Divided Court affirms confirmation of arbitration award against employer without deciding whether “manifest disregard" of the law is an appropriate standard of review. The law did not manifestly require employer to discipline employee for HIPAA violation in this case.

 

Howard Center v. AFSCME Local 1674,  2023 VT 6 

 

REIBER, C.J. . Employer Howard Center appeals from a trial court order that confirmed an arbitration award in favor of grievant Daniel Peyser and AFSCME Local 1674. Employer asks this Court to adopt "manifest disregard" of the law" as a basis for setting aside an arbitration award and to conclude that the arbitrator violated that standard here. We do not decide whether to adopt the manifest-disregard standard because, assuming arguendo it applies, employer fails to show that its requirements are satisfied. We therefore affirm.

Employer issued a written reprimand to grievant for sharing client records with his union representative without redacting confidential information. The arbitrator concluded employer should have instead used informal counseling and directives rather than formal discipline, and that employer thus lacked just cause to reprimand grievant. Employer argues the arbitrator manifestly disregarded HIPAA, which it contends required it  to discipline grievant by imposing an "appropriate sanction[]" and it therefore had just cause to reprimand him.

"Vermont has a long history of upholding arbitration awards whenever possible." Shahi v. Ascend Fin. Servs., Inc. , 2006 VT 29, ¶ 10,  Review is limited to "whether there exist statutory grounds for vacating or modifying the arbitration award" and "whether the parties were afforded due process." Id. See 12 V.S.A. § 5677(a)(1)-(5). We have not yet decided whether to recognize "manifest disregard of the law" as an additional basis for vacating an arbitration award, although other courts have done so. See Masseau v. Luck, 2021 VT 9, ¶ 30  (recognizing that this "remains an open question" under VAA and under Federal Arbitration Act (FAA)

 We review de novo whether the arbitrator manifestly disregarded the law in this case. The HIPAA Privacy Rule mandates that covered entities "must . . . [e]nsure the confidentiality, integrity, and availability of all electronic protected health information" and "[e]nsure compliance with this subpart by its workforce." 45 C.F.R. § 164.306(a)(1), (4). In accordance with § 164.306, a covered entity "must" implement a sanction policy and "[a]pply appropriate sanctions" against employees who fail to comply with patient-confidentiality policies and procedures. Id. § 164.308(a)(1)(ii)(C)

 Neither the HIPAA statute nor regulation define the term "appropriate sanction" and there is no case law interpreting the term. The arbitrator found that grievant did not engage in "intentional misconduct" and, at worst, he "made an error in judgment." Because  the HIPAA Privacy Rule does not clearly require a certain type of sanction for violations, Employer fails to show that this case presents an "exceedingly rare instance[]" of "egregious impropriety," Masseau, 2021 VT 9, ¶ 31  that rises to the level of manifest disregard,

We conclude, as in Masseau, that "even assuming that courts are empowered to vacate an arbitrator's decision based on manifest disregard of the law -- which we do not decide -- the asserted legal error in the arbitrator's decision here does not rise to the level of manifest disregard." 2021 VT 9, ¶ 32.

EATON  J. dissenting. The majority's decision essentially transforms our limited review of arbitration decisions into no review. The arbitrator here recognized that the law required employer to sanction grievant for disclosing confidential patient information but the arbitrator chose to disregard that law and reverse employer's decision. The majority's refusal to adopt the manifest-disregard standard is harmful generally because it erodes confidence in arbitration awards and provides an incentive for arbitrators to avoid explaining the bases for their decisions. It is also detrimental under the circumstances of this case because it punishes employer for carrying out its obligations under federal law and ignores the harm to patients whose information was improperly disclosed. Because employer's decision to sanction grievant was supported and required by law and the arbitrator disregarded the law in overturning it, I would reverse and remand for the trial court to vacate the arbitration order. Therefore, I dissent.

I agree with Employer that the arbitrator manifestly ignored the law in concluding that employer lacked just cause to discipline grievant for violating patient confidentiality. I would adopt the manifest-disregard standard and allow courts to vacate an arbitration award when they find that (1) the arbitrator knew the governing law but refused to follow it or ignored it, and (2) the applicable law was well defined, explicit, and clearly applicable to the case.  Although mere legal error will not suffice to vacate an award, this Court should not turn a blind eye to intentional disregard of the law.

Here the arbitrator purposely ignored applicable law to excuse an unnecessary and unlawful breach of patient confidentiality by grievant who deliberately accessed and shared private health information of his patients solely for his own purposes. While the arbitrator did not find any malicious intent, there is no question grievant acted deliberately. The majority's failure to adopt the manifest-disregard doctrine in this case is essentially a rejection of it.

How cited