Labor Relations Update

Unpaid Interns are Not Statutory Employees, NLRB Concludes

The National Labor Relations Board recently held that a group of employees who were advocating on behalf of unpaid interns were not engaged in protected activity because the interns were not “employees” as that term is defined in Section 2(3) of the National Labor Relations Act.  In so doing, the Board reaffirmed its longstanding precedent that individuals who do not receive or anticipate economic compensation are not statutory employees.  The Board also rejected the application of a test for defining employees that has been adopted by numerous courts and the Department of Labor for determining whether unpaid interns are employees under the Fair Labor Standards Act (FLSA).

The Board also concluded that a management representative’s comments to its employees that she was disappointed that her employees provided her with a petition memorializing their thoughts concerning the pay status of unpaid interns rather than using the company’s “open doors” policy, among other similar commentary, did not rise to the level of a threat of reprisal in violation of Section 8(a)(1) of the Act.

Factual Background

The employer is a non-profit organization employing approximately 25 employees and 15 unpaid interns.  The unpaid interns started a petition requesting compensation for their volunteering.  Two paid, unionized employees provided feedback and support on the petition, and helped the interns solicit signatures.  Eventually, the unpaid interns collected signatures from all but a few of the office’s paid employees—but the group of interns and employees had yet to provide the petition to the employer.

At a staff meeting a few months later, an employee asked the employer to consider paying the interns.  The employer responded positively and discussed the organization’s upcoming plans for implementing a paid internship program, which would include a significant reduction in the number of interns at the office.  At this point, the employer was still unaware of the petition.

That changed the next day, when the interns e-mailed the employer their signed petition, which included signatures of the paid employees.  In response, the employer’s director and the executive team decided to accelerate plans to switch to paid internships.  To management’s frustration, many employees reacted negatively to the paid internship plan, concerned that a sharp reduction in interns would constrain employees’ ability to do their work.  The employer’s representative expressed disappointment that employees did not avail themselves of the organization’s open-door policy to discuss this matter before using an “adversarial” petition.

The following month, an employee who had been a driving force behind the petition initiated a one-on-one meeting with the employer.  The employer mentioned she perceived the petition to be “litigious,” “adversarial” and “sort of levy[ing] a threat.”  She suggested that the employee could have told the interns to “give me a heads-up.”  She repeated later, “I’m not asking anybody to tell on somebody… if you let [me] know your intentions, what you are seeking.”

This conversation resulted in charges being filed.  The ALJ, applying the test of employees used by the Department of Labor concluded that the unpaid interns were employees.  The ALJ also concluded that management’s statement of being “disappointed” in employees who signed the petition violated Section 8(a)(1) as a coercive statement.

NLRB Reverses

In reversing the ALJ the Board reaffirmed a more than 20-year NLRA principle that unpaid workers are not “employees” who are protected by  the Act because they do not “receive or anticipate any economic compensation” from the employer.  Here, the employer’s interns were unpaid and, therefore, were not protected by the Act.  The Board declined to extend a multi-factor test for determining “employee” status of unpaid interns at for-profit institutions used by a majority of courts and the DOL.  This test focuses on whether the unpaid intern or purported employer primarily benefitted from the relationship.

Under the Act, unpaid interns are not protected and do not have a right to unionize.  The Board concluded that because the paid employees’ actions in signing the petition did not concern “wages, hours or other terms and conditions of employment “ of employees, then the paid employees were not engaged in protected activity.

The Board also concluded the employer’s statements did not violate Section 8(a)(1) and instead were protected under Section 8(c) of the Act, as the statements did not constitute a threat of reprisal or force or promise or benefit.  The Board found that in this context, the employer’s statements merely evidenced a desire for better communication from her employees in the future.  She did not threaten them, according to the Board majority.

Member McFerran’s Concurrence

While Member McFerran concurred with the majority’s result that the employer’s statements did not violate the Act because they did not constitute unlawful threats, she sharply disagreed with the majority’s conclusion that protected covered workers who joined together to help their coworkers who are not statutory employees did not constitute protected Section 7 activity.  McFerran noted that the Supreme Court has interpreted for “other mutual aid or protection” broadly, and the employees’ advocacy on behalf of the unpaid interns could improve or affect their own terms and conditions of employment directly.  This, according to Member McFerran, constituted protected conduct.

Takeaways

This is a decision that follows longstanding Board precedent.  Unpaid interns are not “employees” and so actions in support of these individuals by statutory employees was not covered by the Act.  This case demonstrates that the NLRB is not willing to apply tests used under other statutes to administer the Act.  The fact the Board members agreed that no violation of Section 8(a)(1) occurred because a member of management expressed “disappointment” in employees is a fairly commonsense conclusion.  To hold that such a statement was actually coercive of employees would be to upend a good many discussions held between management and employees.

No, Unions Do Not Have A Free Speech Right To Engage In Unlawful Secondary Boycott Activity, Federal Appeals Court Rules

On October 28, 2019, the Ninth Circuit, following in the footsteps of the D.C. Circuit and the Second Circuit, affirmed an order entered by the NLRB confirming that prohibitions on secondary boycotts under Section 8(b)(4)(i)(B) of the NLRA do not violate the First Amendment of the United States Constitution. Nat’l Labor Relations Bd. v. Int’l Ass’n of Bridge, Structural, Ornamental, & Reinforcing Iron Workers, Local 229, AFL-CIO, No. 17-73210, 2019 WL 5539505 (9th Cir. Oct. 28, 2019).

