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NLRB Tightens Arbitration Deferral Standards
February 25, 2015
The National Labor Relations Board (“Board” or “NLRB”) has long limited its involvement in disputes between employers and unions concerning labor agreements that provide for binding arbitration where the disputes involve allegations of contractual violations and unfair labor practices arising from parallel facts. A recent decision by the NLRB in Babcock & Wilcox Construction Co., 361 NLRB No. 132 (Dec. 15, 2014) announced a tightening of the standards applicable to the Board’s deference to the parties’ chosen means of dispute resolution. 
Subject to some exceptions, the Board has deferred to arbitration decisions issued in cases where:
1.    the alleged contractual violation and unfair labor practice are factually parallel,
2.    the arbitrator has been presented with the relevant facts,
3.    the proceedings appear to be fair and regular,
4.    the parties have agreed to be bound by the decision, and
5.    the decision is not “clearly repugnant to the purposes and policies of the Act.” 
This policy, commonly referred to by the case names from which it evolved, Spielberg Manufacturing Co., and Olin Corp., did not require explicit consideration of the statutory issues by the arbitrator, and the burden was on the party opposing deferral to demonstrate that the Spielberg criteria had not been met. 
The Board followed a similar policy of administrative deferral of most disputes at the pre-arbitration stage. Where satisfied, the pre-arbitration deferral criteria, commonly identified by reference to the Board’s decision in Collyer Insulated Wire, would delay the processing of unfair labor practice charges pending the outcome of the parties’ grievance and arbitration process. Administrative deferral was generally provided under the Collyer standard where the parties had an effective dispute resolution procedure that included final binding arbitration and where both parties were willing to arbitrate regardless of any procedural defenses to the timeliness of the grievance. 
The Board’s pre- and post-arbitral deferral criteria changed significantly with its decision in Babcock. On February 10, 2015, NLRB General Counsel Richard F. Griffin, Jr. issued Memorandum GC-15-02 to explain and provide casehandling instructions on the Board’s new deferral standards. The General Counsel’s Memorandum is briefly summarized below.
Postarbitral Deferral.  The party urging deferral to the arbitration decision must demonstrate that:
1.    the arbitrator was explicitly authorized (either in the labor agreement or by agreement of the parties) to decide the unfair labor practice issue;
2.    the arbitrator was actually presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and
3.    the Board law “reasonably permits” the arbitral award.
Prearbitral Deferral.  The General Counsel advises that the Board will no longer defer its processing of unfair labor practice charges to the arbitral process unless the arbitrator is explicitly authorized to decide the statutory issue. The rationale for this change is “because it would be futile to place a case on hold pending arbitration if it is clear from the outset that deferral to that ultimate award would be improper.” 
Deferral to Settlements.  The Board’s standards on deferring to voluntary grievance settlements reached by employers and unions will also change as a consequence of the Babcock decision. Settlement agreements will be evaluated by essentially the same criteria as are now applicable to arbitration decisions. The Board will only defer to settlement agreements where it is shown that:
1.    the parties intended to settle the unfair labor practice issue;
2.    they addressed that issue in the settlement agreement; and
3.    Board law reasonably permits the settlement agreement.
Summary and Recommendations. 
The Board will no longer defer to arbitration decisions nor delay its investigation of unfair labor practice charges while grievances are being processed in the parties’ grievance procedure unless the parties explicitly agree the statutory unfair labor practice issue can and will be addressed by the arbitrator. Similar scrutiny will be applied by the Board to voluntary grievance settlements. Labor agreements that expressly include the resolution of unfair labor practice disputes by arbitration are not common, and the willingness of unions to agree to their inclusion in future agreements remains to be seen. In the absence of such explicit agreements, the new deferral standards have the potential to significantly increase the Board’s active and contemporaneous involvement in disputes arising under the parties’ grievance and arbitration procedure. 
Employers and unions that wish to preserve their contractual procedures as the primary forum for dispute resolution and avoid the proverbial “two bites at the apple” by aggrieved employees must now take steps to amend their agreements accordingly. 
If you have any questions about this issue, or any labor and employment issue, please contact our attorneys.

Labor & Employment Law Peter R. Rich