American Bar Association
Section of Labor & Employment Law
Committee on Practice and Procedure under the NLRA
Mid Winter Meeting
Kohala Coast, Hawai’i
March 7, 2014
New Ruby Slippers
Purple Communications, Babcock & Wilcox, and Murphy Oil
Mark Ross, Jackson Lewis, San Francisco, CA
Bob Giolito, Law Office of Robert S. Giolito, Los Angeles, CA
Joseph F. Frankl, NLRB Regional Director, Region 20
Olivia Garcia, NLRB Regional Director, Region 21
Mori Rubin, NLRB Regional Director, Region 31
EMPLOYER AND UNION PERSPECTIVES ON THREE SIGNIFICANT NEW CASES
- PURPLE COMMUNICATIONS, 361 NLRB No. 126 (2014)
The Board majority (Pearce, Hirozawa, and Schiffer), overruled Register Guard, 351 NLRB 1110 (2007), enforced in relevant part and remanded sub nom. Guard Publishing v. NLRB, 571 F.3d 53 (D.C. Cir. 2009), to the extent that it held that employees have no statutory right to use employers’ email systems for Section 7 purposes. The Board held in Purple Communications that employees who have access to their employer’s email system in the course of their work have a right to use the email system to engage in Section 7-protected communications on nonworking time. An employer can, however, rebut the presumption by demonstrating that “special circumstances” make its restrictions necessary to maintain production and discipline.
- Union Perspective
The Pearce Board unsurprisingly reverses Register Guard and holds that, absent unusual circumstances, employees granted access to their employer’s email system may use it to engage in Sec. 7 communications during nonworking time.
The table was set for this decision seventy years ago when the Supreme Court first held, in Republic Aviation, 324 U.S. 793 (1945), that an employer’s property rights were not absolute but must accommodate employees’ Sec. 7 rights, which included employees’ right to communicate in the workplace during nonworking time. Since then, the so-called “tension” between property rights and the NLRA has been adjudicated along a “spectrum depending on the nature and strength of the respective . . . rights asserted in any given context,” Hudgens v NLRB, 424 U.S. 507, 521 (1976), and “with as little destruction of one as is consistent with the maintenance of the other.” NLRB v. Babcock & Wilcox, 351 U.S. 105, 112 (1956). The Court considers that employees’ rights “are at their strongest when the activity is carried on by employees already rightfully on the employer’s property,” Hudgens, 424 U.S. at 521 fn.10. As the Board majority pointed out, communication by email is overwhelmingly used by employees in the modern workplace, even more so now than when Register Guard was decided seven years ago. Given this, one can easily see why that perverse decision was so roundly panned by scholars, pundits, and others in the legal community and was ripe for reversal.
Nevertheless, it is refreshing to see another well-crafted opinion by a Board majority clearly attuned to the importance of protecting collective rights in the workplace, where workers actually spend their working lives. Also, kudos owed for avoiding the traps of parsing the issue in terms of narrowly constricted “property rights,” determining whether email occurs in a work or non-work area or constitutes a solicitation or distribution, all of which are historical concepts derived from Republic Aviation but that are difficult to apply to modern email communications.
The Board majority also broadly hinted that its reliance on a rights accommodation analysis called into question its prior decisions on employee use of employer-owned equipment. Those decisions rested almost entirely on traditional notions of property rights, resulting in such absurd results as finding lawful an employer’s prohibition on an employee’s use of discarded scrap paper to draft a leaflet. (Johnson Technology, 345 NLRB 762, mercifully overruled in Purple Communications, 361 NLRB at fn. 47.) This portends future decisions by the Pearce Board that may help to restore the balance of rights in our rapidly changing workplaces.
- Employer Perspective
Whether an employer may lawfully maintain a rule that bans employees from making nonbusiness use of a company email system, and whether employees have a statutory right to use their employer’s email system for the purpose of communicating with one another about union organizing and their other commonly held workplace concerns, are legal issues that have been kicking around since the 90’s, when then General Counsel Fred Feinstein first sought to address “Section 7 in Cyber-space.” In 2007, in Register Guard, 351 NLRB 1110, the Battista Board sustained an employer’s Communications Systems Policy that barred all non-job related use of an employer’s email, treating the email system like any other piece of employer-owned business equipment and holding, in accord with a long line of Board precedent, that employers are free under the Act to ban any nonwork use of their equipment by employees.