Facts

A union was hired by a subcontractor to perform work at a construction site. Sometime after work started, the union engaged in a strike due to allegedly substandard wages.  The union’s activity included picketing from August through November 2016. At the start of the picketing, a business agent for the union engaged in conversations with neutral employees of a different subcontractor regarding “Picket Line Etiquette,” which included, among other things, texting and calling neutral employees and delivering flyers to them in an effort to get these employees to stop working. The subcontractor filed an unfair labor practice under Section 8(b)(4)(i)(B) of the Act alleging that the Union induced a secondary boycott by directly encouraging neutral employees to support the strike.

Analysis

The union conceded its activities violated the NLRA by communicating with and distributing flyers to neutral employees in an effort to get them to stop working.  However, the union claimed that decades of NLRB case law was unconstitutional and that its activity was protected as free speech under the First Amendment of the United States Constitution pursuant to Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015), where the Supreme Court applied strict scrutiny to restrictions imposed on content-based restrictions on freedom of speech.

In a brief opinion, the Ninth Circuit found the union’s argument unpersuasive because here, unlike in Reed, the issue was not the content of the communications but rather the purpose of those communications. The union communicated directly with neutral employees in an attempt to persuade them to engage in a secondary boycott to gain an unlawful unfair advantage in a labor dispute. The Court relied upon International Brotherhood of Electrical Workers v. NLRB (IBEW), 341 U.S. 694 (1951), where the Supreme Court found that the NLRA’s prohibition on secondary boycotts does not unlawfully abridge free speech. Previously, two other Circuit Courts (D.C. Circuit and Second Circuit) have addressed this same issue and came out the same way:  the First Amendment protections on freedom of speech do not absolve Unions when their communications are directed at neutral employees in an attempt to induce a secondary boycott. See Warshawsky & Co. v. NLRB, 182 F.3d 948 (D.C. Cir. 1999); NLRB v. Local Union No. 3, Int’l Bhd. Of Elec. Workers, 477 F.2d 260 (2d Cir. 1973).

 Takeaways

The secondary boycott provisions of the NLRA are among the violations the agency takes most seriously because of the impact such conduct can have on employers not directly involved in a labor dispute.  Repeat violations of the secondary boycott provisions can lead to increased oversight and sanctions.  This is why unions almost always settle such charges early in the process, usually by agreeing to walk away from the dispute. The union’s argument deserves an “A” for effort, but it was unlikely that any federal appeals court was suddenly going to declare secondary boycott activity to be a “free speech right” of union representatives.

NLRB Continues to Aid Workers in Ousting Unions

The NLRB recently reiterated its position that the agency should not be so quick to dismiss petitions filed by employees seeking to decertify a union. The Board, in a 3-1 decision, held that if a petition for decertification is properly filed prior to the employer entering into an agreement settling unfair labor practice charges in which the parties agreed to extend the bargaining period, the petition for decertification may go forward. See Pinnacle Foods Group, LLC, 368 NLRB No. 97.

Key Facts

On March 17, 2017, a Union was certified at an Employer’s facility in St. Louis. The Union and the Employer bargained but never reached agreement on a first contract. On August 31, 2018, some six months after the close of the original certification year, a petition for decertification was filed by the employees. Shortly thereafter, on September 7, 2018, the Union filed an unfair labor practice charge against the Employer. During the pendency of the unfair labor charge, the Regional Director held the petition for decertification in abeyance. The Union and the Employer entered into a settlement agreement concerning the unfair labor charge, which was approved by the Regional Director on March 25, 2019. The employee-Petitioner refused to consent to the settlement agreement. The settlement agreement included a non-admission clause and that the Union certification period would be extended, effective March 25, 2019, by seven months to allow additional bargaining. On April 1, 2019, the Regional Director dismissed the petition for decertification.

In dismissing the petition for decertification, the Regional Director relied on the seven month extension of certification, and noted that “representation petitions filed during the certification year must be dismissed.” Id. The Petitioner requested review of the Regional Director’s decision, asserting that the Regional Director erred in dismissing the decertification petition because the petitioner did not consent to the settlement agreement, the settlement included a non-admission clause, and the decertification petition was properly filed prior to entry of the settlement agreement.

Analysis

The Board majority (Chairman Ring, Members Kaplan and Emanuel) reversed the Regional Director and reinstated the decertification petition.

The Board concluded that the Regional Director’s determination that the decertification petition was filed during the extended certification year was erroneous because the petition was filed six months after the original certification year ended and nearly eight months prior to the March 25, 2019 settlement agreement.

In its analysis, The Board majority relied on its recent decision in Cablevision Systems Corp., 367 NLRB No. 59 (2018).  We discussed Cablevision here. Under Cablevision, the Board “reaffirmed that ‘when a decertification petition has been blocked by subsequently settled unfair labor practice charges, a timely filed decertification petition . . . should be reinstated and processed at the petitioner’s request following the parties’ settlement and resolution of the unfair labor practice charge.’” Additionally under existing case law, the Board stated that a decertification petitioner cannot be bound by a settlement that waives its rights under the NLRA. The Board majority went on to note that in order to dismiss a properly-filed petition for decertification on the basis of settlement, there must be a finding of a violation of the NLRA or an admission by the employer that there was a violation of the NLRA, neither of which was present in this case.

The Board held that because the decertification petitioner did not consent to the settlement and the settlement agreement included a non-admission clause, the dismissal of the decertification petition was improper and the decertification petition should go forward during the extended bargaining period.

Takeaways

The Board’s policy of blocking decertification petitions during the pendency of unfair labor practice charges has been a subject of much criticism. In this case, long after the certification period expired, and with no hint that any violations of the law were alleged, the employees filed a decertification petition.  The Union’s charges filed after the petition were served to block the processing of the petition, thereby denying the employees an opportunity to vote on whether to continue union representation.  Despite this timeline, a Regional Director dismissed the petition based on a settlement agreement which was entered into after the petition but which extended the certification period.  The Board majority was unwilling to deny employee rights by events over which the employees had no control.

