Labor Relations Update

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.


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.

Employer Claims Of Unprofitability And Competitive Disadvantage Enough To Trigger Audit Of Financials By Union, NLRB Majority Concludes

The end of another NLRB fiscal year is upon us.  Today, September 30, marks the last date of the fiscal year.  We can expect to see a number of decisions issue from the Board, and many determinations made at the regional level, as the agency attempts to pump up its case processing statistics.  We will of course report any interesting developments.

In the meantime, in early August the NLRB issued an interesting case which seems to extend the existing law about what employer negotiators say in negotiations that triggers an obligation on the employer to “open its financial books” to the union upon request to prove its stated justification.

Most people who have familiarity with labor negotiations know that claiming an “inability to pay” triggers an obligation to prove the claim by allowing the union access to financial records.  The line of demarcation used to be that a claim of inability to pay requires justification while a claim of “competitive disadvantage” does not.

But what happens if the employer affirmatively asserts it is not claiming an inability to pay but states that it is unprofitable and not competitive?  According to a majority of the NLRB, such claims may be sufficient to give rise to an obligation to allow a union to conduct a financial audit of the employer’s books.

In Wayron, LLC, 364 NLRB No. 60 (August 2, 2016) the employer, a metal fabricator, was negotiating for a new contract with three trade unions.  The employer sought deep concessions from the unions, noting that it was not winning as many bids for jobs as it used because of competition with non-union firms.  In fact the employer had laid off most of its employees due to lack of work.

In discussing the need for concessions, the employer made the following statements.

  • the company “wasn’t in jeopardy . . [but] that what we were not going to be able to provide was jobs” if the company wasn’t competitive.
  • That the company “had come to an agreement with the bank and the landlord” and “it was important for [the unions] to get on board. . .so that they could go to the bank and say, hey, this is where we’re at.”
  • A union representative acknowledged in testimony that the company wasn’t “crying poverty. . .They can’t compete with that [collective bargaining agreement]. I don’t believe they ever said they couldn’t afford the contract.”

The unions, for their part, stated that they were unwilling to take reductions. The parties bargained for a period of time and then met with a mediator.  The mediator ultimately concluded that the parties were so far apart there was nothing she could do to assist the situation.

The unions demanded an audit  by a union-selected auditor “to substantiate [the employer’s] claim of inability to pay.”  The employer rejected the request stating that it had not claimed an inability to pay only that it was “unable to remain competitive.”

The employer ultimately terminated the employees and implemented its final offer, actions which were handled in through an injunction proceeding.

The issue regarding the employer’s refusal to allow the audit was tried in an unfair labor practice proceeding.  The Administrative Law Judge dismissed the allegation noting that the employer never claimed that it could not pay.  Moreover, the ALJ noted that the unions did not request information to evaluate the claim of non-competitiveness by asking for examples of which bids had not been awarded.

On appeal, the Board majority reversed the ALJ and found the employer violated its duty to bargain by not allowing an audit of its financial records.  The two member majority sifted through the claims of the parties during negotiations and concluded that although the employer never specifically claimed inability to pay an obligation to provide an audit arose because

[The unions] would reasonably have understood that [the employer] was asserting its inability to continue compensating employees at the expiring contract’s rates, let alone at the increased wages and benefits sought by the Unions [ ] we therefore conclude the Unions were within their rights to demand an audit of the [employer’s] financial records in light of those statements.

This is a fairly novel conclusion, shifting the analysis from what was actually stated in negotiations to the much more subjective basis of how the union interpreted statements that do not on their face amount to a claim of inability to pay.

The Board, citing Nielsen Lithographing Co., 305 NLRB 697 (1991) aff’d. sub nom. GCIU Local 508 v. NLRB 977 F.2d 1168 (7th Cir. 1992) noted that “bargaining claims of an inability to pay differ from bargaining claims of competitive disadvantage:  the former require the party making the claim to provide substantiating financial information if requested, while the latter do not.”

