Following the decision of the National Labor Relations Board in Babcock & Wilcox Construction Co., 361 NLRB No. 132 (December 14, 2014), the NLRB General Counsel has issued Memorandum GC 15-02 (February 10, 2015), which provides guidance to the NLRB regional offices and to the general public regarding the application of that decision in pending and future cases.  The memorandum is lengthy and in some respects complex, but here are the key points.

The New Test:  In Babcock & Wilcox, the Board created a new test for deferring to awards rendered by labor arbitrators in cases also involving alleged violations of Sections 8(a)(1) and (3) of the National Labor Relations Act.  The new test states that deferral will be appropriate “where the arbitration procedures appear to have been fair and regular, the parties agreed to be bound, and the party urging deferral demonstrates 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 arbitral award.”  (GC Mem. at p. 2.)

Arbitrator’s Authority:  Explicit agreement on authority for the arbitrator to reach the statutory issues is a threshold requirement.  It must be given explicitly by the parties either in their collective bargaining agreement or in an ad hoc agreement with respect to any particular arbitration.  If the region has any questions about whether either such agreement exists, the question should be presented to the General Counsel’s Division of Advice for resolution.

Issue Actually Presented and Decided:  The test also requires the arbitrator to have been actually presented with, and to have actually decided, the statutory issue.  The General Counsel stated that this does “not require that an arbitrator conduct a ‘detailed exegesis’ of Board law . . . . “ because many arbitrators (and employer and union representatives) are not necessarily formally trained in labor law. (Id. at p. 4.) But neither will the Board “assume that an arbitrator implicitly ruled on the statutory issue if the award merely upholds disciplinary action under a ‘just cause’ analysis . . . .” (Id.)  What the Board requires is evidence that the parties clearly litigated the statutory issue before the arbitrator, and that the arbitrator clearly considered the issue in deciding the grievance.  (See id. at p. 5, citing and quoting Inland Steel, 263 NLRB 1091, 1096-97 (1982).)  The regions were instructed to present to the Division of Advice any questions concerning whether the statutory issue was presented to and considered by the arbitrator, as well as any cases where a party argues that it was prevented from doing so, including those cases where a union waited to file an unfair labor practice charge until after the underlying facts were arbitrated as part of a grievance, thus preventing the arbitrator from being presented with and deciding the statutory issue.

Reasonably Permitted Standard:  The General Counsel also addressed the key question of how an arbitrator’s award will be deemed to be “reasonably permitted” under the Act.  The General Counsel noted that in the past the test was whether the award was “clearly repugnant” to, or “palpably wrong” under, the Act.  Under this test the Board would generally defer unless there “no conceivable reading of the facts . . .  that would support the arbitrator’s decision.” (GC Mem. at p. 7, quoting Babcock & Wilcox, slip op. at 8.)  Now, under the new standard, the award must represent “a reasonable application of the statutory principles that would govern the Board’s decision.” (Id.)  The General Counsel’s gloss on this important and difficult to define issue is that the arbitrator need not rule exactly as the Board would have, nor will the Board engage in equivalent of de novo review of arbitrator’s awards.  Rather, the award need only reach a result that a decision maker reasonably applying the Act could reach, making allowances for the granting of some degree of deference to the arbitrator’s factual findings and credibility resolutions.  Further, the arbitrator’s remedy need not exactly match the remedy that the Board would have imposed, but some effective remedy must have been granted.  (GC Mem. at pp 7-8.)  Clearly this is one of the more difficult questions arising in deferral cases, and we expect that there will be additional jurisprudence in this area, as questions involving whether an award is “reasonably permitted” are to be presented to the Division of Advice.

Pending and Future Cases:  The GC Memorandum addressed the somewhat surprisingly complicated issue of the application of Babcock & Wilcox to pending and future cases. As a rule of thumb, the prior deferral standards apply if the arbitration hearing occurred before December 15, 2014, the date of the Babcock & Wilcox decision.  If the collective bargaining agreement under which the grievance arose was executed after December 15, 2014, then the new Babcock & Wilcox standards apply.  The complications arise with respect to grievances arising under collective bargaining agreements executed on or before December 15, 2014, but the arbitration hearing occurred after that date.  In such cases, which standard applies will depend on whether there was explicit authorization of the arbitrator to decide the statutory question.  If so, then the new Babcock & Wilcox standards apply – if not, the old standards apply. Special situations include collective bargaining agreements that automatically renewed after December 15, 2014, or that had expired by that date but there were still grievances pending under the expired contract after that date.  These are too complex to address in this blog, but the entire discussion can be reviewed at pp, 8-10 of the GC Memorandum.

Pre-Arbitration Deferral:  The GC Memorandum instructs the regions to no longer place cases in pre-arbitration deferral (i.e., await the outcome of the arbitration decisions) unless the threshold requirement of agreement to present the statutory issues to the arbitrator had been met. A detailed discussion of the issues, including its application to pending cases, is contained at pp. 10-12 of the GC Memorandum.

Grievance Settlements:  Finally, the General Counsel also addresses the question of grievance settlements which purport to dispose of the related unfair labor practice.  In those cases, the Babcock & Wilcox deferral standard will apply generally in the same manner as it does to arbitration awards, with the key questions being whether “(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.”  (GC Mem. at 13.)

An Observation re the General Counsel’s Prosecutorial Discretion:  All of these instructions by the General Counsel are based on the Board’s decision, but they involve a power unique to the General Counsel – his unreviewable prosecutoral discretion under Section 3(d) of the Act.  Oddly, for decades the Board’s decisions in this area have impinged on the General Counsel’s authority.  One wonders what would happen if a future General Counsel, unhappy with these deferral rules, simply decided that her unreviewable prosecutorial discretion allowed her to ignore them?  As a practical matter, this may quietly happen, especially where the resolution of a major labor dispute depends on deferral to an arbitration award or, more likely, a settlement reached by the parties involving the requested dismissal of Sections 8(a)(1) and (3) unfair labor practice charges.