NLRB Considers Radical Changes to Decades-Long Precedent on Deferral to Arbitration

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

In yet another attempt to expand protection for employees under Section 7 of the National Labor Relations Act, the National Labor Relations Board (NLRB) is considering a new standard for deferral to labor arbitration that, if adopted, would significantly undermine the finality of arbitration in cases involving allegations arising under Sections 8(a)(1) and (3) of the Act. This proposed change follows recent guidelines issued by the General Counsel instructing NLRB regional offices not to defer unfair labor practice charges unless the issues can be resolved through grievance and arbitration within a year of deferral. In combination, these initiatives will likely result in increased litigation of unfair labor practice charges and employers being forced to relitigate grievances that have been denied under the collective bargaining agreement.

The Current Standard

Under the Board’s current standard, deferral to an arbitration award is appropriate when (1) the arbitration proceedings were fair and regular; (2) all parties agreed to be bound; and (3) the arbitral decision was not repugnant to the purposes and policies of the NLRA. This standard was established in 1955 in the Spielberg Mfg. Co. case. Consideration of the underlying unfair labor practice issue is also required under Olin Corp., 268 NLRB 573 (1984), meaning that (1) the contractual issue was factually parallel to the unfair labor practice issue, and (2) the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice issue.  The burden of proof rests with the party who is opposing deferral.

The Babcock & Wilcox Case

In Babcock & Wilcox Construction Co., Inc. (No. 28-CA-022625), the Acting General Counsel urged the Board not to defer to a grievance subcommittee’s decision to uphold the termination of Coletta Kim Benali. Benali worked as a forklift operator and was a union steward, and had reported numerous hiring hall violations and other alleged contract violations to the union and her employer, Babcock & Wilcox, in the weeks leading up to her termination. On the morning of her termination, Benali was reprimanded for reporting these concerns to an individual who worked with the company that had hired Babcock to provide construction and maintenance services on a significant project.

A few hours later, Babcock’s superintendent called Benali into his office and informed her that she was being suspended for three days for safety violations. Benali reacted to the news of her suspension with an angry statement that included at least one expletive. Babcock immediately changed Benali’s suspension to a termination for “inappropriate” and insubordinate conduct.

The union filed a grievance alleging that Benali’s suspension and discharge violated the just cause provision of the collective bargaining agreement as well as Section 7 of the Act. Benali also filed an unfair labor practice charge with Region 28.

The grievance was presented to a grievance review subcommittee comprised of management and labor representatives. After reviewing “all the information submitted both written and oral,” the subcommittee denied the grievance on the grounds that no violation of the parties’ collective bargaining agreement had occurred.

Region 28 initially deferred the charge to the parties’ contractual grievance and arbitration procedure, but later issued a complaint on the grounds that the subcommittee’s decision was repugnant to the Act. An administrative law judge subsequently found that subcommittee’s decision did, in fact, meet the Spielberg and Olin standards and dismissed the complaint accordingly.

The General Counsel Files Exceptions And Proposes A New Standard

In exceptions to the administrative law judge’s decision in Babcock, the Acting General Counsel characterized the grievance subcommittee’s decision as repugnant to the Act under Spielberg and Olin and sought to litigate the merits of the unfair labor practice charge. He also proposed a new standard for post-arbitral deferral to “give greater weight to safeguarding employees’ statutory rights” in cases alleging violations of Sections 8(a)(1) and (3).

According to the proposed new standard, a party seeking deferral would bear the burden of establishing that (1) the collective bargaining agreement incorporates the statutory right or the statutory issue was presented to the arbitrator, and (2) the arbitrator correctly enunciated the applicable statutory principles and applied them in deciding the issue. If the party seeking deferral could make the required showing, deferral would be appropriate unless the arbitration award “was clearly repugnant to the Act.”

The Acting General Counsel’s proposed new standard is consistent with a January 2011 memorandum by former Acting General Counsel Lafe Solomon, which advocated for “a new approach to cases involving arbitral deference,” particularly in cases involving allegations of Section 8(a)(1) and (3) of the Act, in order to “give greater weight to safeguarding employees’ statutory rights.”

Additionally, in 2012, the Acting General Counsel implemented new guidelines—GC Memorandum 12-01 and Memorandum OM 12-43—for deferral of 8(a)(1) and (3) charges that included, among other things, a requirement that Regional Directors determine if the grievance/arbitration process was likely to resolve the underlying issues within a year of the deferral. If the issues were unlikely to be resolved within a year, the Director was encouraged to proceed with a full investigation rather than to defer the charge to arbitration.

The Board’s Invitation for Briefing

On February 7, 2014, the Board responded to the Acting General Counsel’s exceptions in Babcock by inviting the parties and amici to submit briefs addressing the following issues:

  1. Should the Board adhere to, modify, or abandon its existing standard for post-arbitral deferral under Spielberg Mfg. Co and Olin Corp.?
  2. If the Board modifies the existing standard, should the Board adopt the standard outlined by the General Counsel in GC Memorandum 11-05 (January 20, 2011) or would some other modification of the existing standard be more appropriate: e.g., shifting the burden of proof, redefining “repugnant to the Act,” or reformulating the test for determining whether the arbitrator “adequately considered” the unfair labor practice issue?
  3. If the Board modifies its existing post-arbitral deferral standard, would consequent changes need to be made to the Board’s standards for determining whether to defer a case to arbitration under Collyer Insulated Wire, United Technologies Corp., and Dubo Manufacturing Corp.?
  4. If the Board modifies its existing post-arbitral deferral standard, would consequent changes need to be made to the Board’s standards for determining whether to defer to pre-arbitral grievance settlements under Alpha Beta Co. and United States Postal Service?

Practical Implications for Employers

Although we can only speculate on whether the Board will decide to adopt the General Counsel’s proposed post-deferral standard (or something similar), the implications for employers could be significant. Not only would a new standard undermine the finality of arbitration and abandon decades worth of deference to parties’ bargained-for grievance and arbitration procedures, but it could significantly increase the amount of litigation of 8(a)(1) and (3) cases at the regional and national levels. The Board’s invitation for briefing on other long-standing deferral standards suggests that changes could be on the horizon for deferral at all stages of a contract dispute.

Until the Board issues a decision in Babcock, employers should expect more push-back from Regional Directors on unfair labor practice charges that historically have been obvious candidates for deferral. Employers should also check their grievance and arbitration provisions for language regarding timelines and prioritize grievances that are likely to proceed to arbitration so that they can be processed within the Acting General Counsel’s one-year deadline. In cases where deferral is granted, be sure that the underlying unfair labor practice issues are fully presented to the arbitrator for consideration to avoid a situation like the one in Babcock, where the subcommittee only appeared to analyze the termination under the terms of the parties’ labor contract.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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