Labor Relations Update

NLRB GC’s Attempt At Summary Judgment In Handbook Case Rejected By NLRB Majority

The change in a presidential administration always brings changes to government agencies, including the NLRB, as new appointments are made reflecting the policy preferences of the administration.  The NLRB is not immune to this change and it has been historical practice for the president to appoint three members from the party of the administration and two members from the opposing party.  Of the five positions on the NLRB two are vacant, and both eventually will be filled by the Republican administration, presumably by management-oriented members.  If that happens, then it is a sure bet there will be changes to existing case law.

While the world awaits these changes (or at least the fraction of the world that cares about labor relations), however, the NLRB continues on with its business as if nothing has changed.  The agency continues to push the envelope on its initiatives.

NLRB GC Attempts To Forego Hearing Altogether By Filing Motion For Summary Judgment

In a recent case,  Mercedes-Benz U.S. International, Inc., 365 NLRB No. 67 (May 5, 2017)  a two person NLRB majority rejected the General Counsel’s attempt to gain summary judgment in a handbook case.  Chairman Miscimarra (a Republican) and Member McFerran (a Democrat) denied a motion of the General Counsel to find a violation of the Act based solely on the employer’s maintenance of a rule prohibiting the use of cameras and recording devices in its manufacturing facility without prior authorization.  The Board majority found summary judgment to be inappropriate because the employer had raised arguments about its “asserted business justification, and about whether the rules were communicated or applied in a manner that clearly conveyed an intent to permit protected activity.”

Member Pearce, in a lengthy dissent, stated he would grant the motion for summary judgment, asserting that the defenses raised by the employer would not matter, “Even assuming the truth of the [employer’s] claims, they do not cure the unlawfulness inherent in the [language of the] rule.”

Significance Of The Case:  Employers Can Continue To Litigate Policy Issues

This two page decision is remarkable for a few reasons.  First, the whole concept of the handbook violations has been based on the language of the policy itself, and usually all other matters are irrelevant.  Under the NLRB’s analysis in Lutheran Heritage Village-Livonia, 343 NLRB 646, 647  (2004), assuming there has not been application of the rule in a discriminatory manner or that it was promulgated in response to protected activity, then the primary inquiry is whether “employees would reasonably construe the language to prohibit Section 7 activity.”  This analysis is essentially the Board’s review of the language at issue to make the determination.  Thus, the employer’s business justification for the rule may not be apparent from the handbook rule itself and thus would not factor into the analysis.

Second, it is surprising the General Counsel hasn’t attempted to obtain summary judgment in handbook cases in the last several years the Lutheran Heritage standard has been in existence.  Those who have the pleasure of being involved in these cases know that the majority are usually submitted to the Administrative Law Judge or Board directly by stipulation because there is no dispute over the language of the policy; in the vast majority of cases there is no evidence of actual impact on identifiable employees. The argument that there are not any facts in dispute would seem to have been viable for many years.

Third, one can only guess as to why this is being attempted now but it seems logical, and likely, that the change in administration has prompted the NLRB to continue pushing the agenda in a new and aggressive manner while it awaits new appointments.  Precluding the employer from having a hearing on the matter by obtaining summary judgment could potentially cut months off of the litigation and get to a remedy much faster.  Of course, employers dislike these types of cases because of the fact it is seemingly illogical that common workplace policies, many of which have been in place for years and evince common sense standards could somehow hypothetically be interpreted in such manner as to violate the Act.  Employers also find this area of the law puzzling because of the vagueness of the standard (which often is decided by two Board members) and the potential serious consequences of a finding of a handbook violation of the Act despite the fact there is rarely, if ever, any evidence identifying employee who impacted, let alone actually read the policy in question.

The Change That Is Coming Likely Will Involve Changes To The Lutheran Heritage Standard

Of the many decisions the NLRB may revisit in the coming months, Lutheran Heritage is certainly on the list.  In prior dissents, then Member Miscimarra has expressed his view that the standard in Lutheran Heritage is unworkable and needs to be changed.  See, e.g., William Beaumont Hospital, 363 NLRB No. 162 (2016) (“This case presents a tragic example presented by the Lutheran Heritage standard”).  Given these strong pronouncements it is very likely we will see some change to the standard if not an outright reversal.

Changes to NLRB precedent could still take months.  For any change to occur, the case law has to be challenged in pending cases and that position has to be advanced up to the Board in the event of an adverse decision.

17 Year Old Ruling In Representation Case Can Preclude New Claim For Employees, Divided NLRB Rules

Of all the changes to the law the NLRB has made in the last several years, the most significant involve how the agency determines bargaining units.  For example, the NLRB’s decision in Specialty Healthcare drastically altered the manner in which bargaining units were determined by the Regional Directors and the NLRB.  Also, the NLRB’s ambush election rules also fundamentally changed the ability to challenge a petitioned for bargaining unit by granting Regional Directors immense discretion to decide whether litigation over a proposed bargaining unit could even proceed.

It is somewhat surprising, then, that the NLRB recently decided that prior unit determinations, even those that are several years old and pre-date Specialty Healthcare, could have a “preclusive effect” (known as res judicata) on a new petition:  that is, a prior Regional Director or NLRB ruling on a bargaining unit presumptively stops a party from attempting to re-litigate the previous issue unless it can rebut the presumption by showing that circumstances have changed.  It is even more surprising that the Board majority was made up of Acting Chairman Miscimarra (who usually is in the dissent) and Member McFerran.  Board Member Pearce dissented.

