Labor Relations Update

NLRB Issues its Final Rule for its New Joint Employer Standard

This morning the National Labor Relations Board (the “Board”) unveiled the final rule setting forth the new legal test it will apply in analyzing whether affiliated businesses are “joint employers”. The final rule, which will be effective on April 27, 2020, can be found here.

Background

On September 13, 2018 the Board published its proposed rule for modifying the existing joint employer standard. An extensive notice and comment period followed, which yielded approximately 29,000 comments before the January 28, 2019 deadline. Now, over a year after the comment period closed, the final rule is ready.

Under the existing standard, the Board would find an affiliated company to be a joint employer of another employer’s employees merely because the affiliated company possessed the authority to control those employees’ terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. In other words, an entity could be found to be a joint employer even if that entity did not actually exercise such control or authority over the employees in question.

The New Joint Employer Rule

Under the Board’s new final rule, in order to be found a joint employer an affiliated company must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment that meaningfully affects another employer’s employees. While the possession of indirect control or contractually reserved control over workers (i.e., retaining the right to exercise control over workers at a later date) can be a factor in determining joint employer status, evidence showing that a company actually exercised its authority or control is now required in order for the new standard to be met.

The final rule clarifies that “essential terms and conditions of employment” are specifically limited to the rights related to determining wages, benefits, and hours of work as well as those dealing with the hiring, discharge, discipline, supervision, and direction of employees. Equally important is the Board’s definition of “direct and immediate control” that is “substantial.” Essentially, in future joint employer cases, the Board will assess whether the company actually possessed and exercised control on a regular or continuous basis. Evidence of control that is merely sporadic or isolated will be insufficient to justify finding an affiliated company to be a joint employer.

In his announcement of the final rule, NLRB Chairman John Ring stated, “With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship.” The final rule’s enhanced clarity may allow companies to reevaluate their current arrangements with their business partners, particularly those that rely on franchisees and subcontracting work.

Looking Forward

Although the final rule provides employers, unions, and employees with much needed clarity as to whether certain business relationships will rise to the level of being a joint employer relationship, some questions still remain. How will the rule be interpreted and applied in future cases? Will the rule be subjected to legal challenges? Proskauer will continue to monitor any developments on these, and other related questions.

Applying the Boeing Standard, NLRB Upholds Employer’s Policies Restricting Cell Phone Use, Non-Work Email Use and Disclosure of Confidential Information

Applying the facially neutral work rule test laid out in Boeing (see here), the Board recently reversed an Administrative Law Judge decision, concluding that the employer maintained lawful workplace rules restricting employee use of (i) cell phones in commercial vehicles, (ii) the company email server for purposes not related to work, and (iii) the disclosure of confidential business information.   See Argos USA LLC d/b/a Argos Ready Mix, LLC, 369 NLRB No. 26 (Feb. 5, 2020).

Factual Background

The employer operates 300 ready-mix concrete facilities across the United States.  Employees, including the truck drivers at issue in the case at the employer’s Naples, Florida facility, are subject to several employment policies.

First, employees are bound by the company’s “Cell Phone Policy,” which places certain restrictions on employees’ ability to use cell phones while working in recognition of the “danger associated with using cell phones while driving.”  Specifically, the policy provides that cell phones are not permitted in the cab of a commercial and/or heavy equipment vehicle.

Second, employees are required to abide by the employer’s “Electronic Communications Policy,” which mandates that the company’s email system is to be used for business purposes only and not personal purposes.

Finally, employees are required to sign an “Employee Confidential Information Agreement,” which prohibits employees from disclosing “confidential Company information” to which employees have access during their employment.  “Confidential information” is defined broadly in the agreement to include, among many other things, earnings and employee information.

In 2017, the employer suspended and subsequently discharged an employee for suspected possession of a cell phone in his concrete truck in violation of the Cell Phone Policy.  His termination occurred after an unsuccessful attempt by the employer and the union representing the Naples truck drivers to resolve the issue.

The employee then challenged the implementation of the Cell Phone Policy, as well as the other policies identified above.

NLRB Reverses ALJ and Upholds Workplace Rules and Suspension/Termination of Employee

Both the Board and ALJ applied the same standard for determining whether a facially neutral work rule, reasonably interpreted, would unlawfully interfere with, restrain or coerce employees in the exercise of their Section 7 rights.  See The Boeing Company, 365 NLRB No. 154 (2017).  Since the Boeing decision, the Board now evaluates the potential impact of the rule on Section 7 rights and the employer’s proffered justification; in so doing, the Board has delineated three categories of rules that represent classification of results from the Board’s application of the new test:  category one (always lawful) because (a) the rule does not interfere with Section 7 rights or (b) the potential adverse impact on protected rights is outweighed by justifications associated with the rule); two (individualized scrutiny warranted); and three (always unlawful).

We summarize the Board’s findings below, and identify which category of rule the Board placed each of the policies at issue.

Employer’s Cell Phone Policy Restricting Use While Driving Was Lawful

Because the employer’s cell phone policy focuses on safe driving practices by prohibiting the presence of cell phones in the cabs of commercial vehicles and/or heavy equipment vehicles (weighing 10,000 pounds or more), the Board reversed the ALJ and found the policy lawful.  The Board concluded that employees would not reasonably interpret the rule as interfering with their Section 7 rights, as the cell phone restriction does not prohibit employees from communicating during non-work hours.  Moreover, the policy ensures the safety of drivers and the general public by drawing awareness to the dangers of distracted driving and prohibiting the device that enables such behavior.

In finding that the policy was lawful (in Category 1(a)), the Board emphasized that “employees are not guaranteed the right to use every method of communication available to them to discuss their terms and conditions of employment.”  Because the cell phone policy was lawful, the employer was justified in suspending and discharging the employee who violated the policy. (As an aside, the ALJ found virtually nothing in the employee’s testimony to be credible and so the judge’s decision rested exclusively on the lawfulness of the policy).  The Board reversed the ALJ and upheld the suspension and discharge.

