NLRB Changes Standard To Favor Post-Arbitral Deferral

December 26, 2019

On December 23, 2019, the National Labor Relations Board (the “Board”) issued its decision in United Parcel Service, Inc., 369 NLRB No. 1 (2019), setting forth a new standard to determine whether the Board will defer to arbitral awards in resolving unfair labor practice cases that allege that an employee’s discharge or discipline violated Sections 8(a)(1) and 8(a)(3) of the National Labor Relations Act (the “NLRA”).  Overruling Babcock & Wilcox Construction Co., Inc., 361 NLRB 1127 (2014), the Board held that it will defer to arbitral awards in discipline and discharge cases as long as the arbitral proceedings were conducted fairly, the parties agreed to engage in binding arbitration, the arbitrator considered the unfair labor practice issue, and the arbitrator’s decision is “not clearly repugnant” to the policies set forth by the NLRA.

Background

United Parcel Service, Inc. (the “Employer”) is a party to national and local collective bargaining agreements with the International Brotherhood of Teamsters, which represents package car drivers.  On October 28, 2014, the Employer terminated a package car driver after he violated the Employer’s package delivery procedures.  The driver grieved his discharge and filed a timely unfair labor practice charge with the Board.  Pursuant to the grievance and arbitration procedures established in the parties’ collective bargaining agreements, a joint arbitral panel considered and denied the driver’s grievance, finalizing his termination.  The issue before the Board was whether it should defer to the arbitral decision in deciding the driver’s unfair labor practice charge. 

In Babcock, 361 NLRB 1127 (2014), the Board overruled decades of precedent, which favored deferring to arbitration awards.  Instead, the Board decided to restrict post-arbitral deferral and held that such deferral was inappropriate unless (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue, (2) the arbitrator was presented with and considered the statutory issue, and (3) the Board’s precedential decisions reasonably permitted the arbitration award.  Under the Babcock standard, the Board should not defer to the arbitral award in resolving the package car driver’s unfair labor practice charge against the Employer regarding his termination.

Decision and Order

The Board, reinstating the holding in Olin Corp., 268 NLRB 573 (1984), held that post-arbitral deferral is appropriate in unfair labor practice cases alleging that an employee’s discharge or discipline violated Sections 8(a)(1) and 8(a)(3) of the NLRA when the following five factors are met:  (1) the arbitration proceedings were fair and regular, (2) the parties agreed to be bound by the arbitral award, (3) the contractual issue subject to arbitration and the unfair labor practice issue are factually similar, (4) the arbitrator was presented with facts relevant to resolving the unfair labor practice issue, and (5) the arbitrator’s decision is not clearly repugnant to the polices or purposes of the NLRA.  

The Board reasoned that this standard was more commensurate with the national policy, set by Congress, which strongly favors the resolution of labor disputes through voluntary arbitration and prevents the Board from unnecessarily dissecting arbitrators’ decisions.  The Board further reasoned that the Babcock standard was flawed because it was based on the mistaken factual presumption that there is an excessive risk of arbitrators not adequately considering the statutory issues implicated in discharge and discipline cases, and an employee’s contractual and statutory rights are entirely independent in these cases.  To the contrary, the Board found that there was no evidence that arbitrators do not consider the statutory implications of their decisions and found that “there are no real statutory issues to litigate apart from contractual issues.”  The Board also criticized the Babcock standard because it impermissibly interfered with the parties’ freedom to negotiate the terms of their collective bargaining agreements, encouraged duplicative litigation of a single incident of discharge or discipline, and replaced the Board’s repugnancy standard for deferring to arbitral decisions with a reasonableness standard that gives unjustifiably little deference to an arbitrator’s factual findings.  Moreover, the Board overruled Babcock and held that the burden is on the party arguing against deferral to demonstrate any defects in the arbitral proceedings or award. 

Applying its holding retroactively to the case, the Board found that deferral to the joint panel’s arbitral decision was appropriate and dismissed the driver’s unfair labor practice charge.  Chairman John F. Ring was joined by Members Marvin Kaplan and William Emanuel in the majority opinion.

Takeaway for Employers

Employers should keep in mind that the Board is now more likely to defer to arbitral awards resulting from the grievance and arbitration procedures in their collective bargaining agreements to resolve unfair labor practice charges regarding employees’ discharge or discipline.  Employers are encouraged, therefore, to make sure that arbitration proceedings for these cases are properly conducted in order to avoid duplicative litigation.

These materials were prepared by Putney, Twombly, Hall & Hirson LLP prior to their combination with Bond, Schoeneck & King for informational purposes only and are not intended as legal advice or advertisement of legal services. Transmission of the information is not confidential and is not intended to create an attorney-client relationship or an attorney-client privileged communication. You should not act upon any of the information contained in these materials without seeking the advice of your own professional legal counsel.