But in Purple Communications, the present Board recently refused to sustain an employer’s “business purpose only” email rule, reversing Register Guard (because it had given too much weight to employer property rights and insufficient weight to NLRA-protected employee rights) and held that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems.” Thus, if an employer has granted employees access to its email for business purposes, then, after Purple Communications, those same employees have a presumed Section 7 right to use the employer’s system to communicate with one another and other employees with respect to unions and other matters concerning mutual aid and protection. Further, even though Purple Communications represents a complete U-turn in the law with respect to business use only email policies, the Board said that it would apply the new decision retroactively, meaning that all employers who now have business use only emails in place are probably noncompliant with the NLRA, their prior reliance on Register Guard notwithstanding.
Recognizing its groundbreaking nature, the Board also went out of its way emphasize the narrowness of Purple Communications, pointing out that the decision:
- Addressed only email systems and expressed no opinion with respect to any other type of electronic communications system;
- Addressed email use by employees only, and did not find that nonemployees have a right to access an employer’s email system;
- Addressed only the rights of employees who have been granted access to their employer’s email, and did not require an employer to grant all employees access to its email system;
- Addressed the rights of employees to use an employer’s email system for nonwork purposes only during nonworking time;
- Allowed an employer wanting to prohibit all nonbusiness email use, including Section 7 use on nonworking time, to rebut the employees’ presumptive right of use by proving that their total and nondiscriminatory ban is necessary to the maintenance of production and discipline; and
- Allowed employers wanting to maintain rules regulating employee use of a company’s email system to uniformly apply and consistently enforce those regulations, provided they too could prove that they are necessary to the maintenance of production and discipline.
While perhaps intended to give the Board a leg up if and when Purple Communications reaches the courts (as well as to mollify an irate employer community), these statements of the decision’s supposed limitations offer cold comfort to those who have to live with the decision and to draft and apply corporate e-mail policies. Indeed, the fact that it has yet to reach these issues says nothing about how this activist Board will decide them if and when they become ripe for decision. Thus, if anything, the Board’s narrowing comments about what was and was not decided in Purple Communications represent a catalogue of newly opened issues of which employers need to be mindful in order to avoid costly Board litigation and the risk of liability.
Purple Communications is plainly at odds with the Board’s standard for determining the facial validity of workplace rules, since a broad and nondiscriminatory “business use only” email policy does not explicitly restrict Section 7 conduct and says nothing that would reasonably lead employees to conclude the rule prohibits them from engaging in protected conduct. Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004). Thus, while there is no disputing the central role played by workplace communications in the exercise of Section 7 rights or the increasing use of email and other forms of electronic communications, the mere maintenance of a business use only email policy that seeks only to confine the use of an employer’s business asset to that business neither obviates nor interferes with employees’ ability to communicate with one another — in the workplace or anywhere else. Moreover, no one, including this Board, can genuinely suggest that nonworking time access to company email is critical to the exercise of Section 7 rights, or that a ban on employee nonbusiness email use will materially affect, much less impede, workers from being able to reach one another on matters of common interest. Most people today own mobile devices with texting capability and with ready access to the internet and social media that offer a far more powerful and effective means of communicating at or away from the workplace and coordinating group activity than an employer’s email. In short, and contrary to Purple Communications, a broad business use only email policy simply does not single out or tend to have a demonstrably adverse impact on Section 7 rights and thus does not significantly implicate statutory rights. Therefore, for the purpose of evaluating the lawfulness of a broad, nondiscriminatory business use only email rule, there simply are no statutory employee rights being implicated to be balanced against an employer’s property rights.
Purple Communications also demonstrates a remarkable indifference to an employer’s private property rights. The right to control the use of one’s property is one of the most basic of all rights. Fundamental to that right is a property owner’s freedom to determine who will be permitted to use that property and how it will be used, while also imposing conditions or restrictions on that use. The fact that an employer elects to grant access to its email to employees so they can perform their job renders the employer’s interest in that system no less private or substantial. Additionally, email systems typically involve significant acquisition expense. They also require ongoing upkeep and maintenance expenses that may vary depending upon when and how the system is used. Accordingly, an employer’s rules as to when and for what purpose its email system is used and who will be allowed to use it are all decisions deeply embedded in the employer’s property rights. Furthermore, with property ownership often comes legal responsibilities and potential risks that a property owner is entitled to address and to protect against. Nowhere are those potential liabilities and risks greater than in the case of an employer’s email system. A broad nondiscriminatory rule that confines the authorized use of an employer’s email to “business purposes only” addresses and advances these property-based concerns as well.