Case Involved 17 year Old Regional Director Decision

In Wolf Creek Nuclear Operating Corporation, 365 NLRB No. 55 (April 7, 2017), the petitioning union sought through a representation petition to hold an election and represent some buyers at a nuclear power plant.  The employer asserted the buyers were “managerial employees” outside of the NLRA’s jurisdiction.  The employer contended that the status of the buyers had been decided during a previous representation proceeding held in 2000.  In the 2000 case, the union had filed a unit clarification petition seeking to place the buyers in an existing collective bargaining unit.  The Region in that case ruled the buyers were managerial employees and did not add them to the existing unit.

In the present case, the Regional Director reviewed the 2000 decision and concluded that it was not binding because “the Board did not issue an official ruling on the issue of whether Buyers are Managerial employees. . .”

The employer appealed.

On appeal, a Board majority granted the appeal and remanded the case to the Regional Director.  In doing so the Board concluded the 2000 Regional Director’s decision was a “final order” which precluded relitigation of the status of buyers because neither party appealed it to the Board; the lack of appeal rendered the decision a final order. The Board came to this conclusion because the rules in effect 17 years ago precluded “parties from relitigating in any related subsequent unfair labor practice proceeding, any issue which was, or could have been raised in the representation proceeding.”  The Board stated that it saw “no reason why a regional director’s decision that could have preclusive effect in a related subsequent unfair labor practice proceeding would not also be potentially preclusive in a subsequent representation proceeding involving the same parties and the same issue, although the Board’s Rules and Regulations do not expressly contemplate that scenario.” (emphasis in original).

The Board held that the prior decision may have preclusive effect unless the party seeking to relitigation of the previously decided issue “satisfies its burden of presenting new factual circumstances that would vitiate the preclusive effect of the earlier ruling.”

The Board remanded the case to the Region to “fully consider whether changed circumstances warranted declining to give the 2000 decision preclusive effect.”

Dissent Takes Issue

Member Pearce disagreed with the majority, claiming that the Board’s decision impermissibly required the union to prove that circumstances had changed:

The employer has raised res judicata as an affirmative defense to the petition, relying on a unit clarification determination that is almost 17 years old.  As the party raising res judicata as an affirmative defense, the Employer bears the burden of proving that is defense is justified.

Impact of Decision

The Board’s decision will be significant for those parties, union or employer, who have previously litigated and won a particular issue in a representation case.  No matter how long ago the prior litigation occurred, the party wishing to enforce it can assert that the issue cannot be relitigated.  Once the prior decision has been raised, the burden will shift to the opposing party to demonstrate that circumstances have changed since the prior ruling warranting a fresh look at the issue.  It is a significant decision because it seems to not take into account the fact the Specialty Healthcare decision fundamentally changed how bargaining units are determined, in effect preserving these prior decisions as precedent.  Given the fact that the decisions that the Board and Regional Directors have issued since Specialty Healthcare have disregarded prior Board precedent, this decision is a notable exception.

There are two vacancies on the Board the new President has yet to fill.  It is entirely possible Specialty Healthcare, and a host of other decisions representing changes to longstanding Board law, will be reversed in the coming years.

Supreme Court Holds that Lafe Solomon Improperly Served as NLRB General Counsel

The Supreme Court has dealt another blow to the stability of the National Labor Relations Board. In a 6-2 decision, in, National Labor Relations Board v. SW General, Inc. DBA Southwest Ambulance, USSC Case No. 15-1251 (March 21, 2017),  the  Court held that the NLRB’s prior Acting General Counsel, Lafe Solomon, who served as acting GC while awaiting Senate confirmation that never came amidst political gridlock, improperly served in that role from January 2011 through the fall of 2013.  The Court concluded, based on its interpretation of the Federal Vacancies Reform Act (“FVRA”), a statute enacted in 1998, that someone who is nominated  serve in an acting office could not also serve as the permanent nominee.

The Supreme Court affirmed the DC Circuit Court’s ruling that resulted in an unfair labor practice complaint issued against the employer SW General, Inc. was void. As we noted in our previous discussion of this case, here, the ruling appears to be limited to those cases involving Solomon decisions where the issue was expressly raised by a party.  This ruling casts a significant shadow over the hundreds of actions undertaken by Solomon directly during his tenure that have been challenged by a party as lacking authority.  Such decisions may include, besides the issuance of complaint, the appointment of Regional Directors and the authorization of injunctive relief.  The Supreme Court remarked that any such actions are “voidable.”

Background

In June 2010, President Obama directed Lafe Solomon, a career NLRB employee, to serve as Acting General Counsel. In January 2011, the President nominated Solomon to serve in this role on a permanent basis.  The Senate never took action on this nomination, and President Obama ultimately withdrew Solomon’s name in favor of Richard Griffin, who was confirmed in October 2013; Griffin still holds the position.

In January 2013, an NLRB Regional Director, acting on Solomon’s behalf, issued an unfair labor practices complaint against SW General, Inc.  An Administrative Law Judge found that SW General had committed unfair labor practices.  SW General appealed the ruling, raising among other things, that the complaint itself was improper, asserting Acting General Counsel Solomon was not properly appointed.  The NLRB rejected the appeal and the employer petitioned the D.C. Circuit Court of Appeals for review, arguing that the Regional Director’s issuance of the Complaint was invalid because subsection (b)(1) of the FVRA precluded Solomon from performing the duties of the General Counsel after having been nominated to fill the position.  The D.C Circuit agreed with SW General and voided the complaint.  The NLRB appealed.