This case also demonstrates the importance of securing a non-admissions clause in any unfair labor practice settlement.  Such clauses, which are harder to secure these days, are legally significant.  In cases like this, it shows the employer was settling but refusing to acknowledge it did anything wrong.  Legally, non-admissions clauses are very important for another reason: if the employer complies with the term of the settlement then the matter cannot be referenced in subsequent cases.

Moment of Clarity? NLRB Upholds Info-Sharing and Media Contact Rules, Clarifies Boeing Standard Applicable to Employer Handbook Policies

The NLRB continues to issue decisions on a variety of interesting issues.  On October 10, the Board held, in LA Specialty Produce Co., 368 NLRB No. 93 (Oct. 10, 2019), that an employer’s strong confidentiality protections and limited media availability rules were lawful, and in so doing, clarified the analysis under the newly-issued Boeing standard, which we previously outlined here.

The Majority’s Clarifications of Boeing

In Boeing Company, 365 NLRB No. 154 (2017), the Board set forth a new standard for evaluating whether facially lawful workplace rules, policies or employee handbook provisions unlawfully interfered with employees’ Section 7 rights.  The Board established a new balancing test, which considered the impact of the rule and the business justification.  In so doing, the Board created a framework of three categories of rules (the first category is lawful, the second is dependent on the circumstances, and the third is unlawful). The Regions (with the instruction of the NLRB General Counsel) have been tasked with interpreting and applying Boeing using this framework, and which we have blogged about previously here.

The Board majority (Chairman Ring, Members Kaplan and Emanuel) in LA Specialty Produce Co., clarified that the NLRB’s General Counsel’s initial burden under Boeing is to prove a facially neutral rule would potentially interfere with the exercise of Section 7 rights, as interpreted by a reasonable employee who is “aware of his legal rights” but “interprets work rules as they apply to the everydayness of his job”; if not, then the rule is lawful and the inquiry ends there.  Only if the initial burden is met would the Boeing balancing inquiry be applied.

LA Specialty’s Rules in Question

The employer, a wholesale distributor of produce and other foods, maintained an employee manual with two rules at issue:

  • “Every employee is responsible for protecting any and all information that is used, acquired or added to regarding matters that are confidential and proprietary of [Respondent] including but not limited to client/vendor lists”; and
  • “Employees approached for interview and/or comments by the news media, cannot provide them with any information”, and the company president is “the only person authorized and designated to comment on Company policies or any event that may affect our organization.”

The majority found both rules lawful because when “reasonably interpreted,” the rules do not prohibit or interfere with the exercise of NLRA rights.  The Board did not see how the confidential rule prohibited employees from appealing to customers during a labor dispute (which would have interfered with Section 7 rights), and when reading “client/vendor list” in the context of the other prohibited materials (i.e., “accounting records, work product, production processes, business operations, computer software, computer technology, marketing and development operations”), the Majority found “client/vendor lists” fall under the type of material an employer may lawfully conceal.  In so holding, the majority added that rules prohibiting disclosure of confidential and proprietary customer and vendor lists to Boeing Category 1 for future cases.

In upholding the employer’s media contact rule, the Board held when the rule is read as a whole, it pertains to instances where the media contacts employees and the employees purport to speak on the company’s behalf, even though the rule itself is not so limited to those circumstances.  The majority reasoned because the NLRA does not confer a right for employees to speak to the media on the employer’s behalf, a rule prohibiting an employee from doing so would be lawful.

The Majority and Dissent Spar Over Boeing

Member McFerran sharply disagreed with the majority, and would have found both rules unlawful because they were not narrowly tailored and would have a reasonable tendency to chill employees from exercising Section 7 rights.   McFerran reiterated why she thought Boeing was wrongly decided, criticized the majority’s “clarifications” to Boeing, asserting that the reconfigured balancing test is “far too strict to adequately protect Section 7 rights,” and argued the majority impermissibly flipped the burden of proof on the General Counsel.

Takeaways

The Board’s scrutiny of employer policies to find language that might interfere with employee rights developed into a true cottage industry, oftentimes without any discernible victim of the unfair labor practice.  This decision could change in the coming years.  In the meantime, employers should continue to refer to Boeing and its progeny for guidance as to whether their rules and handbook policies pass muster with the backdrop that the current Board seems more willing to view employers’ rules as lawful.

Specifically, while similar rules may have been previously viewed as overly broad and unlawful, under LA Specialty an employer’s rules that (i) prohibit the sharing of client or vendor lists with third parties; and (ii) prohibit employees from speaking to the media on the employer’s behalf, likely would be found lawful.  However, an employer likely will have gone too far if the rule or policy prohibits (i) employees from appealing to customers or vendors in support of a labor dispute, (ii) the disclosure of names and locations of customers or vendors derived from sources other than the employer’s confidential records, or (iii) employees from speaking to the media in their personal capacity.

NLRB Proposes Rule to Settle Once and For All: Student Teaching and Research Assistants Are Not “Employees”

As anticipated, today the National Labor Relations Board published a Notice of Proposed Rulemaking (“NPRM”) proposing a regulation which would establish that students at private colleges and universities who perform any services related to their studies for compensation, including teaching and research, are not “employees” within the meaning of Section 2(3) of the National Labor Relations Act. The proposed rule would bring certainty to the student employee-status issue, which the Board oscillated on three times in sixteen years. Per the Board, the proposed rule would promote the purposes and policies of the Act “which contemplates jurisdiction over economic relationships, not those that are primarily educational in nature.”