What Employers Need to Do Now in Light of Purple Communications
- Review and revise their email and solicitation policies (and other policies and practices affecting electronic communications) to ensure that they are consistent with this new decision, since policies that restrict the use of email to business use only will likely be found unlawful;
- Determine whether there are provable “special circumstances” that would justify a ban or restrictions on employees’ non-business email use;
- Realistically evaluate whether and which employees genuinely need e-mail system access to perform their job duties, and cull those who do not really need email access to do their work out of the email system; and
- Make employees aware that the employer monitors or, at least, reserves the right to monitor computer and email use for legitimate reasons, and that employees have no expectation of privacy in their use of the employer’s email system.
- Murphy Oil USA, 361 NLRB No. 72 (2014)
In Murphy Oil, the Board reaffirmed the holding in D.R. Horton, Inc., 357 NLRB No. 184 (2012) that an employer violates the NLRA when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial.”
- Union Perspective
Following the Fifth Circuit’s denial of enforcement of D.R. Horton, the Pearce Board doubles-down, holding again that the NLRA prohibits an employer from requiring employees to waive their right to file a class claim in arbitration or any other forum.
For many and certainly for those of us on the union side, the touchstone of this case, as in D.R. Horton¸ is the belief that the NLRA grants workers a substantive right to engage in collective activity. Since such activity has long been held to include the right to engage in collective legal action, an employer’s demand for a waiver of this right as the price for a job is an obvious unfair labor practice. But if you think that a collective action is merely a procedural device for enforcing statutory rights as under the ADEA or FLSA, then the waiver is merely part and parcel of an agreement otherwise enforceable under the FAA that may not be displaced by the NLRA unless the agreement falls within one of the FAA’s strictly limited exceptions.
But the NLRA is a wholly different animal than other protective labor statutes. The NLRA, and its pre-cursor, the Norris-LaGuardia Act (which also expressly protected workers’ “concerted activities”), represented the legislative end of a decades-long struggle to legitimize workers collective actions, principally including the right to organize a union and bargain collectively, but also the collective rights to strike and boycott and employ other economic weapons against an uncooperative employer. Unfortunately, and for reasons beyond the scope of this discussion, the original sense of the importance of these hard-won collective rights has clearly subsided with the public, the legislatures, and the courts. In recent decades, the political and legislative focus has instead turned towards the protection and assertion of individual employment rights and remedies. Thus, the Fifth Circuit, in denying enforcement of D.R. Horton¸ could easily argue that the Supreme Court had authorized class action waivers in actions under the ADEA and FLSA without even discussing the qualitative difference in the rights protected by those statutes and the NLRA.
The majority’s opinion in Murphy Oil is a robust, well-written exposition of collective rights under the NLRA and a retort to those who view them as just one more item on the statutory menu that can be checked off to ADR under the FAA. Since the agency did not appeal the Fifth Circuit’s decision in D.R. Horton, it will likely be up to the Supreme Court reviewing either this case or another to decide the question. One hopes the Court will take heed of its earlier holdings that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute.” Circuit City Stores, Inc. v Adams, 532 U.S. 105, 123 (2001), quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20, 26 (1991), and Mitsubishi Motors Corp.v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 628 (1985).
- Employer Perspective
In recent years, employers have sought to channel class claims out of the courts and to minimize their class liability risks by requiring their employees enter into pre-dispute arbitration agreements in which the employees agree to prosecute their potential claims individually before a private arbitrator. The National Labor Relations Act does not create a right to class certification or class relief; nor do the claims to be arbitrated under such agreements concern substantive rights under the Act. However, Section 7 grants to employees a right to engage in concerted activity relative to matters of mutual aid and protection, causing the Board to question whether the compulsory execution and later enforcement of such individual arbitration agreements restrained or coerced employees in the exercise of their rights to engage in concerted activity.
