NLRB Sets New Arbitration and Grievance Settlement Deferral Standards | Practical Law

NLRB Sets New Arbitration and Grievance Settlement Deferral Standards | Practical Law

In Babcock & Wilcox Construction Co., the National Labor Relations Board (NLRB) announced a new standard for deferring investigations and prosecutions of unfair labor practice (ULP) charges to arbitration awards in factually parallel matters. The NLRB also changed its standards for deferring ULP cases to pending labor arbitrations and pre-arbitration labor grievance settlements. Each of the new standards increases the burdens on parties urging deferral. The new deferral standards will apply prospectively.

NLRB Sets New Arbitration and Grievance Settlement Deferral Standards

Practical Law Legal Update 8-593-2525 (Approx. 9 pages)

NLRB Sets New Arbitration and Grievance Settlement Deferral Standards

by Practical Law Labor & Employment
Law stated as of 17 Oct 2017 • USA (National/Federal)
In Babcock & Wilcox Construction Co., the National Labor Relations Board (NLRB) announced a new standard for deferring investigations and prosecutions of unfair labor practice (ULP) charges to arbitration awards in factually parallel matters. The NLRB also changed its standards for deferring ULP cases to pending labor arbitrations and pre-arbitration labor grievance settlements. Each of the new standards increases the burdens on parties urging deferral. The new deferral standards will apply prospectively.
On December 15, 2014, in Babcock & Wilcox Construction Co., a three-member majority of the five-member panel (Board) heading the NLRB's judicial functions changed its long-standing standard for deferring investigations and prosecutions of unfair labor practice (ULP) charges to labor arbitration awards from factually parallel matters. The Board also changed its similarly well-established standards for deferring ULP investigations and prosecutions to pending arbitrations and to pre-arbitration grievance settlements in factually parallel matters. Each of the new standards increases the burdens on the party urging NLRB deferral. The new deferral standards will apply prospectively. (361 N.L.R.B. slip op. 132 (Dec. 15, 2014).)

Background

On April 9, 2012, an NLRB administrative law judge issued a decision, deferring to the determination of a labor arbitrator upholding the employer's discharge of the employee-charging party. The NLRB's General Counsel appealed that decision by filing exceptions with the Board and asked the Board to adopt a new post-arbitration deferral standard in 8(a)(1) and (3) cases.
On February 7, 2014, the Board invited briefs and amicus briefs on the following questions:
(See Legal Update, NLRB Invites Briefs on Its Standards for Deferring to Arbitration Awards.)

The Olin/Spielberg Post-arbitration Deferral Standard

Under the Olin and Spielberg standard, the NLRB would generally defer its investigation and prosecution of ULP charges to arbitration awards if:
  • The arbitration proceeding was fair and regular.
  • All parties agreed to be bound to the arbitrator's award.
  • The arbitration award was not repugnant to the purposes and policies of the NLRA.
  • The arbitrator or arbitrators adequately considered the ULP issue, which required that:
    • the contractual and ULP issues were factually parallel; and
    • the parties presented the facts relevant to resolving the ULP issue to the arbitrator.
(Spielberg Mfg. Co., 112 N.L.R.B. 1080 (1955) and Olin Corp., 268 N.L.R.B. 573 (1984).)

The Collyer/Dubo Pre-arbitration Deferral Standard

Under the Collyer standard, the NLRB would generally defer its investigation and prosecution of ULP charges to pending arbitration if:
  • The dispute arises out of a long and productive collective bargaining relationship.
  • There is no claim of employer enmity towards employees' exercise of Section 7 rights.
  • The arbitration clause covers the dispute.
  • The employer manifests a willingness to arbitrate the dispute.
  • The alleged ULP lies at the center of the dispute.
(Collyer, 192 N.L.R.B. at 843.)
Under Dubo, if there is a pending grievance or arbitration under a CBA, the NLRB temporarily defers ULP proceedings on Section 8(a)(3) charges until pending grievance and arbitration proceedings about the same adverse action against an employee are completed. The charging party has no obligation to file or to continue processing a grievance. The NLRB's ULP investigation resumes when either:
  • The grievance arbitration process fails to resolve the dispute.
  • The NLRB finds that the arbitration award does not adequately address the employee's Section 7 rights.
(Dubo Mfg. Corp., 142 N.L.R.B. 431 (1963) and Dubo Mfg. Corp., 148 N.L.R.B. 1114 (1964).)
Regional offices of the NLRB send letters demanding that the parties "show cause" why they should not revoke the deferral for any cases that have been deferred for more than one year (NLRB Opers. Mgmt. Mem. 09-06 (Oct. 7, 2008)).

