With the holidays quickly approaching, the National Labor Relations Board’s union-friendly majority continues to churn out decisions that will significantly impact union and non-union employers in 2015 and beyond. Earlier this week, the Board overturned another longstanding precedent when it issued a decision adopting a new, more demanding standard before the Board will defer to an arbitrator’s decision on a contractual issue that also implicates Section 8(a)(1) and (3) unfair labor practices. In doing so, the Board abandoned a standard that it had used for 30 years.

The Board’s new arbitration deferral standards will have a significant impact on employers who operate under a union contract. With the significant rise in unfair labor practice (ULP) charges filed in non-union environments, the Board’s decision also raises concerns for non-union employers who rely on arbitration to resolve other employment disputes. Moving forward, employers will face a more difficult burden in convincing the Board to defer to the arbitration process or an arbitration award.

Background

The Board’s arbitration deferral standards come into play when a single set of facts in a union grievance or employee dispute has led to both arbitration and an ULP charge filed with the Board. Most commonly, this occurs when a union or employee alleges that an employer disciplined or terminated an employee for engaging in protected concerted activity, and thus also lacked “cause” for its action. In such cases, the Board applies deferral standards to determine whether to investigate and process the ULP charge, postpone its investigation pending the outcome of the arbitration process, or dismiss the charge, when, for instance, an arbitrator has already issued an award that considered and resolved the unfair labor practice issue.

Under the Board’s previous Olin/Spielberg standard for deferral to arbitration awards, the Board deferred to an arbitration award when (1) the contractual and unfair labor practice issues were “factually parallel”, (2) the arbitrator was presented with the facts relevant to resolving that issue, and (3) the arbitrator’s award was not “clearly repugnant” to the policies of the National Labor Relations Act (NLRA). Further, the arbitrator must have adequately considered the unfair labor practice issue. The burden of proof on these elements rested with the party opposing deferral.

The New Standards

Under the Board’s newly adopted post-arbitral deferral standard announced in Babcock & Wilcox, the party urgingdeferral now has the burden of proof and must establish that (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue under the NLRA, (2) the arbitrator was presented with and considered the NLRA issue, or was prevented from doing so by the party opposing deferral, and (3) Board law reasonably permits the award.

Like the Board’s decision in D.R. Horton and related cases that we have covered in the past, the Board has emphasized the importance of NLRA rights over employers’ and employees’ decisions to arbitrate. The Board majority justified the standard by citing a need to provide “greater protection to employees’ statutory rights.” The Board’s new standard will be applied to new cases moving forward, but will not impact any pending cases.

In light of the new post-arbitral deferral standard, the Board also modified its deferral standard for situations before an award has been issued. Under the new standard, the Board will not defer to the arbitration process unless the first requirement of the post-arbitral deferral standard is met, i.e., the arbitrator must be explicitly authorized to decide the ULP issue. The Board explained that this change was warranted because it would be illogical to defer to an arbitration process whose outcome would not satisfy the new post-arbitral deferral standard.

Insights for Employers

While the new deferral standards are neutral on their face, in practice employers will be negatively impacted. More often than not, the employer is the party arguing that the Board should defer to an arbitration award. And under the Board’s new standard, the burden of proof is now squarely on employers in those situations. Accordingly, in processing grievances that could also result in an ULP charge, employers should ensure that the ULP issue is fully presented to the arbitrator, and also ensure that the arbitrator actually addresses the issue in the written award.

The new heightened post-arbitral deferral standard decreases the likelihood that the Board will defer to an arbitration award, thus undermining the finality of arbitration and potentially providing unions who lose at arbitration with a second bite at the apple before the Board. As a result, employers may see an increase in the number of ULP charges filed with the Board alleging Section 8(a)(3) and (1) violations. Given the Supreme Court’s strong rulings in recent years in favor of arbitration, it would not be surprising to see challenges to the Board’s new deferral standards in the near future.