Employer’s Electronic Communications Policy Limiting Use of Company Email Was Valid

The Board again reversed the ALJ, but largely due to the change in NLRB precedent between the ALJ ruling and the instant Board decision.  The ALJ applied Purple Communications, 361 NLRB 1050 (2014), and found that the employer unlawfully banned employee use of the company email system for personal use during non-work time.  Since the ALJ decision, the Board reversed Purple Communications, in Caesars Entertainment Corp., 368 NLRB No. 143 (2019), which reinstated the principle that employees have no statutory right to use employer email systems for Section 7 purposes in a typical workplace.  Because Caesars Entertainment Corp. applies retroactively to all pending cases, the Board reversed the ALJ, holding that the employer’s facially-neutral policy that restricts employees’ personal use of company email systems is lawful.

Confidentiality Agreement is Lawful under the Boeing Analysis

The Board concluded that the employees would not reasonably interpret the confidentiality agreement to potentially interfere with the exercise of Section 7 rights, even though the agreement prohibits the disclosure of company information, including but not limited to, earnings and employee information.  The Board reiterated that the analysis considers the perspective of an “objectively reasonable employee,” and the policy must be read as a whole.  Given this backdrop, the Board concluded that because the policy focuses on the disclosure of the company’s proprietary business information, and does not specifically prohibit disclosure of employees’ wages, contact information or other terms and conditions of employment that would be generally known or accessible from other sources, the policy fit within Boeing Category 1(a).

Board Hints That It Is Taking Aim At Recent Cases Requiring Bargaining Before Discipline

The case contained an allegation that the employer violated its duty to bargain in good faith by not giving notice of its intent to discipline and discharge the employee for violating the use of cell phones.  This rule, which did not so much overrule prior precedent as much as it created a new obligation, requires bargaining over discipline and discharge in first time contract situations.  We have reported on this issue here and here.  The Board in this case severed the allegation which is a sure sign that the new obligation will be eliminated in the near future.

Takeaways

The decision of the Board in this case demonstrates how even under the relaxed scrutiny of handbook provisions, reasonable minds can differ as to lawfulness of a policy.  The ALJ and Board both applied Boeing to the policies at issue but came to opposite conclusions. Here the employee was completely discredited and so the the case rested on the interpretation of a policy, which there is no suggestion was applied in a discriminatory fashion. This may suggest there is more work to be done in creating a legal standard to address common workplace policies.

Still, this decision is consistent with a recent line of cases applying Boeing’s work rule test to uphold routine common sense policies that an objectively reasonable employee would find do not interfere with his or her Section 7 rights to engage in concerted activity for the purpose of collective bargaining or other mutual aid or protection. Most unions have actively avoided going to the NLRB over such policies in recent months hoping to avoid decisions such as this one.

This decision also provides several illustrative examples of the types of rules that will be upheld, particularly rules designed to limit distracted driving and enhance workplace safety.  It bears watching whether another case with similar work rules in different workplace scenarios reaches the Board this term, so stay tuned!

NLRB Sues Oregon Seeking To Invalidate State Law Prohibiting “Captive Audience” Meetings

On February 7, 2020 the National Labor Relations Board (“NLRB”) sued the State of Oregon in federal court seeking a declaratory judgement to invalidate a state statute that protects employees who refuse to attend lawful compulsory meetings held by employers during organizing campaigns from adverse employment action.  These meetings, pejoratively referred to as “captive audience” meetings, are workplace meetings during the working time of the employee where the employer expresses its views on unions.  According to the NLRB, Oregon’s statute is preempted under the preemption doctrine established by the Supreme Court in Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959).  The Garmon preemption doctrine prohibits state and local governments from regulating activities that are otherwise regulated under the NLRA.

The NLRB’s complaint arose out of a June 2019 union election involving the Teamsters and an Oregon employer.  A Teamster local filed a petition seeking to represent several types of employees in the employer’s workforce.  The employer sought a stay of the election, arguing that it had to refrain from making captive audience meetings in order to comply with the Oregon statue.  Although the NLRB denied the stay, it allowed the employer to raise any issues related to the impact of the Oregon statute in any post-election proceedings. Ultimately, the union did not secure enough votes to be selected as the employees’ bargaining representative.

The Oregon statute, ORS 659.785(1), enacted in 2010 provides that an employer may not discharge, discipline or otherwise penalize an employee, or threaten to do the same, because the employee “declines to attend or participate in an employer-sponsored meeting or communication with the employer… if the primary purpose of the meeting or communication is to communicate the opinion of the employer about… political matters.” The statute defines political matters to include “the decision to join, not join, support or not any lawful political or constituent group”, and further defines “constituent group” to include labor organizations.

Since the enactment of the NLRA, it has been lawful for an employer to hold meetings with its own employees to give information and opinions about any unionization effort.  Such meetings can be held at any time during an organizing drive except  the 24-hour period before the representation election. All other rules applying to discourse about unionization apply.  Unions have argued for years that such meetings give the employer an unfair advantage; employers counter this argument by noting the employees are paid for their time and the employer is entitled to run its business the way it wants, including expressing its lawful opinion.

In its complaint, the NLRB argues that the Oregon statute is preempted under Garmon because it conflicts with the NLRB’s exclusive control over union election proceedings, as delegated to the agency by Congress.  In the eyes of the NLRB, the Oregon statute interferes with its ability to regulate a covered employer’s conduct during a union election campaign and to adjudicate any unfair labor practices related to election campaigns.  Indeed, Section 8(c) of the NLRA permits employers to express their views on unions, as long as that “expression contains no threat of reprisal or force or promise of benefit.”  The NLRB also argues that the Oregon statute is preempted under the Supremacy Clause of the Constitution, because the state statute prohibits conduct “permitted and protected by the NLRA.”

