the
Union’s claims. Silence, or absence of language dealing specifically with the
issue, does not prevent an Award from drawing its essence from the Agreement.
School District of City of Allentown v. Hotel and Restaurant Employees

                                         11
International Union, Local No. 391, AFL-CIO, 654 A.2d 86, 89 (Pa. Cmwlth.
1995).
                Jordan testified extensively at the hearing as to prior CBAs of the
parties and contract negotiations which had taken place. At one time a separate
CBA existed for each bargaining unit.                 (R.R. at 99a.)     In 2000, the District
proposed a “thin contract,” which would be reduced “[b]y weight, as well as the
language included in the contract.” Id. The Article IX language of the CBA,
concerning recall and layoff, did not change in agreements negotiated from 2004
through 2013. Id. at 100a-101a. The administration’s position was that certain
items such as recalls and layoffs were in the Public School Code and the contract
could be made thinner if the parties relied on the Public School Code to guide
them. Id. at 105a. Practice between the parties had always been to effect recall
according to Section 1125.1 9 of the Public School Code. Id. at 105a. Arlene
Kempin, chief personnel officer for the Union, also testified that, in her thirty-plus
years with the District, layoff was always by inverse seniority and recall was by
seniority. Id. at 125a.
                During the most recent contract negotiations, the District proposed
reductions in force would be accomplished in a manner that would best meet the

       9
           Section 1125.1 provides in pertinent part as follows:

               (a) Professional employes shall be suspended under section 1124 (relating
       to causes for suspension) in inverse order of seniority within the school entity of
       current employment.
       …
               (c) A school entity shall realign its professional staff so as to insure that
       more senior employes are provided with the opportunity to fill positions for which
       they are certificated and which are being filled by less senior employes.

24 P.S. §11-1125.1, added by the Act of November 20, 1979, P.L. 465.

                                                 12
needs of the District and recalls would be at the District’s discretion and in a
manner to best meet the needs of the District. (R.R. at 96a.) The Union did not
agree to this proposal. Id. at 97a. The District also proposed the deletion of
language requiring a counselor be assigned to each school.          Id.   The Union
disagreed with this proposal, as well. Id. Another District proposal rejected by the
Union would have granted the District “full authority to act unilaterally with
respect to any matter not expressly set forth in this agreement, including the
subject matter set forth in [24 P.S. §6-696(k)] of the Public School Code.” Id. at
114a.
             The Arbitrator was ultimately persuaded that “recall, like layoffs, are
[sic] controlled by seniority as ae [sic] assignments following recall.” (R.R. at
181a.) “Given the clear, consistent, known, and regular application of seniority by
the District in layoff and recalls, [the Arbitrator was] persuaded that Sections A
and B bound the parties to that application. And, because that application was part
of the status quo when the CBA nominally expired following its extension, it
continued in full force and effect in the fall of 2013 and therefore could not be
abrogated by the District.” Id.
             It seems illogical at best that the District would attempt to negotiate
these terms if it did not believe they were already encompassed by the CBA. We
are thus similarly persuaded that recalls and layoffs by seniority, and assignments
following recall, are issues found within the terms of the CBA and the first prong
of the essence test was met.
             The second prong is met if the arbitrator’s interpretation can rationally
be derived from the CBA. The Arbitrator’s determination of the intention of the
contracting parties as evidenced by the CBA and the circumstances surrounding its


