On December 23, 2019, the National Labor Relations Board (NLRB, or the Board) overturned an Obama-era decision regarding deference to labor arbitration proceedings. In United Parcel Service (UPS), the Board returned to its former standard for deciding whether to defer to an arbitrator’s prior resolution of a union grievance concerning an employee’s discipline or discharge that also is alleged to violate the National Labor Relations Act. Under the restored standard, the Board will defer to the arbitrator’s decision when the arbitral proceedings appear to have been fair and regular, all parties have agreed to be bound, the arbitrator considered the unfair labor practice issue, and the arbitrator’s decision is not clearly repugnant to the Act.  

The UPS decision overruled the Obama-era opinion in Babcock & Wilcox Construction Co., Inc., and returns to the deferral standards established long ago in Spielberg Mfg. Co., 112 NLRB 1080 (1955), and Olin Corp., 268 NLRB 573 (1984). In addition, the decision restores rules for pre-arbitral deferral established in United Technologies Corp., 268 NLRB 557 (1984), and for deferral to pre-arbitral settlement agreements in Alpha Beta Co., 273 NLRB 1546 (1985). 

In Babcock, the NLRB abandoned its decades-old “Spielberg/Olin” standard and placed the burden of proof on the party (typically the employer) seeking deferral to the arbitration decision, increasing the likelihood that the Board would ignore the arbitrator’s determinations. In overturning Babcock, the Board was concerned with the risk of improper interference with contractual rights, encouraging the re-litigation of claims resolved at arbitration, and improperly allocating the burden of proof.

The UPS case stemmed from an unfair labor practice charge filed by a long-time employee and Teamsters’ shop steward, who opposed a national collective bargaining agreement that would cover his local union. After the employee was fired for failing to follow UPS delivery protocols, he filed two grievances which were heard by a panel pursuant to the contract’s grievance procedures. The termination was upheld. The employee then filed an unfair labor practice charge with the NLRB. The Administrative Law Judge (ALJ) who heard the case applied Babcock and held that the Board should not defer to the panel’s decision, concluding that the termination violated the NLRA.

On review, the Board unanimously held that the Babcock standard was based on flawed reasoning, so the Board reversed the ALJ, abrogated the Babcock standard, and reinstituted the Spielberg/Olin principles. The Board will apply its return to Spielberg/Olin retroactively.

Interestingly, the NLRB broke from an unwritten tradition that substantive legal principles under the NLRA will not be reversed when the Board has fewer than four members. This could mean that more Obama-era decisions will be revisited in the future.

Employers should evaluate any cases pending before the Board involving an employee termination or discipline that were subject to a contractual grievance/arbitration process.