In D.R. Horton, Inc., 357 NLRB No. 184 (2012), the Board addressed these questions and found such compulsory agreements, requiring individual arbitrations on non-NLRA claims, unlawful, explaining that Section 7’s protection of concerted action created a substantive statutory right for employees to collectively pursue claims without the interference of employer-imposed restraint and that such compulsory class claim waivers violated Section 8(a)(1). However, employment arbitration agreements fall within the ambit of the Federal Arbitration Act (FAA) and must, therefore be enforced in accordance with their terms. Accordingly, when D.R. Horton reached the Fifth Circuit, the court denied its enforcement, holding that “the Board’s decision did not give proper weight to the Federal Arbitration Act (FAA).” D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). Likewise, every other court called upon to rely on D.R. Horton has refused to do so, suggesting or expressly stating that they would not defer to the NLRB’s rationale as it was out of step with the FAA. Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir. 2014); Richards v. Ernst & Young, 744 F.3d 1072 (9th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2nd Cir. 2013); Owens v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013). See also, Iskanian v. CLS Transportation Los Angeles, LLC, 327 P.3d 29 (2014).
Even though it elected not to seek Supreme Court review of the Fifth Circuit’s. Horton decision, in a recent decision, Murphy Oil, 361 NLRB No. 72 (2014), the Board’s Democratic members refused to “acquiesce” to the appellate court’s decision Instead, they elected to “double down” on Horton by finding that the earlier decision to be correctly decided, the Fifth Circuit’s rejection notwithstanding, and again holding that mandatory arbitration agreements that require an employee to waive the right to bring or participate in class or collective actions interfere, restrain and coerce employees in the exercise of their Section 7 rights in violation of Section 8(a)(1). Meanwhile, in two strongly worded and scholarly opinions, the Board’s two dissenting Republican members, Philip Miscimarra and Harry Johnson, explained exactly why D.R. Horton was wrong in the first place and why Murphy Oil is incorrect now.
Central to a resolution of this issue is the relationship, if any, that may exist between the FAA and the NLRA and whether Section 7 can fairly be read as trumping the application of the FAA to non-NLRA class or collective actions/arbitrations. Class procedures in non-NLRA cases are just that – mere procedures that operate to confer no substantive right. Thus, even though the NLRA may protect employees collective act in support of commonly held non-NLRA claims, class litigation is not necessary to Section 7 protections. Nor is participation in class litigation, by itself, sufficient to establish that participation as protected Section 7 conduct. In this connection, the D.R. Horton/Murphy Oil Board mistakenly conflates “class” litigation in a non-NLRA context with Section 7 protected activity under the Act.
Moreover, nothing in the NLRA’s text, the statute’s legislative history or its operation, when viewed in the context of the FAA’s application to non-NLRA claims, even remotely suggests a congressional intent to give the NLRA primacy over the FAA or a legislative command against applying the FAA to such non-NLRA-based collective/class claims – even though the collective assertion of them may constitute Section 7 protected conduct. Indeed, were that the case, Section 7 would operate to render the FAA a complete nullity with respect to all employment-based claims that might be brought collectively, a position that the Court specifically rejected when it issued Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Long ago, the Court observed that “the Board has not been commissioned to effectuate the policies of the Labor Relations Act so single-mindedly that it wholly ignores other equally important Congressional objectives” Southern SS. Co. v. NLRB, 316 U.S. 31, 47 (1942). Yet that is exactly what the Murphy Oil Board has done since, without any congressional license to do so, it plainly nullifies the FAA’s statutory command that arbitration agreements be given effect in accordance with their terms.
Unless and until the Supreme Court is presented with these issues, this activist Board can be expected to persist in the erroneous positions taken in D.R. Horton and Murphy Oil. This means that employers who avail themselves of arbitration agreements containing class/collective waivers and/or seek their enforcement need to weigh the risks and rewards of doing so for they may be required to defend their actions before the Board. A petition for review of Murphy Oil is now pending before the Fifth Circuit. However, since that court has already weighed in on the issue of arbitration agreements containing class waivers and absent a hearing en banc, a change in that court’s position and a split in the circuits are unlikely.
