Labor Relations Update

Federal Appeals Court Partially Affirms Elimination of NLRB Rule, Hitting Fast-Forward Button on Representation Elections

A divided three-judge panel of the D.C. Circuit Court of Appeals partially affirmed a federal district court’s decision to vacate part of a rule issued by the National Labor Relations Board (the “Board”) in 2019 that eliminated several “quickie” representation election procedures established by a 2014 rule (the “2014 rule”).

In 2019, the Board issued this rule (the “2019 rule”), which changed a number of provisions from the 2014 rule that dramatically sped up the timeline for representation elections.  The practical effect of the 2019 rule, which we discussed here, was to impose a more deliberate pace on the election process, thus allowing more time for resolution of disputes.

The Board promulgated the 2019 rule without a notice-and-comment period, taking the position that the rule fell within an exception to the Administrative Procedure Act’s typical notice-and-comment requirement (the “APA exception”) for federal rulemaking.  The APA exception allows federal agencies to promulgate rules relating to the agency’s internal organization, procedure, or practice—i.e., “housekeeping” rules that do not affect regulated parties’ rights or interests—without notice-and-comment.

The AFL-CIO challenged the 2019 rule in the District Court for the District of Columbia, claiming that the rule was substantive and that the APA therefore required the Board to provide a public notice-and-comment period.  On May 30, 2020—one day before the 2019 rule was to go into effect—the district court struck down several of the rule’s provisions as substantive rather than procedural.

On appeal, the panel only affirmed the district court’s ruling on these grounds as to three of the five challenged provisions of the 2019 rule:

  • Voter List Production – The 2019 rule extended the period within which employers must provide a list of eligible voters to the union following the Regional Director issuing a direction of an election, from two business days (as permitted by the 2014 rule) to five. The panel’s holding means that employers must continue to produce voter lists in the shorter timeframe, which employers complain has led to increased possibility of errors.
  • Delayed Certification – The 2019 rule directed Regional Directors to certify election results only after any requests for review by the Board had been resolved or, in the absence of requests, after the window to seek review had passed. The 2014 rule directed Regional Directors to certify elections regardless of whether a request for review had been filed.  Because an employer’s duty to bargain with a union arises only when that union has been certified, this rule change directly affected when this duty attaches.
  • Election Observers – The 2019 rule imposed narrower criteria on who may be selected as an election observer, requiring that observers be a current member of the voting unit or, if such an individual is not available, a current non-supervisory employee. (The 2014 rule permitted any observer of the parties’ choosing, subject to the Regional Director’s limitations.)  Even though the National Labor Relations Act (the “Act”) does not create a substantive right to election observers, the panel reasoned that imposing new observer requirements substantively affected the parties’ interests in fair elections.

However, the panel found that the District Court erred by vacating two additional provisions from the 2019 rule as requiring notice-and-comment, finding that these two provisions merely regulated the Board’s internal “housekeeping” matters and thus fell within the APA exception:

  • Pre-Election Litigation of Certain Issues – The 2019 rule permits parties to litigate disputes regarding voter eligibility, unit scope, and supervisory status in front of the Regional Director before the election takes place. The 2014 rule allowed these disputes to be resolved after an election.
  • Election Scheduling – The 2019 rule established a presumptive waiting period of 20 business days between the Regional Director directing an election and the actual election date. Besides this waiting period, which allows for possible requests for review to the Board, the 2019 rule did not otherwise change the “earliest date practicable” standard for scheduling an election.

Retaining these timing changes will allow for more thoughtful and efficient dispute resolution so that elections can go forward without pending challenges hanging over the parties’ heads.

The panel also found that, contrary to the AFL-CIO’s arguments, the 2019 rule was not arbitrary and capricious as a whole.  In promulgating the rule, the Board acknowledged that the rule would have the effect of making elections take longer but reasonably explained that its purpose in promulgating the rule was to promote election transparency, uniformity, finality, and certainty.

Finally, the panel struck down a provision of the 2019 rule that permits an election to go forward even if one party has filed a request for review, so long as the ballots are impounded and remain unopened pending the review’s decision.  The panel agreed with the AFL-CIO that this provision violated the Act’s prohibition on the Board’s review operating as a “stay of action” taken by a Regional Director.

