​In yet another holiday “gift”, on December 15, the National Labor Relations Board issued its decision in the closely watched Babcock & Wilcox case, reversing 30+ years of NLRB precedent on whether the NLRB will defer an unfair labor practice charge to a parallel arbitration award.

​The NLRB has a long history of deferring an unfair labor practice charge to the grievance-arbitration process for union represented work forces. In that setting, it is not unusual for an employee or a union to file an unfair labor practice charge with the NLRB claiming that an employee was fired because of his union activities (in violation of Section 8(a)(3) of the NLRA), while simultaneously pursuing a grievance through the parties’ grievance-arbitration process claiming that the employee was discharged without “just cause”, under the parties’ collective bargaining agreement.

​Since the mid-1980’s, when presented with this type of a case, the NLRB would usually defer the unfair labor practice charge to the arbitration process, so long as the employer was willing to waive any procedural defenses it might have (such as the grievance being untimely) so that the grievance would be addressed on the merits by the parties’ arbitrator. For all practical purposes, this meant that if an unfair labor practice charge dealt with factual issues that would be addressed in the arbitration proceeding, the Board would decline to process the unfair labor practice charge, which would be held in abeyance pending the outcome of the arbitration. Once the arbitration award was issued, the NLRB would typically defer to the arbitration award as well, even if the arbitrator did not explicitly address the issue of whether or not the employee was discriminated against because of his/her union activities. Therefore, the arbitrator’s award would, in most cases, conclusively resolve the unfair labor practice charge as well as the pending grievance, even if the arbitrator did not rule on the actual unfair labor practice charge.

During the 1970’s and early 1980’s, the NLRB flip-flopped on what standard it would apply in deciding whether or not it would defer a pending unfair labor practice charge to an employer’s and union’s grievance-arbitration process if the unfair labor practice allegations appeared to be encompassed within pending grievance dealing with the same issue. Finally, in Olin Corp., 268 NLRB 573 (1984), the Board ruled that it would defer an unfair labor practice charge to an arbitration award where the contractual issue was: (1) factually parallel to the unfair labor practice issue; (2) the arbitrator was presented with the facts relevant to resolving that issue; and (3) the arbitration award was not “repugnant” to the NLRA.

​On February 14, 2014, the Board invited amicus briefs in the Babcock & Wilcox case, specifically requesting that amici address the issue of: [s]hould the Board adhere to, modify, or abandon its existing standard for post-arbitral deferral under Spielberg Mfg. Co., 112 NLRB 1080 (1955), and Olin Corp., 268 NLRB 573 (1984)?

​In the Babcock case, the General Counsel argued that the Board should defer to an arbitration award only if the statutory right was either incorporated in the collective-bargaining agreement or presented to the arbitrator by the parties, and if the arbitrator “correctly enunciated the applicable statutory principles and applied them in deciding the issue.”

​In deciding the Babcock case, the Board altered the deferral standard, but did not adopt the General Counsel’s position that the arbitration award must reflect that the arbitrator applied applicable statutory principles. Under its new standard, 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, this modified framework will “rectify the deficiencies in the current deferral standard in a way that provides greater protection of employees’ statutory rights”.

​Although the Board rejected the standard advocated by the General Counsel, it is notable that under the new standard, the arbitrator must consider the statutory issue (such as, whether or not the employee was terminated because of his/her union activities). According to the Board, the Board will “find that the arbitrator has actually considered the statutory issue when the arbitrator has identified that issue and at least generally explained why he or she finds that the facts presented either do or do not support the unfair labor practice allegation.”

​The Board’s new standard will likely result in more unfair labor practice charges not being deferred and being heard through the NLRB’s unfair labor practice charge procedures. This outcome is likely because, while many arbitrators issue comprehensive decisions, other arbitrators issue short or summary opinions that simply deny or sustain a grievance. The latter type of decision will not result in the Board deferring to the arbitrator’s award, as that type of decision would not provide any evidence that the arbitrator considered the NLRA issue. This change in approach has been something the Board has been studying for quite some time, as the previous General Counsel issued a Memorandum in 2011 addressing the issue, and building on questions raised by his predecessor. From a cynical point of view, the Board’s new standard could be interpreted as somewhat of a “turf grab”, so that the Board (and its bureaucracy) try and hear more unfair labor practice cases. Moreover, the Board’s decision goes against extensive recent judicial precedent favoring arbitration as a more cost-effective, final and binding dispute resolution mechanism – fact noted by Member Miscimarra in his separate opinion:

the changed deferral standards reflect an underlying hostility towards final and binding grievance arbitration and “cause” determinations, contrary to the federal policies favoring arbitration that Congress incorporated into the Federal Arbitration Act (in 1925) and into the Labor Management Relations Act (in 1947). The most important characteristic of “final and binding” arbitration is the notion that adjudicated outcomes will, in fact, be “final” and “binding.” Yet, my colleagues now effectively guarantee that, in most cases involving existing CBAs, arbitration will not be final and binding. The outcome will be more work for the Board, at the expense of speed, predictability, and certainty for the parties, and the virtual elimination of finality given the long litigation treadmill that is associated with Board and court litigation of unfair labor practice claims.