III. Babcock & Wilcox, 361 NLRB No. 132 (2014)
The Board majority (Pearce, Hirozawa, and Schiffer) adopted new standards for determining whether to defer to arbitral decisions in cases alleging violations of Section 8(a)(1) and (3) of the Act.. In doing so, the Board found that the existing postarbitral deferral standard did not adequately balance the protection of employee rights under the Act and the national policy of encouraging arbitration of disputes over the application or interpretation of collective-bargaining agreements. The majority reasoned that the existing standard created excessive risk that the Board would defer when an arbitrator had not adequately considered the unfair labor practice issue, or when it was impossible to tell whether that issue had been considered. The new standard retains the Spielberg requirements that the arbitral proceedings appear to be fair and regular and that all parties have agreed to be bound. In addition, the new standard places the burden on the party urging deferral to show that: (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue (i.e. the specific statutory right at issue was incorporated in the collective-bargaining agreement or the parties agreed to authorize arbitration of the statutory issue in the particular case); (2) the arbitrator was presented with and considered the statutory issue (or the party opposing deferral acted affirmatively to prevent the party advocating deferral from placing the statutory issue before the arbitrator); and (3) Board law reasonably permits the arbitral award. The Board also modified the standards for prearbitral deferral and deferral to grievance settlements.
- Union Perspective
This is perhaps the most important of the Pearce Board’s recent decisions, even though its practical impact will be on that small fraction of arbitration cases that involve ULP allegations under Secs. 8(a)(1) or (3), e.g. where the employer is alleged to have disciplined an employee because of the employee’s protected activities.
The decision announces a new deferral standard that requires the party urging deferral to an arbitrator’s award to show that the parties explicitly authorized the arbitrator to decide the ULP issues, that the arbitrator considered those issues (or was prevented from doing so by the party opposing deferral), and that Board law “reasonably permits” the final award.
Importantly, the new standard also applies to grievance settlements, where the party urging deferral must show that the parties intended to settle the ULP issues involved, that they expressly addressed those issues in the settlement, and that Board law reasonably permits the adjustment.
Starting now, all parties are on notice to make sure that their grievance awards and settlements expressly discuss and resolve any ULP issues involved in a manner that reasonably comports with the Act. The majority noted that they do not expect arbitrators to become ALJs or employer or union representatives to turn into labor lawyers, but it’s likely that legal advice will be sought in such cases and that RDs will scrutinize them more carefully. While the majority stressed that the arbitrator (or the parties to a settlement) need only identify the statutory issue and “generally explain” why the facts found do or do not support the ULP allegation, we’ll have to see how this plays out Region to Region.
Member Johnson’s dissent claimed, among other things, that the new standard will encourage a party to “keep silent” as to its statutory claims in hopes of having a second chance with the Board (as if that is something we all want!). In most cases, this would be a very foolish tactic. Holding back an issue, or worse, evidence, in a contested case not only undermines the case, but risks Board deferral anyway based on the evidence that was presented by the other party, who has nothing to lose by raising any statutory issues. The majority also made clear that the party holding back will not be heard to argue later that the withheld evidence precludes a deferral.
Since the decision essentially adopted, with some modification, the pre- and post-arbitration deferral standards urged by former Acting General Counsel Lafe Solomon in GC Memo 11-05, we can anticipate that current GC Dick Griffin will issue a revised memo to incorporate the new standard.
Ironically, all of this was no help to the unlawfully discharged job steward involved in the case, as the Board determined to apply the new standard prospectively only.
- Employer Perspective
In its December 15 decision, Babcock & Wilcox Construction, Inc., 361 NLRB No. 132 (December 15, 2014) (Babcock), the Board radically changed the rules as they relate to when and how the Agency will defer future Section 8(a)(1) and (3) claims to the arbitration process. In order to put these new rules in a meaningful context and to appreciate their impact, one must first understand the origins and history of the Board’s deferral practice and how that practice has operated until now.