Holding

The Supreme Court affirmed the D.C. Circuit’s decision, finding that application of the statute to these circumstances was fairly “straightforward.” After analyzing the plain language of the statute, the Court concluded that subsection (b)(1) of the FVRA clearly prevents a person who has been nominated to fill a vacant office requiring Presidential appointment and Senate confirmation (referred to as a “PAS office”) from performing the duties of that office in an acting capacity.

The Court rejected the NLRB’s contention that government-issued “guidance” construing this provision to apply only to “first assistants” trumps the plain language of the statute, and the Court also dismissed the argument that Congress had acquiesced to this practice by failing to “speak up” to prior circumstances where permanent nominees had served as acting officers in violation of the FVRA.

Impact of the Decision

There is no way to tell how many of the hundreds of prosecutorial decisions made by Lafe Solomon were challenged as “voidable” but it is possible the number could be very high. Only time will tell the impact.  For example:

  • Some employers may have been found to have violated the NLRA based on a voidable complaint which they contested but did not appeal beyond the NLRB. Those decisions may be erased from an employer’s record.
  • Similarly, some employers may have had a bargaining unit certified by a Regional Director who was appointed by Solomon.  There may no longer be an obligation to bargain in such a unit.

Solomon worked and made decisions in his capacity as Acting General Counsel from January 2011 to October 2013. Actions taken by the Acting General Counsel during this period of time should be reviewed.

Employer’s Interview Of Employees During Defense Of Unfair Labor Practice Violates Act, NLRB Rules

We already know that when it comes to the NLRB there already are several actions an employer can take that violate the NLRA, even though such actions would be perfectly acceptable under any other employment law.  And sometimes the actions are deemed unlawful even when they are not directly related to the NLRA.  Thus, we’ve seen how telling employees to maintain confidentiality during an investigation violates the Act.  So does having handbook provisions that are typical and normal for any workplace.  We also see how social media postings by employees that are critical of the employer can spell trouble for employers punishing employees for such postings.

A recent decision by the NLRB reminds us that some violations unique to the NLRA are not new.  In Tschiggfrie Properties, Ltd., 365 NLRB No. 34 (February 13, 2017) the employer was confronted with an unfair labor practice complaint primarily concerning the termination of an employee that was set for trial. As is typical in any legal proceeding, leading up to trial the employer representative and attorney interviewed an employee witness twice as part of the defense.  The General Counsel of the NLRB alleged these interviews violated the Act because proper assurances had not been given.

During the trial, the employee witness was asked whether the employer and employer’s counsel posed any questions about the union.  The employee testified, “yeah, a few, but not a lot.”  The General Counsel did not elicit any specific information about what the employee was asked during trial preparation.

The Administrative Law Judge concluded no violation had occurred because based on the record “[i]t is not possible to judge the lawfulness of a question under [the NLRB’s standard for coercion] without knowing what the question was.”  In other words, there was no proof in the record that any question was posed that could possibly coerce an employee under the Act.

On appeal, the NLRB reversed, finding the employer’s interviews with the employee violated the Act.  The NLRB recited the law concerning interviewing employees in defense of unfair labor practice cases:

When an employer interviews an employee about protected activity in preparation for an unfair labor practice hearing, ‘the employer must communicate the purpose of the questioning, assure him that no reprisal will take place, and obtain his participation on a voluntary basis.’  Johnnie’s Poultry Co., 146 NLRB 770, 774-775 (1964). . .

The Board concluded that a violation had occurred because the employer  “questioned [the employee] about protected activity by asking him about the union campaign. . .”  This, of course, contradicts the record which did not support that any question regarding any employee’s protected activity had been posed.  Still, like so many other situations, the Board found a violation by incrementally stretching precedent to cover the situation despite a marked lack of proof.  It would appear now that absent proof the assurances were given then a violation will be found.

Of course, defending an unfair labor practice proceeding necessarily requires inquiry into matters that may involve protected activity and so it is always a good idea to give the Johnnie’s Poultry assurances.  Also,

  • Always get the assurances in writing.  In this case, the employee couldn’t remember what he had been told by the employer and employer’s attorney and having something in writing would resolve the issue.
  • Defense of an unfair labor practice is not the only proceeding where the assurances should be given.  It is the safe and prudent course of action to give the proper assurances when interviewing any union-represented employee as part of a workplace matter, whether it be a sexual harassment investigation or in preparation for an arbitration under a collective bargaining agreement.

Employer Did Not Violate Duty To Bargain Over Change To Christmas Gift Policy, NLRB Rules

What would the holiday season be without a Christmas gift case?  A perennial problem for labor relations personnel is whether the yearly Christmas turkey given to employees is something that an employer must bargain over before (bah humbug) discontinuing. See, e.g., Q-1 Motor Express, Inc., 323 NLRB 767, 775 (1997).

In a decision issued shortly before Christmas, the NLRB held that an employer’s change of an existing Christmas gift policy did not violate its duty to bargain because the employer had followed the procedure for changing the policy set forth in the collective bargaining agreement.  In  Howard Industries, Inc., 365 NLRB No. 4 (December 21, 2016), the employer, a unionized manufacturer of electronic transformers, had a “Christmas Gifts” policy that covered “employees and retired employees” whereby employees would be eligible for a “Christmas gift of a ham if the company deems so on a year to year basis.”  The employer always included in the definition of “employee” those who were out on medical leave or workers compensation as eligible to receive the Christmas ham.