The Board stated this basic standard was not one of “magic words” that an employer utter “but only that its statements and actions be specific enough to convey an inability to pay.”  Stella D’oro Biscuit Co, 355 NLRB 769, 770 (2010), enf. denied sub nom. SDBC Holdings, Inc. v. NLRB, 711 F.3d 281 (2nd Cir. 2013).  Applying this analysis, the Board majority concluded the employer “directly connected [the employer’s] bargaining demand for concessions with its need to demonstrate to the bank that it had reduced expenses and increased income.”  The Board majority explained:

It is, of course, an entirely unsurprising proposition that competitive disadvantage, if continued at length, may eventually lead to inability to pay — especially when the business is losing money and lacks financial resources to cover its losses.  Here we find the facts and circumstances establish that [the employer] despite its surface characterizations to the contrary, was asserting that it could not pay, during the life of the contract  being negotiated, the existing (or higher) levels of compensation that the Union sought.

Unsurprising perhaps to the Board majority; this notion certainly must have been surprising to the employer representatives who followed the then existing law to carefully present their proposals.  The fact is this represents a departure from the standard that is, like so many other areas of the NLRA these days, so murky as to be undefinable.  The NLRB majority cited two factors for its decision:  the fact the employer claimed it was not profitable and that the employer stated it needed further financing.

Member Miscimarra dissented in a lengthy opinion where he took a very detailed look at the record and would have found the evidence did not support a violation.  Member Miscimarra quoted at length the credited testimony of the union representatives noting, contrary to the majority, that “the record demonstrates the Unions understood that [the employer] was claiming competitive advantage, not inability to pay.”  The dissent also noted the judge had discredited one union representative who testified that the employer stated in bargaining that it would go out of business.

The dissent also cited to distinguishing characteristics in the cases cited by the majority including Lakeland Bus Lines, 335 NLRB 322 (2001) where the Board concluded an employer who was claiming it was trying to become profitable triggered an obligation to provide information, a decision which was denied enforcement by the court of appeals on the ground the Board had not followed its own precedent.  Lakeland Bus Lines Inc. v. NLRB, 347 F.3d 955, 963 (D.C. Cir. 2003)

The upshot of all of this is that employers seeking concessions must be much more vigilant when presenting the reasons for the proposed cuts:  or risk triggering obligation to open itself to an audit of its financial records.  This new frontier appears to have moved beyond the clear cut “inability to pay” statement to claims of unprofitability tied to some urgency.


Split D.C. Circuit Panel Upholds NLRB: DirecTV Violated NLRA By Terminating Technicians For Statements Made During A News Interview

In a 2-1 ruling in DirecTV Inc. v. National Labor Relations Board, the U.S. Court of Appeals for the D.C. Circuit affirmed the NLRB’s ruling that DirecTV must reinstate technicians who were terminated for complaining about a company pay policy during a television interview, finding that the employees’ conduct constituted protected, concerted activity and was not “so disloyal, disparaging and malicious” as to lose protection of the NLRA.


In early 2006, DirecTV informed its installation contractors (whom DirecTV hires to install satellite television receivers in subscribers’ homes) that it wanted each of its television receivers to be connected to a working telephone landline in customers’ homes, which would offer additional options for the customers and allow DirecTV to track customers’ viewing habits to help guide its programming decisions. DirecTV informed MasTec Advanced Technologies, one of its installation contractors, that it would begin charging MasTec $5 for each receiver installed without a phone line connection.  MasTec in turn instituted a new pay policy under which technicians would be paid $2 less for each receiver they installed, but would receive an additional $3.35 if they connected the receiver to a phone line.  In addition, technicians who failed to connect receivers to phone lines more than half the time in a 30-day period would be “back-charged” $5 for each unconnected receiver.

MasTec technicians immediately began to express their displeasure over the new policy. In response, DirecTV and MasTec provided advice to the technicians on how they could connect more receivers.  Some of the advice either involved standard sales techniques or was “plainly not meant to be taken literally,” for example, a MasTec manager’s comment that technicians should tell customers that their DirecTV system would “blow up” without a phone connection.  The technicians “continued to voice their concerns and frustration,” but the pay policy remained in place.  A group of MasTec technicians then contacted a local news station, which agreed to air a story.  The technicians appeared at the news station in DirecTV vans and wearing their DirecTV uniforms.  They proceeded to discuss the pay policy and the “advice” that was provided to them about getting customers to connect their receivers to phone lines, with one of the technicians stating: “Tell the customer whatever you have to tell them.  Tell them if these phone lines are not connected the receiver will blow up.  We’ve been told to say that.  Whatever it takes to get that phone line into that receiver.”  After the segment aired, DirecTV instructed MasTec to terminate the technicians who appeared in the broadcast.

