Hunton Employment & Labor Perspectives

Often times, the same set of underlying facts will give rise to both a contractual dispute between an employer and a union and an unfair labor practice charge. In these instances, an arbitrator usually decides the contract dispute, while it is the National Labor Relations Board's responsibility to determine the merit of the alleged unfair labor practice. Historically, however, the Board has commonly declined to hear unfair labor practice charges related to contractual disputes, and has instead deferred to arbitrators' earlier contractual rulings. Until recently, the burden fell on the party seeking to avoid Board deferral (usually the union) to prove that deferral was inappropriate. Practically, this ensured that employers could easily avoid addressing the same issues or facts in essentially duplicative litigation.

On December 15, 2014, however, the Board dramatically altered the standard it has historically used to determine when to defer to an arbitrator's decision. Babcock & Wilcox Construction Company, 361 NLRB 132. On February 10, 2015, the Board's General Counsel, Richard Griffin, issued a memorandum explaining the major differences between the traditional deferral standard and the new standard the Board will now use.

The Old Deferral Standard

From 1955 up until the recent Babcock decision, the NLRB applied the Spielberg doctrine and deferred to existing arbitration awards in cases where (1) all parties agreed to be bound by the arbitrator's decision; (2) the arbitration proceedings were "fair and regular" on their face; (3) the factual issues underlying the unfair labor practice charge before the Board were presented to and determined by the arbitrator; and (4) the arbitrator's award was not "clearly repugnant" to the purposes and policies of the Taft-Hartley Act. Pursuant to the Olin guidelines, articulated in 1984, an arbitrator was deemed to have adequately considered the unfair labor practice issue if the facts relevant to the unfair labor practice allegation were presented before the arbitrator and paralleled the facts relevant to the contractual issue. Under this doctrine, the party seeking to avoid deferral--usually the union--had the burden of demonstrating this standard was not satisfied. This standard remained in place for nearly sixty years, offering both employers and unions a sense of predictability when it came to seeking deferral.

The Board revisited this standard in late 2014, finding that it did not adequately balance the policy of encouraging arbitration of collective bargaining disputes with the protection of employee rights. More specifically, the Board believed that the traditional standard created too great a risk that it would defer to an arbitrator who had not adequately considered the unfair labor issue.  

The New Deferral Standard

Consequently, the Board announced a new standard for determining when to defer to arbitral decisions in Section 8(a)(1) and 8(a)(3) cases. Under the new Babcock standard, the Board will defer to an arbitral award in cases where all parties agree to be bound by the arbitrator's decision, the arbitration procedures appear fair and regular, and the party urging deferral demonstrates 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) NLRB law "reasonably permits" the arbitration award. Under this standard, the burden now falls to the party seeking deferral (usually the employer) to prove that each element has been satisfied. The first two elements of this new standard--requiring arbitral consent and fair and regular procedures--remain virtually unchanged since Spielberg. The next three elements, which the party seeking deferral must prove, require further discussion.

Under the first new requirement, the arbitrator must be explicitly authorized to decide the statutory issue. This can be shown by demonstrating either that the specific statutory right at issue was incorporated into the collective bargaining agreement or that the parties specifically agreed to authorize arbitration of the statutory issue in the particular case.

Under the second new requirement, the party seeking deferral must demonstrate that the arbitrator explicitly identified the statutory issue and explained why or why not the facts supported the unfair labor practice allegation. In imposing this requirement, the Board abandoned the presumption that an arbitrator has adequately considered the alleged unfair labor practice if he was presented with facts that are loosely relevant to both the alleged contract violation and the alleged unfair labor practice.

Finally, under the third new requirement, the party seeking deferral must demonstrate that the award represents a reasonable application of the statutory principles that would govern the Board's decision. This requires a stronger showing than the previous standard, under which deferral was only improper if the decision was "clearly repugnant" or "palpably wrong." Under Babcock, the decision must now be a reasonable interpretation of the Act.

The Effects of the New Standard

As a result of this ruling, the Board will likely defer to arbitral awards less often. This means that employers may be forced to "re-litigate" the same issues or facts before the Board following related arbitration hearings. In cases where employers are unhappy with the arbitration results, this may be a welcome change; however, in cases where the employer wishes to uphold the arbitrator's decision, this will present further obstacles and less predictability. In addition, arbitration hearings themselves may become more complicated, as both parties explicitly devote more time and energy to both the contractual dispute and the related unfair labor charge. As Hunton & Williams' attorney Kurt Larkin predicts, "The Board's new standard will impact the predictability of the arbitration process. Usually when you arbitrate a case involving employee rights or discipline, you are reasonably confident that the dispute is over once the case is over - whether you win, lose or settle. Employers won't have that same confidence given the new standard."

According to Griffin's memo, these new rules will apply to collective bargaining agreements executed after December 15, 2014--the day Babcock was decided.