United States: NLRB Changes Standard For Deferral To Arbitration In Discrimination And Retaliation Cases

In a significant recent decision, the National Labor Relations Board (NLRB or Board) again abandoned long-standing, accepted Board precedent. In Babcock & Wilcox Construction Co., 361 NLRB No. 132 (Dec. 15, 2014), the Board changed its standard for deferral to arbitration awards, grievance/arbitration proceedings and pre-arbitration grievance settlements in cases where it is alleged that employees suffered retaliation or reprisal for engaging in union and/or protected concerted activity in violation of Section 8(a)(3) and (1) of the National Labor Relations Act (Act).1 Agreeing with the Board's General Counsel (GC) that the existing deferral standard for arbitration awards in the Board's 1984 decision in Olin Corp. "does not adequately balance the protection of employees' rights under the Act and the national policy of encouraging arbitration of disputes arising over the application or interpretation of a collective-bargaining agreement," the Board ruled that, going forward, employers urging deferral to an arbitration award have the burden of showing that the "statutory issue" was presented to the arbitrator, that the arbitrator considered the statutory issue and that Board law "reasonably permits" the award. The Board also changed the standards for pre-arbitration deferral and deferral to pre-arbitration settlements to be consistent with the change to the arbitration award standard.

What the Standard Was and the General Counsel's Distaste for it

The Board issued its first decision agreeing to defer to arbitration awards in 1955 in Spielberg Mfg. Co., holding that it would defer to arbitration decisions in cases where the proceedings were fair and regular, all parties agreed to be bound, and the decision of the arbitrator was not "clearly repugnant" to the Act. In 1984, in Olin Corp., the Board added the requirements that the contractual issue addressed by the arbitrator be "factually parallel" to the unfair labor practice issue and that the arbitrator be presented generally with the facts relevant to resolving the unfair labor practice. Returning to prior precedent, the Board also placed the burden on the party opposing deferral to show that the requirements for deferral had not been met.

Interpretation of the law remained unchanged until January 2011, when the GC issued GC Memorandum 11-05, which, among other things, stated that the Olin Corp. standard was inadequate to ensure that employees' statutory rights were protected in the arbitral process and recommended that the Board adopt more demanding standards regarding deferral of Section 8(a)(3) and (1) cases. In February 2014, in connection with its consideration of the appeal of the judge's decision in Babcock & Wilcox, the Board requested briefs addressing four issues, including whether the Olin Corp. standard should be modified and, if so, whether the modifications previously recommended by the GC should be adopted.

What the Board Did

Rejecting contrary arguments raised by dissenting Members Miscimarra and Johnson and arguments offered by others in the briefing process, the Board majority of Chairman Pearce and Members Hirozawa and Schiffer adopted virtually all of the GC's recommendations. In the majority's opinion, deferral to arbitration was a matter of "statutory" discretion for the Board to exercise in its judgment and—such "discretion" was not restricted or prohibited by any section of the Act. It was for the Board to decide whether its intervention in the arbitration process was necessary based on the statutory rights involved, or whether it should withhold its authority to adjudicate alleged unfair labor practices where federal labor policy would be best served by deferring to an arbitration decision involving the same subject matter. In Babcock & Wilcox, the Board concluded that the employees' statutory rights affected in Section 8(a)(3) and (1) cases warranted intervention, and it then proceeded to change all of the standards for deferral of cases involving those and similar allegations.

The newly established standard for deferral to arbitration awards is 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. According to the Board, the "explicitly authorized" requirement would be met by showing either that the specific statutory right at issue was incorporated in the parties' collective bargaining agreement (CBA) or that the parties agreed to explicitly authorize the arbitrator to decide that issue in that case. With respect to the "Board law" requirement, the arbitrator's decision had to constitute a "reasonable application of the statutory principles that would govern the Board's decision, if the case were presented to it, to the facts of the case."

Turning to the pre-arbitration deferral standard under Collyer Insulated Wire and United Technologies Corp., the Board changed the standard to be consistent with the post-arbitration deferral standard. Thus, the Board held that it would not defer Section 8(a)(3) and (1) allegations to the grievance/arbitration process unless the parties "explicitly authorized" the arbitrator to decide the unfair labor practice issue, either in the CBA or by specific agreement in a particular case. The Board also decided to apply the new deferral standard to pre-arbitration grievance settlements. To comply, the employer must show that the parties intended to settle the unfair labor practice issue, that they addressed the issue in the settlement agreement and that Board law "reasonably permits" the settlement reached by the parties.

Fortunately for employers, the Board will apply its new deferral standards only prospectively, and not retroactively to all pending cases, as it usually does. Because the new arbitration award deferral standard did not apply to the Babcock & Wilcox case, the Board followed the Olin Corp. standard, which had been met, deferred to the arbitration award upholding the discharge of the employee, and dismissed the complaint.