The Road to Rulemaking

Though Section 2(3) of the Act defines the meaning of “employee” in broad terms, the Act does not explicitly address whether students performing teaching and research services at private universities in exchange for stipends are included within that definition. Thus, over the course of 45 years, the Board has been asked to visit and re-visit the scope of the definition of “employee” in order to determine whether or not student teaching and research assistants fall within it.

Indeed, since the 1970s, the Board has issued five seminal decisions directly addressing the issue, beginning with its decision in Adelphi University, 195 NLRB 639, 640 (1972). In Adelphi, the Board found graduate students serving as teaching and research assistants were “primarily students,” not “employees.” The Board subsequently overruled itself three times on this issue; first in New York University, 332 NLRB 1205 (2000) (graduate teaching and research assistants were “employees”), next in Brown University, 342 NLRB 483 (2004) (the relationship between student assistants and their universities was “primarily educational” rather than economic), and most recently in Columbia University, 364 NLRB No. 90 (2016) (returning to NYU, finding that student teaching and research assistants were statutory “employees”).

In this atmosphere of unpredictability, the Board turned to rulemaking in order to provide institutions of higher education and students alike with certainty as to whether or not student teaching and research assistants are “employees” within the meaning of the Act.

The Proposed Rule

Importantly, the proposed rule makes clear that both graduate and undergraduate students performing services in connection with their studies would be excluded from the Act’s coverage. In crafting this broad rule, the Board relied on the majority decision in Brown that such students are “primarily students” with a “primarily educational” relationship with their universities, not an economic one. Further, the Board’s proposed rule rejected NYU and Columbia on the basis that Brown and the proposed rule “reflect[] an understanding of Section 2(3) that is more consistent with the overall purposes of the Act.”

In the NPRM, the Board articulated several premises in support of its proposed rule which underscored the educational aspects of students teaching and research assistantships. In particular, the Board highlighted the fact that teaching and research services performed by students are “vital” to their education, and that such students spend the majority of their time focused on coursework and studies rather than their assistantship duties. Moreover, the Board found that funding received by student assistants was more accurately characterized as “financial aid” rather than “consideration for work.” Finally, the Board noted that the faculty-student relationship is ill-suited to collective bargaining, as the relationship is centered on the advancement of students’ education, rather than the interests of a traditional employer-employee relationship.

Next Steps

The comment period runs for 60 days from the date the proposed rule is published in the Federal Register, which is scheduled to occur on Monday September 23. The NLRB has a history of extending comment periods, so the time to comment may be extended past 60 days. Next, the NLRB will review all of the submitted comments and determine whether its proposed rule should be modified. Once the Board has completed this process, which we suspect will take several months, the Board will issue a Final Rule and provide a date for when the effective date of the Final Rule. Based on this timeline, we anticipate a Final Rule to be out by Spring 2020.

NLRB Tips Scales in Favor of Employers When Drawing Distinctions Between Claims of “Inability to Pay” Versus “Competitive Disadvantage,” and “Surface” Versus “Hard” Bargaining

In recent weeks, the National Labor Relations Board has issued several employer-friendly decisions, and its September 13 decision in Arlington Metals Corp., 368 NLRB No. 74 (2019) was no exception. In Arlington Metals, the Board considered: (1) whether an employer’s statements during bargaining in response to a union’s economic proposals amounted to an asserted “inability to pay,” which would trigger an obligation to provide the union with access to the company’s financial information; (2) whether the employer engaged in bad faith “surface” bargaining by refusing to make financial concessions; (3) whether the employer unlawfully withdrew recognition from the union; and (4) whether following the withdrawal, the employer violated the Act by denying the Union access to its premises.

The Board, reversing the Administrative Law Judge, answered these four questions in favor of the employer.

Background

In Arlington Metals, the union was initially certified at the employer’s (Arlington Metal Corp.) Illinois steel processing facility in 2007. By 2013, the parties attended more than 35 bargaining sessions, but no collective bargaining agreement was reached. The employer, twice claiming good faith impasse was reached, unilaterally implemented economic terms and conditions of employment in 2009 and 2012. In 2014, the employer withdrew recognition from the union after receiving a decertification petition signed by a majority of the bargaining unit employees. After withdrawing recognition, the employer denied the union access to its premises for a safety inspection.

Claimed “Inability to Pay” vs. “Competitive Disadvantage”

In general, when an employer claims it is unable to pay what a union demands, the union is permitted to review relevant financial records to assess the truth of the assertions; information the union would otherwise not be privy to. There, during bargaining sessions in 2013, the employer responded to the union’s economic proposals with the following statements:

  • “Economic conditions had not changed, but if anything they were weaker,” and the employer was “doing the best it could and had kept everyone employed.”
  • “Production volume was down” and the employer “faced increased costs, increased taxes, and downward pressure on pricing.”
  • Competitors were “attempting to take business away” and “business was moving.”
  • The employer “had hoped conditions would improve” but “business had softened” and “[b]oth volume and price were down.”
  • The “‘iceberg’” the employer was on “[was] ‘melting’” and the “business had changed.”

Reversing the ALJ, the Board found that the above statements did not amount to an asserted inability to pay the union’s economic demands. Instead, the Board found the employer’s statements “amounted to an assertion of competitive disadvantage,” and it therefore had no obligation to provide the union access to its financial records.

Moreover, the Board found that even if the employer’s statements amounted to an asserted inability to pay, it had no obligation to respond to the union’s “wide-ranging request” (which included requests for a report on business conditions, 4 years of audited financial reports, income statements, balance sheets, cash-flow statements, sales listed by customer, and federal and state income tax returns) because the union failed to narrowly request “specific information to validate specific claims.”