Other employers have filed representation petitions since the June 2019 Teamsters election, arguing that the employers may be forced to choose between exercising their rights under the NLRA or complying with the Oregon statute.  In November 2019, the NLRB notified the Attorney General of the State of Oregon of its concern that Oregon employers were faced with a dilemma during organizing campaigns, and asked the Attorney General to determine whether their preemption argument could be addressed by the state legislature. The Deputy Attorney General responded, expressing his disagreement with the NLRB and informing the agency that his office would take all steps to defend the Oregon statute.  The NLRB’s complaint soon followed.

There are a variety of state statutes on the books that run in direct conflict with the NLRA. Oftentimes, these statutes are not an issue because they are not enforced. For example, some state statutes prohibit the hiring of replacement workers during a strike, which is directly opposite what is permitted under the NLRA.  In this case, it appears Oregon too has not actually enforced the statute but enough employers have complained that the NLRB has taken notice.

We will continue to cover this litigation as it progresses. Stay tuned!

NLRB Upholds Employer’s Bargaining And Demotions Post-Impasse As Lawful

In its January 31, 2020 decision in Phillips 66, 369 NLRB No. 13 (January 31, 2020) the Board reversed a number of findings of unfair labor practices found by an Administrative Law Judge related to the employer’s conduct during organizing and subsequent bargaining.

Background

In November 2011, the union filed a petition to represent the five health and safety specialists (HSS Specialists) working at the employer’s Santa Maria, California oil and gas refinery.  During emergencies, the HSS Specialists served as “incident commanders,” temporarily assuming control over facility operations and coordinating a response.  The employer asserted that these emergency duties made the HSS Specialists statutory supervisors and opposed the union’s petition.

Four days before the union election, management explained to the HSS Specialists that they would lose their supervisory duties, which could result in shortened work schedules and adjusted overtime, if they joined the union.  One day before the election, management explained that they would work toward “mending fences” with the HSS Specialists if they voted against the union.

The union unanimously won the election, and the parties executed a side letter agreement that specified the HSS Specialists’ hourly wage, maintained the health and safety focus of their classification, and clarified that the employer would not lay off anyone if the HSS Specialist positions were eliminated.  During the next seven months, the parties bargained over the terms of an initial collective bargaining agreement, with each strictly adhering to their core positions throughout their negotiations.  The employer took the position that it had to demote the HSS Specialists because their incident commander duties made them supervisors who could not form unions.  The union generally bargained to preserve the status quo.

The parties compromised on some secondary issues, but by November the employer presented the union with its “Final Company Proposal.”  The employer maintained that there was leeway for negotiation if the union agreed that only two of the HSS Specialists would be transferred to new health and safety coordinator positions (with fewer job duties, different work schedules, and lower wages).  The union representative responded, “Don’t hold your breath.”  On month later, the employer declared impasse, implemented the terms of its final offer, and transferred all of the HSS Specialists to health and safety coordinator or operator positions.

The union filed charges.

Board’s Main Findings

  • Employer’s Offer To Mend Fences Was Not An Unlawful Promise Of Benefits

The Administrative Law Judge ruled that the employer’s statement to employees that it would “mend fences” if they voted against the union constituted an unlawful promise of benefits in violation of Section 8(a)(1) of the Act.  On appeal the Board disagreed.  The Board concluded that management’s suggestion that it would work toward “mending fences” with the HSS specialists in exchange for their “no” votes was not an unlawful promise of benefits designed to influence the election because it was not specific enough.  The Board ruled this was permissible union campaign propaganda because it did not specifically refer to terms or conditions of employment.

  • Employer Did Not Engage In Bad Faith Bargaining

The Administrative Law Judge (“ALJ”) concluded that the employer bargained in bad faith in violation of Section 8(a)(5) because: (i) it knew or should have known that its bargaining proposal to transfer HSS specialists to different positions was not based upon legitimate business justifications; and (ii) its proposals were a close-minded extension of its threat four days before the election that HSS Specialists would lose their jobs or that their wages, hours and working conditions would change if they voted for the union.

The Board disagreed, overruling the ALJ’s finding.  The Board held that the ALJ erroneously focused on only a portion of the parties’ bargaining.  The Board held that the correct standard for evaluating good faith bargaining is to consider the totality of the conduct.  In this case, the Board concluded the parties both bargained hard and the employer could not be found to have negotiated in bad faith by “merely h[olding] firmly to their respective proposals.”

First, the Board emphasized that its place was not “to decide the good or bad faith of the parties based on the correctness or incorrectness of the reasons they put forward in support of their bargaining positions.”  Accordingly, it was not unlawful for the employer to remain unmoving on its central position because it reasonably believed that it put forward a fair proposal.  The employer did not need an ironclad business justification for its position in order to bargain in good faith.

Second, the Board held that the judge’s limited view of the employer’s proposals as being linked to unlawful pre-election threats failed to take into account the company’s overall conduct, its attempts to reach agreement and its flexible conduct during collective bargaining.  “By finding evidence of bad faith in the similarity between [the employer’s] proposals and its earlier unlawful threat, the judge effectively barred [the employer] from advancing any proposals related to removal of incident commander duties from the HSS specialists, at least where such proposals would adversely affect the HSS specialists’ wages, hours, and job duties.”  In reviewing relevant case law, the Board noted that this is exactly the kind of substantive judgment that the Board cannot pass concerning an employer’s bargaining proposals.  Ultimately, the employer did not want to assign incident commander duties to union members, and the other changes that the employer proposed were logically related to its proposal to remove those duties from the HSS Specialists.

The Board specified that in the 11 bargaining sessions that employer and the union participated in from May to November 2012, both parties “engaged in hard but lawful bargaining over the key issues.”  Significantly, the employer’s conduct was “not that of an employer intent on frustrating the possibility of reaching agreement” but showed that the employer was “lawfully adamant regarding its core positions while demonstrating its willingness to compromise where it could do so without abandoning those positions.”