Takeaways

It is doubtful this ruling will change the way elections are being conducted today.  In response to the panel’s decision, Board Chair Lauren McFerran stated the Board will not change how it administers elections, noting that the decision may be appealed, and that the agency is con

Even though the panel reversed the district court’s order vacating the pre-election litigation and election scheduling provisions of the 2019 rule, it also remanded the matter back to the district court to consider the AFL-CIO’s other arguments against them in the first instance.  Therefore, it is possible that these two provisions will still ultimately be found invalid on some other grounds.

Either side still may decide to further appeal this decision, first to the full D.C. Circuit and potentially up to the Supreme Court, where Justice Ketanji Brown Jackson—who authored the May 2020 district court decision striking down these provisions—now sits.

As for the three provisions that the panel agreed fell outside of the APA exception—regarding voter list production, delayed certification, and election observers—the panel’s holding orders that they will remain vacated unless and until the Board re-promulgates them with a notice-and-comment period.

As always, we will continue to monitor any developments.  Please do not hesitate to contact us if you have any questions.

No Limits: Board Finds Hotel Improperly Limited Bargaining Subjects

On December 16, 2022, the National Labor Relations Board (“NLRB” or “Board”) issued its decision in Troutbeck Company, LLC d/b/a Brooklyn 181 Hospitality, LLC, among the latest in an eventful string of rulings over the last two weeks.  In a 2-1 decision (Chairman McFerran and Member Prouty in the Majority, with Member Ring dissenting), the Board held that Troutbeck Company, LLC (“Company”) violated Sections 8(a)(5) and (1) of the National Labor Relations Act (“Act”) when it refused to bargain with the New York Hotel and Motel Trades Council, AFL–CIO (“Union”) over economic subjects until all non-economic subjects had been resolved.

This case provides an important cautionary tale that engaging in the practice of refusing to negotiate over certain bargaining subjects until other issues are agreed to can violate the Act.

Factual Background

The Company owns a hotel in Brooklyn where the workforce is represented by the Union. In June 2020, at the parties’ second bargaining session, the Company’s negotiator proposed several “ground rules,” including that the parties first discuss the non-economic terms of the agreement before turning to the economic subjects at issue. The Union rejected the rule, stating that “we do not want to constrain the parties’ capability to freely explore and discuss any items, such as specific proposals, terms, or conditions, during bargaining sessions.”

The Company then proposed a modified version of the rule: “The parties agree to focus primarily on non-economic subjects before turning to economic subjects, but it is understood that this general framework does not preclude either party from raising and freely discussing any item at any point in the bargaining process.” The Union also rejected this rule, stating that the Company was not entitled to “preclude the parties from bringing up certain subjects.”

Despite the Union’s rejection of the rule, the Company moved forward with bargaining focusing only on non-economic terms first. Meanwhile, the Union made economic proposals to which the Company refused to respond until the non-economic proposals were settled.  The Company refused to provide a comprehensive proposal or counter-proposal on all issues, despite the Union’s repeated requests for one.

A 7-month hiatus of bargaining followed due to the COVID-19 pandemic and its impact on the hotel industry. When bargaining continued in 2021, the parties continued to disagree about the mechanics of bargaining—the Company disagreed with the Union’s refusal to discuss individual topics without a complete proposal from the Employer, and the Union argued that meaningful bargaining could not occur until it received a wage proposal. Both parties agreed to leave this issue for the Board to decide.

Majority Decision – Company Violated the NLRA

The Board held that the Company violated Section 8(a)(5) of the Act for failure to bargain in good faith as a result of its bargaining tactics. The NLRB reasoned that while parties may make good-faith proposals and agree to certain ground rules regarding the subject and sequence of negotiated terms, there was obviously no such agreement here between the parties.

Citing longstanding precedent, the Board concluded that the Company “unreasonably fragmented the negotiations and drastically reduced the parties’ bargaining flexibility,” by insisting on an agreement concerning non-economic items before responding to the Union’s proposal regarding economic issues.  Moreover, as a result of the back-and-forth, rather than negotiating over the substantive terms at issue, the parties “expended significant bargaining time discussing how negotiations would be conducted.”

Dissent – Company Did Not Violate the NLRA 

Member Ring dissented, finding that the COVID-19 pandemic and good-faith disputes between the parties accounted for their inability to make progress in the negotiations. Specifically, he noted that the Company reasonably proposed negotiating subsets of certain topics, starting with non-economic subjects, while the Union conveyed a preference for reviewing an agreement in its entirety.  Member Ring emphasized that “[w]hile the Board has held that a party violates [the Act] by refusing indefinitely to bargain about economic matters until all non-economic matters are resolved, no such refusal has been proven here.”  Member Ring’s dissent stressed that the Board’s majority decision undermined the system of collective bargaining by intervening prematurely in parties’ still-ongoing negotiations.

