On December 15, 2014, the National Labor Relations Board (“NLRB” and “Board”) issued a decision in which the three Democratic-appointed members of the Board struck down the standard that the NLRB has applied for the last 30 years to determine whether to defer to arbitral decisions in cases that also involve alleged violations of Section 8(a)(3) and (1) of the National Labor Relations Act (“NLRA”). The case, Babcock & Wilcox Construction Co., Inc., is broad in scope, because the majority also use it as an opportunity to announce changes to the NLRB’s pre-arbitral deferral standard and to its standard for determining whether to defer to settlement agreements arising from the grievance-arbitration process. Not surprisingly, the two Republican-appointed members of the Board offered sharply worded dissents.
For the past 30 years, the NLRB has followed the deferral standard set forth in Olin Corp., 268 NLRB 573 (1984). Under Olin, deferral to an arbitral decision was deemed appropriate where the contractual issue is “factually parallel” to the unfair labor practice issue, the arbitrator was presented generally with the facts relevant to resolving the issue and the award is not “clearly repugnant” to the Act. Also, under Olin, the burden of proof was placed on the party opposing deferral to demonstrate that the standards for deferral had not been met. For three decades, this standard had been accepted by the Board and by reviewing federal courts of appeals as striking the proper balance between reconciling the Board’s obligation to prevent unfair labor practices with national labor policy encouraging the voluntary settlement of labor disputes through grievance and arbitration procedures.
However, the Obama-appointed General Counsel to the NLRB and organized labor attacked the existing standard as inadequately protective of employees’ rights under the NLRA. The three-member majority of the Obama Board agreed. In Babcock & Wilcox, they announced that, going forward, the new standard for post-arbitral deferral cases involving Section 8(a)(3) and (1) cases (i.e., those alleging that employers have retaliated against employees exercising their Section 7 rights) would be as follows:
“If the arbitration procedures appear to have been fair and regular, and if the parties agreed to be bound, the Board will defer to an arbitral decision if the party urging deferral shows that: (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (2) the arbitrator was presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (3) Board law reasonably permits the award.”
Although not at issue in this case, the three-member majority also used its decision in Babcock & Wilcox as an opportunity to announce changes in the NLRB’s pre-arbitral deferral standard and its standard for determining whether to defer to settlement agreements arising from the grievance-arbitration process. Regarding the former, the three-member majority announced that the NLRB will no longer defer unfair labor practice allegations to the arbitral process unless the parties have explicitly authorized the arbitrator to decide the unfair labor practice issue, either in the collective bargaining agreement or by agreement of the parties in a particular case. Regarding the latter, under the new standard, a settlement agreement arising from the grievance-arbitration process will not preclude litigation of companion unfair labor practice allegations unless the party seeking deferral can show that the parties intended to settle the unfair labor practice issue; that they addressed it in the settlement agreement; and that Board law reasonably permits the settlement agreement.
The Republican-appointed Board members, Philip Miscimarra and Harry Johnson, wrote separate dissenting opinions, both of which assailed the majority for needlessly overruling over 30 years of accepted Board practice. The decision is clearly another big win on a long list of recent wins for organized labor handed down by the Obama Board.