  • Employer’s Declaration of Impasse Was Lawful

The ALJ determined that the employer’s declaration of impasse was unlawful because of the employer’s bad faith bargaining.  The Board held that since it had determined the employer’s bargaining was lawful, the impasse was as well.  In this regard, the parties understood that they were at an impasse after bargaining on numerous occasions without budging on key issues.  An issue of critical importance to both parties was HSS Specialist staffing and the consequences of removing the incident commander function from HSS Specialists.  The parties’ willingness to move on issues of secondary importance did not change their stances on these key points.  After considering the parties’ bargaining history, their good faith, the length of negotiations, the importance of the disputed issues and the parties’ understanding of the negotiations, the Board found that the employer lawfully declared impasse and implemented its final offer.

Takeaways

All decisions coming out from the Board are made by the remaining three members, Chairman Ring and Members Emanuel and Kaplan.  Decisions like these are not surprising, or far-reaching, but they do illustrate how rulings can differ widely based on the time of issuance.  The three issues discussed in this blogpost probably would have had a different outcome three years ago.  It is not wholly partisan, however.  This Board spends a significant amount of time evaluating existing precedent to support its position.  Here, the Board upheld longstanding Supreme Court precedent by refusing to sit in judgment of the substantive terms of the parties’ collective bargaining agreement and by considering the totality of the negotiations in finding that the employer bargained in good faith.

In addition, this case presents a rare situation where a final offer was actually implemented.  The parties bargained only 11 times before reaching impasse, but the impasse was acceptable because the bargaining proposals were lawful and made in good faith.

Congress Passes Labor-Friendly “PRO Act”

On Thursday, February 6, 2020 the U.S. House of Representatives passed the Protecting the Right to Organize Act, also known as the “PRO Act”.  The legislation (which can be viewed here), passed mostly along party lines, would provide sweeping changes to the NLRA that would enhance greatly the ability of unions to organize employees and permit the NLRB to impose penalties on employers who retaliate against those seeking to unionize. The PRO Act, if enacted, would be the most significant series of amendments to the 85 year-old National Labor Relations Act and is essentially a pro-labor “wish list” that unions have long-sought since the Taft-Hartley amendments passed in 1947.

However, the PRO Act is likely “dead on arrival” in the Republican-majority U.S. Senate. Indeed, the chairman of the Committee on Health, Education, Labor and Pensions already has stated that the Committee will not take up the bill this session. This said, the PRO Act clearly outlines the Democratic Party’s legislative goals in the area of labor relations, and many of the Democratic presidential candidates have endorsed the bill.  Should the balance of power in Washington change after the 2020 election, the PRO Act (or some form of it) would be more likely to pass.

Summary of the PRO Act

The PRO Act touches upon nearly every aspect of labor-management relations governed by the NLRA and reverses several recent employer-friendly rulings by the NLRB and the Supreme Court, and NLRB rulemakings.

Specifically, the PRO Act would:

  • Expand the protections of the NLRA to more workers by adopting a narrow criteria to classify a worker as an independent contractor. Under the PRO Act, more workers in the “gig economy” could potentially be classified as employees entitled to NLRA protection.
  • Require an employer to recognize a union based on a “card-check” authorization, in the event the union loses an election and the NLRB determines that an employer improperly interfered with the election. Currently, no such requirement exists.
  • Enable the NLRB to levy civil penalties against employers who commit unfair labor practices under NLRA Section 8(a) of up to $50,000 for each violation, and in certain cases, up to $100,000. Currently, no monetary penalties exist.
  • In first-contract negotiations, compel the employer and the union to mediation by the Federal Mediation and Conciliation Service in the event the parties fail to reach an agreement within 90-days of commencing collective bargaining negotiations. If mediation fails, the FMCS must refer any disputes to a three-person arbitration panel for interest arbitration. The panel would then by majority vote be able to set the terms of the agreement and would be binding on the parties for a period of two years, unless amended by the parties. Interest arbitration for contract disputes is common in the public sector, but not the private sector.
  • Supersede “right-to-work” laws by permitting employers and unions in all 50 states to agree upon a “fair share” clause, which would require all workers who are covered by a collective bargaining agreement to contribute union dues for the “cost of representation, collective bargaining, contract enforcement, and related expenditures.”
  • Permit workers to engage in secondary boycotts and prevent employers from permanently replacing strikers.
  • Grant workers the right to bring civil actions in federal district court against employers under Section 8(a)(1) or (3), after the expiration of a 60-day period following the filing of a charge with the NLRB, or if the NLRB determines not to issue a complaint. Further, employers would not be able to enter into agreements preventing employees from joining class or collective actions arising out of their employment relationship. Under the PRO Act, class and collective actions would be “protected activity” under Section 7.
  • Authorize employees to use an employer’s electronic communication devices and systems, including company computers, internet access, email, cell phones or “other company equipment” to engage in activities protected by Section 7.
  • Make required attendance at an employer’s organizing campaign meetings an unfair labor practice.

Stay tuned for all developments regarding the PRO Act.

D.C. Circuit Vacates NLRB Decision, Reinforcing Board’s Limited Jurisdiction over Religious Schools

Similar to other disagreements between the NLRB and D.C. Circuit (see here for a recent example ), a tension developed during the last several years regarding the appropriate standard to determine whether teachers at religious schools are covered by the NLRA and within the Board’s jurisdiction, or whether the Religion Clauses of the First Amendment preclude NLRA-coverage.

Most recently, in Duquesne Univ. of the Holy Spirit v. NLRB, No. 18-1063 (D.C. Cir. Jan. 28, 2020), the D.C. Circuit reinforced its own standard, established in a 2002 Circuit decision, finding that as long as the school (1) holds itself out to the public as a religious institution, (2) is non-profit, and (3) is religiously affiliated, then the Board lacks jurisdiction over all faculty.  See University of Great Falls v. NLRB, 278 F.3d 1335, 1341 (D.C. Cir. 2002).  If this standard is met, then all faculty members are exempt from the NLRA, regardless of the subjects the faculty members teach, or how the school holds out the faculty members vis-à-vis the school’s religious objectives.