Takeaways

The decision serves as a reminder about how the Board may view certain strategies utilized by a bargaining party, even commonly-used tactics like the one at issue in Troutbeck.  Although this tactic—insisting that the parties bargain over non-economic terms before moving to economic terms—is not a per se violation of the Act, bargaining parties should proceed with caution in light of the Board’s decision.  If the other side agrees with this “ground rule,” then there is no issue.  However, this strategy can backfire if the other side refuses to segment the bargaining subjects.  While these cases are heavily fact-dependent, if one party insists on refusing to negotiate over certain subjects, then the Board may find that such conduct evidences a desire not to reach agreement in violation of the duty to bargain in good faith under the NLRA.

NLRB Nixes Reopening Remedy after Remand from D.C. Circuit

In a 2-1 decision (Members Kaplan and Ring in the Majority, with Member Prouty dissenting), the National Labor Relations Board (“NLRB” or “Board”) revisited its 2020 decision in RAV Truck & Trailer Repairs, Inc., 369 NLRB No. 36, reversing the decision in part.  Notably, the Board reversed its earlier order requiring the Company to reopen a facility that was closed due to union animus, citing the passage of time and futility of doing so at this stage.  The Board’s decision on remand demonstrates the impact that an appeal that lasts several years can have on the impact of a remedial order by the NLRB.

Factual Background and Procedural History

In 2020, the Board held that the Company violated the National Labor Relations Act (“NLRA”) by unlawfully discharging one employee and laying off another because of their union involvement.  The Board also found that the Company closed its facility in efforts to prevent union organizing there. As part of its remedy, the NLRB ordered the Company to reopen and restore the closed facility.

The Company appealed to the U.S. Court of Appeals for the District of Columbia.  On appeal, the D.C. Circuit affirmed the Board’s decision that dismissing the employees violated the NLRA, but the Court remanded for further consideration concerning the lawfulness of the Company’s closure of its facility.

The Court also held that “the Board did not properly consider whether its order to restore the RAV auto repair shop would be legally permissible, necessary, or unduly burdensome.”  The Court then criticized the Board’s order requiring the Company to restore the facility, finding that, given these circumstances, the Board’s ruling ordering the Company to “reopen and restore RAV’s business operation as it existed on May 14, 2018” was not “even factually possible.”  The Court noted that the Company’s lease terminated on May 31, 2018, which had no relation to the union organizing activity.

NLRB’s Decision on Remand

On remand—more than 4.5 years after the facility closed—the NLRB held that the Company’s facility closure was unlawful and motivated by the employees’ union organizing activity in violation of long-standing Board precedent. The Board concluded that the “suspicious timing” of the closure immediately after the two layoffs was “strong evidence” of union animus.

However, the Board agreed with the D.C. Circuit that its requirement to reopen the shop would be unduly burdensome, because restoring the facility would require the Company to “either renew its old lease, which ended over 4 years ago, or enter into a new one.” In particular, here, the Board cited the “passage of time,” as well as other factors, which contributed to its finding that its prior restoration and bargaining orders are no longer appropriate.

Takeaways

This decision demonstrates the bounds of the Board’s remedial powers and highlights how it may be strategically advantageous for companies to appeal to the Circuit.  This may be especially true with respect to orders that require parties to restore the status quo in a manner that could be factually difficult to accomplish many years later—like reinstatement, bargaining orders, reopening closed facilities, etc.  In such cases, like RAV Truck, appealing to the Circuit could be an attractive option for employers, as the passage of time could make compliance many years later a futile endeavor.

“Fight On”; NLRB’s Regional Office Pursuing Unfair Labor Practice Charges on Behalf of College Athletes against USC, Pac-12, and NCAA

On December 15, 2022, the Regional Director of the Los Angeles Region of the National Labor Relations Board (“NLRB” or “Board”) found “merit” in the unfair labor practice charges filed by football and men’s and women’s basketball players against the University of Southern California (“USC”), the Pac-12 Conference, and the NCAA.

