NLRB Considering Policy Changes That Could Mean Grievance Arbitration is No Longer Final and Binding

by Douglas S. Zucker

National labor policy in the United States mental aims of the Act.3 has long favored contractual grievance and arbitration procedures as the best way for parties to resolve disputes arising out of a collective-bargaining relation- ship. The National Labor Relations Board (NLRB) historically deferred to contractual arbitration to resolve disputes, even where they included potential unfair labor practice charges. At the strong urging of its general counsel, the NLRB currently is considering whether to change existing policy and no longer routinely defer certain types of cases to arbitration. This article will explore the history of the NLRB’s deferral policy and the reasons it now is considering changing its well-established policy, the outcome of which could mean many arbitration awards that culminate contrac- tual grievance procedures would no longer be final and binding on the parties.

Although the National Labor Relations Act (NLRA)1 does not specifically address the relationship between the NLRB and contractual grievance arbitration, courts have long recog- nized the board has the exclusive right to determine whether it will defer a particular unfair labor practice charge(s) to grievance arbitration. In Carey v. Westinghouse Electrical Corp.,2 the U.S. Supreme Court recognized the NLRB’s exclusive jurisdiction in deferral matters when it stated:

There is no question that the Board is not precluded from adjudicating unfair labor practice charges even though they might have been the subject of an arbitration proceeding and award. Section 10(a) of the Act expressly makes this plain, and the courts have uniformly so held. However, it is equally well estab- lished that the Board has considerable discretion to respect an arbitration award and decline to exercise its authority over alleged unfair labor practices if to do so will serve the fundamental aims of the Act.3

The NLRB may defer to arbitration either after an arbitra- tion award issues (post-arbitration deferral), prior to the matter proceeding to arbitration (pre-arbitration deferral), or at a time after the parties agree to proceed to arbitration but before the matter is adjudicated.

Post-arbitration Deferral

In the early years of the NLRA, a jurisdictional overlap existed between the NLRB and contractual arbitrators, where the grievance alleged both violations of the parties’ agreement and unfair labor practices (ULPs) in violation of the NLRA. In some early cases, the NLRB did show deference to arbitrators’ awards, even where the facts suggested if the board investigated the matter it could have sustained the unfair labor practice charge.4

In 1955, the NLRB formally established a standard for the circumstances under which it would defer to an arbitrator’s award, and not exercise jurisdiction over a matter, which the board still uses today. In Spielberg Manufacturing Company,5 the NLRB said it will defer in cases where:

  1. The arbitration proceedings were fair and regular;
  2. All parties agreed to be bound by the arbitrator’s decision;
  3. and
  4. The award was not clearly repugnant to the policies of the NLRA.6

The issue in Spielberg arose out of the employer’s refusal to reinstate four strikers the company terminated for miscon- duct on a picket line. Following a hearing, a panel of three arbitrators denied the grievance and held the employer did not need to reinstate the grievants. The grievants then filedunfair labor practice charges with the NLRB, based on the same set of facts. On appeal, the board reviewed and reversed the trial examiner’s decision and upheld the arbitration award, but in so doing, the board specifically did not reach any decision on the merits of the discharges or the propriety of the workers’ picket line conduct.7

The NLRB subsequently added a fourth criterion to the above standard, whereby in order for the board to defer to an arbitration award the arbitrator also must have considered the issue raised in the unfair labor practice charge.8 The board later clarified its standard for deferral to arbitration awards in Olin Corp.,9 stating it would find the arbitrator adequately consid- ered the issues raised in the unfair labor practice charge if:

  1. the contractual issue is factually parallel to the unfair labor practice issue; and
  2. the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice.10

The NLRB also decreed that in deter mining if an award is “clearly repug- nant” to the NLRA, the board would “not require an arbitrator’s award to be totally consistent with Board prece- dent.” The board explained, “[u]nless the award is ‘palpably wrong (i.e., ‘not susceptible to an interpretation consistent with the Act’), we will defer.”11 Finally, the NLRB clarified that the burden of proof on deferral rests with “the party seeking to have the Board ignore the determination of an arbitrator,” and that party must affirmatively demon- strate “defects in the arbitral process or award.”12

