The Trump National Labor Relations Board (Board or NLRB) gifted employers a significant win on the eve of the Christmas holiday with its December 23 decision in United Parcel Service, Inc., 369 NLRB No. 1 (UPS), which announced a return to the decades-old standard for deferring to arbitral decisions in unfair labor practice cases alleging discharge or discipline in violation of Section 8(a)(1) and (3) of the National Labor Relations Act (NLRA or Act). The Board continues to reshape the Act with new decisions that reverse precedents and undo legal restrictions placed on employers during the Obama administration, and its decision in UPS is just the latest in a string of employer-friendly decisions issued this month alone, including Caesars Entertainment, 368 NLRB No. 143 (December 17, 2019)(overruling Purple Communications and freeing up employers to ban employees from using Company-owned computers during their non-work time to engage in protected concerted or union activities); Apogee Retail, LLC, 368 NLRB No. 144 (December 17, 2019)(overruling Banner Health, allowing employers to require employees to keep workplace investigations confidential and banning them from discussing them with other employees); and Valley Hospital Medical Center, 368 NLRB No. 139 (December 16, 2019)(holding that an employer is free to unilaterally cease union dues checkoff after a CBA expires). Our recent blog article addressing these critical decisions can be found here.

Brief History of NLRB’s Deferral Standard

Briefly, the National Labor Relations Act (NLRA or Act) is designed to minimize the disruption of commerce caused by labor disputes and to promote industrial peace through the collective bargaining process. Subsumed within and integral to that bargaining process is the private and peaceful resolution of labor contract disputes by way of the agreement’s grievance and arbitration procedure. Indeed, Section 203(d) of the Taft-Hartley amendments to the Act declares final adjustment of such disputes by the method agreed upon by the bargaining parties to be “the desirable method for settlement” of such contract disputes. Consistent with that legislative declaration and where a qualifying contract grievance and arbitration procedure is in place, the Board has a long history of abstaining from taking action on many arguably meritorious unfair labor practices when the acts or omissions giving rise to those ULP claims may also be adjusted and remedied by means of the parties’ contractual grievance procedure (prearbitral deferral). United Technologies Corporation, 268 NLRB 557 (1984); Collyer Insulated Wire, 192 NLRB 837 (1971). Further, once a dispute has been submitted to and decided by an arbitrator, the Board has long deferred to that final and binding arbitral decision as long as the proceedings giving rise to the decision were “fair and regular” and unless the resulting decision was proven by the party opposing deferral to be palpably wrong or clearly repugnant to the purposes and policies of the Act (postarbitral deferral). Olin Corp., 268 NLRB 573 (1984); Spielberg Mfg. Co., 112 NLRB 1080 (1955). The net benefit of this time honored Board practice was that disputes arising both under the Act and under a contract would typically be litigated only once in arbitration and not in multiple, separate piecemeal adjudications before both an arbitrator and the Board.

However, in 2014, the Obama Board took a major step back from this traditional deference to arbitration in Babcock & Wilcox Construction Co., 361 NLRB 1127. There, the Board held that it would no longer grant prearbitral deferral in discriminatory discipline cases unless it could be shown that the bargaining parties incorporated the statutory right at issue into their CBA or they explicitly authorized an arbitrator to decide the ULP’s in question. Additionally, the Babcock Board significantly narrowed the circumstances under which the Board would grant postarbitral deferral to a ULP, holding that even if an arbitration was final and binding on the parties and appeared to be fair and regular, the Board would no longer defer to an arbitrator’s decision unless the party seeking deferral could show 1) the arbitrator was explicitly authorized to decide the ULP 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) Board law reasonably permitted the arbitrator’s award.

Babcock presented a serious problem for employers in situations where a CBA or the parties’ submission to the arbitrator failed to authorize an arbitrator to address and decide the ULP issue, i.e. whether an employee was disciplined because of their protected concerted or union activities. Because discipline giving rise to a dispute could – and often was – the subject of both a NLRB ULP proceeding and an arbitration, a grievant and their union were afforded multiple opportunities to challenge the discipline. This, in turn, compelled an employer to go to the trouble and expense of defending its discipline decision not once, but twice. Likewise, even where an employer won a discipline case before an arbitrator, the grievant and their union could take a second bite of the same discipline apple due to the Board’s newly-announced preference to not defer to the arbitrator’s decision unless the employer could show that the ULP issue was, in fact, presented to and considered by the arbitrator and the arbitrator’s subsequent decision on that statutory issue was not so inconsistent with the Act as to foreclose postarbitral deferral. Unsurprisingly, employers attempting to satisfy this heavy burden under the Babcock framework rarely prevailed.

