Contract Interpretation: How do you know what your contract means when the language is ambiguous?

By Richard Thal, WPPA General Counsel

In order to enforce your contract, you must know what provisions it contains. Once you know what is in your contract, you will know when to file a grievance over employer violations of clear contractual language. Amending or eliminating contractual provisions that are clear and unambiguous can only be done in bargaining. Clear language cannot be changed through your grievance procedure because even if an arbitrator believes that application of clear language is unfair, the arbitrator cannot amend the contract.

But often contractual provisions are not clear. When language is ambiguous, it is not obvious whether the employer has violated a provision.

When a union needs an interpretation of ambiguous language, negotiations with the employer may result in an agreement as to its meaning. But when there is no agreement and when it is the union’s position that the employer has violated the provision in question, the union must file a grievance seeking a binding decision interpreting the language. If filing a grievance ends in an impasse, usually the dispute is submitted to an arbitrator.

Arbitrators say that when language is ambiguous they try to determine the intent of the parties when they bargained the language. This approach makes sense when the parties actually had a mutual intent. But often there is no discernable mutual intent. Ambiguities can arise, for example, when circumstances occur that the parties never contemplated during bargaining.

Knowing how arbitrators interpret ambiguous language can help a union decide whether to seek an interpretation of the language through arbitration, and it helps a union determine what it needs to prove to present an organized and a coherent case to an arbitrator.

It is important to keep in mind that an arbitrator interprets a contract where the parties disagree on the meaning of language by first looking at the language to determine if it is clear on its face. If not, the arbitrator then looks to other standards to determine the meaning: (1) standards of contract interpretation; (2) the concept of past practice; and (3) the principle of reasonableness.

1. STANDARDS OF CONTRACT INTERPRETATION

a. Standards Used to Interpret Ambiguous Language

A basic principle of contract interpretation is that the agreement is to be construed as a whole. In interpreting contracts, arbitrators generally reach their decisions from the contract as a whole, not from a single word or phrase. They try to interpret the meaning of the word or part of the contract with respect to the connection in which it is used in the contract.

All provisions of the contract are assumed by the arbitrator to have meaning; otherwise, the parties would not have included them in their agreement. If the arbitrator finds that one of the suggested interpretations of the clause would give it meaning while the other suggested interpretation would render the provision meaningless or ineffective, he or she will use the interpretation which gives effect to all the provisions. Similarly, the arbitrator will avoid harsh, absurd, or nonsensical results: if one interpretation would lead to a just and reasonable result, that interpretation usually will be followed.

Second, “to express one thing is to exclude another.” When the parties to a contract have mentioned one item of a group or a class of items and not mentioned others, arbitrators often interpret that to mean that the parties meant to exclude the other items in the group or class. Under this doctrine, where general words follow an enumeration of specific terms, the general words will be interpreted to include or cover only things of the same general nature or class as those enumerated, unless a party to the contract can demonstrate that the parties intended that the general term should be interpreted to cover more than is specifically expressed. For example, under this doctrine, one arbitrator found that a contract clause providing that seniority governs in cases of layoff, transfer, or other adjustment of personnel, should not be interpreted to require allocation of overtime work on the basis of seniority, since overtime was not specifically listed by the parties, whereas other items — such as layoff and transfer — were.

b. Interpretation in Light of the Law

Because arbitrators try to give effect to all the terms in a collective bargaining agreement, they try to give ambiguous language a lawful meaning. In other words, arbitrators strive to interpret the contractual term in question in conformity with the law. For example, arbitrators will interpret ambiguous provisions relating to leaves of absence so that their interpretations are consistent with the Family and Medical Leave Act. Other language will be interpreted to be consistent with the Fair Labor Standards Act, the Fair Employment Act, the Americans With Disabilities Act, etc.

c. Ordinary and Popular Meaning of Words

When interpreting contractual language, arbitrators use the ordinary and popularly accepted meaning of words, unless there is an indication that the parties intended that the words be given a special meaning. This means that arbitrators may consult dictionaries when they want to learn the ordinary meaning of a word, and the dictionary definition may be used as an aid in interpreting the contract.

d. Specific Versus General Language

Where there is conflict between specific language and general language in a contract, greater weight will be given to the specific language. For example, one contract contained the following two clauses:

The department shall continue to make reasonable provisions for the safety and health of its employees.

Wearing apparel and other equipment necessary to properly protect employees from injury shall be provided by the department in accordance with practices now prevailing … or as such practices may be improved from time to time by the department.

In this case, the arbitrator held that the employer was not obligated to furnish rain clothes to employees where those clothes had not been furnished or required in the past.

Arbitrators also are inclined to rule that when an exception is stated to a general principle, the exception should govern, where applicable.

e. Avoidance of a Forfeiture or Penalty

If there are two possible interpretations, one of which would result in a forfeiture or penalty for a party, arbitrators usually will adopt the interpretation which will avoid the forfeiture or penalty. A party claiming a forfeiture or penalty under a written contract has the burden of proving that such a loss to the other side was the unmistakable intention of the parties to the agreement.

For example, a provision granting back pay for an employee unjustly discharged was interpreted by an arbitrator not to require back pay because the grievant had suffered no loss of earnings while off the employer’s payroll because he found other employment.

f. Bargaining History

Where language is ambiguous, many arbitrators will assume, if there is no conflicting evidence, that the parties intended the language to have the same meaning as they gave it during the negotiations leading up to the contract. In this case, the substance of the negotiations, as indicated by the credible records or minutes of bargaining sessions or the recollections of the negotiators, is crucial.

In considering the record of the pre-contract negotiations, arbitrators usually try to put themselves in the position of the parties during the bargaining sessions in order to view the circumstances as the parties viewed them. In addition, if a party tried but did not succeed during negotiations to include a specific clause in the contract, arbitrators will be reluctant to read such clauses into the contract during a grievance arbitration.

g. No Consideration to Compromise Offers

In the interpretation of an ambiguous agreement, no consideration will be given to compromise offers or to concessions offered by one party and rejected by the other during negotiations which preceded arbitration. If a party made an offer during the course of conciliation, it should not be used to prejudice their case once it reaches arbitration. Arbitrators understand that parties often will make offers in hopes of reaching a settlement that might be less than they consider to be their strict contractual rights.

h. Prior Settlements as Aid to Interpretation

When arbitrators interpret ambiguous language they may consider prior settlements by the parties of grievances involving the same or similar ambiguous language. Arbitrators may even consider oral resolutions of grievances made by the parties involving the ambiguous provisions if those agreements are clearly proven during the arbitration.

i. Interpretations Against the Party Selecting the Language

When no other rule or standard applies, an arbitrator may sometimes rule against the party that proposed the ambiguous language currently in question. The reasoning is that the drafting party could more easily have prevented doubts as to the meaning of the language.

This standard is rarely applied. It is not used if there is no ambiguity or where there is no showing that the other party was misled.

2. CUSTOM AND PAST PRACTICE OF THE PARTIES

When interpreting ambiguous contracts, arbitrators often look to the parties’ customs and past practices. A “past practice” is a pattern of prior conduct consistently undertaken — with the knowledge of both parties — so as to evolve into an understanding that the conduct is the appropriate course of action. In addition to being used to interpret ambiguous language, an established past practice in some instances can create an enforceable condition of employment even if the contract is silent on the subject.

Most arbitrators require that in order to establish a past practice, there must be:

• Clarity and consistency of the pattern of conduct;

• Longevity and repetition of the activity;

• Acceptability of the pattern; and

• Mutual acknowledgment of the pattern by the parties.

Arbitrators recognize that the scope of a past practice is restricted by the circumstances under which it arose. The practice may be enlarged over time through the administration of the contract, but it remains linked to its origin and purpose. A party relying on a past practice to prove a case before an arbitrator must establish the existence of the claimed past practice.

An established practice that is an enforceable condition of employment, wholly apart from any language in the contract, cannot be modified unilaterally or terminated during the term of the contract. But either party may repudiate such a past practice at the time a new contract is negotiated. Because the continuation of the practice depends on the parties’ mutual intent to retain it, the effect of the repudiation is that the practice expires with the expiration of the contract. On the other hand, a practice that serves to clarify an ambiguous provision in the contract becomes the definitive interpretation of that term until there is a mutual agreement on rewriting the contract. That past practice cannot be repudiated unilaterally. Finally, a change in the conditions that initially produced the past practice may permit a party to discontinue it.

3. RULE OF REASONABLENESS

When contract language is absolutely clear, it must be applied in accordance with its terms, even if it is not equitable to both parties. But, where the language is ambiguous, arbitrators try to interpret it in a manner which is fair and reasonable to both parties. As one arbitrator said, “Look at the language in the light of experience and choose that course which does the least violence to the judgment of a reasonable person.”

Furthermore, under both labor law and contract law, parties must act in good faith when bargaining an agreement. This duty of good faith provides arbitrators with a doctrine that prevents an employer from evading the spirit of a bargain.

CONCLUSION

Ambiguities will always arise in reading contractual provisions. They arise because language is imperfect; because of unforseen circumstances; and because the parties bargained vague language in the absence of a meeting of the minds.

So we return to the initial question: Does a union know what their contract means when language is ambiguous? Generally, it doesn’t know what it means. That is why it is important to know the standards that arbitrators use when interpreting contractual language. Then at least the union can determine whether it wants to file a grievance and have an arbitrator determine what the language means.

1. 1. Contracts between employers and unions are correctly called collective bargaining agreements. For simplicity, in this article, such agreements are referred to as contracts.

2. 2. For you Latin lovers, this rule of construction is known as “expressio unius est exclusio alterius.”

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