Unlawful “Surface” Bargaining vs. Lawful “Hard” Bargaining

The Board also found that the fact that the employer rejected the union’s economic proposal and refused to make anything other than a “minor modification” to its economic counterproposal in response did not amount to bad faith bargaining. Rather, the employer’s position was typical of the “hard bargaining” between the parties, marked by “various states of deadlock for years,” during which both sides only made “minor concessions.”

Lawful Withdrawal of Recognition & Denial of Access

Finally, the Board found that the employer lawfully withdrew recognition from the union, and thus lawfully denied the union access to employer premises for a safety inspection. In particular, the Board found that the decertification petition was valid, as there was sufficient evidence of the authenticity of the signatures on the petition, which sufficiently supported the employer’s good faith belief the union no longer enjoyed majority support.

Takeaways

When bargaining with a union, employers should always be mindful of the precise language used when rejecting a union’s proposals based on company finances, or making other representations about the company’s financial health. Indeed, as seen in Arlington Metals, statements made by an employer at the bargaining table may later be scrutinized by an ALJ or the Board. Employers should similarly plan ahead when intending to engage in hard bargaining, as the employer’s actions in doing so may be reviewed by the Board. Nevertheless, while a different Board may have sided with the ALJ on each of the four issues presented in this case, the current Board has shown a clear willingness to give employers the benefit of the doubt.

NLRB Puts a Finer Point on Its Community of Interest Test with a New Three-Step Analysis

Still hard at work as we head into mid-September, the National Labor Relations Board, in a 3-1 decision (Chairman Ring and Members Kaplan and Emanuel in the majority, Member McFerran dissenting) announced a three-step test which clarifies how petitioned-for partial workforce units are analyzed under the traditional community of interest factors.

In 2017, the Board in PCC Structurals, Inc., 365 NLRB No. 160 (2017) rejected the Obama-era Board’s “micro-unit” concept (overruling Specialty Healthcare, 357 NLRB 934 (2011)) and reinstated the previously long-standing traditional community of interest test for determining whether a proposed bargaining unit is appropriate.  Under that test, the Board may consider a multitude of factors to determine if the petitioned-for unit shares a community of interest “sufficiently distinct” from employees excluded from the unit.  Such factors include the organization of departments, skills and training of employees, job functions, functional integration, contact, interchange, terms and conditions of employment, shared or separate supervision, and prior bargaining history.  The Board, however, did not provide further guidance on how to apply the factors.

Earlier this week, in The Boeing Company, 368 NLRB No. 67 (2019), the Board applied PCC Structurals and the traditional community of interest factors and rejected the petitioned-for unit that included just two classifications, Flight-Line Readiness Technicians (“FR Technicians”) and Flight-Line Readiness Inspectors (“FR Inspectors”), amounting to approximately 178 employees among the 2700 total production and maintenance employees working at Boeing’s South Carolina airplane manufacturing plant.  In doing so, it provide new guidance on how it will apply the community of interest test to bargaining unit requests.

The Board articulated a three-step process for determining whether a petitioned-for unit is appropriate under the traditional community of interest standard, as follows:

  • Step One: Shared Interests Within the Petitioned-For Unit. Per the Board, the analysis begins by assessing whether the classifications in the petitioned-for unit share sufficient interests among themselves, pursuant to the traditional community of interest criteria, discussed above.  If the putative members of the petitioned-for unit do not share sufficient interests, the unit is not appropriate, and the inquiry ends there.
  • Step Two: Shared Interests of Petitioned-For and Excluded Employees. Under the second step, the Board requires a comparative analysis to determine if the interests of employees excluded from the petitioned-for unit are sufficiently and meaningfully distinct and outweigh any similarities with those included in the petitioned-for unit.  If such distinct interests do not outweigh similarities, the unit is inappropriate, ending the inquiry.
  • Step Three: Special Considerations of Facility, Industry, or Employer Precedent. Pursuant to the third and final step, the Board explained that the analysis considers guidelines, if any, the Board has previously established for specific industries regarding appropriate unit configurations.

The Board Rejects the Small Unit Using the Three-Step Analysis in Boeing

After establishing the above-described three-step test, the Board applied that test to the facts at issue in Boeing.

Step One: Shared Interests Within the Petitioned-For Unit.

The Board found that the FR Technicians did not share interests with the FR Inspectors sufficient to establish a community of interest within the petitioned-for unit.  In so finding, the Board relied on the fact that FR Technicians and FR Inspectors were in separate departments, did not share any supervision, had different job functions, and a lack of interchange between the classifications.  Taken together, the Board found the interests shared between the two classifications were too disparate to form a community of interest, and the petitioned-for unit was therefore inappropriate.

Step Two: Shared Interests of Petitioned-For and Excluded Employees.

Although the Board’s Step One analysis could have ended the inquiry, the Board continued its analysis under Steps Two and Three in order to illustrate application of the newly-developed test.  Accordingly, under Step Two, the Board found that the excluded employees did not possess interests which were sufficiently and meaningfully distinct from, and did not outweigh similarities with, the interests of the petitioned-for unit of FR Technicians and FR Inspectors.

Specifically, the Board found that there was a high degree of functional integration among the excluded and included employees, and that the included classifications were in the same departments as excluded employees and shared supervision, shared most terms and conditions of employment, and shared most of the same skills and training.  The Board further found that any distinguishing factors between the included classifications and excluded employees were “relatively insignificant” for collective bargaining purposes.

The petitioned-for unit was thus also not appropriate under Step Two.

Step Three: Special Considerations of Facility, Industry, or Employer Precedent.

Finally, under Step Three, the Board found that there were no industry-specific guidelines applicable to the instant case.