The NLRB reiterated its commitment to this standard in Southern California Edison Co., where it refused to exercise jurisdiction over an arbitration award upholding the employer’s right to implement a drug-testing program unilaterally. The board rejected the argument presented by the general counsel and the charging party that the employer had no right under the collective-bargaining agreement to implement the program unilaterally. The NLRB said:

the mere fact that the Board would not have [reached the same conclusion as the arbitrator] is insufficient by itself to establish repugnance. The Board will determine whether a partic- ular award is “clearly repugnant to the Act” by reviewing all the circumstances, including the contractual language, evidence of bargaining history and past practice presented in the case.13

The NLRB continues to apply the tests it developed in Spielberg, supra, and its progeny to deferral questions involving cases where the arbitrator already held a hearing and issued an award, although the board currently is considering significant modifications to this practice.

Pre-arbitration Deferral

The NLRB also applied its deferral standard to require parties to use their contractual grievance and arbitration procedures to resolve disputes before seeking board review of unfair labor practice charges concerning the same issue(s). In Collyer Insulated Wire,14 the board established its policy to withhold making a determination on certain unfair labor practice charges when the parties, particularly the employer, agree to process a grievance involving the same issue under the grievance/arbitration provisions of the applicable contract. In addition to requiring that the employer consent to arbitrate the claim, deferral under Collyer, supra, also requires the employer be willing to waive any time limits under the grievance procedure.15 In such cases, if “the charging party fails to process the ULP issue through the grievance procedure after deferral of the charge, deferral will generally not be appropriate” and the board may dismiss the charge instead.16 After the parties receive the arbitration award, the charging party in the ULP may request that the regional office review the award.

The NLRB also recognized that deferral still could be appropriate in circum- stances where a matter would not qualify for deferral under Collyer because one of the criteria for deferral is not met. In Dubo Manufacturing Corp.,17 the NLRB developed a policy whereby, even if one party initially opposed bringing the matter to arbitration (thereby making Collyer inapplicable), the board still will defer if both parties agree voluntarily to process the claim through their contrac- tual grievance and arbitration procedures. If either or both of the parties do not wish to process the claim through arbitration, the board will not defer.18 Through numerous case decisions, the NLRB also identified certain circumstances when deferral is generally not appropriate, including:

  • Where the charge alleges a violation of Section 8(a)(4)19
  • Where the charge alleges a party has failed to supply information in viola- tion of Section 8(a)(5) or 8(b)(3)20
  • Where the charged party’s defense is not reasonably based on an interpre- tation of the collective-bargaining agreement21
  • Where the case involves the resolu- tion of unit determination or other representation type issues22

Against this background, consider recent developments at the NLRB regarding its policies on deferral of unfair labor practice charges to contractual grievance arbitration provisions. Notably, the board has remained fairly consistent in its application of its defer ral policies, and much of the impetus to charge either originated with or is being advocated by the office of the general counsel to the board.

The General Counsel Advocates Changes to the Board’s Deferral Policies

GC Memorandum 11-05

In Jan. 2011, the then-acting general counsel, Lafe E. Solomon issued GC Memorandum 11-05 (GCM 11-05) on guidelines concerning deferral to arbi- tral awards and grievance settlements in Section 8(a)(1)23 and (3) cases.24 In GCM 11-05, the General Counsel’s Office announced to the board’s 26 regional offices that after conducting an analysis of cases involving deferral to arbitration under Spielberg and Olin, supra, going forward, the general counsel “will urge the Board to modify its approach in post-arbitral deferral cases to give greater weight to safeguarding employ- ees’ statutory rights in Section 8(a)(1) and (3) cases, and to apply a new frame- work in all such cases requiring post- arbitral review.”25

GCM 11-05 explains that in decisions concerning matters arising under federal employment law statutes other than the NLRA, the U.S. Supreme Court “clearly envisions that employees will receive full consideration of their statu- tory rights in arbitration....”26 GCM 11 05 further provides that deferral to arbi- tration simply means the arbitrator considers the employee’s statutory claims, rather than a judge, but those claims are not waived simply because the employee chose arbitration over NLRB resolution of an issue involving both contractual and statutory rights.27

