Why it matters

The U.S. Court of Appeals, Ninth Circuit affirmed that the National Labor Relations Board (NLRB) properly applied a new standard prospectively and was correct not to retroactively reverse an arbitral decision against an employee. A forklift and crane operator filed an unfair labor charge after she was terminated for inappropriate conduct, alleging that she was actually fired because of her union activities. The NLRB issued a complaint. An administrative law judge (ALJ) upheld an arbitral decision in favor of the employer, finding just cause for the termination based on the employee’s use of profanity and insubordination. When the NLRB considered the case, it announced a new standard for determining whether to defer to an arbitral decision, but elected to apply it only prospectively and not to the case at hand. The employee appealed and the Ninth Circuit sided with the NLRB. Balancing the interests in considering retroactive application of the new standard, the federal appellate panel said the NLRB reached the proper conclusion, in part because the employee never advocated for the change in standard and both parties relied upon the prior standard that had been in place for almost six decades.

Detailed discussion

A forklift and crane operator, Coletta Kim Beneli, served as a job steward for her union, the International Union of Operating Engineers. After roughly two months of employment at Babcock & Wilcox Construction Co., Inc. (B&W), she was terminated for cause because of repeated safety violations and inappropriate conduct.

On the day she was fired, Beneli was called to a meeting where she was told she was being suspended without pay for two safety violations. She responded with profanities and was then terminated. The union filed a grievance over her suspension and termination. Pursuant to the collective bargaining agreement (CBA) in place, binding arbitration was conducted before a joint labor-management Grievance Review Subcommittee.

The subcommittee denied the grievance and upheld Beneli’s discharge. The National Labor Relations Board (NLRB) reviewed the decision and issued a complaint against the employer. After a hearing, however, an administrative law judge (ALJ) issued an order recommending that the NLRB defer to the subcommittee decision and dismiss the complaint.

The ALJ’s decision to defer was based on a long-standing NLRB precedent originally established in 1955 and affirmed in 1984, known as the Spielberg/Olin standard. The NLRB filed exceptions to the ALJ’s decision and recommended that the NLRB revisit the standard.

Upon review, the NLRB adopted the ALJ’s decision and denied Beneli’s complaint. However, the NLRB also decided to change the standard for determining when to defer to an arbitration decision. Under the new standard, the NLRB will defer 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.”

While this standard shifts the burden of proof and makes deferral to an arbitral decision less likely, the NLRB applied the new standard only prospectively and declined to apply it to Beneli’s case. The employee asked the U.S. Court of Appeals, Ninth Circuit to reverse and apply the new standard to her case.

But the federal appellate panel—giving “considerable deference” to the NLRB’s expertise—sided with the NLRB and ruled the new standard should be applied only prospectively.

Using a five-factor test, the court noted that the case was one of first impression but that the standard was changed on the recommendation of the NLRB, not Beneli, and that the new rule represents “an abrupt departure from well-established practice.” Importantly, the Spielberg/Olin standard was in place when the union and B&W entered into their CBA in 1996, the grievance procedure was amended in 2004, the subcommittee heard Beneli’s grievance in 2009 and the ALJ issued his decision in 2012.

“At each of those steps, B&W would have relied upon the Spielberg/Olin standard in formulating its decisions with regard to negotiating the CBA with the Union, determining whether to oppose the Union before the subcommittee, and developing and presenting its case to the Subcommittee,” the Ninth Circuit said. “These reliances and similar equitable considerations support the prospective application of the new standard.”

Retroactive application would severely burden the employer, the court added, because the subcommittee hearing and decision occurred in 2009, creating problems with faded memories, the likely dispersal of witnesses and the subsequent closure of the B&W work site. Finally, the panel said the balance of statutory interests favored prospective application, as the stability of labor relations would be undermined by retroactively adopting a new standard that “detract[s] from final and binding arbitration procedures to which employers and unions have previously agreed.”

With the Spielberg/Olin standard in place, the Ninth Circuit’s substantive review of the subcommittee decision was brief, with the panel concluding that “the arbitration decision that Beneli was discharged for cause was susceptible to an interpretation consistent” with the National Labor Relations Act.

To read the opinion in Beneli v. National Labor Relations Board, click here.