In Babcock & Wilcox Construction Co., Inc., 361 NLRB No. 132 (December 15, 2014), the National Labor Relations Board (NLRB) significantly altered the standards under which it will defer to grievance and arbitration proceedings, a pre-arbitration settlement or an arbitrator’s decision, in a case involving alleged discrimination in violation of Sections 8(a)(1) and (3) of the National Labor Relations Act (Act).

Prior to the Babcock decision, the NLRB generally would defer to a collective bargaining agreement’s grievance and arbitration procedures so long as the procedures were final and binding and the employer agreed to waive any time limits, and typically would defer to an arbitration decision if (1) the contractual issue was “factually parallel” to the unfair labor practice issue, (2) the arbitrator was presented generally with the fact relevant to resolving that issue and (3) the award was not clearly repugnant to the Act. In Babcock, however, the NLRB concluded that the prior standards did not adequately protect employees’ rights involving alleged discrimination because they created excessive risk that the NLRB would defer without the statutory issue being adequately considered or when it was impossible to tell if that was the case. Accordingly, in Babcock, the NLRB set forth new deferral standards that will significantly impact the grievance and arbitration process (the NLRB did not change its deferral standards for alleged bad faith bargaining in violation of Section 8(a)(5) of the Act).

Deferral to Arbitration Decisions

Under the new standards, in addition to showing that the parties agreed to be bound by the arbitrator’s decision, and that the proceedings appear to have been fair and reasonable, the party urging deferral must prove 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." The NLRB elaborated on these new requirements by explaining as follows:

  • The party urging deferral can demonstrate that the arbitrator was authorized to decide the unfair labor practice by showing that (a) the specific statutory right was incorporated into the collective bargaining agreement, or (b) the parties explicitly authorized the arbitrator to decide the statutory issue.
  • The party urging deferral can prove that the arbitrator was presented with and considered the statutory issue by demonstrating that the arbitrator identified that issue and at least generally explained why he or she found that the facts presented did or did not support the unfair labor practice allegation.
  • The party urging deferral can establish that NLRB law reasonably permits the award by showing that the arbitrator’s decision constitutes a reasonable application of the statutory principles. Significantly, however, the mere fact that an arbitrator upheld a discharge under a “just cause” provision will not suffice. Instead, in such a case, the arbitrator’s decision must fairly be read as finding that the discipline was for “cause” and not for protected conduct.

Deferral to Grievance and Arbitration Procedures

In addition to establishing a new standard for deferring to arbitration decisions, the NLRB altered the standard for deciding whether to defer to the arbitral process in the first instance. Under the new standards, the NLRB will not defer to the grievance and arbitration process unless “the parties have explicitly authorized the arbitrator to decide the unfair labor practice issue, either in the collective bargaining agreement or by agreement of the parties in a particular case.”

Deferral to Pre-Arbitration Settlements

Given the changes the NLRB made to its deferral to arbitration decision procedures, the NLRB determined that the same changes should be applied to its deferral to pre-arbitration settlements. “Thus, it must be shown that the parties intended to settle the unfair labor practice issue; that they addressed it in the settlement agreement; and that Board law reasonably permits the settlement agreement.” In making this determination, the NLRB will also consider whether the key parties have agreed to be bound by the settlement, whether the settlement is reasonable in light of the nature of the alleged violations, whether there has been any fraud or coercion and whether the respondent has a history of unlawful conduct or has breached previous settlement agreements.

Impact on the Grievance and Arbitration Process

Based on the Babcock decision, employers seeking to have the Region or the NLRB defer will need to revise their approach and now prove one or more of the following:

  • To have the Region or NLRB defer the dispute to the collective bargaining agreement’s grievance and arbitration process, the employer will need to show that the agreement incorporates the statutory issue or, more likely, that the employer is willing to present the statutory issue to the arbitrator.
  • If the parties settle the case, the employer will need to insure that the settlement agreement explicitly shows that the parties considered and intended to settle the alleged unfair labor practice and that the resolution is consistent with NLRB law.
  • If the matter reaches arbitration, the employer will need to show that the collective bargaining agreement incorporates the statutory issue or that the parties authorized the arbitrator to consider the statutory issue, that the arbitrator explicitly addressed that issue in his decision, and that the arbitrator resolved the issue in a manner that is consistent with NLRB law.