Part III: Deference Change–Analysis of a Shift on a Labor Arbitration Review Standard

By Antranik Chekemian

CPR Spring Intern Antranik Chekemian has provided extensive highlights on CPR Speaks of a Feb. 24 CPR online panel discussion, hosted by CPR’s Employment Disputes Committee and its Government & ADR Task Force, covering the current state of employment conflict resolution in the executive and legislative branches.  In “Part I: How Workplace ADR Will Evolve Under the Biden Administration,” Antranik covered presentations by panelist Mark Kantor, a Washington, D.C., arbitrator, who focused on prospects for legislative changes for employment and labor ADR issues, and possible regulation, and panelist Mark Gaston Pearce, Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute, who discussed developments in decisions of the National Labor Relations Board, where he served as chairman from 2011 to 2017. In “Part II: More on Workplace ADR Under the Biden Administration,” panel moderator Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, turned to panelist Kathryn Siegel, a shareholder in Littler Mendelsohn’s Chicago office, whose presentation was highlighted, and then led a general discussion.  Here, Antranik returns to the program to highlight a piece of the discussion on the recent evolution of a key NLRB arbitration standard as discussed by panelist Pearce.

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At CPR’s February webinar, “What Will Labor and Employment ADR Will Look Like Under a Biden Administration?” former NLRB board chair Mark Gaston Pearce discussed the effects of a 2019 United Parcel Service Inc. Board decision overruling its 2014 Babcock & Wilcox decision.

Babcock & Wilcox had changed the standard of post-arbitration deferral on resolution of a grievance concerning an employee’s discipline or discharge that has been alleged to violate the National Labor Relations Act.  

United Parcel Service reverted to the previous, long-running arbitration-deference standard.  NLRB Chairman John F. Ring (currently a board member), and members Marvin E. Kaplan and William J. Emanuel, all Trump appointees, unanimously decided the case.

Babcock & Wilcox Construction Co. Inc., Board Case No. 28-CA-022625 (reported at 362 NLRB No. 36) (Board summary here) (9th Cir. review Oct. 17, 2017, under the name Beneli v. NLRB), provided that 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.”

The Babcock & Wilcox standard shifted the burden of proof to the party urging deferral. In addition, deferral was appropriate only when the party urging deferral was able to demonstrate that the specific statutory right at issue was incorporated in the collective-bargaining agreement.

In employers’ views, this made deferral to an arbitral decision less likely, with the need to prosecute cases at the grievance stage and the unfair labor practice stage. The NLRB decided to apply the standard prospectively.

During the webinar, Mark Gaston Pearce noted that it was still difficult to say whether Babcock & Wilcox had an impact on businesses, because any contract negotiated prior to the decision was not affected by the new change in standards. 

The Board in United Parcel Service Inc., 369 NLRB 1 (Dec. 23, 2019), reversed the Babcock & Wilcox decision, returning to the arbitral deferral standards established in Spielberg Mfg. Co., 112 NLRB 1080 (1955) and Olin Corp., 268 NLRB 573 (1984).

The United Parcel Service decision states that the Board will defer to an arbitration award in cases alleging discharge and discipline in violation of Section 8(a)(3) and (1), “if (1) the arbitration proceedings were fair and regular, (2) the parties agreed to be bound, (3) the contractual issue was factually parallel to the unfair labor practice issue, (4) the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice, and (5) the decision was not clearly repugnant to the purposes and policies of the [NLRA].”

The NLRB stated in United Parcel Service that Babcock & Wilcox “disrupted the labor relations stability” and that the 2014 decision disfavored “the peaceful resolution of employment disputes about discharge and discipline issues through collectively bargained grievance arbitration proceedings.”

In a press release announcing the decision of United Parcel Service, the NLRB stated it “will continue to safeguard the exercise of Section 7 rights—particularly by ensuring that arbitral awards are not clearly repugnant to the Act—while better promoting the strong federal policy in favor of arbitration as the parties’ agreed-upon mechanism for resolving employment disputes.”

Mark Gaston Pearce told the CPR seminar attendees that the burden was once again placed on the party resisting deferral to the arbitration decision. He stated that the explicit authorization under the collective bargaining agreement sending the matter to the arbitrator to decide on a specific issue was not required anymore, and that there is no longer a requirement that the statutory issue be precisely articulated by the arbitrator.

Pearce concluded that it is still a “big question mark” whether a new Board under President Biden will reinstate the Babcock & Wilcox standard eliminated at the end of 2019, as it was to be effective prospectively. It was only recently that newly negotiated contracts would be subject to that standard.

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The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

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