The collective bargaining agreement of the parties contained what is commonly known as a zipper clause which stated:

The parties acknowledge that during the negotiations which resulted in this Agreement, each had an unlimited right to make demands and proposals with respect to any subject or matter not removed by law from the area of collective bargaining.  Except as provided below, they may therefore each voluntarily and unqualifiedly waive the right for the life of this Agreement to bargain collectively with respect to any matter referred to or covered in this Agreement or with respect to any subject or matter not specifically referred to or covered by this Agreement.

Such language has long been held to act as a bar to further negotiations (it “zips up” the agreement) if either party does not wish to talk about a matter.  This particular clause continued as follows:

However, if the Company wishes to change an existing policy, create a new policy, or modify job performance standards that affect the bargaining unit, advance written notice will be provided to the Union via email.  If the Union wishes to negotiate over the changes it will notify the Company in writing within ten (10) calendar days of the receipt of the notification.  If the Union does not serve written notification of a desire to negotiate over the policy or policy change, the Company may implement the change and the Union waives any arbitration or other legal remedies concerning the creation or modification of the policy.

The employer’s Human Resources manager sent an email to the union representative attaching a proposed “Christmas Gifts” policy which defined changed the definition of employees to “active employees” and would necessarily mean that employees on leave would not receive the Christmas ham.  The email incorrectly listed the date of the policy in effect.  The union did not respond or otherwise engage the employer and the employer implemented the new policy.  After employees who did not receive the Christmas gift complained to the union the union requested bargaining.  The employer refused citing the zipper clause. The union filed charges and the NLRB issued complaint.

The Administrative Law Judge noted a case concerning a change would “normally require an analysis of issues such as whether the employer made a unilateral change regarding a mandatory subject of bargaining, and if so, whether the union clearly and unmistakably waived its right to bargain.”  The ALJ stated such an analysis was unnecessary because, “the parties created and agreed to a specific procedure that applies when [the employer] wishes to change an existing policy. . .”  The NLRB General Counsel did not contend the waiver contained in the zipper clause was invalid.  Under these circumstances the ALJ ruled, “the issue in this case, then, is whether [employer’s decision] to implement its [new] gifts policy. . is protected by the collective bargaining agreement.  I agree with [the employer] that it is.”

Both the union and the General Counsel argued that the error in the employer’s email that incorrectly listed the date of the policy somehow excused the union from requesting bargaining.  The ALJ disagreed “that the incorrect date of the old policy invalidates [the employer’s] notice to the Union.  Even with the incorrect date of the old policy, the Union was still on notice under the procedures set forth in the collective-bargaining agreement.”  Indeed, the ALJ found that “[t]o the extent that the incorrect date of the old policy prompted questions, that should have provided the Union with even more reason to notify [the employer] that it wished to negotiate.”

A unanimous three member panel of the Board upheld the ALJ’s decision without comment.

One wonders why this case even made it to complaint.  The union failed to request bargaining within the agreed upon timeframe and then immediately filed charges when it did not get its way.  Arguably, the union violated its duty to bargain in good faith by filing Board charges despite the fact the language of the agreement said it waived “any legal remedies.”

This case is a good example of very clear contractual language setting forth the procedure for changing policy.  The employer followed the policy and the union didn’t, and despite the language of the zipper clause saying the union had waived all remedial rights by failing to respond to the email notice the General Counsel still pursued a case through trial and appeal.

This case is yet another example of how inconsistent the NLRB can be when it comes to evaluating waivers of bargaining.  The case demonstrates that even with crystal clear language regarding notice and opportunity to bargain, and the consequences for failing to respond, the NLRB may still insist that such language really doesn’t mean what it says.

NLRB Overturns Election Win For Employer That Failed To Timely Serve Voter List (Even Though Union Received List In Timely Fashion)

The NLRB is down to three members, the bare minimum required to conduct business, and so cases are being issued somewhat sporadically.

The so-called ambush election rules have received a lot attention over the last few years.  We recently discussed here a case where the NLRB found that a union had not timely filed a position statement on an issue as required by the new rules.  The NLRB held that the rules prohibited the receipt of the position statement but nonetheless found that the Regional Director had discretion to consider the issue,–to the benefit of the union that failed to follow the rules.

In a recent case the NLRB found that an employer’s failure to timely serve a voter eligibility list pursuant to the rules required the overturning of an election where the union lost,–even though the union had received the list in a timely fashion.

In URS Federal Services, Inc., 365 NLRB No. 1 (December 8, 2016), the employer and union entered into a stipulated election agreement to hold a representation election at the employer.  The election agreement required the employer to submit a voter eligibility list within two business days of approval of the agreement.  The election agreement was approved on a Thursday, so the list would be due on the following Monday.  The employer filed the list with the Region on Saturday, two days before it was due.  On Monday, the Region forwarded the list to the union, which was approximately 8 days before the election.  The employer did not serve the union with the list.

The union lost the election (although we are not told by how much), and it filed an objection to the election based on the fact the employer had not served the list on the union.  The Regional Director did not find the employer’s failure to serve the list problematic because under the election agreement the Region was required to forward the list to the union, which it did. So the union had the information required under the rules in a timely fashion.

The union appealed.  A two member majority of the NLRB (Miscimarra dissenting) found that the new election rules required them to overturn the election, and so the majority reversed the Regional Director and sent the case back for a new election.

