Third Circuit Upholds National Labor Relations Board's Return To Pre-Obama Deferral Standard

• Published date: 27 July 2021
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Unfair/ Wrongful Dismissal, Employee Rights/ Labour Relations, Arbitration & Dispute Resolution
• Law Firm: Duane Morris LLP
• Author: Ms Eve Klein, James R. Redeker and Elizabeth Mincer

On July 8, 2021, the United States Court of Appeals for the Third Circuit issued an opinion upholding the National Labor Relations Board's 2019 decision relating to post-arbitral deferral standards. The Third Circuit found that the Board's decision to eliminate an Obama-era rule and return to the standard that had been in effect for decades prior was rational and consistent with the National Labor Relations Act (the "Act").

Though a positive outcome for unionized employers, the broad deference that circuit courts apply to Board rules goes both ways. As we approach a Democrat-majority Board (which could come as soon as August 2021), union and nonunion employers should prepare for the inevitability that many Trump-era rules, such as the post-arbitral deferral standard, could be on the chopping block.

Brief History

The Board has long recognized that the arbitration process is an important aspect of national labor policy, favoring the private resolution of labor disputes. Over the years, the Board has developed various tests for determining under what circumstances deferring to arbitration is appropriate. Prior to 2014, in circumstances where an arbitrator has issued an award and a party files a related unfair labor practice charge, the Board utilized a test from a 1984 decision, Olin Corp., 268 NLRB 573. Under this well-established standard, the Board would defer to an arbitrator's award where:

1. The arbitral proceedings appear to have been fair and regular;
2. All parties have agreed to be bound;
3. The arbitrator considered the unfair labor practice issue and
4. The arbitrator's decision is not clearly repugnant to the Act.

That all changed when the Board, under Obama, changed the test. See Babcock & Wilcox Construction Co., Inc., 361 NLRB 1127 (2014). Under the standard in Babcock, the burden was placed on the party urging deferral, which had to show:

1. The arbitrator was explicitly authorized to decide the statutory 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 permitted the award.

This new test presented a significant shift. It placed the onus on the party seeking deferral (more often the employer) to prove the appropriateness of deferral. It also required explicit authorization to decide the unfair labor practice issue?which meant that if a collective bargaining agreement or other grievance procedure did not already contain such...