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December 18, 2014

NLRB Modifies Arbitration Deferral Standard

In a recent decision entitled Babcock & Wilcox Construction Co., Inc., Case No. 28-CA-02265, the National Labor Relations Board (“NLRB” or the “Board”) modified its post-arbitral deferral standard in cases involving alleged violations of Sections 8(a)(3) and (1) of the National Labor Relations Act (the “Act”).  The modified standard requires the party urging deferral to demonstrate that: (1) the parties presented the statutory issue to the arbitrator; (2) the arbitrator considered the statutory issue or was prevented from doing so by the party opposing deferral; and (3) Board law reasonably permits the arbitration award.  Upon such a showing, the Board will defer to the arbitral decision. 

Background

Prior to the Board’s Babcock & Wilcox decision, the arbitration deferral standard was governed by two seminal Board decisions, Spielberg Mfg. Co., 112 NLRB 1080 (1955), and Olin Corp., 268 NLRB 573 (1984).  In Spielberg Mfg. Co., the Board held that it would defer, as a matter of discretion, to arbitral decisions in cases in which the proceedings appeared to have been fair and regular, all parties agreed to be bound, and the decision of the arbitrator was not clearly repugnant to the purposes and policies of the Act.  The standard articulated in Spielberg Mfg. Co. attempted to reconcile the Board’s obligation under Section 10(a) of the Act to prevent unfair labor practices with the federal policy of encouraging the voluntary settlement of labor disputes.  Under Spielberg Mfg. Co., the party seeking deferral bore the burden of showing that the standards for deferral had been met.  Subsequently, the Board adopted a different deferral standard in Olin Corp., holding that deferral was appropriate where the contractual issue was “factually parallel” to the unfair labor practice issue, the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice issue and the award was not “clearly repugnant” to the Act.  The Olin Corp. decision also shifted the burden to the party opposing deferral to demonstrate the standards for deferral had not been met.   

In Babcock & Wilcox, the Board considered specifically whether to adhere to, modify or abandon the standard for postarbitral deferral under both Spielberg Mfg. Co. and Olin Corp.

The Babcock & Wilcox Deferral Standard

On December 15, 2014, the Board held that the Spielberg/Olin deferral standard did not adequately protect employees’ exercise of their rights under Section 7 of the Act.  The Board therefore modified the post-arbitral deferral standard 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.

  1. The arbitrator must be explicitly authorized to decide the statutory issue.

The proponent of deferral can satisfy the first requirement of the standard by showing that the specific statutory right at issue was incorporated in the collective bargaining agreement.  Alternatively, the party can show that the parties otherwise explicitly authorized the arbitrator to decide the statutory issue.

  1. The arbitrator must have been presented with and considered the statutory issue, or have been prevented from doing so by the party opposing deferral.

The proponent of deferral must show that the arbitrator identified that issue and generally explained why he or she finds that the facts presented either do or do not support the unfair labor practice allegation.  The arbitrator need not engage in a detailed analysis or interpretation of Board law to meet this standard.  In addition, if the unfair labor practice issue is placed before an arbitrator and a party withholds evidence supporting its statutory claim in the arbitral proceeding, the fact that the arbitrator might have reached a different decision on the basis of the withheld evidence will not preclude deferral where the other requirements for deferral are met.
 

  1. Board law must reasonably permit the award.

The arbitrator’s decision must 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.  This requirement does not amount to a de novo review by the Board of the arbitrator’s decision; rather, the result of the arbitration need only be a result that a decision maker reasonably applying the Act could reach.

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