In this case, the D.C. Circuit rejected the Board’s more expansive test, established in a 2014 decision, which provided the agency would assert jurisdiction over the religious school if the school does not hold out the faculty members as playing a specific role in the school’s religious educational environment.  See Pacific Lutheran University, 361 N.L.R.B. 1404 (2014).

Factual Background

Duquesne University is a non-profit, Catholic institution in Pennsylvania that is home to both undergraduate and graduate students.  The school’s curriculum includes secular and religious-based courses.  Several years ago, some of the adjunct professors sought to join a union, and Duquesne responded that the NLRA did not authorize the Board’s jurisdiction in light of the First Amendment.  The teachers and union responded that the adjunct faculty were not required to “perform specific religious roles at the school,” and the Act could apply to them.  The union prevailed in an election.  Duquesne refused to bargain and the union initiated a refusal to bargain unfair labor practice charge under Section 8(a)(5) of the Act.

Evolution of the Standard for Determining NLRB Jurisdiction Over Religious Schools

The basis for the Board to decline to exercise jurisdiction of religious schools is grounded in the First Amendment, which provides that the government will not interfere with religious practices, and guarantees religious organizations “independence from secular control or manipulation.” See Hosanna-Tabor Evangelical Lutheran Church & Sch. V. EEOC, 565 U.S. 171, 199 (2012) (Alito, J., joined by Kagan, J., concurring).  While the Board “generally will not assert jurisdiction over nonprofit, religious organizations” and will avoid disputes between such organizations and their employees, the Supreme Court has drawn the line as follows:  religious schools that are “completely religious” are outside of the Board’s jurisdiction, while schools that are merely “religiously associated” are within the Board’s grasp.  NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 500, 507 (1979).      

Applying this standard, in 2002, the D.C. Circuit, on appeal of a NLRB decision, articulated a bright-line, three-factor test (known as the Great Falls test) to determine whether the Board may exercise jurisdiction over a religious school.  If the institution: (a) holds itself out to the public as a religious institution; (b) is a non-profit; and (c) is religiously affiliated, then the Board must decline to exercise jurisdiction.

Twelve years later, the Board departed from the Great Falls test and espoused a different standard:  in order to avoid the Board’s jurisdiction, a religious institution must first show that it “holds itself out as providing a religious educational environment” (akin to the three-factors outlined above), and then, it must show that it considers the faculty members to perform a “specific role in creating or maintaining the … university’s religious educational environment.”  Pacific Lutheran University, 361 N.L.R.B. 1404 (2014).  The additional component may mean that even if a school is religious in nature, some faculty members could be exempt from the NLRA, while others could not.

Application

In this case, the Regional Director held that under the Pacific Lutheran test, the agency could exercise jurisdiction over the adjunct professors who, the Regional Director concluded, lacked a role in creating or maintaining the university’s religious educational environment.

On appeal, the D.C. Circuit reversed and rejected the Pacific Lutheran test, concluding that the standard ran afoul of Supreme Court precedent in Catholic Bishop of Chicago; in that case, the Supreme Court concluded that all teachers at a religious school can implicate the school’s religious mission, and thus if the school was sufficiently religious in nature, the Board lacked jurisdiction over all teachers at the school.  According to the D.C. Circuit, the Supreme Court’s decision forecloses application of Pacific Lutheran.

Since Duquesne met each of the three Great Falls factors – even the NLRB conceded as much – then the Board lacked jurisdiction over the adjunct faculty.

Judge Pillard dissented and couched the issue of whether religious-school employees who arguably do not embody the school’s religious mission as a matter left open by the Supreme Court’s decision and the Court’s own Great Falls test.  Judge Pillard endorsed the Board’s approach for such circumstances.

Takeaways

The D.C. Circuit’s decision reinforces the Board’s limited authority over faculty at religious schools and the independence of religious organizations, favoring a clear, bright-line test that limits the Board’s jurisdiction, rather than a standard that could blur the line of demarcation.

The challenge for religious schools is that “Board law” for future cases is still Pacific Lutheran, as only a subsequent NLRB decision overturning prior precedent or a Supreme Court decision will change that fact. The Board frequently chooses not to follow federal circuit court decisions, usually treating an adverse decision as the “law of the case.”  Nevertheless, as a practical matter, any employer can appeal any unfair labor practice determination by the NLRB to the D.C. Circuit, so as the dissenting NLRB members remarked in Duquesne, any attempt by the Board to “chart a different path appears predestined to futility.”

It bears watching whether another case with similar facts reaches the Board this term, which may give the Board an opportunity to formally overturn Pacific Lutheran and adopt the Great Falls test as Board law.  As we have blogged about recently, the Board has done just that in other similar disagreements with the D.C. Circuit; most recently, in adopting the “contract coverage” test long-applied by the D.C. Circuit when determining if an employer’s unilateral act violated Section 8(a)(5).

Stay tuned!

Union’s Failure to Provide Factual Reasons as to Why It Needed Certain Information Privileged Employer to Deny Request, NLRB Rules

In prior posts, we’ve discussed how information requests in the context of labor relations can be deceptively complex to comply with for employers.  We’ve seen how an employer’s assertion of confidentiality, standing alone, is not enough to justify denying a request.  Sometimes, albeit rarely, the NLRB has determined the subject of some requested information is not something that has to be turned over where the information sought is far removed from the union’s representational responsibilities.

One of the most common issues in information request disputes is whether the union requesting the information has sufficient justification entitling it to receive the data.  In G4S Secure Solutions (USA) Inc. and Waste Treatment Security Guards Union 161 Case No. 19-CA-221172, the National Labor Relations Board dealt with a similar issue.  The Board held that a security services company lawfully denied a union’s request to obtain a copy of its contract with a client, finding that the union had failed to provide adequate reasons why the contract was relevant to its representation of security guards at the client’s waste treatment plant.  In doing so, the Board held that unions need to provide more than “mere speculation” that the requested information is relevant to their representation.

