On December 15, 2014, in a split decision along party lines, the National Labor Relations Board (“the Board”) in Babcock & Wilcox Construction Co., Inc., overruled 30 year-old precedent that will needlessly undermine the utility and finality of arbitrations that concerned allegations of retaliation, interference and coercion with employees Section 7 rights. The Board did this by imposing a new standard for when it will defer to arbitration decisions alleging violations of Section 8(a)(1) and (3) of the act.

Under the new test, the Board will defer to an arbitration decision only if the arbitration proceeding was fair and regular; the parties agreed to be bound; the party urging deferral shows that the arbitrator was explicitly authorized to decide the unfair labor practice issue; the arbitrator was presented with and considered the unfair labor practice issue or was prevented from considering the unfair labor practice issue by the party opposing deferral; and Board law reasonably permits the award.

The Board’s new approach places the burden on the employer to ensure either that the arbitration agreement incorporates the statutory right at issue in the unfair labor practice allegation or that the parties explicitly agree to address the issue; that the arbitrator considered and addressed the issue in rendering the award. This framework will likely undermine the finality of arbitrations as it provides the Board considerable discretion in determining whether an award/decision is “reasonable.” It also may give unions a second bite at the apple if an arbitrator denies a grievance in an arbitration that deals with allegations such as unlawful/unjust discharge or discipline.