After-Acquired Evidence Doctrine Bars Reinstatement and Backpay in CBA Arbitrations

Introduction

Teamsters Local Union No. 355 v. Ensinger Penn Fibre, Inc. is a Third Circuit decision addressing the narrow scope of judicial review over labor‐management arbitration awards under Section 301 of the Labor-Management Relations Act (LMRA). The dispute arose when Ensinger terminated Chad Hall—a 29-year equipment operator and union member—for repeatedly leaving his workstation without permission. After an arbitration panel found the discharge lacked “just cause,” the arbitrator nonetheless denied reinstatement and backpay on the ground that Ensinger had discovered, immediately after the termination, that Hall had reported to work under the influence of alcohol—a major violation of the employer’s handbook. The Union challenged the remedial portion of that award in federal court, and the District Court granted summary judgment for Ensinger. The Third Circuit affirmed, establishing that an arbitrator may apply the after-acquired evidence doctrine to limit equitable relief—even where the underlying discharge was deemed without just cause—and that such a remedy “draws its essence” from the collective bargaining agreement (CBA).

Summary of the Judgment

On October 14, 2020, Chad Hall was terminated for leaving his work area without permission. The CBA between Ensinger and Teamsters Local 355 required “just cause” for discharge (Article 12) and a written explanation at the time of termination. The Union grieved, and an arbitrator concluded that Ensinger lacked just cause because it did not consider Hall’s 28-year discipline-free record. However, upon learning that Hall was intoxicated at work—a “major violation” under Ensinger’s handbook—the arbitrator applied the after-acquired evidence doctrine and denied reinstatement and backpay. The Union sued to vacate that remedial ruling under LMRA § 301. Both sides moved for summary judgment. The District Court (Williams, J.) granted Ensinger’s motion, holding that (1) the arbitrator’s factual finding of inebriation was supported by record evidence, (2) Article 12’s notice requirement governed only the issue of just cause, not remedies, and (3) the CBA did not bar application of after-acquired evidence. The Third Circuit affirmed.

Analysis

Precedents Cited

LMRA § 301 (29 U.S.C. § 185): grants jurisdiction to enforce or vacate awards under CBAs.
Davis v. Ohio Barge Line, 697 F.2d 549 (3d Cir. 1983): introduced the “essence” test for arbitration awards.
Brentwood Med. Assocs. v. UMWA, 396 F.3d 237 (3d Cir. 2005): defined “drawing its essence” and the standard for manifest disregard.
Exxon Shipping Co. v. Exxon Seamen’s Union, 73 F.3d 1287 (3d Cir. 1996): emphasized plenary review but deferential standard to the arbitrator.
Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504 (2001): confirmed courts cannot review merits or correct arbitrator’s errors.
Nat’l Ass’n of Letter Carriers v. U.S. Postal Serv., 272 F.3d 182 (3d Cir. 2001): clarified “manifest disregard” requires total lack of contract support.
Citgo Asphalt Ref. Co. v. PACE, 385 F.3d 809 (3d Cir. 2004): held that factual findings of arbitrators are binding if arguably supported.
McKennon v. Nashville Banner Publ’g Co., 513 U.S. 352 (1995): established the after-acquired evidence doctrine in employment law.
Mardell v. Harleysville Life Ins. Co., 65 F.3d 1072 (3d Cir. 1995): recognized no absolute bar on backpay when after-acquired evidence is discovered.
Mobil Oil Corp. v. Independent Oil Workers Union, 679 F.2d 299 (3d Cir. 1982): affirmed deference to arbitrator’s view of issues submitted.

Legal Reasoning

The Third Circuit applied its familiar two-step framework for reviewing arbitration awards under LMRA § 301. First, the court determined whether the award “draws its essence” from the CBA—meaning it has some rational basis in the contract’s language or context. Second, it checked for “manifest disregard”—whether the arbitrator’s decision was totally unsupported by contract principles. If neither defect existed, the award must stand.

Here, the arbitrator found four things: (1) Ensinger terminated Hall without considering less severe discipline; (2) Hall was intoxicated at work the day of discharge; (3) the handbook mandated immediate dismissal for on-the-job intoxication; and (4) reinstatement would be futile in light of that major violation. The court concluded that all four findings were arguably grounded in the CBA and handbook, and that the arbitrator did not ignore or modify any contractual provision. In particular, the panel held that Article 12’s written-notice requirement governed only the procedural adequacy of a discharge, not whether remedial relief should be granted after a “just cause” finding. By contrast, the after-acquired evidence doctrine—an equitable principle borrowed from McKennon—governs remedies, not initial fault. The arbitrator thus acted within his authority in applying it to deny backpay and reinstatement.

Impact

This decision underscores three important points for labor arbitration and federal courts:

Courts will enforce an arbitrator’s remedial rulings if it can be “rationally derived” from the CBA, even where the remedy employs equitable doctrines drawn from broader employment law.
The after-acquired evidence doctrine can be invoked in CBA arbitrations to limit or extinguish equitable relief—reinforcing that remedies under a grievance arbitration are not unlimited.
Judicial review of arbitration awards remains narrowly confined: courts will not second-guess factual findings or substitute their own interpretations of contract text unless the arbitrator manifestly disregarded the agreement.

Complex Concepts Simplified

“Draws Its Essence” Test: A court asks whether the arbitrator’s award can be traced to some plausible reading of the collective bargaining agreement. If yes, the award stands.
Manifest Disregard: A rare ground for vacatur requiring that the arbitrator totally ignored clear contract terms or principles of contract interpretation.
After-Acquired Evidence Doctrine: An equitable principle that asks, once an employer learns of later evidence (e.g., theft, intoxication), whether the fired employee would have been discharged anyway for that misconduct—in which case backpay or reinstatement can be limited or denied.
LMRA § 301: Federal statute allowing parties to enforce or challenge arbitration awards under collective bargaining agreements in federal court.

Conclusion

Teamsters Local Union No. 355 v. Ensinger Penn Fibre clarifies that in labor arbitrations under a CBA, an arbitrator may properly apply the after-acquired evidence doctrine to deny reinstatement and backpay—even after finding a lack of just cause—and still “draw the essence” of the CBA. The Third Circuit’s decision reaffirms the limited nature of judicial review: so long as an award rests on an arguable contract interpretation or application of equitable principles, federal courts will uphold it. This ruling will guide future arbitrators, employers, and unions in structuring grievance procedures and in assessing the potential scope of remedies following unjust discharges.