During its early years, the Board refused to defer its C-Case decision-making to arbitrators, citing Section 10(a)’s statutory directive that charged the Agency with the sole responsibility for preventing unfair labor practices (ULP). But beginning in the 1950’s and continuing into the 1960’s, the Board witnessed a “normalization” of bargaining life and the maturation of bargaining relationships; more and more collective bargaining agreements (CBA) were successfully bargained with little strife and, by then, many bargaining parties had achieved a stasis in their relationship that allowed for peaceful resolution of their differences by use of their agreed upon grievance procedure. This experience persuaded the Board to rethink its position on ULP deferral to arbitration and to conclude that if the federal policy favoring industrial peace through bargaining and consensual dispute resolution was to be achieved, then the Board would have to give “hospitable acceptance to the arbitral process as part and parcel of the collective bargaining process and thus, voluntarily withhold its authority to adjudicate alleged ULPs involving the same subject matter, unless the arbitration was tainted by fraud, collusion, unfairness, or serious procedural irregularities or the award was clearly repugnant to the Act.” International Harvester Co., 138 NLRB 923, 927 (1962). This occurred in incremental decisional steps.
The first tangible evidence of the Board’s newfound “hospitable acceptance” of arbitration came in Spielberg Manufacturing Co., 112 NLRB 1080 (1955) (Spielberg), a case in which the Board announced its willingness to defer to an arbitrator’s decision if the decision could satisfy the following conditions: (1) the proceeding was fair and regular; (2) all parties agreed to be bound by the award and (3) the decision was not repugnant to the purposes and policies of the Act. Several years later, two cases, Raytheon Co., 140 NLRB 883 (1963) and Olin Corp., 268 NLRB 573 (1984) (Olin), combined to tack on a fourth requirement for post-arbitral deferral, one that required an arbitrator to have considered the unfair labor practice issue, a condition which would be deemed satisfied if the contractual and statutory issues were factually parallel and the arbitrator was presented generally with the facts relevant to resolving the ULP. Additionally, Olin placed the burden on the party opposing deferral to demonstrate that the deferral criteria were not met.
Spielberg was limited to the Board’s deferral to awards, but in Dubo Manufacturing Corp., 142 NLRB 431 (1963) (Dubo), the Board opened the deferral door a little wider when it held that it would defer action on a ULP charge pending the completion of the grievance-arbitration process where the parties had already committed their dispute to the arbitral process and then review the product of that process pursuant to Spielberg.
Eight years later, in Collyer Insulated Wire, 192 NLRB 837 (1971) (Collyer), the Board kicked the deferral door down, when it dismissed an 8(a)(5) complaint and ruled that, in the future, it would suspend action on such ULP charges and defer to the bargaining parties’ grievance-arbitration procedure prior to any party’s invocation of the grievance process. Under Collyer, if the bargaining parties could take the matter to arbitration but refused to do so, then the charge that would otherwise have been put on hold was dismissed. Collyer deferral rested on the national policy of encouraging resolution of labor disputes through grievance-arbitration machinery, on the notion that such deferral was consistent with the statutory policy enunciated in Section 203(d) of the Labor Management Relations Act to encourage the parties to resolve their differences through the “method agreed upon by the parties” and that such “disputes [could be better] resolved by arbitrators with special skill and experience in deciding matters arising under established bargaining relationship than by application of this Board of a particular provision of [the Act].” Thereafter, in National Radio Co., 198 NLRB 527 (1972), the Collyer doctrine was extended to reach and apply to Section 8(a)(1) and (3) cases based on an assumption that the arbitration process would resolve such statutory discrimination/retaliation claims in a manner consistent with the standards of Spielberg.
In subsequent years, the scope of the Collyer deferral and its applicability to 8(a)(1) and (3) cases was hotly debated. See, Great American Transportation Corp., 228 NLRB 808 (1977); see also, United Technologies Corp., 268 NLRB 557 (1984). But in the end, proponents of deferral won out. Accordingly, as of the Board’s issuance of Babcock, 8(a)(1) and (3) claims were typically treated as appropriate subjects for administrative deferral as per Collyer and then subject to review in accordance with Spielberg. Accordingly, if an 8(a)(1) or (3) charge was filed and the bargaining parties had a contract containing language that permitted those statutory claims to be arbitrated, the charge would routinely be put on hold for a reasonable period of time while the parties ran the dispute through the grievance-arbitration process and then the resulting award would be deferred to and the statutory claims dismissed pursuant to Spielberg unless the party opposing deferral could show that the standards of Spielberg had not been met.