The Dissenters' Views

While Members Miscimarra and Johnson both agreed with the decision to dismiss the complaint, each filed separate, lengthy dissents. Member Miscimarra's primary argument was that the majority's decision to deny deferral in all arbitration cases that determined whether "cause" supported an employee's suspension or discharge, unless the party seeking deferral proved that the arbitrator considered so-called "statutory" or "unfair labor practice" issues, was precluded by Section 10(c) of the Act. Miscimarra also complained that the new standards required parties to rewrite certain CBA provisions or be prepared for two track arbitration/Board litigation, thereby eliminating the benefits of "final and binding" arbitration. In Miscimarra's view, the changed deferral standard reflected an underlying hostility toward final and binding grievance arbitration and "cause" determinations, contrary to the federal policies favoring arbitration. Finally, Miscimarra argued that there was no reason for the Board to change any of the well-established, understood, and widely applied and enforced deferral standards. Member Johnson also argued that the new standards reflected an implicit hostility toward arbitration, that there was no rational basis for departing from the prior standards, and that a result of the changes would be for unions and employees to embrace the two track litigation option, with the Board litigation being at public expense.

Effect on Unionized Employers

Once again, the Board majority has overruled long-standing (30 years) Board precedent. The relatively stable, collectively bargained process of grievance resolution and final and binding arbitration has been disrupted. The known and understandable standards for deferral to arbitration of matters within the Board's jurisdiction have been changed substantially, and how those standards will be interpreted and applied by the Board has yet to be determined. There are however, some known effects of the Board's decision:

  1. Regardless of whether the proposed deferral is to an existing arbitration award, to prospective arbitration procedures or to pre-arbitration grievance settlements, the proponent of arbitration – generally the employer – bears the burden of showing satisfaction of all requirements of the deferral standard.
  2. To satisfy the requirement that the arbitrator be "explicitly authorized" to decide the unfair labor practice issue, the parties' CBA must contain a provision prohibiting discipline for engaging in union and/or protected concerted activity. If it does not, the parties have to either negotiate such a provision or execute a written agreement containing the authorization for each case involving Section 8(a)(3) and (1) allegations. As noted in both dissenting opinions, however, neither renegotiating discipline provisions nor negotiating case-by-case agreements are simple matters for either party, for many reasons.
  3. In accordance with the Board's decision to apply the new standards prospectively, outstanding arbitration awards and pending (post-hearing) awards are governed by the Olin Corp. deferral standard. With respect to arbitrations that have not occurred, the new standard will be applied where the parties already have, either contractually or explicitly for a particular case or cases, authorized arbitrators to decide unfair labor practice claims. However, where current CBAs do not authorize arbitrators to decide unfair labor practice issues, the Board will not apply the new standard until those CBAs have expired or the parties have agreed to present particular statutory issues to the arbitrator. Based on this statement by the Board and an accompanying footnote, it appears that the Olin Corp. deferral standard will govern arbitration awards under those contracts, even if the arbitration occurs after the Babcock & Wilcox decision. The decision does not address deferrals to the arbitration process or to pre-arbitration grievance settlements under such contracts.
  4. There is a substantial likelihood that the current Board (now with Member McFerran sworn in as Member Schiffer's replacement) will refuse to defer to any arbitration award that is not consistent with what it would do under Sections 8(a)(3) and (1) with the same facts, regardless of the majority's assertion that the Board would not do so. More aggressive unions and dissatisfied employees are likely to take advantage of that possibility, especially if they do not prevail in the underlying arbitration.
  5. Employers will have to make a request to the union that unfair labor practice charges alleging Section 8(a)(3) and (1) violations be deferred to the grievance/arbitration process and show that the "explicitly authorized" requirement has been met. Again, more aggressive unions may reject such requests. In addition, some arbitrators are inclined not to consider NLRA deferral matters, even if both parties agree to the contrary. In such circumstances, a parallel NLRA claim will be permitted to move forward.
  6. Depending upon the circumstances, pre-arbitration settlements of grievances are now much more complicated. Lower level managers, supervisors, and Human Resources representatives often resolve grievances at early stages quickly and cost effectively. In many cases, such resolutions will not be challenged simply because both parties sincerely wanted a settlement. Where a challenge later occurs, however, to warrant deferral to such settlement, the employer will have to prepare a written agreement showing that the requirements of the new standard have been satisfied.
  7. Employers cannot preclude employees from engaging in two-track litigation, even if the CBA contains a provision authorizing an arbitrator to resolve unfair labor practice issues, because employees can pursue their unfair labor practice claims with the Board, which may or may not defer to the arbitration award. If there is no CBA provision authorizing arbitration of the unfair labor practice, the opportunity for employees to pursue their claims through both the grievance/arbitration process and the Board is guaranteed.
  8. An immediate appeal of the Board's decision may not occur, as the underlying complaint in Babcock & Wilcox was dismissed. As a result, employers should anticipate these substantial changes to the deferral process to be in effect now, subject to the conditions described above. Ultimately, however, the Board's new standards are likely to be challenged in some later case.

Footnote

1. The deferral standard for cases involving Section 8(a)(5) bad faith bargaining/unilateral change allegations was not addressed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions