Carroll R. Daugherty

Dr. Carroll Roop Daugherty died on May 11, 1988.  Within days articles in the New York Times, Los Angeles Times, and Chicago Tribune provided notice.  His achievements in life earned him characterizations as a distinguished economist, labor arbitrator and educator.  The significance and impact of his work in shaping a definition of just cause remains prevailing, relevant, and informs our advocacy today.

Dr. Daugherty held a doctoral degree from the University of Pennsylvania.  Among many accomplishments he served as the chief economist at the Bureau of Labor Statistics and at the Wage and Hour Administration in the Roosevelt Administration.  He also directed the Wage Stabilization Division of the National War Labor Board and after the war directed negotiations between the United States and New Zealand to settle Lend-Lease arrangements between the two countries.  Daugherty was named by President Harry S. Truman to head three ad hoc committees seeking to settle threatened strikes in the steel and railroad industries in 1949-52.  After 22 years on the faculty of Northwestern University, upon his retirement in 1968 he was named a professor emeritus.  In 1986 the American Arbitration Assn., meeting in Los Angeles, awarded Daugherty its first Lifetime Achievement Award.  

A Cohesive Theory of Just Cause

On March 28, 1966, Daugherty issued a decision in an arbitration between Enterprise Wire Company  (Blue Island, Ill.) and the Enterprise Independent Union regarding the termination of an employee for absenteeism and insubordination.  His written decision established the seven tests for just cause, a standard referred to by arbitrators adjudicating disputes regarding disciplinary decisions imposed by employers on union-represented aggrieved employees.

Daugherty’s Analysis

Among other components of his decision, Daugherty reviewed contract language from the collective bargaining agreement mutually agreed upon between the union and the employer.  It included an article governing disciplinary action stating:

Article VIII Discipline

Section 1. Proper Cause. No employee shall be discharged or otherwise disciplined except for proper cause.

Daugherty examined the term “proper cause” and its absence of definition within the contract.  He wrote, “no contractual criteria exist for determining from the facts of any disciplinary case, including this one, whether or not the Company had just cause for its decision. Therefore it is necessary for the Arbitrator to supply and apply his own just cause standards…”

Daugherty concluded that cause is often implied in the determination of such decisions, but just cause often lacked specific definition in such agreements.  The same principle issue remains true for union contracts in effect today.  Articles governing discipline and discharge may contain as little as one sentence establishing just cause protections as a metric, similar in format to the Enterprise Agreement quoted above. 

About the Seven Tests of Just Cause

The seven tests of just cause buttress the specific meaning and intention of such disciplinary clauses between parties, and among arbitrators and adjudicators.  The enforcement of just cause provisions in private arbitrations has the significance of common law with variance by industrial context.  Private arbitration lacks the consistent authority of statutory code or case law.  An arbitrator may choose to consider the decisions of other arbitrators in arriving at their own, or not at all.  

In describing his definition, Daugherty wrote, "This definition consists of a set of guide lines or criteria that are to be applied to the facts of any one case, and said criteria are set forth below in the form of questions."  A failure to meet one or more of the tests meant an, "employer’s disciplinary decision contained one or more elements of arbitrary, capricious, unreasonable, or discriminatory action to such an extent that said decision constituted an abuse of managerial discretion warranting the arbitrator to substitute his judgment for that of the employer."

In the Enterprise decision, Daugherty was direct about the imprecision of the standard in its application, "Frequently, of course, the facts are such that the guide lines cannot be applied with precision."  He further emphasized that the criteria should be met by an Employer prior to the imposition of discipline upon an employee.

The Questions/The Significance

Listed below are Daugherty's tests.  In the Enterprise decision, Daugherty also included notes or qualifiers for each of the tests.  These notes are not provided here, rather a concise commonly accepted descriptor.

1.  Did the company give to the employee forewarning or foreknowledge of the possible or probably disciplinary consequences of the employee’s conduct?

Simply, this is a test of Notice.

2. Was the company’s rule or managerial order reasonably related to (a) the orderly, efficient, and safe operation of the company’s business and (b) the performance that the company might properly expect of the employee?

This is a test of Reasonability.

3. Did the company, before administering discipline to an employee, make an effort to discover whether the employee did in fact violate or disobey a rule or order of management?

This is a test of Investigation.

4. Was the company’s investigation conducted fairly and objectively?

This is a test of Fairness, specifically qualifying investigatory activity.

5. At the investigation did the “judge” obtain substantial evidence or proof that the employee was guilty as charged?

This is a test of Proof.

6. Has the company applied its rules, orders, and penalties evenhandedly and without discrimination to all employees?

This is a test of Equity.

7. Was the degree of discipline administered by the company in a particular case reasonably related to (a) the seriousness of the employee’s proven offense and (b) the record of the employee in his service with the company?

This is a test of Appropriateness or proportionality.

Criticism and Scaffolding Development

In the decades since the Enterprise decision, impactful decisions enumerating due process rights, including Weingarten rights and Loudermill rights, have gone into effect.  Daugherty’s seven tests have been analyzed and criticized on numerous fronts by scholars, and the attributes of the tests have evolved distinctly in assessing awards.  In principle and framework, reference to the seven tests remains commonly applied. 

"Unfortunately, the Daugherty tests do not accurately reflect the way arbitrators currently decide cases," wrote Robert M. Schwartz (Labor Notes, 2019).  Notably, Schwartz reviewed more than 15,000 awards by labor arbitrators and found more precise agreement regarding interpretation of the tests, summarized below.  

1. Prior notice

An employee may not be punished for violating a rule or standard whose nature and penalties have not been made known.

2. Recent enforcement

Punishment may not be imposed for violating a rule or standard that the employer has not enforced for a prolonged period.

3. Due process

An employer must conduct an interview or hold a hearing before making a decision to issue discipline, must take action promptly, and must list charges precisely. Once assessed, discipline may not be increased.

4. Substantial evidence

Charges must be proven by substantial and credible evidence.

5. Equal treatment

Unless justified by a valid distinction, an employer may not assess a much stronger punishment against one employee than it has assessed against another employee known to have committed the same offense.

6. Progressive discipline

When responding to misconduct that is short of egregious, an employer must issue at least one level of discipline that allows the employee an opportunity to improve.

7. Mitigating, extenuating, and aggravating circumstances

Discipline must be proportional to the gravity of the offense, taking account of any mitigating, extenuating, or aggravating circumstances.