Employers liked the Collyer approach for three basic reasons: First, it forced unions to put their money where their mouth was by forcing them either to arbitrate or to drop a claim; second, the arbitral process was relatively time and cost efficient as compared to Board litigation; and third, Collyer operated to give an aggrieved party, i.e., an adversely affected employee, their union or both, but a single bite of the apple by forcing the consolidation of all of their claims, both contractual and statutory, into a single proceeding before an arbitrator. Moreover, because Spielberg’s standards were fairly easily met and since the burden of proof was on the person wanting to avoid deferral, the end of the arbitral process typically meant the end of the suspended ULP charge still pending before the Region.
In 2011, then General Counsel Lafe Solomon issued GC Memo 11-5, entitled Guideline Memorandum Concerning Deferral to Arbitral Awards and Grievance Settlements in Section 8(a)(1) and (3) cases in which he complained that the Board’s existing post-arbitral deferral policy as applied to Section 8(a)(1) and (3) cases was “distinctly at odds” with that which prevails in other areas of employment law and out of synch with the Agency’s Section 7 and 10(a) mandates. GC Solomon also criticized the manner in which the Board had deferred to the pre-arbitral settlement of Collyer without giving due regard to statutory issues. Accordingly, GC Solomon announced his office would be urging the Board to adopt a new approach to the deferral of Section 8(a)(1) and (3). In Babcock, the Board accepted and acted on that invitation; what came out in that decision signals a dramatic change in whether and when the Board will defer 8(a)(1) and (3) cases in the future.
The charging party in Babcock, Beneli, was a utility operator who also served as a steward for the Operating Engineers. She was discharged for directing an angry remark and profanity at her manager in response to a three day suspension she received for safety violations. Thereafter, Beneli’s union grieved the suspension and discharge, arguing that her discipline was in violation of the parties’ CBA and retaliation for her union activities. While that grievance was pending, Beneli filed a ULP charge with the Phoenix Region which, in turn, administratively deferred the case pursuant to Dubo. Later, after the joint labor-management committee hearing the matter denied the union’s discipline grievance and upheld the discharge, Beneli returned to the Region and asked that it not defer to the committee’s decision but instead proceed with her ULP case. The Region, thereafter, issued a complaint on the charge; lost the case in front of the Administrative Law Judge (ALJ), who recommended dismissal of the case, applying the current Spielberg standards; and then took the case up to the Board on exceptions. The Board adopted the ALJ’s recommended order and dismissed the Region’s complaint on behalf of Beneli, but in so doing, issued a decision laying out a new set of rules to be applied to 8(a)(1) and (3) deferral cases prospectively. Those new rules (the Babcock Standards) turn existing deferral law on its head and make the future deferral of Section 8(a)(1) and (3) claims anything but a foregone conclusion.
Under Babcock, Spielberg (post-arbitral ) deferral is appropriate in Section 8(a)(1) and (3) cases only where the arbitration procedures appear to have been fair and regular and the parties have agreed to be bound by the outcome of the procedure as required by Spielberg and where the party urging deferral, typically the employer, demonstrates that: (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (2) the arbitrator was presented with and actually considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (3) Board law “reasonably permits” the arbitral award.
Likewise, under Babcock, prearbitral deferral under Collyer will not be appropriate in Section 8(a)(1) and (3) cases unless the arbitrator is explicitly authorized to decide the statutory issue either in the bargaining parties’ CBA or in the parties’ arbitration agreement. This is because it would be futile to place a case on hold pending arbitration if it is clear from the outset that deferral to the ultimate award would be improper or futile.
Finally, as to the Board’s deferral to prearbitral settlements resolving both contractual and Section 8(a)(1) and (3) claims, Babcock states that 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. As to this last element, in assessing whether Board law reasonably permits a given settlement, the Board will consider the following factors: (1) whether the charging party(ies), the respondent(s), and any of the individual discriminatee(s) have agreed to be bound by the settlement and the position taken by the General Counsel regarding the settlement; (2) whether the settlement is reasonable in light of the violations alleged, the risks inherent in litigation and the stage of the litigation; (3) whether there has been any fraud, coercion or duress by any of the parties in reaching the settlement; and (4) whether the respondent has engaged in a history of violations of the Act or has breached previous settlement agreements resolving ULP disputes. Independent Stave Co., 287 NLRB 740, 743 (1987) (Independent Stave).