GCM 11-05 discusses the Supreme Court’s expectations that arbitrators actually would consider employees’ rights under Title VII of the Civil Rights Act, or another applicable employment- related statute, when presented with a grievance alleging both contractual and statutory violations. GCM 11-05 then distinguishes the Court’s expectations from “[t]he Board’s Olin standards for accepting of NLRA rights—that the contract and statutory issues were ‘factually parallel’ and the arbitrator was ‘presented generally with the facts relevant to resolving the unfair labor practice’ do not require such consideration.”28 GCM 11-05 continues:

In addition, the Board’s Olin standards tolerate substantive outcomes from arbitrators that differ significantly from those that the Board itself would reach if it considered the matter de novo. Such outcomes can result in the denial of substantive Section 7 rights— if the overly deferential Olin standards are met, the Board may dismiss the administrative charge even if the statutory issue has never been consid- ered.29

To address this perceived inconsistency, the General Counsel’s Office “urges” the NLRB to change its deferral policy with regard to discipline and discharge cases alleging unfair labor practices under Section 8(a)(1) (interfere, restrain, or coerce employees in the exercise of their Section 7 rights), or Section 8(a)(3) (discrimination in employment to encourage or discourage union member- ship or union activity), and in all other cases alleging 8(a)(1) violations. In GCM 11-05, the General Counsel’s Office advocates that the NLRB no longer should defer any of these types of cases unless the party seeking deferral demon- strates to the board the arbitrator gave adequate consideration to the employ- ee’s statutory rights. GCM 11-05 states that absent such showing, the NLRB should handle the charge directly instead of deferring to arbitration.30

GCM 11-05’s recommendations also include shifting the burden of proof to the party advocating in favor of deferral, and requiring that party to present evidence proving the arbitrator specifically considered the statutory rights at stake in deciding the award in the arbitration.31 To meet this burden, the party asking the board to defer in a post-arbi- tral matter must prove:

(1) the contract had the statutory right incorporated in it or the parties presented the statutory issue to the arbitrator; and (2) the arbitrator correctly enunciated the applicable statutory principles and applied them in decid- ing the issue.32

According to the recommendation, if the party advocating deferral met its burden, the NLRB should defer, unless the award is “clearly repugnant to the Act.” GCM 11-05 then defines “clearly repugnant” to mean that the arbitrator “reached a result that is ‘palpably wrong,’ i.e., the arbitrator’s decision or award is not susceptible to an interpretation consistent with the Act.”33 GCM 11-05 explains that by moving to this new, modified deferral policy, which the NLRB did apply previously in limited cases, the board “would provide greater protection of employees’ statutory rights while, at the same time, further- ing the policy of peaceful resolution of labor disputes through collective bargaining.”34

Finally, the recommendations in GCM 11-05 include urging the NLRB not to accept any grievance settlement “unless the evidence demonstrates that the parties intended to settle the unfair labor practice charge as well as the grievance.” Absent such evidence, the board should apply the same procedures it currently applies when evaluating to determine if it will accept other private settlements between parties in which the board did not participate.35

The Babcock & Wilcox Decision

Currently pending on appeal before the NLRB is Babcock & Wilcox Construction,36 in which Administrative Law Judge Jay R. Pollack applied the current Spielberg/Olin standards to a case involving the suspension and subsequent dis- charge of an employee, Colleta Beneli. According to the employer, it discharged Beneli on March 11, 2009, because she used profanity toward supervisors while performing in her capacity as shop steward.

The union filed a grievance in accor- dance with the parties’ contractual grievance and arbitration procedure and, while the grievance was still pending, Beneli filed an ULP charge with the NLRB on July 30, 2009. In her charge, Beneli alleged the employer violated Sections 8(a)(3) and 8(a)(1) of the NLRA. The regional director issued a complaint and notice of hearing on the charge on Aug. 29, 2009. On Sept. 8, 2009, the region issued a letter to the parties defer- ring the ULP charges to contractual grievance/arbitration procedure, pursuant to Dubo Manufacturing Corp., supra.