The charges raise the potentially important question whether college athletes should be deemed to be “employees” entitled to protections under the National Labor Relations Act (“NLRA” or “Act”). Such a determination could lead to a renewed effort by college athletes to organize and join a labor union for purposes of collective bargaining.  In addition, colleges and universities (and potentially, athletic conferences and the NCAA) could be held liable for violations of the Act with respect to conduct engaged in toward college athletes.

The charges at issue here were initially filed in February 2022 by the National College Players Association (“NCPA”), a nonprofit advocacy organization, which alleged that USC, the Pac-12, and the NCAA misclassified college athletes as “non-employees,” and suppressed their Section 7 rights under the Act, including the right to speak about compensation and working conditions.

This case comes nearly eight years after Northwestern University football players’ petition to unionize.  Then, after the Chicago Regional Director of the NLRB ruled that players receiving athletic scholarships are “employees” under the Act, the full Board ultimately declined jurisdiction on separate grounds, ending the players’ unionization drive, but leaving open the question of whether college athletes are “employees” under the NLRA.

In September 2021, NLRB General Counsel Jennifer Abruzzo stated in a memo that her position is college athletes are “employees” and entitled to protections under the NLRA. GC Abruzzo instructed the Board’s Regional Offices to treat “Players at Academic Institutions” as employees that have the right to join a labor union, paving the way for the charges that the NCPA filed in February.

Based on the NLRB General Counsel’s prosecutorial directive, the Regional Director’s determination to issue a Complaint in this matter is not surprising.  The next steps are a trial before an Administrative Law Judge in the coming months, which likely will address the “employee” status of college athletes under the Act;  whether the conference and NCAA have any potential liability under a “joint employer” theory; and whether, based on the facts as they are developed, those bodies violated the Act with respect to the college athletes.  The losing party will have the right to appeal to the Board, with potential subsequent appeals of rulings to the U.S. Circuit Court of Appeals and, possibly, the U.S. Supreme Court.

Of course, USC, the Pac-12 and the NCAA have significant defenses to the unfair labor practice charges.

The employee status of college athletes is also at issue in a case currently pending before the Third Circuit Court of Appeals, Johnson et al. v. NCAA et al., involving a different federal statute, namely the Fair Labor Standards Act.  We will continue to monitor these and other cases relating to the legal status of college athletes.

It’s Up To You New York, New York; NLRB Reinstates Worker-Friendly Standard for Access to Third-Party Property

The National Labor Relations Board (“NLRB” or “Board”) capped off an extremely busy week, by issuing another precedent-reversing decision, on the last day of Republican Member John Ring’s 5-year term.  In Bexar County II, 372 NLRB No. 28, the Board revised the standard and thus limited the circumstances property owners can limit access to off-duty employees of an onsite contractor, overruling the standard adopted in Bexar County I, 368 NLRB No. 46 (2019) and returning to the test laid out by the NLRB more than 11 years ago, in New York, New York Hotel & Casino, 356 NLRB 907 (2011).

The case addresses whether property owners can lawfully bar non-employees from accessing their property to engage in protected union activity like leafletting, even if those non-employees work for an on-site contractor.  This new standard is far more favorable to a contractor’s employee’s rights to access the property, because, to limit access, the property owner must demonstrate that:

  • The protected activity “significantly interferes” with the owner’s use of their property; or
  • The exclusion is justified by another legitimate business reason (such as the need for the property owner to maintain production and discipline).

The Previous Standard Under Bexar County I

 In its 2019 decision, Bexar County I, the Board established a new standard that a property owner may lawfully prohibit the off-duty employees of its on-site contractors (or licensees) from accessing its property to engage in Section 7 activity unless (1) the off-duty employees regularly and exclusively work on the property, and (2) the property owner cannot show the off-duty employees do not have one or more reasonable non-trespassory alternatives for communicating their message.   This decision strengthened private property owner rights when it comes to non-employees and Section 7 rights.

According to the Board, “regularly” meant that the contractor employee regularly performed services or conducted business on the owner’s property, and “exclusively” meant if contractor employees performed all of their work for that contractor on the owner’s property, even if they had a separate employer/job elsewhere.

While on appeal, the D.C. Circuit Court found that the Bexar County I standard was inconsistent and arbitrary in how it was applied to the workers in this case (which we reported on here), and remanded the case to the current Board, which set the table for this Board to potentially announce a new version of the test.

A Return to the New York, New York Standard

Aligning itself with the D.C. Circuit opinion on appeal, the Board found that the Bexar County I test “essentially strip[s] off-duty contractor employees whose employer does not own the property where they work from having Section 7 rights at their workplace.” Rather than modify the Bexar County I standard, the Board decided to abandon it altogether because it “fundamentally fails” workers’ rights under the NLRA. Instead, and in accordance with the General Counsel’s request, the Board adopted the New York, New York test, enunciated above.

In balancing the countervailing interests of a property owner’s right to exclude individuals from its premises with contractor employees’ rights to exercise Section 7 activities under the Act at their work location, the Board held that the New York, New York test more clearly and sufficiently protects Section 7 activity and promotes the Act’s underlying purposes.

Critical to its decision, the Board explained that, although off-duty contractor’s employees do not fit neatly into the text of Section 7, they are not outsiders to the property and should be protected by the Act to engage in Section 7 activities at their workplace. According to the Board, the owner’s property might be the only place that the contractor employees can effectively reach a small, specific audience through which they would like their messages on working conditions shared.

Further, the Board went out of its way to state that property owners can still fully protect their property interests without excluding the off-duty contractor employees—for example, the contractor-employer could agree to use its employment authority to enforce the property owner’s rules, or the property owner could exercise its “legitimate managerial interests” in preventing improper interference with its property.

As is typical, the Board announced that the New York, New York test applies to this case and to all pending cases before the Board.

 Takeaways

 This decision clearly affords greater rights to off-duty contractor-employees seeking to engage in Section 7 activity at their workplaces.  Now, as it was prior to 2019, property owners have the burden of demonstrating the individuals’ conduct “significantly interferes” with the use of the property, or that legitimate business reasons (e.g., need to maintain operations, production or discipline) support the exclusion.

While the Board emphasized that the test endorsed in its Bexar II opinion does not eliminate property owners’ rights to exclude off-duty contractor employees, and instead, it places articulable limits on these rights that are easier for the Board and administrative law judges to apply than the Bexar County I test, the proof will ultimately be in how this standard will be applied.

As always, we will continue to monitor for updates.

 

 

Johnnie’s on the Spot; Board Reaffirms Standards for Employer Interrogations of Employees in Preparation for NLRB Proceedings

On the eve of the last day of Member Ring’s term, and in the third in a string of significant rulings by the National Labor Relations Board (“NLRB” or “Board”) (which we reported on here and here)—with potentially more to come—the Board, in Sunbelt Rentals, Inc., 372 NLRB No. 24 (2022), affirmed the standards applicable when an employer interrogates an employee in the course of preparing a defense to an unfair labor practice (“ULP”) charge, which were established in a case decided more than 58 years ago, Johnnie’s Poultry, 146 NLRB 770 (1964).

Johnnie’s Poultry Standard

Over the years, the Board has consistently applied the Johnnie’s Poultry procedures, balancing the “inherent danger of coercion” in employer questioning of employees in preparation for Board proceedings, while also acknowledging that employers have a countervailing “legitimate cause to inquire” to prepare their defense to ULP allegations.

Johnnie’s Poultry established that during such interviews, employers must (1) communicate to the employee the purpose of the questioning; (2) assure the employee that no reprisal will take place; and (3) obtain the employee’s participation on a voluntary basis.  The Board has held that failure to provide these safeguards renders the interrogation per se unlawful.

While courts reviewing NLRB decisions on this issue have generally agreed that whether Johnnie’s Poultry safeguards have been provided in advance of questioning is a relevant consideration in determining whether the employer violated the Act, some courts have disagreed with this bright-line approach and have instead applied a “totality of the circumstances” test, finding that whether such questioning is given is only one of potentially several factors to consider.

NLRB Reaffirms Bright-Line Johnnie’s Poultry Requirements

In Sunbelt, the Board found that while a totality of the circumstances test is used for analyzing most allegations of coercive employer questioning, a different standard must apply where an employer questions employees for the purpose of investigating facts relevant to a ULP complaint because of the unique interests at stake.  On one hand, there is an inherent danger of coercion in such questioning, but on the other, employers have a countervailing legitimate cause to inquire in order to prepare to defend themselves at the ULP hearing.

The Johnnie’s Poultry standard, according to the Board, appropriately balances these interests by permitting the employer to question employees on matters that involve Section 7 activity without incurring liability if the employer observes the particular safeguards that are meant to minimize the coercive impact of the interrogation. The Board also found that the simplicity and predictability of the Johnnie’s Poultry standard encourages employer compliance, and the bright-line nature of the safeguards offer stability and clarity in the law.