The Alpha Beta Pre-arbitration Grievance Settlement Deferral Standard

Under Alpha Beta, the NLRB applies modified Spielberg/Olin factors and will defer ULP charge investigations and prosecutions to a settlement reached during the grievance and arbitration process where:
  • The grievance proceedings were fair and regular.
  • The settlement was made under the collective bargaining agreement's (CBA) grievance procedure.
  • All parties had agreed to be bound including the employees. Employees who do not directly participate in the settlement would be bound to the settlement negotiated by their union because, either or both:
    • based on Supreme Court precedent, the employees empower unions to bind them to contract terms including waivers of their NLRA rights by selecting them as their collective bargaining agents (Metro. Edison Co. v. NLRB, 460 U.S. 693 (1983)); or
    • employees authorize a union to settle the dispute when they invoke the contractual grievance procedure.
  • The settlement agreement was not clearly repugnant to the purposes and policies of the NLRA.
  • The ULP issue was considered by the parties when reaching the settlement before arbitration because:
    • the contractual issue and the ULP issue are factually parallel; and
    • the parties were generally aware of the facts relevant to resolving the ULP.
(Alpha Beta Co., 273 N.L.R.B. at 1546-48 and Postal Service, 300 N.L.R.B. at 197-98.)

Outcome

The Board majority (Chairman Pearce and Members Hirozawa and Schiffer) found that each of its well-settled arbitration and grievance settlement deferral standards failed to adequately protect employees' (and unions') rights to access NLRB processes to preserve their NLRA rights. In turn, it set new standards, each increasing the burdens on parties urging NLRB deferral.

The New Post-arbitration Deferral Standard

The Board majority held that the NLRB would defer its investigation and prosecution of ULP charges to arbitration awards if the party urging deferral shows that:
  • The arbitration procedures were fair and regular.
  • The parties agreed to be bound by the arbitration award.
  • The arbitrator was explicitly authorized to decide the ULP issue either because:
    • the specific NLRA right at issue was incorporated in the CBA; or
    • the parties explicitly authorized the arbitrator to decide the issue when submitting the case to arbitration.
  • The arbitrator:
    • actually was presented with and considered the statutory issue. To satisfy this point, the arbitrator must identify the issue in the award and at least generally explain why the facts presented support or do not support the ULP allegation. The Board would not assume that an arbitrator upholding a discharge under a "just cause" analysis understood the ULP issues and considered but found unpersuasive evidence tending to show an unlawful motive; or
    • was prevented by the party opposing deferral from considering the issue even though the ULP issue was incorporated in the CBA.
  • Board law reasonably permits the award in light of the evidence presented. The Board majority:
    • described this reasonableness standard as more critical than the "clearly repugnant to the [NLRA]," "palpably wrong" and "not susceptible to an interpretation consistent with the [NLRA]" standard discussed in Olin;
    • noted that it would not expect an arbitrator to address a statutory issue in same way an NLRB ALJ would; and
    • disclaimed that it would conduct de novo review of arbitration awards.

The New Pre-arbitration Deferral Standard

The Board majority held that the NLRB would not defer its investigation and prosecution of ULP charges to pending arbitrations if the party urging deferral cannot show that the parties explicitly authorized the arbitrator to decide the ULP issue either:
  • In their CBA.
  • By agreement in a particular case.
The Board majority noted that:
  • It was prudent to adjust its pre-arbitration deferral policy to incorporate the "explicitly authorized" factor from its new post-arbitration deferral standard. If the Board would ultimately not defer the matter to the arbitration award, there would be no reason to delay the ULP proceeds pending the arbitration award.
  • The NLRB General Counsel has unreviewable discretion as to whether to investigate or issue complaints on ULP charges and may decide under what circumstances it should defer to pending arbitration before issuing complaints.

The New Pre-arbitration Grievance Settlement Deferral Standard

The Board majority held that its pre-arbitration grievance settlement deferral standard will largely combine:
  • A modified form of the Board's new post-arbitration deferral standard. In particular, the party urging the Board to defer to a grievance settlement must show that:
    • When the parties settled the grievance they also intended to settle the ULP issue.
    • The ULP issue was addressed in the settlement agreement. The Board will not expect the parties to have addressed the statutory issue in same manner as NLRB administrative law judges or engage in de novo review of settlement agreements; and
    • Board law reasonably permits the settlement agreement.
  • The Board's standard for reviewing non-Board settlements of pending ULPs from Independent Stave Company, Inc. In particular, the Board will consider whether:
    • the charging party in the ULP case, the employer and any of the individual discriminatees have agreed to be bound by the settlement;
    • the NLRB General Counsel has opposed or approved of the settlement;
    • the settlement is reasonable in light of the violations alleged, the risks inherent in ULP litigation and the stage of the ULP litigation when the settlement is reached.
    • there has been any fraud, coercion or duress by any of the parties in reaching the settlement; and
    • the employer has engaged in a history of violations of the NLRA or has breached previous settlement agreements.
    (Independent Stave Co. Inc., 287 N.L.R.B. 740, 743 (1987)).

The New Deferral Standards will Apply Prospectively

The Board unanimously:
  • Affirmed that the ALJ properly applied the Board's extant arbitration deferral policy and dismissed the charging party's complaint.
  • Held that it would be unjust to apply the Board majority's new deferral standards to pending cases.
The Board majority ruled that:
  • Where parties have already, either contractually or explicitly, authorized arbitrators to decide ULP claims, the Board will apply the new standard to all future arbitrations.
  • If CBAs do not authorize arbitrators to decide ULP issues, the new standard will be applied the earlier of when:
    • the CBA expires; or
    • the parties agree to present particular statutory issues to the arbitrator.

The Dissenting Opinions

Members Miscimarra and Johnson noted in separate dissenting opinions, among other things, that the majority:
  • Unnecessarily overturned effective and long-standing precedent supporting the efficient resolution of labor grievances through final and binding arbitration.
  • Created deferral standards that distinguish "statutory issues" from the issue of discipline for "cause" in contradiction with Section 10(c) of the NLRA, which makes "cause" a statutory issue and prohibits the Board from reinstating or awarding backpay whenever "cause" exists for an employee's suspension or discharge.
  • Effectively requires parties interested in saving labor arbitration awards from Board scrutiny and sparing themselves from duplicative arbitration and NLRB trials to negotiate specific terms into their CBAs or agreements about submissions to arbitration in particular cases. Two-track arbitration and Board litigation become a near certainty.
  • Departs from a national labor policy favoring final and binding arbitration to resolve labor disputes without justification.
  • Despite contentions to the contrary, requires de novo review of arbitration awards that the parties agreed would be final and binding before it will defer to those awards.
  • Created more work for the NLRB and more delays for parties attempting to resolve their labor disputes.

Practical Implications

The NLRB's new deferral policies make Board deferral to arbitration, pending arbitration and grievance settlements less likely. The decision initially harms employers, who are nearly always the party urging the Board to defer ULP proceedings.
Employers should expect:
  • More dual-track arbitrations and ULP proceedings concerning the same facts and issues in at least the near term. Grievants and their unions will likely want the current Board to scrutinize whether the NLRA would require better results than an arbitration award or grievance settlement provided.
  • Unions not to agree to permit arbitrators to decide "statutory" issues (which would preserve the prospect of the Board deferring ULP cases to arbitration awards or settlements) without garnering employer concessions on other issues.
  • This decision to reduce the efficacy of grievance-arbitration procedures to a degree that will not be determinable for several years.
  • That the new deferral policies may ultimately be reviewed by US Courts of Appeals, but not likely from a petition for review of this decision, because:
    • the employer won this case as the Board applied extant law and dismissed the ULP complaint after deferring to the arbitration award. It's prospective harm from the prospective application of the new deferral standards to future arbitration awards is hypothetical; and
    • the charging party is not likely to appeal because there is little chance she would be able to convince an appeals court that the Board acted arbitrarily, unreasonably or abused its discretion by either applying its extant precedent supporting deferral in her case or declining to deviate from that precedent to apply the new post-arbitration standard retroactively to her.
Update: On October 17, 2017, in Beneli v. NLRB, the US Court of Appeals for the Ninth Circuit considered whether the Board properly determined that a new standard for deferring to arbitral decisions (developed by the Board in the underlying case), should only be applied prospectively. The Ninth Circuit held that the Board properly applied this deferral standard prospectively. ( (9th Cir. Oct. 17, 2017).)