ALJ and Board Decisions

An unfair labor practice was filed against MasTec and DirecTV and the ALJ initially ruled in favor of the companies, finding that while the technicians’ television appeal related to an ongoing labor dispute (as necessary for their conduct to qualify as protected concerted activity under the NLRA), their actions nevertheless fell outside of the Act’s protections because they were “so disloyal, disparaging and malicious to be unprotected.”

The matter was appealed to the Board, which reversed the ALJ’s decision. The Board stated that, under the two-pronged test first set out in American Golf Corp., 330 NLRB 1238 (2000) (Mountain Shadows Golf), “employee communications to third parties in an effort to obtain their support are protected where: (i) the communication indicates it is related to an ongoing dispute and (ii) it is not so disloyal, reckless or maliciously untrue as to lose the Act’s protection.”

The Board found that the ALJ “clearly erred” with regard to the second prong of the test, as “almost all of the statements [made by the technicians during the broadcast] were truthful representations of what the companies told them to do,” and any “arguable departures from the truth were no more than good-faith misstatements or incomplete statements, not malicious falsehoods.” The Board further found, with regard to whether the statements amounted to “unprotected disloyalty or reckless disparagement,” that it “will not find a public statement unprotected unless it is flagrantly disloyal, wholly incommensurate with any grievances which the employees might have” and that the technicians’ statements did not meet that standard.

Circuit Court Decision

The D.C. Circuit affirmed the NLRB’s decision, finding that “the Board acted within its discretion” and did not reach a conclusion so unsupported by substantial evidence as to warrant a reversal.

Citing the Mountain Shadows Golf test, the court found that the “first prong of the test—whether ‘the communication indicates it is related to an ongoing dispute between the employees and the employers’—focuses on whether it would be apparent to the target audience that the communication arises out of an ongoing labor dispute.”  Here, stated the court, “there is no dispute” that the technicians’ statements in the interview segment satisfied this prong, and noted that the companies did not challenge the Board’s finding “that the employee communications here were clearly related to their pay dispute.”

As to the second prong of the test—whether the technicians’ third-party appeal communications were “so disloyal, reckless or maliciously untrue as to lose the Act’s protection” —the court first rejected the dissent’s argument that “the NLRA doesn’t immunize disloyal behavior.” Rather, stated the court, the issue is “not of whether the employees’ third-party appeal was disloyal, but instead of whether it exhibited ‘such detrimental disloyalty as to provide cause for dismissal,’” quoting the standard articulated by the Supreme Court in NLRB v. Local Union No. 1229, Int’l Bhd. of Elec. Workers, 346 U.S. 464 (1953) (Jefferson Standard).

In concluding that the Jefferson Standard test was not met here, the circuit court found that the Board had substantial evidence that the technicians’ statements were not flagrantly disloyal or maliciously untruthful.  The court cited the fact that the technicians approached the television station “only after repeated unsuccessful attempts to resolve” their dispute through discussions with MasTec.  The court also noted that although the newscast “shed unwelcome light” on the pay practices and “advice” in question, the segment “directly related to the technicians’ grievance about what they considered to be an unfair pay policy that they believed forced them to mislead customers” about the need for a phone connection.

Thus, the court affirmed the Board’s conclusion that the technicians’ statements were not “wholly incommensurate with their grievances.” The court also affirmed the Board’s finding that “while the technicians might have been aware that the newscast could lead some consumers to cancel their service, there was no evidence the technicians specifically intended to inflict such harm on the companies in their statements in the segment.”