The Board reviewed the election rules:

Section 102.62(d) of the Board’s Rules and Regulations, as amended, expressly requires that the employer in a representation case ‘shall provide to the regional director and the parties . .a list of the full names…[and other information] of all eligible voters. . .Finally, Section 102.62(d) provides that an employer’s failure to file or serve the list ‘shall be grounds for setting aside the election whenever proper and timely objections are filed.’ Id., emphasis added.

The Board held the rules were amended in this fashion because “the Board deliberately sought to eliminate the prior two-step procedure –under which the employer would file the list with the regional director, who would then forward the list to the other parties–because it had caused delay and unnecessary litigation.”

The Board distinguished its prior ruling in Brunswick Bowling Products LLC, 364 NLRB No. 96 (August 25, 2016), where it held that the rules prohibited the Regional Director from accepting an untimely filed position statement but could nevertheless consider the issue because the rule in question there, 102.66(b) expressly granted such discretion.

The Regional Director had ruled that the union could not be prejudiced because it had the information required by the rules in a timely fashion, meaning there was no impact on the election.   The Board majority stated, “we need not address the Acting Regional Director’s reasoning on this account…The Board in 102.62(d) has articulated a prophylactic rule concerning voter list service that obviates the need for Regional Directors to delve into a showing of prejudice in order for elections to be set aside.”  In other words, the rule is so bright line that it requires the Regional Director to ignore whether there is any possibility the union was actually prejudiced in conducting the election.  There was no possibility of prejudice to the union in this case.

Member Miscimarra dissented citing numerous reasons why the Board majority was wrong.  In particular, Miscimarra pointed out:

[I]n this case, the [union] received the voter list  on time, and the only deviation from the Election Rule was that the list was transmitted to the Petitioner by the Region rather than the Employer.

Member Miscimarra interpreted Brunswick differently than the majority, stating:

With all due respect to the majority, their attempt to draw a distinction between these two cases does not withstand scrutiny.  In Brunswick Bowling, the Board concluded that the Regional Director properly exercised her discretion to find merit in a contract-bar defense, even thought the union’s Statement of Position was not timely served. Notwithstanding this defect, the Regional Director in Brunswick Bowling concluded–and the Board unanimously agreed–that noncompliance with the service requirement should not prevent the Board from appropriately addressing an outcome determinative election issue.

For rules that were passed with the intention of eliminating litigation, it seems this goal has not been met.  The Board’s rules require the party filing an unfair labor practice charge to serve the charge on the opposing party, and this almost never happens because the Board serves the charge during the investigation.  No party ever claims the charge cannot move forward.

The requirement that the union have access to the voter eligibility list in a timely fashion has been the law for many years prior to the passage of the ambush election rules.  The union received the same exact list from the Region it should have also received from the employer, but didn’t.  It is troubling that such a technical issue as whether a document was served, which under these circumstances could not have had any impact on the election, could result in granting the losing party (a rule which could only apply to a union loss) a brand new election.  This case reminds one of the Board’s rule of overturning elections due to the presence of a handbook violation, another instance where not a single employee could have been impacted by the issue.

Micro-Units under the Microscope: The Second and Fifth Circuit Courts Consider Specialty Healthcare and Its Misapplication

Last week, the U.S. Court of Appeals for the Second Circuit joined the Third, Fourth, Fifth, Sixth, Seventh, and Eighth Circuits in upholding the Board’s Specialty Healthcare standard for determining appropriate bargaining units under the National Labor Relations Act, although with a very skeptical eye on how it applied.  Constellation Brands, U.S. Operations, Inc. v. NLRB, No. 15-2442, 2016 U.S. App. LEXIS 20768 (2d Cir. Nov. 21, 2016).  Though the court found that Specialty Healthcare was consistent with the Act, the court further held that the Board misapplied the test because the Regional Director failed to analyze why the excluded employees had “meaningfully distinct interests” from members of the petitioned‐for unit to warrant the establishment of a separate unit.  This comes merely three days after the Fifth Circuit denied a petition for rehearing en banc in Macy’s, Inc. v. NLRB, No. 15-60022, 2016 U.S. App. LEXIS 20682 (5th Cir. Nov. 18, 2016), where six dissenting judges sharply criticized a “micro” unit’s certification, similarly questioning the “meaningfully distinct interests” analysis under the Specialty Healthcare framework.

In Specialty Healthcare, 357 NLRB No. 83 (August 26, 2011), a divided National Labor Relations Board held that it will find a petitioned-for unit appropriate where the unit is made up of an identifiable group of employees who share a community of interest with one another.  No other employees could be added to the petitioned-for unit unless they shared an overwhelming community of interest with employees already included by the union.  We’ve previously discussed this topic here, here, and here.

In Constellation Brands, the Board’s Regional Director determined that a subset of a cellar operations department within a completely integrated production facility constituted an appropriate bargaining unit.  The Regional Director rejected the employer-winery’s argument that the remaining employees within cellar operations should also be included in the unit.  He found “that the employees in that unit are a readily identifiable group, such that there is a rational basis for grouping them together in a bargaining unit.”  In a footnote order, the Board declined to review the Regional Director’s decision.

