Arbitration Decisions Matter: The NLRB Reverts to Prior Standards on Deferral to Arbitration and Pre-Arbitration Settlements

Arbitration is a strongly favored federal policy and generally can be relied on to resolve even statutory discrimination claims. This is not a novel concept in federal jurisprudence from the Supreme Court of the United States down (although California and the Obama-era National Labor Relations Board (NLRB) have and had a different view). On December 23, 2019, in United Parcel Service, No. 06-CA-143062, the NLRB reversed yet another of its many controversial Obama Board decisions—Babcock & Wilcox Construction Company, 361 NLRB 132 (2014)—that had itself overruled many decades of precedent (including Spielberg Mfg. Co., Olin Corp., and Collyer Insulated Wire). The NLRB has reverted to the time-honored tests that respect the role of arbitration in the collective bargaining process and recognizes arbitration as “the culmination of the statutory scheme that Congress empowered the Board to uphold.”

The employer in this case and the International Brotherhood of Teamsters had negotiated a new national master agreement and numerous local supplement agreements in 2013. A local shop steward with the Teamsters in Pennsylvania was disgruntled with the agreement, actively opposed ratification, and ran against the local president who had supported ratification. Shortly after final ratification of the bargaining agreement and losing the internal union election against the local president, in 2014, the employer discharged the shop steward for violating the employer’s delivery policies. The steward, represented by the local president against whom he had just ran, filed grievances challenging his discharge and alleging the discharge was in response to his actions as a dissident union activist in violation of Section 8(a)(3) of the National Labor Relations Act (NLRA). In 2015, the grievances were arbitrated before a joint grievance panel comprised of representatives of the union and the employer in accordance with the provisions of the agreement. The panel unanimously upheld the discharge, finding no violation of the agreement.

The steward also filed unfair labor practice (ULP) charges with the NLRB making the same claims that his discharge had been in violation of Section 8(a)(3) of the NLRA. In a November 2016 decision, an administrative law judge applying Babcock & Wilcox gave the steward a “second bite of the apple,” refused to defer to this arbitration decision, and found the discharge was unlawful. The employer appealed to the NLRB, which invited briefing and comment on whether it should reverse Babcock & Wilcox and, if so, what the standard should be for postarbitral deferral.

Following the expiration of Member Lauren McFerran’s term, the remaining three Republican appointees unanimously reversed Babcock & Wilcox. The NLRB explained that the Obama Board’s decision in that case “represents a policy choice based on the then-majority’s differing view of the relative weight to be assigned the protection of employees’ individual statutory rights and the encouragement of grievance arbitration in a collective-bargaining relationship.” – The NLRB found that “[t]o fully effectuate the policies and purposes of the Act, Babcock must be overruled and the prior deferral standards must be reinstated.”

Under the restored standard, the Board will defer to the arbitrator’s decision where (1) the arbitral proceedings appear to have been fair and regular, (2) all parties have agreed to be bound, (3) the arbitrator considered the unfair labor practice issue, and (4) the arbitrator’s decision is “not clearly repugnant” to the Act.

Key Takeaways

This decision affects deferral to pre-arbitration grievance settlements, deferrals to arbitration (rather than processing many ULPs), and also deferral to the actual arbitration awards under the standard set forth above.

This decision will again level the playing field in many cases and allow employers to rely on the collectively bargained dispute resolution mechanism—arbitration—rather than being forced to defend the same basic claim in multiple forums with potentially inconsistent outcomes, as had happened in this case with the “second bite of the apple.”

This outcome is particularly important for employers because defending a ULP complaint that is prosecuted by the federally funded general counsel’s office, before an administrative law judge, then the Board, and then possibly a circuit court of appeals can be a very expensive process for employers. The union and grievant, on the other hand, generally have very little cost, as the federal government is paying the tab for the case as it progresses.

One of the other important changes is that under the restored standard, the party challenging deferral (generally the union) again has the burden of showing that deferral is not appropriate, whereas under the Babcock & Wilcox requirement, the party seeking the deferral had the burden of proof.