Rejecting the companies’ argument that “it was maliciously untruthful for the technicians to say that they would lose money if they did not lie,” the court noted that the technicians “had little, if any, control over the editing of their interview or the content of the final segment” and agreed with the Board that the technicians’ statements “fairly reflected their personal experiences under the new pay scheme.”

In a dissent, U.S. Circuit Judge Janice Rogers Brown stated that this was “not a close case” and found that the technicians’ complaints about being instructed to lie were “malicious and untrue” and “crossed a line—from labor dispute to public disparagement.” Judge Brown also disagreed with the majority’s conclusion that there was no evidence that the technicians did not intend to inflict harm on the companies, stating: “Had the MasTec technicians honestly and fairly discussed their labor dispute with the news station, their aggressive tactics could be sustained as a proper appeal to outside parties. . . . But these technicians chose instead to feed the station a false, disparaging story they knew would trigger public outrage.”

This case reinforces the need for employers to carefully evaluate the risks of taking action against employees who make statements, particularly as a group, to outside parties about workplace grievances. As we have noted, the Board itself is hardly consistent in this area.

Labor Day Wouldn’t Be Labor Day Without New NLRB Decisions

The onset of Labor Day and the end of the NLRB fiscal year (September 30) one can count on seeing a number of decisions issued.  This year is no different, and perhaps more are being issued during these last few days because Member Hirozawa’s term expired on Saturday August 27.

Here is a summary of a couple of decisions of note issued by the NLRB in the last few days.

Pre-Discipline Bargaining In Newly Represented Units Required (Again)

Over three years ago, a constitutionally infirm panel issued a decision requiring employers to bargain over discipline and termination in a newly organized workplace if the employer’s discipline system was discretionary.  We discussed that development in a past post.  That case ultimately was voided by the Supreme Court’s decision in Noel Canning.  

The NLRB in a new case Total Security Management Illinois 1, LLC, 364 NLRB No. 106 (August 26, 2016) returned to the invalidated standard, which applies to newly organized units before a collective bargaining agreement is negotiated (after which, all discipline/discharge would be submitted to a contractual grievance procedure).  The Board stated the new bargaining obligation as follows:

Under today’s decision, after the employer has preliminarily decided (with or without an investigatory interview) to impose serious discipline, it must provide the union with notice and an opportunity to bargain over the discretionary aspects of its decision before proceeding to impose the discipline.  At this stage, the employer need not bargain to agreement or impasse, if it commences bargaining promptly.  In exigent circumstances, as defined, the employer may act prior to bargaining provided that, immediately afterward, it provides the union with notice and an opportunity to bargain about the disciplinary action and its effects.

“Exigent circumstances” according to the Board is a reasonable good faith belief by the employer that the “employee has engaged in unlawful conduct that poses a significant risk of exposing the employer to legal liability for the employee’s conduct or threatens the safety, health or security inside or outside the workplace.”

What this means is that in the narrow circumstances of the date a union gains representational rights until the date a contract is reached, the employer must bargain over the discretionary aspects of discipline prior to imposing such discipline.  The risk of not engaging in such discipline of course, is now that a bargaining obligation attaches to the decision is that the discipline could be overturned by the NLRB.

The NLRB declined to extend this standard retroactively, so it will apply to discipline situations going forward as of August 26, the date of the decision.

Social Media Continues to Vex Employers 

The explosion of social media, in particular the ability of employees to immediately express themselves to a wide audience, is an area that has caused significant hand wringing when it comes to the NLRB.  We have discussed this issue many times including here, here and here.

Employers often want to regulate or outright prohibit the posts of employees, only to find out the NLRB deems such activity to violate the Act.  The decisions can seem confusing and conflicting.

A recent NLRB decision on this issue adds to the confusion.  In Chiptole Services LLC, 364 NLRB No. 72 (August 18, 2016) involved an employee who would use his Twitter account to respond to customers and sometimes fellow employees.  The case involved, among other things,  three “Tweets” the employer asked the employee to delete from his account, which he did.  These Tweets were as follows:

  • The employee tweeted the employer’s communication director a copy of a news article about people who have to work on snow days when public transportation was closed, adding the comment “Snow days for ‘top performers’ [communications director]?”
  • A customer posted “free Chipotle is the best thanks.” In response, the employee tweeted “nothing is free only cheap #labor.  Crew members make only $8.50hr  how much is that steak bowl really.”
  • A customer posted about guacamole.  The employee responded “its not free like #Qdoba. enjoy the extra $2.