On appeal, the Second Circuit upheld the Specialty Healthcare standard, but remanded the case to the Board.  The court held that Specialty Healthcare demands more than a mere recitation and repetition of the standard.  Rather, “the Board must analyze . . .  the facts presented to: (a) identify shared interests among members of the petitioned‐for unit, and (b) explain why excluded employees have ‘meaningfully distinct interests’ in the context of collective bargaining that outweigh similarities with unit members.”  The court further clarified that this showing must be made by the union, and not the employer.

The Second Circuit is the latest circuit court to uphold Specialty Healthcare.  Back on June 2nd, 2016, the Fifth Circuit upheld Specialty Healthcare and found that Macy’s failed to establish that a bargaining unit, consisting solely of cosmetics and fragrances employees at one of its stores, was clearly not appropriate.  Macy’s petitioned for a rehearing en banc, arguing that it could be compelled to bargain with thousands of “micro” units – comprised of employees working in a specific sales department in a single store.  On November 18th, 2016, the Fifth Circuit, in a split vote, denied further review.  In the process, six judges dissented in a sharply-worded opinion penned by Judge E. Grady Jolly.

The dissenting judges noted that the Board’s community-of-interests analysis focused solely on the similarities of the employees in the petitioned-for unit, while failing to consider the similarities and differences of excluded employees.  By the same logic, “[t]hree bowtie salesmen would be an appropriate bargaining unit if they sold bowties at a separate counter from other merchandise.”  This approach hardly promotes labor peace and stability, the dissent observed.  In analyzing the community of interest factors, “the NLRB must compare and contrast the employees in the group with each other and with employees outside of the group.” Because the Board failed to consider any of the similarities between included and excluded employees, only identified one distinction between them, and did not explain how that distinction was meaningful, its decision was an abuse of discretion.

Significantly, both the Second Circuit and the dissenting judges of the Fifth Circuit noted the drawbacks that can result from the incorrect application of the Specialty Healthcare framework.  The Second Circuit noted amici’s concerns of the proliferation of “micro” units and their impact on employer’s operations.  The Fifth Circuit dissenters explained that as “micro” units flourish, there could be a dozen micro-units within an employer’s workforce, with disputes and “mini-strikes occurring continually over the working year.”  While Specialty Healthcare has been upheld by every circuit court to consider it, various bills have been introduced in Congress to repeal the decision and eliminate “micro” units.  We will continue to monitor the developments given the recent changes in political administration.

 

 

Federal Appeals Court Rules Counties May Enact Right To Work Laws

The term “right to work state” is fairly well known.  After all, 25 of the United States are “right to work states,” states which have enacted laws prohibiting compulsory unionism as part of a collective bargaining agreement.  In a right to work state, the law prohibits the parties to a collective bargaining agreement from including a “union security clause,” which is a provision requiring bargaining unit employees to become and remain members of the union (and pay dues) as a condition of continued employment.  To the extent such provisions exist in right to work states, they are rendered null and void by state law.  Although employees working in right to work states are not required to join the union many voluntarily decide to do so (consider this: Nevada is a right to work state and virtually every employee working on the casino strip is a union member).

But, what if the state decides not to enact right to work legislation but one of its counties does?  Is a county ordinance that effectively makes it a “right to work county” entitled to the same deference as a state law?

According to one court of appeals, the answer to this question is yes.  In a recent decision UAW v. Hardin County, Kentucky et al., No. 16-5246 (6th Cir. November 18, 2016), the Sixth Circuit Court of Appeals ruled that county right to work laws do not conflict with federal labor law and may be enforced.

Kentucky is a non-right to work state.  There have been several efforts over the years by the state legislature to enact a right to work law, but those efforts failed.  In 2015, Hardin County, Kentucky enacted a right to work ordinance.  Shortly thereafter, eleven other Kentucky counties adopted ordinances banning compulsory unionism.

The ordinances, which apply to private sector employees, contain similar provisions:

no person covered by the National Labor Relations Act shall be required as a condition of employment or continuation of employment:

(B) to become or remain a member of a labor organization:
(C) to pay any dues, fees, assessments or other charges of any kind or amount to a labor organization; [or]
(D) to pay to any charity or other third party, in lieu of such payments, any amount equivalent to or a pro-rata portion of dues, fees, assessments, or other charges regularly required of members of a labor organization[.]

[the ordinance states such agreements to be] unlawful, null and void and of no legal effect.

Plaintiff, a coalition of  labor organizations, filed suit in federal district court alleging that these ordinances were preempted by federal labor law and could not be enforced.  Specifically, the plaintiff cited to Section 14(b) of the National Labor Relations Act [29 U.S.C. §164(b)] which it asserted did not grant authority to counties to enact right to work legislation but only to states.   Section 14(b) provides:

Nothing in this Act shall be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition in any State or Territory in which execution or application is prohibited by State or Territorial law.

County Right To Work Ordinances Are Authorized By Section 14(b) And Are Not Preempted 

The federal district court struck down Hardin County’s ordinance ruling that the plain language of Section 14(b) did not entitle it to exception because it was not a “State or Territorial law”:

[I]t makes little sense to read ‘State or Territorial law’ as encompassing local law in the light of the statute’s previous reference to ‘any State or Territory’–if ‘State or Territorial law’ includes the laws of political subdivisions then the statute must be read ‘in any State or Territory [or political subdivision thereof]’ to avoid assigning two different meanings to ‘State’ in the same sentence.   This is not a logical reading.