                                         13
execution is to be respected by the judiciary if the interpretation can in any rational
way be derived from the CBA, viewed in light of its language, context, and any
other indicia of the parties’ intentions.         Midland Borough School District v.
Midland Education Association, PSEA, 616 A.2d 633, 636 (Pa. 1992), quoting
Community College of Beaver County v. Community College of Beaver County,
Society of the Faculty (PSEA/NEA), 375 A.2d 1267, 1275 (Pa. 1977). Reliance
upon past practices in the face of an ambiguous provision in the CBA is not only
permissible, but is an important tool through which the arbitrator may discover the
intent of the parties. Danville Area School District v. Danville Area Education
Association, PSEA/NEA, 754 A.2d 1255, 1262 (Pa. 2000).
               The District also argues the “supposed past practice” of recalling
counselors in seniority order cannot be relied upon to interpret an ambiguous
provision because the language at issue is not the least bit ambiguous.
(Appellant’s Br. at 50.)
               In Danville, an arbitrator was asked to interpret a section of a
collective bargaining agreement to determine a teacher’s retirement benefits. The
agreement used a phrase, “years of service in public education” that was not
defined in the agreement to determine eligibility for retirement benefits. Danville,
754 A.2d at 1258. The arbitrator attempted to discern what the parties meant by
the term and looked to the Retirement Code10 which was used by the parties in the
past to give meaning to the term. Id. at 1261. The arbitrator also looked to other
teachers with similar circumstances and how the term was applied. Id. The
arbitrator made his decision by deriving the intent of the parties from the


      10
           Public School Employees’ Retirement Code, 24 Pa.C.S. §§ 8101-8535.

                                             14
agreement, viewed in the light of the school district’s past practices with respect to
other similarly-situated employees. Id.
             In the case sub judice, the Arbitrator relied on the language of the
CBA and the past practices of the parties in making his Award. (R.R. at 179a-
181a.) In the undisputed testimony of Jordan, all prior layoffs and recalls by the
District were done by seniority. Id. at 180a. Since the CBA was silent on the
matter of seniority for recalls, the Arbitrator used the past practices of the parties to
fill in the blanks. Id. As such, it was determined that the District violated the CBA
when it failed to recall laid off counselors in seniority order and failed to assign
those recalled to their school of preference, and failed to assign at least one
counselor to each school on a full-time basis. Id. at 181a.
             The CBA between the parties had nominally expired at the time of the
actions that led to the filing of the grievances. When a situation such as this arises,
the status quo must be upheld and the CBA is treated as if it were in full force and
effect and, therefore, cannot be disregarded by the District. Coatesville. A review
of the past practices of the parties is the appropriate interpretive tool to be
employed when the CBA is silent on the matter. Danville. An arbitrator may
attempt to discern the intent of the parties and resolve a dispute over contract
interpretation, by considering the actions of the parties as evidence of their
interpretation of the terms of the CBA. Id.
             All prior recalls were made according to seniority and, despite the
CBA’s expiration, the 2013 recalls should have proceeded under the same scheme.
We are compelled to point out the obvious – that the parties bargained for binding
arbitration. The benefits of binding arbitration would be eroded if the courts
assumed a greater role in reviewing arbitration awards. Danville. The court does


                                           15
not inquire into whether the arbitrator’s decision is reasonable or even manifestly
unreasonable but whether the award may in any way be rationally derived from the
agreement between the parties. Id.
             Agreed-upon binding arbitration protects the parties by allowing their
disputes to be addressed swiftly and efficiently, outside the judicial process. As
such, it assists the administration of justice in such a critical way that courts are
loath to interfere except in the most unusual circumstance. In the present matter,
the Arbitrator examined the CBA and the circumstances surrounding its execution
in order to ascertain the intentions of the parties, and his conclusion must therefore
be respected by the judiciary. Midland Borough.
             For the reasons set forth in this opinion, we affirm the decision of the
trial court denying the District’s Motion to Vacate the Award.




                                       ___________________________
                                       JOSEPH M. COSGROVE, Judge




                                         16
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


School District of Philadelphia,         :
                          Appellant      :
                                         :
                  v.                     :
                                         :
Philadelphia Federation of Teachers,     :   No. 2301 C.D. 2015
AFT, Local 3, AFL-CIO                    :


                                      ORDER


            AND NOW, this 8th day of June, 2017, the order of the Court of
Common Pleas of Philadelphia County dated November 10, 2015 is AFFIRMED.




                                       ___________________________
                                       JOSEPH M. COSGROVE, Judge