Taken together, the Board concluded that the petitioned-for unit was inappropriate, vacated the Union’s certification, and dismissed the petition.

*          *          *

The Board has been particularly active lately addressing both long-standing precedent and more recent changes from the previous administration, issuing new decisions almost daily.  Stay tuned for more posts covering these latest decisions, undoubtedly of interest to employers and unions alike.

NLRB Dumps Longstanding “Clear and Unmistakable Waiver” Standard for More Employer-Friendly “Contract Coverage” Test

As we near the end of the agency’s fiscal year on September 30, the NLRB is churning out many significant decisions.  On September 10, the Board issued a sweeping decision concerning an issue that has divided the NLRB and D.C. Circuit Court of Appeals (as well as the First and Seventh Circuits, and partially, the Second Circuit) for years.  A 3-1 majority of the Board (Chairman Ring and Members Kaplan and Emanuel, with Member McFerran dissenting), adopted the “contract coverage” test instead of the “clear and unmistakable waiver” standard for determining whether an employer’s unilateral action is permitted by a collective bargaining agreement.  See MV Transportation, Inc., 368 NLRB No. 66 (Sept. 10, 2019).

Key Takeaway – Board Adopts the “Contract Coverage” Test and Applies it Retroactively

Rejecting the exacting “clear and unmistakable waiver” standard that had been Board law for nearly 70 years, the NLRB finally adopted the “contract coverage” test that the D.C. Circuit and other courts have utilized for decades.  The impact of this decision is that the NLRB has loosened the reins on employers defending against a Section 8(a)(5) unilateral change allegation by asserting contractual language privileged it to make the disputed change without further bargaining.  The holding sheds new light on the relevant analysis an employer (and union) now must undertake to determine whether the parties’ collective-bargaining agreement (specifically, management-rights provisions) afford the employer the right to unilaterally act.  The decision levels the playing field that had previously been skewed towards unions.

The prior “clear and unmistakable waiver” standard – which the Board majority remarked was “‘in practice, impossible [for employers] to meet,’ or virtually so” – had required an employer to establish that the contract “unequivocally and specifically express [the parties’] mutual intention to permit unilateral action with respect to a particular employment term.”  In other words, the parties were required to have bargained-over the employer’s right to unilaterally act and the collective-bargaining agreement must have specifically codified the parties’ agreement as to that issue.

Now, under the contract coverage test:

“[T]he Board will assess the merits of this defense by undertaking the more limited review necessary to determine whether the parties’ collective-bargaining agreement covers the disputed unilateral change (or covered it, if the disputed change was made during the term of an agreement that has since expired).  In so doing, the Board will give effect to the plain meaning of the relevant contractual language, applying ordinary principles of contract interpretation; and the Board will find that the agreement covers the challenged unilateral act if the act falls within the compass or scope of contract language that grants the employer the right to act unilaterally.”

The Board went on to note that in applying this test, “we will not require that the agreement specifically mention, refer to or address the employer decision at issue.”  However, the Board cautioned that the contract coverage test does not amount to a rubber stamp for all unilateral actions, citing decisions from the D.C. Circuit and First Circuit where courts rejected employers’ attempts to utilize management-rights clauses to apply to subject matters not reasonably addressed by those provisions.

The Board decided that the contract coverage standard applies retroactively – i.e., to all pending cases in whatever stage – concluding that doing so would not work a “manifest injustice” because the waiver standard has sustained judicial criticism for nearly 20 years and the parties could not have justifiably relied on the Board continuing to adhere to that standard.

Basis for the Majority’s Decision to Adopt the “Contract Coverage” Test

As is typical when overturning precedent, the Board majority went to great lengths to outline why it decided to depart from the “clear and unmistakable waiver” (in short, “waiver”) standard in relation to this defense, reiterating that it had “carefully considered this important issue” and that the holding is “more consistent with the purposes of the Act and sound labor policy.”

The Board majority outlined the bases for its holding, as follows:

  • The waiver standard necessarily required the Board to sit in judgment upon parties’ contract terms, which, according to Supreme Court precedent, it is not permitted to do. The majority cited several cases in a footnote (just the “tip of the iceberg”) where the Board declined to find a “clear and unmistakable waiver” based on the contract’s failure to expressly identify the specific unilateral action at issue, even though the agreement otherwise covered the employer’s conduct generally.
  • The waiver standard undermined contractual stability by requiring “perpetual bargaining” over contract terms instead of encouraging parties to negotiate comprehensive labor contracts in the first place.
  • The waiver standard also altered the deal the parties reached in collective bargaining by applying an exacting standard only to an employer’s right to act unilaterally, and not any other provisions or union obligations. In doing so, the waiver standard ignored that such a contractual right was part and parcel of the give-and-take of collective bargaining, and tilted the playing field in the union’s favor.
  • The waiver standard resulted in conflicting contract interpretations between the Board and the courts, and Section 301 of the LMRA authorizes federal courts, not the Board, to “fashion a body of federal law for the enforcement of…collective bargaining agreements.”
  • The waiver standard also undermined grievance arbitration because it encouraged unions to raise contractual disputes before the Board, where it was more apt for a favorable determination, which runs contrary to the policy established by the Supreme Court in the Steelworkers trilogy to resolve contractual disputes in arbitration.
  • Finally, the waiver standard has been “indefensible and unenforceable,” as the D.C. Circuit, which has plenary jurisdiction to review NLRB decisions, recently sanctioned the Board for continuing to adhere to it in NLRB decisions on appeal.