The final step in the parties’ contrac- tual grievance procedure left resolution of the grievance to a grievance review subcommittee, which included representatives from both management and labor. The subcommittee conducted a hearing in the matter, in which both sides participated. On Oct. 8, 2009, the subcommittee issued a decision uphold- ing the discharge, denying the grievance, and finding the employer did not violate the parties’ collective-bargaining agreement.

Sometime thereafter, Beneli advised the region that she was not satisfied with the subcommittee’s decision, and asked the region not to defer to the decision and to conduct a de novo review. The region considered the parties sub- missions and determined the decision was repugnant to the NLRA and, there- fore, reversed the decision. The region then withdrew the deferral and issued a complaint against the employer in Aug. 2011.

At the hearing on the complaint, the primary issue before the administrative law judge (ALJ) was whether the NLRB should defer to the subcommittee’s arbi- tration decision. It was undisputed that most of the elements of the Spielberg/Olin standard were satisfied in that all parties agreed to be bound by the subcommittee’s decision, the pro- ceedings were fair and regular, “the con- tractual issue presented was factually parallel to the unfair labor practice issue and the subcommittee was generally presented with the facts relevant to resolving” the ULP.37 The ALJ concluded that although not expressly stated in the decision, the subcommittee clearly resolved the ULP issue, and found that Beneli was not discharged because she was the shop steward. The ALJ held that the subcommittee’s decision was not repugnant to the NLRA, even though the ALJ would have reached a different conclusion, and recommended “the Board defer to the arbitration and griev- ance procedure.”38

The general counsel filed exceptions to the ALJ’s decision, asking the NLRB to adopt a different standard for deferrals to arbitration in accordance with the modifications the general counsel urged in GC Memo 11-05. Specifically, the general counsel’s exceptions included the following:

The ALJ’s failure to adopt a new framework in Section 8(a)(1) and (3) post-arbitral deferral cases and require the party urging deferral to demonstrate that: (1) the contract had the statutory right incorporated in it or the parties presented the statutory issue to the arbitrator; and (2) the arbitrator correctly enunciated the applicable statutory principles and also applied them in deciding the issue. If the party urging deferral makes that showing, only then should deferral be appropriate, unless the award is clearly repugnant to the Act.39

In response to the general counsel’s exceptions, the board issued an order inviting the parties and interested amici to submit briefs in response to the following questions:

  • Should the Board adhere to, modify, or abandon its existing standard for post-arbitral deferral under Spielberg Mfg. Co., 112 NLRB 1080 (1955), and Olin Corp., 268 NLRB 573 (1984)?
  • If the Board modifies the existing standard, should the Board adopt the standard outlined by the Gener- al Counsel in GC Memorandum 11- 05 (January 20, 2011) or would some other modification of the existing standard be more appropriate: e.g., shifting the burden of proof, redefining “repugnant to the Act,” or reformulating the test for deter- mining whether the arbitrator “ade- quately considered” the unfair labor practice issue?
  • If the Board modifies its existing post-arbitral deferral standard, would consequent changes need to be made to the Board’s standards for determining whether to defer a case to arbitration under Collyer Insulated Wire, 192 NLRB 837 (1971); United Technologies Corp., 268 NLRB 557 (1984); and Dubo Mfg. Corp., 142 NLRB 431 (1963)?
  • If the Board modifies its existing post-arbitral deferral standard, would consequent changes need to be made to the Board’s standards for determining whether to defer to pre-arbitral grievance settlements under Alpha Beta, 273 NLRB 1546 (1985), review denied sub nom. Mahon v. NLRB, 808 F.2d 1342 (9th Cir. 1987); and Postal Service, 300 NLRB 196 (1990)?40

Briefs were due by March 25, 2014, and the parties had until April 8, 2014, to file responsive briefs. The NLRB has not indicated when it expects to issue a decision.