On appeal, the Court of Appeals disagreed, holding that the court’s interpretation was too narrow a reading because counties are essentially creatures of each State.  The Court held:

[I]f the first reference to ‘State’ in §14(b) (referring to a geographical jurisdiction) includes political subdivisions of the state (which it plainly must, as political subdivisions are components of the State within the State, that exercise governmental power of the State), then the second reference to State must also be read to include political subdivisions, thereby necessarily excepting the law of political subdivisions from preemption as well.

Having concluded that counties would fall within the Section 14(b) exception, the court then reviewed Supreme Court precedent and concluded that when a federal statute allows for “State” action it allows for action by political subdivisions such as counties.  Wisconsin Public Intervenor v. Mortier, 501 U.S. 597, 607-608 (1991) (“The principle is well settled that local governmental units are created as convenient agencies for exercising such of the governmental powers of the State as maybe entrusted to them. . .in its absolute discretion”); City of Columbus v. Ours Garage and Wrecker Service, 536 U.S. 424, 429 (2002) (“Absent a clear statement to the contrary, Congress’ reference to the ‘regulatory authority of a State’ should be read to preserve, not preempt the traditional prerogative of the States to delegate their authority to their constituent parts”).

Finally, the court considered whether the ordinance was preempted by virtue of pervasive federal regulation as set forth in the Supreme Court’s decision in San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959).  The court held that the question of whether the county’s right to work ordinance is preempted is dependent upon the answer to whether Section 14(b)’s “explicit exception of state law from preemption encompasses laws of the political subdivisions of the State.”  Because the court concluded counties fell within Section 14(b)’s exception there could be no preemption.

County Ordinance’s Hiring Hall and Checkoff Provisions  Preempted By Federal Law

Two other provisions of the county’s ordinance prohibited to other collective bargaining agreement provisions:  checkoff clauses (where employers agree to deduct union dues from employee paychecks) and hiring hall provisions (which require employers to hire only from a union hiring hall).  The court concluded both of these contractual provisions were heavily regulated by the NLRA and were not subject to an exception (as was the right to work provision).  Therefore, the ordinance’s attempt to regulate these matters was preempted by federal law and essentially nullified.

Conclusion

In the last few years it has been quite common for cities and counties to diverge from state labor and employment laws and this is another manifestation of the phenomenon.  The Sixth Circuit’s decision surely will not be the last word in this area, although it might encourage other counties (and perhaps some cities as well) to consider adopting right to work laws.    This is an area of the law that will be worth watching as it evolves.

Permanent Pause to Persuader Rule: Texas Court Issues Permanent Nationwide Injunction

On November 16, 2016, in National Federation of Independent Business v. Perez, No. 5:16-cv-00066, a federal judge in Texas issued a permanent injunction  preventing the Department of Labor (the “DOL”) from enforcing its new interpretation of the Labor-Management Disclosure Act’s “Persuader Rule.”  The new DOL interpretation would have required far more expansive public disclosure by law firms and others regarding work they perform for employers in conjunction with certain labor relations activities, including union organizing and collective bargaining.

By granting summary judgment to the plaintiffs, which include ten states and various business groups challenging the new Rule, Judge Sam R. Cummings converted the nationwide preliminary injunction he granted in June into a permanent injunction. The preliminary injunction blocked the implementation of the new Rule, which was finalized by the DOL in March and scheduled to go into effect on July 1.

The DOL’s new Rule attempted to narrow the so-called “advice exemption” by changing the long-standing definitions of reportable “persuader activity” and non-reportable “advice.” The previous iteration of the Rule only required such reporting when an advisor made direct contact with an employer’s employees, regardless of the persuasive purpose of the advice.  Under the now permanently-enjoined rule, any legal or other advice that is designed to “indirectly persuade” employees regarding union organizing or their rights to engage in collective bargaining would have been publicly reportable by both employers and their legal advisors.  Moreover, in accordance with the DOL’s interpretation, many run-of-the-mill employment-related undertakings, like the modification of employee handbooks, under certain circumstances, could have been considered “persuader activity.”

Shortly after the new Rule’s publication, several states, associations, and other entities filed lawsuits against the DOL, seeking to enjoin the Rule on a variety of legal theories, particularly that the new Rule exceeds the scope of the DOL’s authority pursuant to the Labor-Management Disclosure Act and conflicts with existing state rules governing the professional conduct of lawyers. These lawsuits were filed in the District of Minnesota, the Eastern District of Arkansas, and the Northern District of Texas.

On June 27, 2016, in Texas, Judge Cummings issued a nationwide preliminary injunction, enjoining the implementation of the DOL’s new Rule days before it was scheduled to take effect. Judge Cummings explained that the Rule is defective to its core because it, among other things, eliminates the Labor-Management Disclosure Act’s advice exemption and, therefore, is arbitrary and capricious and constitutes an abuse of discretion.  Plaintiffs separately moved for summary judgment in August and September, seeking a nationwide permanent injunction.

In the latest ruling, Judge Cummings granted those summary judgment motions and converted the preliminary injunction preventing the implementation of the new Rule into a permanent injunction with nationwide effect, noting that the new Rule should be held unlawful and set aside. Earlier in the week, Judge Cummings issued a show cause order asking the parties for additional briefing over the issue of whether the government owes attorneys’ fees and costs.

The outgoing Obama administration DOL may appeal the ruling, like it also appealed the ruling issuing the nationwide preliminary injunction. However, the changing of presidential administrations in January makes it extremely unlikely that the new Persuader Rule will be implemented in its current form, regardless of any future steps in the litigation.