The employee deleted the tweets.  As part of a larger unfair labor practice case (involving other issues including the employee’s termination), the issue of the deleted tweets was alleged as unlawful.

In finding a violation of Section 8(a)(1) the NLRB ALJ noted that the analysis for evaluating whether an employee’s actions are “protected, concerted activity” involves two prongs which are analyzed separately and objectively.  First, the employee’s action must be concerted.  Second, the purpose of the employee’s action must be for “mutual aid or protection.”.  In this case the Judge noted that the employee had not sought out other employees nor had he consulted with them before sending the tweets.  Nevertheless, the ALJ ruled the first prong was met because the employee was seeking group action because the tweets “did not pertain to wholly personal issues relevant only to [the employee] but were truly group complaints.”

On appeal a majority of the three member NLRB panel reversed this finding holding, simply, “On this record, we do not find that [the employee’s] were concerted.”  The footnote also states Chairman Pearce dissents, and would affirm the ruling except with respect to the tweet about the guacamole.

In sum, whether a social media posting by an employee  constitutes protected concerted activity can be very confusing.  This case illustrates that four NLRB employees (the ALJ and three Board members) were split evenly over whether the tweet constituted activity protected by the Act.

The best course is to be extra careful when considering taking action for an employee’s personal social media post, whether it is to ask the employee to delete the post or issue discipline.  If the post does not violate a clear (and lawful) employer policy there will be risk taking action.


NLRB Enforces Ambush Election Rules…..Then Finds Way Around Them

There has been a lot of hype about the so-called NLRB ambush election rules.  These are, of course, the NLRB’s take on fixing what it deemed a broken secret ballot election scheme, one allegedly marred by employers gaming the system to delay a secret ballot election.  Of the many new rules issued by the NLRB, one requires the parties to a representation petition to file a Statement of Position identifying all issues for hearing.  By identifying issues the Board hoped to avoid unnecessary hearings.  The Board felt this issue was so important that it adopted harsh consequences if such issues were not raised in the Statement of Position.  Under NLRB Rules and Regulations Section 102.66(d), a party failing to timely file a Statement of Position “shall be precluded from raising any issue, presenting any evidence relating to any issue, cross-examining any witness concerning any issue, and presenting any argument with respect to any issue not filed in a timely Statement of Position .. .”.  In other words, if the issue wasn’t raised in a timely fashion it shouldn’t be considered.  This is known as issue preclusion.

In one of the first applications of the rule the NLRB concluded that the rule applied to prevent a union facing a decertification petition from litigating an issue it had not timely raised.  The NLRB then promptly found a way to consider the issue anyway and dismissed the petition.  In Brunswick Bowling Products LLC, 364 NLRB No. 96 (August 25, 2016), an employee filed a decertification petition seeking a vote on whether to continue union representation.  The NLRB promptly sent out a notice of the required Statement of Position.  The union filed the Statement of Position identifying an issue that the petition was barred by the “contract bar” principle (which holds that a currently effective collective bargaining agreement precludes the filing of a decertification petition except for the 90 to 60-day period prior to the expiration), but approximately 3 hours and 20 minutes after the deadline.  The union then tried to raise the issue at the hearing and the employer objected, citing Rule 102.66(d).  The hearing officer nonetheless accepted the evidence and argument.  In issuing her decision, the Regional Director considered the evidence and dismissed the employee’s petition.

On appeal, the NLRB ruled that the Regional Director erred in accepting and considering the evidence.  The NLRB ruled that 102.66(d) does not require a showing of prejudice by a party.  The Board majority also noted that the union had not sought an extension of time to file its Statement of Position.