Background- Plant Gets New Security Subcontractor

A waste treatment plant contracted with a new security services company, the employer, to take over responsibility for security from its predecessor.  As a result, the union, which represented the plant’s security guards, found itself working for a new employer, pursuant to a new contract with the plant.

The union sent the employer a request for information seeking to obtain a copy of this contract.  The employer denied the request, asking the union to provide specific reasons for why it would be entitled to obtain the contract.

Shortly thereafter, the union responded with an email describing in detail what information, including the contract, it was requesting and purporting to supply its reasons.  The union’s email noted that “the entirety of our work is based off this contract” and assumed, without stating why, that the contract would affect the terms and conditions of the guards’ employment. In its email response the union stated:

Upon review I understand that our request of information, the contract between [client] and [employer] may have been a little vague. So we would like to explain and expand on our reasons why we have requested the contract.

  • Contractual obligations to the client from [employer], to ensure the union can assist in meeting said obligations.
  • Any and all information related to terms and conditions, wages, hours and work assignments, agreed to by [employer] and [client].
  • For proper representation of the union members, any information related to officer and shift lead duties, including training, job descriptions, officer discipline, which is to include any information related to client request for removal of officers.
  • Any and all information related to safety, including information about on shift safety representatives.
  • The entirety of our work is based off this contract and is relevant based [sic].

Due to the sensitivity of the information, the union is willing to sign a non-disclosure agreement with you to show good faith in the matter. Furthermore, we would like to request all information concerning the cost of running the [] contract, including but not limited to wages, benefits, overhead etc. The Union reserves the right to request further relevant information on this matter. Please provide this information by May 28th. 2018. Please notify me immediately if there are.

In addition, the union had been involved in a dispute with the former employer of its members, a different security company, over whether their members were jointly employed by the company and the plant.  In support of its request for information, the union sent the employer a copy of an NLRB Advice Memorandum from the Board regarding this dispute.  The memorandum stated only that the plant and the former security company were joint employers, and described the relevant details of their relationship that led to its conclusion.

Board Finds No Legal Obligation to Provide Employer’s Contract with Client

The Board agreed with the administrative law judge that the contract between the employer and the plant was not presumptively relevant because it did not directly relate to the employees’ terms and conditions of employment.  However, the Board found that the judge had erred in concluding that the relevance of the contract was established by the union’s email and the advice memorandum.

The Board noted that to obtain information that is not presumptively relevant, a union must prove relevance by demonstrating “a reasonable belief supported by objective evidence for requesting the information” and that “suspicion alone was not enough.”

The Board found that the union’s email merely assumed that the contract might include provisions that affect unit employees’ terms and conditions of employment.  It did not state any facts supporting a reasonable belief that the contract actually included such provisions.

The Advice memorandum was also insufficient to establish the contract’s relevance.  The Advice memorandum only addressed the relationship between the plant and the employer’s predecessor, and described details of the contract between the two parties.  The union failed to explicitly state that it believed the requested contract, between their current employer and the plant, would contain similar terms to the contract described in the Advice memorandum.  Nor did the union’s statements provide an objective factual basis for an unstated belief.  The mere fact that the employer had taken over security responsibilities from its predecessor only meant that “the unit employees continued to do the same job; it does not mean that they continued to do so under the same contractual terms.”

The Board held that a union must have an objective factual basis for believing the requested information is relevant before making a request; it cannot use the request itself as a means to confirm its suspicions.  The Board also distinguished a Seventh Circuit case upon which the administrative law judge had relied, noting that here, the employer never told the union that it relied upon anything in the contract of its predecessor to establish the new terms and conditions of the guards’ employment.

Takeaways

 This is one of many types of cases where the outcome could have come out differently depending on the make-up of the Board.  Still, the decision presents a good example of how to effectively respond to an information request that appeared outside of the union’s responsibilities.  The employer did not simply reject the request, which almost always results in the filing of an unfair labor practice charge, but inquired about the reasons the union needed the information.

Oftentimes, the information request will seem like a fishing expedition.  The employer’s questions about why the union needed the information confirmed that there was no current issue and the union was raising hypothetical problems.  Again, this case undoubtedly would have turned out differently had it occurred three years ago.  The case does provide a good demonstration about how to negotiate over information requests to determine whether there is a solid basis to provide the requested information.

 

Federal Appeals Court Vacates Arbitration Award, Concluding Arbitrator Issued Own “Brand of Industrial Justice”

In the field of labor relations, there exist some rare occurrences, things that happen so seldom that it seems as if they are impossible.  As we’ve previously discussed, one such “unicorn sighting” is the NLRB overturning an Administrative Law Judge’s credibility determinations.

Another event that falls in the category of “super rare” is a court invalidating an arbitration award.  Most labor practitioners know that arbitrators have a wide latitude to decide cases, frequently returning to work employees who have unquestionably engaged in misconduct and interpreting labor agreements.  The latitude given arbitrators is so high that it is often considered a waste of time and resources to challenge the award in court.  This is because the standard used by reviewing courts is whether the arbitration award “draws its essence” from the contract.  If the court determines the arbitrator relied upon the contract to make a decision then the inquiry is over.

But, as one court recently pointed out, “deference [to arbitration awards] is not unlimited.  If it were, it would by an oxymoron.”  In an end of year decision, the Third Circuit issued a rare rebuke of an arbitrator and affirmed a federal district court’s ruling vacating an arbitration decision.  The appeals court acknowledged that “[t]he bar may be low to uphold an arbitration award, but it still exists.”  Monongahela Valley Hospital Inc. v. United Steel Paper and Forestry Rubber Manufacturing Allied Industrial and Service Workers International Union AFL-CIO CLC, No. 19-2182 (3rd Cir. Dec. 30, 2019).

