Reinsurance & Arbitration Focus

New York statutes classify certain civil service positions as exempt where such positions are confidential in nature and require personal qualities that cannot practicably be tested by an examination. These positions are typically appointed positions, such as deputies and secretaries to political officers. As such, the nature of the positions requires that the officer exercising the appointment and removal power possess largely unrestricted authority and unlimited responsibility for appointments to positions in that class. As a result, exempt civil service positions are terminable at will, unlike most other New York civil service positions. At-will employment status allows elected officials and political appointees to hire their preferred officers, deputies, and secretaries in place of incumbent exempt class employees.

In 2015, the town of Monroe entered into a collective bargaining agreement with labor union Teamsters Local 445 that provided certain grievance procedures for covered employees, including binding arbitration regarding terminations. The agreement defined the employees covered by its provisions to include the secretary to the town planning board. In 2017, the town fired the employee. The union filed a grievance with the town alleging violations of the collective bargaining agreement’s “just cause” termination provisions and subsequently sought to compel arbitration of the dispute. The New York Supreme Court compelled arbitration of the dispute, and the Appellate Division affirmed. The New York Court of Appeals reversed, holding that for-cause termination protections, including requiring binding arbitration of related disputes, cannot be made applicable to an exempt class employee: “The statutory framework, the criteria for exempting positions, and the policy concerns underlying the exempt class’s historical terminable-at-will status together compel this conclusion.”

The court found that excluding exempt civil service employees from such protections was consistent with the legislature’s omission of such employees from the statutory tenure protections provided to other classes of employees. The exclusion was also consistent with the legislature’s intent to closely guard exempt class positions, which demonstrates an intent that positions properly classified as exempt remain so unless the applicable statutory procedure for reclassification is followed. Lastly, the court stated that public policy weighed against enforcement of the collective bargaining agreement’s termination protections, as “appointing officers must be free to choose their employees as they please. A contrary result would require officers to continue to employ in the most sensitive positions employees who do not meet the officers’ preferred qualifications.”

As a result, the court held the arbitration provisions of the collective bargaining agreement unenforceable as applied to exempt class employees, and reversed the decision to compel arbitration.

In re Teamsters Local 445 v. Town of Monroe, No. 40 (N.Y. Ct. App. May 23, 2023).