Nevertheless, the NLRB majority concluded that dismissal of the decertification petition was proper, explaining:

The contract bar issue was raised by the Petitioner [the employee] on the face of the petition, which stated that there was a current collective bargaining agreement covering the unit. The Regional Office then obtained a copy of the contract in the course of its prehearing investigation.  The Petitioner and the Employer further confirmed the existence of the contract before the opening of the hearing when they signed a stipulation to that effect.

The Board majority concluded that these facts were sufficient evidence of contract bar.

Member Miscimarra concurred in part and dissented in part to the decision, noting that the Board’s decision was an important clarification of the election rules:

Although the Election Rule can be read to state otherwise, the Board in today’s decision rightly places substance over form.  We uphold the Regional Director’s decision to reach and decide an outcome-determinative issue, even though the party in whose favor the Regional Director ruled failed to timely serve its Statement of Position in conformity with the Election Rule.

While Member Miscimarra concurred in the result he continued to dissent to the election rules themselves, as he has done from the beginning.

While the fact of the existing contract was known, it seems quite a stretch to extrapolate this fact to one where the contract bar issue was “raised” by the petitioner, an employee, who simply filled out the NLRB’s representation form.  Employees are often not versed in labor law and one doubts whether a very technical issue like “contract bar” would have been in the petitioner’s mind.

This case is very important because it does provide bright line guidance about issue preclusion.  Most petitions filed are representation petitions, where a union is seeking to represent the employees.  So employers need to be extra careful about raising all issues in the Statement of Position in a timely fashion or be precluded from asserting them.

NLRB Rules That Graduate Students Are Employees

Earlier today, the National Labor Relations Board (“the Board”) issued its long awaited decision in Columbia University.  Not surprisingly, the Board, in a 3-1 decision, overturned 12 years of precedent by ruling that “student assistants” (including assistants engaged in research funded by external grants) who have a “common law” employment relationship with their university are employees as defined by the National Labor Relations Act (the “Act”), and therefore are entitled to the protections afforded to employees under the Act such as engaging in the right to unionize. 

The Board has equivocated on the issue of whether graduate students are employees as defined by the Act.  In 2000, the Board in its New York University decision determined that graduate students were employees under the Act.  Four years later in Brown University, the Board overturned New York University and held that graduate students were not employees.  With today’s ruling, the Board has yet again changed course on this issue.

In Columbia University, the Board held that student assistants could be employees as defined by the Act, while also being students.  Specifically, the Board held that “the payment of compensation, in conjunction with the employer’s control, suffices to establish an employment relationship for purposes of the Act.”

The Board’s decision in Columbia University and its very broad definition of what students can be classified as employees could have a significant impact on private universities across the country.  If you have questions about the application of this case please feel free to contact us. 

Non-Compete Agreement A Mandatory Subject of Bargaining, NLRB Rules

The first day of employment is often chaotic.  New employees must learn their way around the jobsite, meet (and remember the names of) many new people and otherwise familiarize themselves with working at a new job.  Oh, and there’s the paperwork.  Seemingly endless mounds of paperwork.  New employees are asked to sign a multitude of documents concerning all aspects of employment.  Many of the documents are not something employees ever thoroughly read, like the employee handbook, which we’ve noted many times, including here and here,  can have serious consequences.

One such document employees often are asked to sign is a non-compete agreement, an agreement which basically restricts the ability of the employee to work for a competitor for a certain period of time after leaving employment.  These agreements also frequently prohibit the employee from sharing of knowledge learned at a prior place of employment.  The law varies widely from state to state as to the enforceability of non-compete agreements.

When employees are represented by a union the employer must consider whether all this new-hire paperwork is consistent with its obligation to bargain with the union.  In Minteq International, Inc., 364 NLRB No. 63 (July 29, 2016),  the NLRB recently ruled that an employer’s unilateral implementation of a non-compete agreement to new hire employees violated the law because the employer owed the union a duty to bargain over the non-compete agreement.