Memorandum GC 12-01

The General Counsel’s Office issued a follow up to GCM 11-05 a year later, in which it asks the NLRB to change its existing policy on deferrals of Section 8(a)(1) and 8(a)(3) cases, and not make deferrals where the arbitration cannot be completed within a year following deferral. In Memorandum GC 12-01 (GCM 12-01) the General Counsel’s Office recommends the regions do a more thorough investigation in these cases before deciding whether to defer, including taking affidavits from the charging party and its witnesses, and also consulting with all parties, includ- ing any individual discriminatees.41 GCM 12-01 further recommends the NLRB modify its current practice, whereby the region will contact the parties once every 90 days to check the sta- tus of the matter, and

at the fourth ninety-day review, i.e. after the charge has been deferred for one year, the Region should send a “show cause” letter to all parties, including the Union, any individual Charging Party, and the Employer, seeking an explanation of why, given the length of the deferral period, deferral should not be revoked and a full investigation made. Unless the Regional Director is satisfied that there is a good reason to continue deferral, for instance if arbitration is imminent, the Region should make a full investi- gation of the charge, arrive at a merit determination, and submit the charge, if meritorious, to Advice. If the charge is nonmeritorious, the Region should dismiss it, absent withdrawal. If the Charging Party does not respond to the show-cause letter, the Region should not dismiss for failure to prose- cute without contacting the Charging Party and any individual discriminatees to ensure they understand that the case is subject to dismissal absent some response.42

The general counsel is awaiting the NLRB’s decision in Babcock & Wilcox, supra, after which it will more aggressively pursue implementation of GCM 12-01 and succeeding memoranda on the issue of deferral.

The Bottom Line

The general counsel’s position, if adopted by the NLRB, would have significant impact on collective-bargaining relationships, which almost uniformly have an established grievance proce- dure, the final step of which is arbitra- tion. In labor relations, it is well estab- lished that arbitration is final and binding upon the parties. If the NLRB adopts the general counsel’s strongly advocated changes, however, parties will no longer have any assurance that arbitration will be the final step because if the grievance includes any alleged violation of the NLRA the board may decide to review and reopen the issue, possibly for de novo review.

Although the general counsel pres- ents these changes as being in the best interest of protecting employees’ Section 7 rights and bolstering grievance arbitration as the favored mechanism to resolve labor disputes, the author believes the reality is not so objective. Indeed, the general counsel’s recom- mendations focus primarily on cases that include claims under Sections 8(a)(1) and 8(a)(3) of the NLRA, both of which are employer prohibitions, which constitute unfair labor practices by employers. The author believes this focus highlights a bias by the NLRB in favor of workers and unions and against employers. Employers are the parties most potentially at risk if the board reviews the awards by neutral arbitrators and replaces or supplements those decisions with orders from the less than neutral board. Moreover, it is the author’s view that substantially more intervention by the NLRB in grievance arbitration awards also replaces the voluntary nature of arbitration awards with involuntarily imposed board decisions, which seems contrary to the basic tenants of national labor policy.

Douglas S. Zucker is a founding member of Zucker Hatfield LLC, in Springfield. He focuses his practice on representing private and public employers in labor and employment law matters.

