New Year, Old NLRB: Board Restores Deferential Standard for Arbitration Decisions

The National Labor Relations Board (NLRB) helped employers ring in the new year by overturning yet another Obama-era decision that was unfavorable to employers. On December 23, 2019, the Board’s unanimous decision in United Parcel Service, Inc. restored its deferential standard for determining when to defer to arbitration decisions in labor disputes.

The Obama-Era Standard

In the NLRB’s 2014 Babcock & Wilcox Construction Co. decision, it abolished the decades-old Spielberg/Olin deference standard regarding deferral to the parties’ grievance and arbitration process. In Babcock, the Board heightened the standard for deferral to arbitral decisions, shifted the burden of proof to the party requesting deferral and set a nearly-unattainable standard for pre-arbitration deferral in discipline and discharge cases. These changes diminished the prospect that the Board would defer to arbitration and increased the likelihood that employers would have to defend the same issue on two fronts — the labor contract’s grievance procedure and in unfair labor practice proceedings.

The Restored Standard

The Board’s unanimous United Parcel Service decision overturns Babcock’s stringent pre-arbitration deferral standard and restores the deferential Spielberg/Olin post-arbitration standard. Now, as before Babcock, the NLRB will defer to an arbitrator’s decision when all the following are met:

• All parties agreed to be bound by the decision
• The arbitration proceedings appear to have been conducted in a fair and regular manner
• The contractual issue and the unfair labor practice issue are factually parallel
• The arbitrator considered the unfair labor practice at issue and
• The decision is “not clearly repugnant” to the National Labor Relations Act (NLRA)

Likewise, the burden returns to the party arguing against deferral.

Policy Rationale, Reasoning and Takeaways

In reaching its decision, the NLRB found that the Obama-era Babcock standard was premised on an unwarranted “implicit distrust of arbitration” given the “overwhelming body of judicial precedent voicing confidence in, and strong preference for, resolution of discharge and discipline cases through collectively bargained grievance arbitration procedures.”

The Board also identified several concerns with Babcock’s reasoning, including interference with parties’ freedom to contract, the possibility of relitigating discharge or disciplinary issues and improperly shifting the burden of proof to the party asking for deference to the arbitrator.

All in all, a return to the Spielberg/Olin deferral standard means that, when presented with unfair labor practice claims that are factually parallel to contractual issues, the Board will defer to the parties’ negotiated grievance and arbitration process. Forcing employers and unions to use their contractual dispute resolution process to settle disputes that may also constitute unfair labor practices preserves the Board’s resources and reduces the likelihood that employers are forced to defend matters in multiple forums stemming from the same facts.

Finally, this decision is notable for one additional reason: It is the first decision issued following the departure of former lone Democratic Member Lauren McFerran. Accordingly, this may signal that the Board, which currently consists of three Republican members, will continue overturning Obama-era precedent.