What do the new, rigorous Babcock Standards mean to employers? What should employers do to still take full advantage of Spielberg/Collyer deferral and to protect themselves against two separate proceedings – one contractual and held before an arbitrator and the second, statutory in nature and prosecuted by the GC before the Board – but both arising out of a common nucleus of facts?
First, Babcock means that an employer faced with Section 8(a)(1) and/or (3) charges will have to sustain the burden of proving the elements of this new test as a condition of obtaining the Board’s deferral. If the employer cannot sustain that burden, then the Board will likely not defer under either Spielberg or Collyer, thus placing the employer at risk of facing two separate but related litigations.
Second, it means when employers enter into CBAs or arbitration agreements, they need to decide whether they will want to avail themselves of deferral of possible 8(a)(1) and (3) claims and, assuming they do, to make sure that the agreements they enter into contain appropriate language addressing statutory issues, making them arbitrable, and authorizing an arbitrator to hear and decide them. Otherwise, the Board may decide that the arbitrator was not explicitly authorized to hear the issues and, thus, refuse to defer to the arbitral process under Collyer or rejects its resulting award/decision for Spielberg deferral purposes. Likewise, when drafting and negotiating contractual grievance and arbitration provisions, employers should seek the inclusion of language wherein not only the Union, but the employee(s) on whose behalf the union is acting, agree to be bound by the outcome of the arbitral process. Employer should also seek the inclusion of procedures that will enable them to meet and prove the second prong of the Babcock test, the one calling for the employer to be able to show that the statutory issue was actually presented and considered by the arbitrator.
Third, employers are advised to take affirmative steps to ensure that statutory issues are presented to and actually considered by the arbitrator, and that they are able to marshal the evidence to prove that that, in fact, happened. Accordingly, the issue submissions/stipulations given to an arbitrator at the outset of a hearing should identify the statutory issues as being among the issues being submitted to the arbitrator for decision. Likewise, it would be the wise employer who gets a transcript of proceedings and insists on the submission of post-hearing briefs in which the employer could address and argue its position with respect to both contract and statutory issues.
Fourth, Employers should also alert the arbitrator to the applicability of the Babcock standards and ask them to issue certain findings of fact including credibility determinations and conclusions of law in their awards that specifically address the statutory issues in conformity with Board law. Not only will this come in handy for the purpose of showing that statutory issues were presented to and actually considered by arbitrators, but it may be critical to an employer’s ability to show that the arbitral award is one that would be “reasonably permitted” under Board law.
Fifth, employers need to tailor their evidence to meet the order and allocation of proof as to both contractual and statutory issues so as to meet the Babcock requirement that an award be “reasonably permitted” under Board law. This is required because it is anyone’s guess as to what it will take for an award to satisfy or fail this prong of the Babcock test. In Babcock, the Board stated that an arbitrator need not rule exactly as the Board would have ruled in a case; nor would it engage in the equivalent of a de novo review of an arbitrator’s decision. However, the Board was far less than clear in stating what its review standard or process would be, meaning that a finding of “just” or “good” cause, though sufficient to win a contract claim, will not carry the day in terms of deferral because the presence of “good cause” may not be a legal defense to a claim of discrimination. Thus, until Babcock’s standard/process of review is fleshed out and better established by subsequent decision, an employer seeking the protection of deferral should prove its case in a way that not only makes a good defense to contract claims, i.e. that good or contractually sufficient cause existed for its adverse action, but also proves that an employee’s protected and/or union activity was not a motivating factor in its adverse action, as well as offer proof that meets the shifting evidentiary burdens of Wright Line, 251 NLRB 1083 (1980).
Finally, as to prearbitral settlements of Section 8(a)(1) and/or (3) claims, care must be given to the drafting of settlement agreements so as to confirm the fact that the settling parties intend to settle and are settling the statutory claims as part of a deal. Further, it may be wise to include commonly agreed upon recitations of fact as to why the parties have chosen to settle all claims, including the statutory issue, at a given stage, and how and why that settlement satisfies the factors set forth in Independent Stave.
/ The employer perspective is provided by Mark Ross and the union perspective is provided by Robert Giolito.
/ The Board did not address the Register Guard’s definition of discrimination. See slip op. at 5 n.13.