NLRB Majority Stuns Nation By Ruling Employer Has Management Right, Chairman Dissents

In another example of the inconsistency of the current state of Board law, a 2-1 majority of the NLRB ruled that an employer not only had a management right but it wasn’t necessary that this right be expressly set forth in the parties’ contract.  This is certainly odd because the NLRB went out of its way during the Summer to declare a pretty specific management rights clause was insufficient.  What makes the recent decision an even greater oddity is that the Board majority did not include Chairman Pearce, who dissented to the finding.

In Weavexx, LLC, 364 NLRB No. 141 (November 2, 2016) the Board was confronted with a situation where the parent of the employer was trying to standardize payroll practices across its subsidiaries by insisting on bi-weekly payroll.  The employer, Weavexx, a manufacturer of felt used in paper products, had a unionized facility in Mississippi.  Weavexx had paid its employees on a weekly basis since 2002.  Heeding the call of the parent, the employer informed the employees that it would be moving to a bi-weekly payroll, changing the practice of payment from every Thursday to every other Friday.  There is no dispute the employer did not give notice to the union nor did it offer to bargain over the change.

The union filed grievances over the change.  The employer denied the grievances, citing its management rights clause, which stated:

The Employer retains all authority not specifically abridged, delegated or modified by the Agreement, including, but not limited to, the right to make and enforce work and safety rules, and the right to subcontract work so long as the Employer is motivated to do so because of economic reasons and not to displace regular employees. . .During the term of this agreement, the Company will not implement new work rules or policies relating to terms and conditions of employment without notice to the Union and the opportunity for the Union to raise concerns and to grieve any change it deems unreasonable.

The union pursued the grievances to arbitration but also filed charges with the NLRB alleging a refusal to bargain.  The Regional Director deferred the charges pending the outcome of the arbitration.

The arbitrator denied the grievance.  Although the arbitrator cited to the management rights clause, ultimately he decided that the change to a bi-weekly pay period was a proper use of “management discretion” and should not be seen as a violation of “a binding past practice.”  Upon reading the arbitrator’s decision, the Regional Director revoked the deferral and sent the case to trial concluding that the arbitrator’s decision was “repugnant to the Act.”

After an unfair labor practice hearing, the Administrative Law Judge ruled that the arbitrator did not properly consider the issues and the employer violated its duty to bargain with the union by not bargaining over the pay practices in violation of Section 8(a)(5).  The employer appealed.

In a 2-1 decision (Miscimarra and McFerran), reversed the ALJ’s decision and found no violation of the Act.  The Board majority, citing  Spielberg Mfg. Co., 112 NLRB 1080, 1082 (1955) noted that the Board will defer to an arbitrator’s award “when the proceedings appear to have been fair and regular, all parties have agreed to be bound, and the decision of the arbitrator is not clearly repugnant to the purposes and policies of the Act.”  The Board held that it had deferred to an arbitrator’s decision “where a reasonable interpretation of the decision was the employer was privileged to implement unilateral changes based on the management-rights clause contained in the parties’ collective bargaining agreement.”  The Board relied on its prior decision in Smurfit-Stone Container Corp., 344 NLRB 658, 659-661 (2005) where the Board held deferral to an arbitration award was appropriate because

(1) the [employer] argued to the arbitrator that the management-rights clause privileged it to unilaterally implement the new attendance control policy; (2) the arbitrator referred to the [employer’s] argument; (3) the arbitrator prominently quoted the management-rights clause; and (4) the arbitrator immediately followed his quotation of the management-rights clause with the assertion that the [employer] had the right to make rules.

In running through these factors the Board majority noted the employer argued the management-rights clause privileged its action, and the arbitrator quoted the management rights clause in his decision.  Finally, “the arbitrator ultimately concluded that the ‘Company’s use of managerial discretion was proper and should not be seen as a violation of a binding past practice.'”

The Board majority acknowledged that the arbitrator discussed the employer’s “noncontractual inherent management prerogatives” but concluded that the “arbitrator’s decision is not dependent on that theory but contains sufficient textual evidence to establish that it is susceptible to the interpretation that [the arbitrator] relied on the management-rights clause.”  The Board majority thus concluded the arbitrator’s decision was not repugnant to the Act and dismissed the complaint.

Chairman Pearce dissented, writing that he would find the arbitrator’s decision was “inappropriate” because:

The arbitrator failed to make any finding whatsoever on the key contractual issue of whether the management-rights clause in a collective-bargaining agreement privileged the [employer’s] unilateral changes.  To the contrary, the arbitrator explicitly framed his inquiry around past practice and, as found by the administrative law judge, concentrated his analysis on the extra-contractual considerations pertinent to that inquiry.

In other words, the Chairman asserted there was no evidence the text of the management-rights clause relied upon by the employer did not reference the changes to the payroll practices.  Because the parties’ agreed upon management rights did not authorize the change, the arbitrator’s decision was not defensible.

It would be very difficult to square this decision with other recent decisions of the Board. This is especially so because the make-up of the Board majority included Member Miscimarra, who up until now pretty much exclusively found himself in the dissent.

Management-rights makes strange bedfellows.  While it is pure speculation, it does appear that the Board majority was swayed by the fact that the parties had submitted the matter to binding arbitration and that the arbitrator had considered the central defense of the employer that it was privileged by management-rights to make the unilateral change.  Still, the fact that the management-rights clause was silent on the issue of payroll practices certainly makes this decision hard to fit within the recent pattern of management-rights related cases.

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