The majority commented that its decision did not conflict with Supreme Court precedent that referred to a “clear and unmistakable waiver” standard (see, e.g., Metropolitan Edison v. NLRB, 460 U.S. 693 (1983)), because those decisions did not squarely address the issue before the Board here, and to the extent those decisions relied on the Board’s expertise and experience in interpreting and applying the Act at the time, those same reasons underscore the Board’s holding here and warrant application of the contract coverage test.

Applying the Contract Coverage Standard to the Employer’s Unilateral Acts

At issue in the case was whether the employer, who operated a fixed route transit system, violated Section 8(a)(5) and (1) of the Act by implementing the following five policies without union agreement or first bargaining with the union to impasse:  (i) the addition of a light duty assignment; (ii) implementation of a new safety policy; (iii) modification of a schedule adherence policy; (iv) implementation of a new security sweep / breach policy; and (v) application of a new drive cam or event recording policy.

Applying the contract coverage test, the majority found that MV Transportation was within its contractual rights, among other reasons, to unilaterally implement the aforementioned changes.  Generally, each revision or new policy was covered by the parties’ CBA, specifically the broad management-rights clause where the company reserved and retained the right to, among other things, “adopt and enforce reasonable work rules.”

Member McFerran’s Dissent

Member McFerran issued a lengthy dissent, in which she lambasted the majority for overturning 70 years of precedent without notice or public participation, and for abandoning “one of the oldest and most familiar of Board doctrines” by, according to McFerran, failing to engage in reasoned decision making.  McFerran defended the waiver standard and suggested that instead of siding with the D.C. Circuit’s “shift in position” on this issue, the Board should have adhered to its traditional view and sought Supreme Court review. As we have noted in prior posts, the agency’s overturning precedent in the last several years is hardly new. Many longstanding decisions were overturned without notice and public participation.

McFerran, in dissent, asserted that the majority’s decision will result in industrial strife and destabilize collective bargaining because in light of this decision and others, unions may decide they are simply better off without a CBA.  The majority responded to this “dire prediction” by reeling off several reasons such a dystopian outcome is unlikely, such as the impetus for unions to enter into a security / dues arrangement in a CBA, the pressure to codify employee benefits in an written agreement, and the desire to institute a grievance-arbitration system to resolve employee complaints.

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To be sure, the impact of the Board’s precedent-changing decisions in recent years (and weeks) bears close monitoring.  We will continue to keep you informed as new decisions from this active Board are issued!

Board Affirms Right to Unilaterally Implement Changes to Benefit Plans Based on Waiver, Foreshadowing Potentially Looser Standard for Contractual Waivers

The NLRB continues to churn out decisions post-Labor Day.  On September 4, in a 2-1 decision,  (Chairman Ring and Member Kaplan, with Member McFerran dissenting), the NLRB found that  E.I. DuPont De Nemours did not violate the NLRA by unilaterally implementing changes to its company-wide retiree medical and dental plans based on the unions’ waiver of the right to bargain over such changes.

Although not reversing precedent, the Board signaled its inclination to reconsider what a collective bargaining agreement must contain to meet the “clear and unmistakable” waiver standard when an employer seeks to modify or terminate an existing benefit plan, suggesting in a footnote that a CBA need only make a brief, general reference to a benefit plan that includes a “reservation-of-rights” clause, rather than an express reference to that clause or to plan documents of which it is a part.

Key Facts

DuPont has company-wide medical and dental plans that apply to active members of the bargaining unit and retirees.  Three facilities were involved in the case:  Richmond, Nashville and Louisville, where employees are represented by different locals of the International Brotherhood of the DuPont Workers.  Each unit has had its own collective bargaining agreement and separate bargaining histories with DuPont, but at all those locations the unions have agreed to participate in the company-wide plans.

The benefit plans contained a reservation-of-rights provision, which provided that the employer retained the right to modify or terminate the benefit plan at its discretion.  The CBAs contained an “Industrial Relations Plans and Practices” article that listed the applicable company-wide benefit plans, and recognized the employer’s right to make changes to or terminate the plans, subject to any restrictions set forth in the article and applicable benefit plan documents.

In 2013, the employer ceased providing Medicare-eligible retirees (MERs) medical and dental coverage through the plans, and instead provided them with funds to purchase secondary medical and dental health benefits through a health reimbursement agreement.  This change would apply to current bargaining unit members when they become MERs.  The local unions were provided advance notice of the changes and objected; DuPont unilaterally implemented those changes pursuant to its reservation-of-rights authority.

Board Majority’s Decision Finding Waiver of the Right to Bargain

The Board reversed the ALJ and found that an “amalgam” of factors established a clear and unmistakable waiver of DuPont’s bargaining obligation:

  • Contractual Language: The parties’ collective bargaining agreements incorporated reservation-of-rights language from the benefit plan documents, enabling DuPont to terminate or modify the plans at its discretion; the CBAs further acknowledged that participation was “subject to the provisions of such Plans.”
  • Bargaining History: The parties’ bargaining history also supported a waiver finding because during negotiations, the unions expressly agreed to participate in the plans subject to DuPont’s reservation of rights to modify or terminate.
  • Past Practice: Although a union’s acquiescence standing alone cannot operate as a waiver, the majority found that waiver can be inferred from past practice, even a single instance.  Here, over several decades DuPont had implemented numerous changes to the plans unilaterally, without union objection.

These factors, taken together, supported the conclusion that the unions waived the right to bargain over the changes implemented to DuPont’s company-wide plans for retirees.

Member McFerran’s Dissent

Member McFerran dissented, reasoning that there was no evidence of contractual waiver pursuant to the reservation-of-rights clauses in the CBAs.  Moreover, bargaining history and past practice cannot compensate for the absence of contractual language evidencing a union’s clear and unmistakable waiver. The dissent cautioned that the majority’s endorsement of the notion that an “amalgam” of factors could establish waiver in a particular case, would undermine the “clear and unmistakable waiver standard.”