The facts are fairly straightforward.  The employer manufactures products used in the steel industry.  Its employees are represented by a union.  The parties entered into a collective bargaining agreement effective from 2011 to 2014.  Sometime during 2013, without informing the union, the employer implemented a requirement that each new-hire sign a non-compete agreement which restricted the signer’s ability to move to a competitor for 18 months following leaving the employment of the employer.  The agreement also prohibited the signer from disclosing certain confidential information about the company.  The non-compete was presented to the new hires during two days of paid orientation.  One bargaining unit member who had signed the non-compete agreement left employment to work for a competitor.  The employer sent the former employee letters “reminding him of his obligation” under the non-compete agreement.  The employee complained to his former union and charges were filed with the NLRB.

The parties’ collective bargaining agreement contained a management-rights clause giving the employer the right to “hire employees, determine their qualifications” and “issue amend and revise work rules” and “Standards and of Conduct . . .and to take whatever action is either necessary or advisable to manage and fulfill the mission of the Company. . ”

Although the bargaining allegation was before the Administrative Law Judge at trial, the judge did not address the issue.  Instead, the Administrative Law Judge found certain portions of the non-compete language to be unlawfully overbroad.  Both the General Counsel and the employer appealed.

The NLRB found the employer violated its duty to bargain in good faith by unilaterally implementing the non-compete agreement for new hires.  The NLRB found that the non-compete agreement was a mandatory subject of bargaining because “it settles an aspect of the relationship between the [employer] and its employees.  The [non-compete agreement] applies to individuals both while they are employed by the [employer] and after their employment with [the employer] has ended.”

The NLRB rejected the employer’s argument that the non-compete agreement was not a mandatory subject of bargaining because it contained no threat of discipline.  The NLRB concluded that “agreeing to comply with the requirements of the [non-compete] is a term of employment, implicit in the [non-compete] is the threat of discipline or discharge for failing to comply with its provisions.”  In other words, because the employee could violate the non-compete agreement while still employed (by disclosing confidential information or working for a competitor), it was likely there could be some consequences such as discipline or discharge making it sufficient to constitute a mandatory subject of bargaining.

The NLRB also found that the non-compete agreement was a mandatory subject of bargaining because it “effectively impos[es] a cost of lost economic opportunities on employees as a consequence of working for [employer].”  Also, the non-compete agreement’s assignment of inventions to the employer “imposes economic opportunity costs on employees by broadly restricting their ability to benefit from their discoveries, inventions, and acquired knowledge related to working for [employer].”

The employer contended it was privileged to implement the non-compete agreement because the parties had agreed to a management-rights clause.  As seems to be the new trend, the NLRB rejected this argument noting that “the management-rights clause at issue makes no reference to the non-complete/non-disclosure agreements and thus does not constitute” a clear and unmistakable waiver.

Finally, the NLRB evaluated the language of the non-compete agreement found by the Administrative Law Judge to be unlawfully overbroad.  In what seems to be a first the NLRB actually reversed the judge and found certain phrases to be lawful.  For example, the Administrative Law Judge found the non-compete agreement’s confidentiality policy overbroad because it prohibited the disclosure of “any other information which is identified as confidential by the Company.”  The NLRB reversed this conclusion, reasoning the language was lawful because read in context it was not overbroad:

Viewed in isolation, a prohibition on releasing ‘any . . . information which is identified as confidential by the Company’ would clearly be overbroad, since it would allow the [employer] to designate any information, including information about employees’ wages, benefits, or other terms and conditions of employment- as confidential and thus restrict employees’ exercise of their Section 7 rights.

However, the phrase containing this prohibition does not stand alone and must be read in context.

The NLRB noted the policy defined “confidential information” narrowly as “any proprietary or confidential information or know-how belonging to the company” and that definition was followed by examples of confidential information illustrating the scope of the policy.  This is, of course, the proper analysis set forth in the law concerning the evaluation of the lawfulness policy. What is startling is that the NLRB seems to have taken the time to look at, and analyze, the entire context of the phrase in question, something it doesn’t always do in its opinions.

Bottom line:  in a unionized context, make sure that all the policies being handed out in new-hire orientation are consistent with any obligation to bargain with the union representing the employees.  If the paperwork imposes conditions on employment there is a good chance it is something that must be addressed in bargaining with the union before it is implemented.  Finally, as noted, employers need to be wary of relying on the language of a management-rights clause before implementing a new work rule.