The case stemmed from a dispute over preference for selecting vacation days between a bargaining unit employee and her working supervisor, a non-bargaining unit employee at a hospital employer.  The labor agreement  between the employer and the union contained a provision concerning the scheduling of vacation, which provided that: “Vacation will, so far as possible, be granted at times most desired by employees; but the final right to allow vacation periods, and the right to change vacation periods is exclusively reserved to the Hospital.”

The employer denied the bargaining unit employee’s vacation request because her working supervisor had requested that same week off and both could not be away at the same time.  The bargaining unit employee then filed a grievance alleging the requested vacation denial as a CBA violation.  The union’s assertion was that the agreement’s language should have granted the bargaining unit preference.

The arbitrator ruled that the employer violated the agreement.  In interpreting the scheduling of vacation provision of the agreement, the arbitrator reasoned that the employer’s “exclusivity in allocating vacations” was subordinate to the “so far as possible” language.  The arbitrator ruled the agreement prevented the employer from denying bargaining unit employees their desired vacation when no “operating need” existed.

The employer appealed.  Courts provide a “heavy degree of deference” to an arbitrator’s decision, but “that deference is not unlimited.”  Here, the appeals court, using  sharp language, declined to reinstate the arbitration award because (1) the award “manifestly disregard[ed] the plain language of the CBA,” and (2) the arbitrator “deviated far beyond the scope of his authority by force-feeding the ‘operating need’ requirement into the CBA.”

The court ruled that the arbitrator ignored the plain language of the contract.  The CBA gives the employer the “final” and “exclusive[ ]” right to deny bargaining unit employees their desired vacation.  The “so far as possible” language is a generalization that “cannot hold hostage” the explicit rights granted to the employer in the agreement.

The court also ruled that the arbitrator exceeded his authority by inserting the requirement that the employer establish “operating need” to not give a bargaining unit preference language that appears nowhere in the agreement.  Indeed, the court noted that the agreement’s grant of authority to the arbitrator contained the common limitation: the arbitrator has no authority to “add to, detract from or alter in anyway” the agreement.

The court stated that “an arbitrator’s authority sources from the CBA itself” and that the arbitrator “dispens[ed] his own brand of industrial justice” by inserting the “operating need” restriction.

This case is a good reminder of the importance of drafting labor agreement provisions in a manner that clearly define the authority of the employer.  While the parties’ agreement stated the employer would grant vacation preference “so far as possible,” the reservation of rights to the employer to make the “exclusive” decision ultimately won the day.

NLRB: Outsized Payment to Union Supporter to Waive Reinstatement in Board Settlement Not Unlawful Bribe

Shamrock Foods Company, 369 N.L.R.B. No. 5 (January 7, 2020) is the latest in the National Labor Relations Board’s series of employer-friendly decisions.  In Shamrock Foods, the Board held that an employer did not violate Sections 8(a)(3) and (1) of the National Labor Relations Act by offering and entering into a settlement agreement with an unlawfully-discharged employee who waived his right to remedial reinstatement in exchange for a large cash payment.  In doing so, the Board affirmed its longstanding policy favoring the compromise and settlement of unfair labor practice charges.

Factual Background

During an active campaign by a union to organize a distribution warehouse, the employer fired an employee, a key figure in the union’s campaign.  An administrative law judge later found this discharge to be unlawful.  The employee remained active in the union’s efforts after his discharge, and soon became a focal point for union supporters, who picketed with signs including the slogan, “Workers United to Bring [Employee] Back”.  Thereafter, as part of an NLRB injunction proceeding, a federal court issued an order reinstating the employee to his position while the matter was in litigation.  Union supporters viewed the order as a win, and distributed flyers around the warehouse.

Initially, the employer complied with the court order and offered the employee reinstatement.  The employer then changed its position and offered the employee a settlement of $178,000 in exchange for waiving his right to reinstatement.  The figure also included settlement of a separate disability charge the employee had filed with the EEOC over his termination.  The employee rejected the offer and countered with $350,000 as well as 3 years of medical coverage.  Eventually, the two parties agreed on $214,270.30, which the employee accepted.  This settlement figure represented more than four times the amount of remedial back pay the employee could have received as part of the NLRB litigation.  The employer stated several times during negotiations that it did not want the employee back.

The union filed additional charges alleging the settlement constituted an unlawful bribe in violation of the Act.

Analysis

In determining whether the settlement agreement constituted an unlawful bribe in violation of the NLRA, the Board noted that this was an “unusual case warranting careful scrutiny.”

The Board found substantial evidence that the employer had used the settlement offer as a means of preventing the employee from returning to work.  The evidence was clear the employer knew that the employee was a well-known and active supporter of the union’s efforts.  In addition, the employer was not raising typical defenses to remedial reinstatement—that employee’s work was deficient, or that his reinstatement would cause friction with other employees or management.  The employer also knew that the employee’s reinstatement had become a prominent issue among warehouse employees, and its prevention would deal a setback to the union’s efforts.  Finally, the employer offered the employee more than four times the amount of his lost pay and related expenses, and failed to present any witnesses to explain its reasons for offering such a large sum.  The Board noted that put together, these facts raise “at least a colorable basis for finding that [employer’s] settlement offer to [the employee] was unlawful.”

However, the Board distinguished several cases in which they had declined to give effect to settlement agreements conditioned upon prospective waivers of Section 7 rights.  In this case, the employee waived no rights; he was only asked to decline re-employment.  The Board also found significant that the employee had independently negotiated with the employer regarding the settlement figure, and had the option of refusing, forcing his employer to reinstate him or be held in contempt.  Finally, though the settlement figure was substantially larger than the sum of the employee’s remedial back pay, it also included compensation for the resolution of his disability claim with the EEOC.

