Pennsylvania Supreme Court holds that a labor arbitration award pursuant to the Public Employee Relations Act reinstating an employee who was terminated for acts of sexual harassment violated well-defined public policy and should be vacated.

In The Philadelphia Housing Authority, the employee was found to have engaged in "lewd, lascivious and extraordinarily perverse" sexual harassment—which included verbal comments and inappropriate touching—toward another employee and was terminated in accordance with the employer's policy prohibiting sexual harassment. Following the employee's termination, his union grieved the termination and, following the exhaustion of the grievance procedures provided for in the collective bargaining agreement, an arbitration was held to determine "whether [the employer] had just cause to terminate [the employee's] employment and, if not, what would be the appropriate remedy." Following the arbitration, the arbitrator specifically found that the employee had been adequately informed about the employer's policy prohibiting sexual harassment, the employee was not credible, the victim of the sexual harassment testified credibly regarding the sexual harassment, and the harassment was "unacceptable." Nonetheless, the arbitrator concluded that the employer did not have "just cause" to terminate the employee's employment because a supervisor previously provided him with a verbal warning concerning his conduct prior to the formal investigation. As a result, the arbitrator ordered that the employer reinstate the employee and pay him back wages.

On appeal, the Pennsylvania Supreme Court vacated the arbitrator's ruling and held that the award to reinstate the employee to his position with full back pay violated "a well-defined and dominant public policy against sexual harassment in the workplace," namely the policies set forth in Title VII and the Pennsylvania Human Relations Act. In so holding, the Pennsylvania Supreme Court reasoned that the arbitrator's award prevents the employer from taking appropriate corrective action following its sexual harassment investigation. In fact, the Court expressly noted that "[t]o allow an arbitration award which finds that an employee engaged in 'extraordinarily perverse' physical sexual harassment of a co-worker, yet then simply dismisses the conduct as unworthy of an employer response beyond initial 'counseling,' and reinstatement with back pay, would eviscerate the ability of employers to enforce dominant public policy."

Case Law Alert - 4th Qtr 2012