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U.S. Court of Appeals Addresses NLRB Deferral Standard Ruling

Oct 23, 2017
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On October 17, 2017, the U.S. Court of Appeals for the Ninth Circuit held that the National Labor Relations Board (NLRB or Board) appropriately deferred to an arbitration award finding that a former employee of Babcock & Wilcox Construction Co., Inc. (B&W) was lawfully terminated.

This case dates back to March 2009, when Coletta Kim Beneli was terminated following a profane outburst in the workplace. Ms. Beneli subsequently filed both a grievance under a collective bargaining agreement that covered her employment at a construction site in Arizona, and an unfair labor practice charge with the NLRB. The NLRB’s regional office decided to defer further proceedings on the unfair labor practice charge, which alleged that B&W had fired her due to protected activity related to her role as a union steward, while the grievance went to arbitration. In October 2009, the Grievance Review Committee of a national labor relations industry group issued a binding arbitration decision denying Ms. Beneli’s grievance.

Despite its initial decision to defer to arbitration, the NLRB regional office issued a complaint almost two years later, in August 2011. A hearing was held in January 2012 and, in April 2012, an administrative law judge issued a decision concluding that the NLRB should defer to the arbitration decision. NLRB counsel filed exceptions to that decision and, nearly two years later, in February 2012, the NLRB’s Washington, DC headquarters issued a Notice and Invitation to File Briefs in which it asked the parties to address four questions regarding its longstanding standards regarding deferral to arbitration proceedings and awards.

In December 2014, the NLRB’s board members issued a decision prospectively changing its well-established standards regarding deferral to arbitration awards (and pre-arbitral grievance settlements) but found that deferral was appropriate in this case, and dismissed the NLRB regional office’s complaint. Ms. Beneli then filed an appeal with the U.S. Court of Appeals for the Ninth Circuit in which she argued that the NLRB’s new deferral standard should have been retroactively applied to this case. B&W, represented by KWW Attorneys Julie Trout and Tom Green, together with the NLRB, then successfully argued to the Ninth Circuit that the NLRB properly determined that it would not apply its new deferral standard retroactively to Ms. Beneli’s case.

In light of the foregoing, it appears that the NLRB’s new deferral standards are here to stay. Accordingly, in cases alleging violations of Sections 8(a)(1) or (3) of the National Labor Relations Act, the following standard will be used where arbitration has already occurred and a party requests that the NLRB defer to the arbitration decision:

If the arbitration procedures appear to have been fair and regular, and if the parties agreed to be bound, 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 first part of this standard – specifically, the requirements that “the arbitration procedures appear to have been fair and regular” and that “the parties agreed to be bound” – remains unchanged from the previous deferral standard. The remaining portions of the new standard, however, represent considerable changes from the previous standard, which will likely result in far less deferral than the previous standard. For the past 30 years, the established deferral standard placed the burden on the party opposing deferral to show that the standards for deferral had not been met. This new standard completely reverses this burden and requires that the party urging deferral prove that each of the requirements for deferral has been met. Typically, in a Section 8(a)(1) or (3) case, the employer will be the party urging deferral; thus, the employer will generally bear this burden.

In addition to its changes to the post-arbitral deferral standard, in cases where arbitration has not yet occurred, the NLRB “shall no longer defer unfair labor practice allegations to the arbitral process unless the parties have explicitly authorized the arbitrator to decide the unfair labor practice issue, either in the collective bargaining agreement or by agreement of the parties in a particular case.” Finally, the NLRB decided “to apply the same deferral principles to pre-arbitral settlement agreements as to arbitral awards,” resulting in changes to the standard for determining whether to defer to settlement agreements arising from the grievance-arbitration process. Specifically, “it must be shown that the parties intended to settle the unfair labor practice issue; that they addressed it in the settlement agreement; and that Board law reasonably permits the settlement agreement.”

Should you have any questions regarding the Ninth Circuit ruling or would like additional information regarding the impact of the NLRB’s deferral standards on your collective bargaining relationships, please feel free to contact Julie Trout, Tom Green or any other KWW attorney.