The Ninth Circuit, a historically employee-friendly court, recently issued a decision that backs the NLRB’s revised post-arbitral deferral standard laid out in its December 15, 2014 Babcock & Wilcox decision. This Board decision was previously blogged about here. On Tuesday, October 17, 2017, the Court affirmed the Board’s decision to apply its new deferral standard only prospectively and upheld the denial of the petitioner’s unfair labor practice complaint as it was analyzed under the previous more deferential standard. In doing so, the Court considered a five-part balancing test and ultimately found that a prospective application was appropriate.

Significantly, the Court held that the new post-arbitral deferral standard was an abrupt departure from a well-established practice that the employer relied on and a retroactive application would severely burden the employer and not appropriately balance statutory interests as it would undermine the previous arbitration and ALJ proceedings in the case at hand. Critically, retroactively applying the new standard “would impair the ‘stability of labor relations [that] was the primary objective of Congress in enacting the National Labor Relations Act’” and thus the Court found “the primary purpose of the NLRA favors prospective application.”

In Babcock & Wilcox, the Board majority found its previous post-arbitral deferral standard failed “to ensure that employees’ statutory rights are adequately protected,” despite the fact that it had been in place for decades without substantial change (and the several challenges made by the Board’s Republican members at the time). Specifically, the Board majority held that the previous standard relied on a “conclusive presumption that the arbitrator ‘adequately considered’ the statutory issue” since the underlying ULP issue and contractual issue only needed to be “factually parallel” and the arbitrator only needed to be “presented generally” with the relevant facts.

Accordingly, the Board now defers to an arbitrator’s decision if it is shown that (1) the arbitrator was explicitly permitted to decide the underlying ULP issue; (2) the arbitrator was presented with and considered the statutory issue, or was blocked from doing so by the party opposing deferral; (3) and Board law reasonably permits the arbitral award. Notably, the previous post-arbitral deferral standard placed the burden of proof on the party opposing deferral to demonstrate that the deferral criteria were not met, but the new standard places the burden on the party urging deferral to prove that the deferral standard is satisfied (i.e., usually the employer). The NLRB’s General Counsel issued a memorandum back on February 10, 2015 offering guidance on the Babcock & Wilcox decision and noted that this decision also changed the standards for pre-arbitral deferral and grievance settlements.

In short, the Court correctly noted that this revised post-arbitral deferral standard “makes deferral to an arbitral decision less likely.” As such, employers should continue to be mindful of the discretion Regional Offices across the country have in refusing to defer to an arbitrator’s decision and, critically, the possible arguments that a union who loses at arbitration may make to Regions investigating ULP charges that encompass issues already litigated in a previous arbitration.