Board’s Rejection of Babcock in UPS

On December 23, the current Board addressed these concerns by overruling Babcock in UPS. There, Robert Atkinson, an individual Teamster-represented package car driver and former shop steward and union activist who vociferously opposed the Union’s acceptance of UPS’ contract without first being submitted to rank and file for ratification, concurrently filed both a contract grievance and a ULP charge alleging that his October 2014 termination was due to his union and protected concerted activities. In addition to requiring UPS to have just cause for discharge, sections of the CBA covering Atkinson’s employment specifically prohibited discrimination based on union activity and retaliation for enforcement of contract rights. Thereafter, Atkinson’s grievance proceeded to a grievance hearing before an adjustment board consisting of two management representatives and two union officials where Atkinson testified as to his union activity. After the hearing, the adjustment board unanimously upheld the discharge and rejected the grievance, finding “no violations of any contract articles.” Subsequently, Atkinson’s ULP charges were investigated and proceeded to trial before an administrative law judge (ALJ) who, applying Babcock’s standard, refused to defer to the adjustment board’s unanimous decision and, based on the record evidence, found Atkinson’s termination to be unlawful.

Acting on UPS’ exceptions to the ALJ’s refusal to defer to the adjustment board’s decision, the Board reversed the ALJ, finding that Babcock’s standards had not been shown to be necessary to protect either employee rights or the Board’s jurisdiction. The UPS Board further found that by disfavoring the private resolution of discipline disputes through collectively bargained arbitration, the Babcock Board disrupted the very labor relations stability that it was charged by Congress to encourage. Based on these policy considerations and contrary to Babcock, it was obvious to the current Board that the bargaining parties’ grievance arbitration machinery, and not the Board’s processes, should be the primary mechanism for resolving everyday employment disputes, even when those disputes arguably presented issues of statutory protection.

Further, apart from these overarching policy concerns, the Trump Board also identified several other defects in Babcock — all of which also counseled in favor of Babcock’s reversal and a return to the precedent and deferral practices predating Babcock. Included in this list of defects were the following: 1) by requiring explicit authorization for an arbitrator to decide a statutory issue as a condition of deferral, Babcock impermissibly interfered with the bargaining parties’ freedom of contract and needlessly encouraged multiple litigations of a single contested discharge or discipline; 2) Babcock erred by imposing an undue burden of proof on the party seeking deferral beyond merely proving the existence of an arbitration award and failing to place a burden of proof on the party opposing deferral and seeking de novo review; and 3) Babcock’s evisceration of the “repugnancy” standard used for postarbitral deferral had stood the test of sixty years and its reliance on a new “reasonable application of the law” standard subjected an arbitrator’s fact finding and decision-making to undue and unprincipled second guessing by the Board. Based on the foregoing, the Trump Board concluded that Babcock should be overruled and that the requirements for deferral of Section 8(a)(3) and (1) cases predating Babcock should be reinstated.

Based on its rejection of Babcock and its reinstatement of the postarbitral deferral standards in effect immediately prior to Babcock, the Board reversed the ALJ, deferred to the adjustment board’s unanimous decision sustaining the discharge, and dismissed the ULP case against UPS, noting that the earlier adjustment board proceeding met the Board’s pre-Babcock standards. Further, applying the Spielberg standard to the adjustment board’s decision, the NLRB concluded that the resulting award was not clearly repugnant to the Act because it was susceptible to a reading consistent with the Act, i.e. that the adjustment board considered but rejected Atkinson’s ULP claims and that the actual cause of this termination was his failure to follow company procedures.

Important Takeaways – What UPS Means for Employers

In all pending and future cases, the NLRB will likely grant prearbitral deferral in discipline cases — even though they raise possible violations of Sections 8(a)(3) and (1) and despite the fact that the parties’ CBA does not specifically prohibit the employer from disciplining or otherwise discriminating against employees because of their union or protected concerted activities.

Likewise, in all pending and future cases, the Board will apply the Spielberg/Olin postarbitral test and defer to arbitration awards in discipline cases alleging violations of Sections 8(a)(3) and (1) if the following conditions are met:

1. The arbitration proceedings were “fair and regular”;

2. The parties agreed to be bound by the outcome of the arbitration;

3. The contractual issue submitted to arbitration 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 arbitrator’s decision was not clearly repugnant to the purposes and policies of the Act, i.e. the decision is susceptible to an interpretation that is consistent with the Act.