  1. 29 U.S.C. §§151-168.
  2. 375 U.S. 261, 268 (1964)(citing Interna tional Harvester Co., 138 NLRB 923, 925- 26 (1962) (“collective bargaining agree- ments that provide for final and binding arbitration of grievance and disputes arising thereunder” contribute signifi- cantly to promotion of industrial peace and stability).
  3. Id.
  4. See, e.g., Timken Roller Bearing, 70 NLRB 500 (1946), rev’d on other grounds, 161 F.2d 949 (6th Cir. 1947) (Board deferred to arbitrator’s award and held that it would not grant the union’s request to review the matter after the union first pursued the matter in arbitration and received a decision on the merits, albeit unfavorable).
  5. 112 NLRB 1080, 36 LRRM 1152 (1955).
  6. Id. at 1082.
  7. Id. at 1082, n. 6 (“we do not, by this decision, express any opinion as to the legality of the picket line conduct”).
  8. Monsanto Chemical Co., 130 NLRB 1097 (1961)(Board exercised jurisdiction because the arbitrator only decided what he considered contractual and not statu- tory issues); Ratheon Co., 140 NLRB 883 (1963) (NLRB trial examiner considered and reversed arbitrator’s award uphold- ing discharge for inciting work stoppage in violation of no-strike clause because arbitrator did not consider whether dis- charged employees engaged in protected concerted activity), rev’d on other grounds, 326 F.2d 471 (1st Cir. 1964).
  9. 268 NLRB 573 (1984).
  10. Id.
  11. Id.
  12. Id.
  13. Id.
  14. 192 NLRB 837 (1971).
  15. NLRB Casehandling Manual for Unfair Labor Practice Proceedings (“Casehan- dling Manual”) §10118.1 (b) (Dec. 2011) (citing Collyer, 192 NLRB at 843 and Unit- ed Technologies Corp., 268 NLRB 557 (1984)).
  16. Casehandling Manual §10118.1(a).
  17. 142 NLRB 431 (1963).
  18. See General Counsel Memorandum 79 36 (Procedures for Application of the Dubo Policy to Pending Charges) (May 14, 1979).
  19. Casehandling Manual §10118.1(a) (citing Food & Commercial Workers Local 1776, 325 NLRB 908 (1998)). Section 8(a)(4) prohibits an employer from punishing a worker for filing charges with the board. 29 U.S.C. § 158(a)(4).
  20. Casehandling Manual §10118.1(a) (citing Clarkson Industries, 312 NLRB 349, 353 (1993)). Section 8(a)(5) requires employ- ers to bargain collectively in good faith with the union; and Section 8(b)(3) imposes the corresponding obligation on unions to bargain with employers. A refusal to provide certain information is an example of a refusal to bargain in good faith. 29 U.S.C. § 158(a)(5), § 158(b)(3).
  21. CasehandlingManual§10118.1(a)(citing Oak Cliff-Golman Baking Co., 202 NLRB 614, 616–617 (1973)).
  22. CasehandlingManual§10118.1(a)(citing St. Mary’s Medical Center, 322 NLRB 954 (1997)).
  23. Section8(a)(1)oftheNLRAstatesitisan unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7”; Section 8(a)(3) states that it is an unfair labor practice for an employer “by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization....” 29 U.S.C. § 158(a)(1), (3).
  24. General Counsel Memorandum 11-05 (Jan. 20, 2011).
  25. Id., p. 1.
  26. 14 Penn Plaza, LLC v. Steven Pyett, 129 S. Ct. 1456 (2009); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
  27. GC Memorandum 11-05, p. 4 (citing Pyett, 129 S. Ct. at 1469; Gilmer, 500 U.S. at 26).
  28. Id., p. 5 (citing Olin, 268 NLRB at 573 574).
  29. Id.
  30. Id., p. 6.
  31. Id.
  32. Id., p. 7.
  33. Id.
  34. Id., p. 8 (citing Yourga Trucking Inc., 197 NLRB 928 (1972); Airco Industrial Gases, 195 NLRB 676, 676-677 (1972); Suburban Motor Freight, Inc., 247 NLRB 146, 146- 147 (1980).
  35. Id, p. 9 (citing Independent Stave Co., 287 NLRB 740, 743 (1987) (listing the cir- cumstances the NLRB will examine when evaluating non-board settlements).
  36. Babcock & Wilcox Construction Co., Inc. (No. 28-A-022625) ALJ’s decision dated April 9, 2012.
  37. Id. (citing Spielberg Mfg. Co., 112 NLRB 1080 at 1082 (1955); Olin Corp., 268 NLRB 573 at 574 (1984). See also, K- Mechanical Services, Inc., 299 NLRB 114,117 (1990) (applying Spielberg/ Olin deferral standards to determinations by joint employer-union committees that are final dispositions of a grievant com- mittees that are final dispositions of a grievance).
  38. Id., p. 5-6.
  39. Babcock & Wilcox Construction Co., Inc. (No. 28-A-022625) Exceptions to ALJ’s decision by counsel for the general counsel filed, May 11, 2012.
  40. Babcock & Wilcox Construction Co., Inc. (No. 28-A-022625) Notice and invitation to file briefs, dated Feb. 7, 2014.
  41. General Counsel Memorandum 12-01 (Jan. 20, 2012).
  42. Id.