In reaching its conclusion, the Board emphasized its longstanding policy to encourage compromise and settlement, as established in Independent Stave and related cases.  Ultimately, given the evidence on both sides, the Board decided that its policy favoring settlements tipped the scale, and adopted the ALJ’s dismissal of the union’s allegation.

Takeaways

This is an interesting case involving an allegation that an employer used its economic resources to buy-off a union supporter. Absent the context of a settlement of NLRB litigation, this payment clearly would be an unlawful bribe.  However, making such a payment as part of a settlement made it acceptable.  Parties settle litigation for all sorts of reasons, and this is not the first time an employer has been willing to pay a premium to have an employee waive reinstatement.

The case does put a spotlight onto the competing interests in NLRB settlements.  The union clearly saw the outsized payment as a deliberate attempt to thwart its organizing efforts by removing a strong pro-union adherent.  The employer had openly expressed that it did not want the employee to come back to work.  The employee, for his part, had a price he was willing to accept to waive reinstatement, and that figure ultimately was met by the employer.

In the end, the strong preference to settle litigation won out.  If the union’s allegation had been found to have merit, the settlement payment would be put into jeopardy and the employee might have been faced with reinstatement to a job with some lower amount of backpay.

The Board’s decision was a continuation of a long line of cases approving settlements in which the employee waives reinstatement in exchange for a larger remedial payment from the employer.

NLRB Gives End of Year Gift for Employers, Restores Longstanding Standard for Deferring to Arbitral Decisions

In yet another end-of-2019 decision overruling significant NLRA precedent, the Board reverted to the less stringent Spielberg / Olin standard for determining whether to defer to arbitration decisions in the context of Section 8(a)(1) and (3) unfair labor practice cases.  See United Parcel Service, Inc., 369 NLRB 1 (2019). The Board issued this decision unanimously, in the first significant decision with only three Republican members after Member McFerran‘s term ended on December 16th.

Factual Background

A package driver was discharged for allegedly violating the employer’s delivery procedures.  The driver filed two grievances under the parties’ collective bargaining agreement, which also alleged that he was discharged in violation of 8(a)(3) of the Act.  The grievance panel denied the grievances.

The driver filed unfair labor practice charges over the same issues as addressed in the grievances.  After trial, an Administrative Law Judge found the discharge violated the Act.  The ALJ applied the 2014 Babcock standard for evaluating the case in light of the grievances.

The NLRB reversed and in so doing, overruled Babcock and reinstated the Spielberg / Olin standard, restoring the standard that had been in place prior to 2014.

Babcock Standard

In 2014, the Board, in Babcock & Wilcox Construction Co., 361 NLRB 1127 (2014), stated it would not defer to arbitral decisions unless “(1) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (2) the arbitrator was presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (3) Board law reasonably permits the award.” The burden of proof under this standard rested with the party urging deferral.

Babcock also established a standard for pre-arbitral deferral to grievance arbitration proceedings and to pre-arbitral grievance settlements in unfair labor practice cases alleging discharge or discipline in violation of NLRA § 8(a)(1) and (3):  the Board would not defer to grievance arbitration proceedings in these cases unless the parties in a collective-bargaining relationship have “explicitly authorized an arbitrator to decide the unfair labor practice issue, and that it would not defer to grievance settlement agreements that did not comport with the new requirements for postarbitral deferral.”

Almost no grievance procedure provides such explicit authorization, so the Babcock standard resulted in employers having to defend the employment action twice, under the grievance procedure and in unfair labor practice proceedings.

Overruling Babcock

In its unanimous decision, the Board explained that deferral to collectively-bargained grievance-arbitration procedures is meant to balance the Board’s exclusive Section 10(a) authority to prevent unfair labor practices with the NLRA’s purpose to “reduce industrial strife by ‘encouraging practices fundamental to the friendly adjustment of industrial disputes’ and ‘encouraging the practice and procedure of collective bargaining.’” The Board noted it prefers – when feasible – to let “parties resolve employment disputes through negotiated mechanisms of their own choosing without resort to the Board’s processes.”

Spielberg/Olin Standard Reinstated

The Board‘s order has two significant components on arbitration deferral.  First, the Board reinstated pre-arbitral deferral standards that existed prior to Babcock, and second, the Board reverted to the Spielberg/Olin standard for deferring to post-arbitral decisions in unfair labor practice cases alleging discharge or discipline in violation of NLRA Sections 8(a)(1) and (3).

Now, the Board will defer to an arbitration decision and award if: “(1) the arbitration proceedings were fair and regular, (2) the parties agreed to be bound, (3) the contractual issue was factually parallel to the unfair labor practice issue, (4) the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice, and (5) the decision was not clearly repugnant to the purposes and policies of the Act.” The burden is once again on the party arguing against deferral.

The key difference is that the arbitrator need not expressly consider the unfair labor practice, as long as the contractual issue and ULP are factually parallel. Applying the post-arbitral deferral standard to the facts of this case, the Board reversed the ALJ and dismissed the case.  The Board also noted that it would apply this standard retroactively to all other pending cases, at whatever stage.

Implications

This decision makes it far more likely that the Board will defer to the parties’ grievance arbitration process when faced with parallel unfair labor practice claims.  This outcome aligns with long-standing Supreme Court precedent trumpeting arbitration, and encourages the collective bargaining parties to resort to negotiated dispute resolution machinery to resolve their disputes that potentially overlap with unfair labor practices.  It also preserves the parties’ and the Board’s resources by potentially avoiding multiple litigations over the same facts and circumstances.

As noted above, this is the first significant decision after Member McFerran – the lone Democratic member of the Board — left the NLRB at the end of her term on December 16, 2019.  Neither McFerran nor the other prior Democratic member, former Chairman Mark Gaston Pearce, has been replaced by President Trump, and the Board is now comprised of 3 Republican members.  Traditionally, under such circumstances without a minority voice on the Board, the NLRB has declined to overturn precedent.  But the UPS decision appears to depart from this precedent and signals that the Board may continue to stay busy into 2020 by overturning precedent.

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