Takeaways:  Language Necessary to Establish Waiver and More Changes on the Horizon

As noted, this case did not reverse precedent, but is noteworthy nonetheless for what it instructs regarding modification/termination of benefit plans, and the contractual language required to demonstrate waiver and the right to act unilaterally.

In brief, the current state of the law is such that for a contractual waiver over an employer’s right to unilaterally modify or terminate the terms of a benefit plan, the CBA must:

  • Specifically include reservation-of-rights language; or
  • Specifically reference plan documents or summary plan descriptions that contain reservation-of-rights; or
  • Provide that participation in the plan is subject to the terms of the plan (which contains the reservation-of-rights language).

The real significance of this decision is the Board’s foreshadowing of future action.  The Board recognized the current, not uncommon tension between the Board and the D.C. Circuit Court of Appeals regarding the quantum of proof required to establish that a benefit plan, including reservation of rights language, has been effectively incorporated by reference in a CBA.

The Board has held that a CBA must expressly incorporate the reservation of rights clause  by reference or expressly incorporate the summary plan description that contains such language.  On the other hand, the D.C. Circuit has held that “brief, general references” to a benefit plan in a CBA is sufficient to incorporate by reference all provisions of the plan, including reservation-of-rights language.  See, e.g., Amoco Chemical Co., 328 NLRB 1220 (1990), enf. denied 217 F.3d 869 (D.C. Cir. 2000).  While the facts of this case did not require the Board to grapple with this issue and overturn precedent (because, according to the majority, the agreements specifically incorporated by reference the plan documents), the fact that the Board noted it “would be willing to reconsider” its precedent on this issue, clearly signals a willingness to move in the direction of  the D.C. Circuit on this issue once the right case comes along.

So, stay tuned!

National Labor Relations Board: Labor Day Roundup

While much of the country spent the last week of summer enjoying the last few days of sun, the National Labor Relations Board spent the week before its eponymous three-day weekend churning out a couple of important decisions.

A brief round-up of the Board’s recent activity in areas related to the intersection of Section 7 rights and independent contractors or non-employees, including related to leafletting and  misclassification issues, is discussed below.

Employers Can Legally Prohibit Non-Employees From Leafletting on Their Premises –Bexar County Performing Arts Center Foundation d/b/a Tobin Center for the Performing Arts and Local 23, American Federation of Musicians, Case 16-CA-193636 (N.L.R.B. August 23, 2019)

On August 23, the Board set new precedent, deciding that an employer can legally bar non-employees from leafleting on the employer’s premises even if those non-employees work for an on-site contractor.

The decision comes after an Administrative Law Judge (ALJ) ruled that the Bexar County Performing Arts Center Foundation illegally blocked members of the San Antonio Symphony from leafletting on the Center’s premises.  Though the members were Symphony employees, the Symphony used the Center for roughly 80% of its rehearsals and performances.  The dispute arose when members attempted to pass leaflets during a performance, criticizing the Ballet’s use of recorded-over live music.  The Center kicked them off the property.

The Board disagreed with the ALJ.  A majority of NLRB Chairman Ring and Members Emanuel and Kaplan found that contractor non-employees are not entitled to the same NLRA Section 7 access rights as statutory “employees are, and thus they are not entitled to the same access and protections.  The decision reverses prior cases holding the opposite, such as New York New York Hotel and Casino, 356 NLRB 907 (NLRB March 25, 2011) and Simon DeBartolo Group, 357 NLRB 1887 (NLRB December 30, 2011), which the current Board concluded wrongfully limited an employer’s Constitutional property rights.

In her dissent, Member McFerran criticized the majority for not only “scal[ing] back labor law rights for…employees who work regularly on property that does not belong to their employer,” but also for reversing precedent without any public input.

Overall, the ruling allows employers the right to prevent non-employees from leafletting on their premises.  However, the Board did carve-out workers who are not employed by the property owner but work “regularly and exclusively” on said property, without other “reasonably nontrespassory” ways of advocating their position, who must be permitted access.

Misclassifying Workers Does Not Violate the NLRA – Velox Express, Inc. and Jeannie Edge, Case 15-CA-184006 (N.L.R.B. August 29, 2019)

On August 29, in an anticipated decision, the Board held that an employer that misclassifies employees as independent contractors does not violate the NLRA.

In this case, Velox Express misclassified its employees as independent contractors, and an ALJ found that doing so violated the Act because independent contractors inherently fear reprisal for asserting protected rights reserved for employees.  The Board’s majority of NLRB Chairman Ring and Members Emanuel and Kaplan disagreed.  While the Board confirmed that Velox Express misclassified employees as independent contractors, the majority did not agree that misclassification alone interfered with Section 7 rights.

The Board reasoned that independent contractors can still collectively act, and it is not until an employer responds to such collective action with “threats, promises, interrogations, and so forth” that the employer violates Section 8(a)(1) of the NLRA.  For this reason, the Board agreed that Velox Express did violate the Act when it fired driver Jeannie Edge for complaining about the misclassification.  In her dissent, Member McFerran argued that “misclassification itself chills” workers’ Section 7 rights and that misclassified workers would fear retribution for acting inconsistently with their signed agreements, which in this case classified them as independent contractors.

This expected decision will relieve one potential risk for businesses when undertaking the fact-intensive and often difficult decision regarding worker classification.  Now, as long as employers do not subsequently retaliate or threaten misclassified workers, there is no liability under the National Labor Relations Act for alone incorrectly classifying workers as independent contractors rather than employees.

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