The Board rejected the totality of the circumstances test because it risks insufficiently weighting the heightened risk of coercion that is present when an employer questions employees before a hearing, as it would treat that risk “as just one among numerous factors, with no guidance as to how much weight any individual factor carries.”

Additionally, unlike the prophylactic effect of the Johnnie’s Poultry standard, the totality of the circumstances test “would not affirmatively prevent unlawful coercion because it relies on an after-the-fact analysis to determine whether the questioning was coercive.”

The dissenting members (Ring and Kaplan) proposed adopting a rebuttable presumption standard, under which an employer’s failure to provide the Johnnie’s Poultry safeguards would be presumed coercive, but the employer would then be provided an opportunity to rebut that presumption by showing, by a preponderance of the evidence, that the questioning was not coercive under the totality of the circumstances.  The majority rejected this suggestion because such an approach “fails to ensure that employer questioning…is noncoercive, invites employers to provide post hoc rationalizations, and opens the door for employers to probe into employees’ union sympathies.”

Finally, the Board majority rejected the argument, advanced in an Eight Circuit case that overturned a Board decision finding the employer liable for failing to give Johnnie’s Poultry assurances, that the standard infringes on free speech rights under Section 8(c) of the NLRA.  The Board reasoned that the Johnnie’s Poultry standard actually allows the employer to engage in a broader range of questioning than the Board permits in other contexts “because the assurances mitigate employee concerns about potential retaliation.”

Takeaways

The Board reaffirmed what had been a well-settled rule under NLRB precedent, despite many reviewing courts having taken a different approach:  when employers question employees in connection with defending against a ULP proceeding, employers must give Johnnie’s Poultry assurances or risk a per se violation of the Act regarding the questioning.

Importantly, while departing from the bright-line safeguards results in a per se violation, if an employer simply provides these assurances at the outset, it does not wholly insulate an employer from a subsequent ULP charge of coercive questioning.  That will, of course, depend on the actual questions asked.

Finally, always get Johnnie’s Poultry assurances in writing.  In addition, defense of an unfair labor practice is not the only proceeding where the assurances should be given. It is the safe and prudent course of action to give the proper assurances when interviewing any union-represented employee as part of a workplace matter, whether it be a sexual harassment investigation or in preparation for an arbitration under a collective bargaining agreement.

Special Delivery: NLRB Returns to Obama-Era Standard to Limit Employer Ability to Change a Proposed Bargaining Unit

The National Labor Relations Board continues its December precedent merry-go-round with a return to the Specialty Healthcare, 357 NLRB 934 (2011) (“Specialty Healthcare”) standards for bargaining unit determinations.  In American Steel Construction, 372 NLRB No. 23, the Board overturned PCC Structurals, Inc., 365 NLRB No. 160 (2017) (“PCC Structurals”) (which had, itself, restored traditional community-of-interest analysis).  This is just the latest in a flurry of Board decisions coming down before Member John Ring’s term ends on December 16, 2022, and one of many foreshadowed by General Counsel Jennifer Abruzzo’s enforcement agenda (which we discussed here).  Once again, the Board is potentially ushering in an era of “micro units” by giving unions extremely broad latitude in establishing the scope of a petitioned-for bargaining unit.

“Overwhelming Community of Interest” and the Specialty Healthcare Unit Determination Standard

Under Specialty Healthcare, a bargaining unit will be considered appropriate if (i) it consists of  a readily identifiable group, (ii) that group shares a community of interest, and (iii) it is “sufficiently distinct” from excluded employees.  In order to establish that certain employees excluded from a proposed unit are not “sufficiently distinct,” the employer must establish that the excluded employees can show an overwhelming community of interest with the unit members.  (We have discussed Specialty Healthcare and its application on a number of occasions over the years in posts).

In contrast, prior to Specialty Healthcare and under the PCC Structurals standard (which we have previously discussed here and here), to add employees to a bargaining unit, the employer needed to show only that those employees have interests that are not “meaningfully distinct” from those of the proposed unit members.

The Board Majority (Chairman McFerran and Members Wilcox and Prouty, with Members Ring and Kaplan dissenting) explicitly stated that the goal was to give more deference to the employees’ choice of unit structure, and in a footnote, the Board also suggested that this standard honors employees’ “broader Constitutional right to freely associate.”

According to the Board, for excluded employees to share an “overwhelming” community of interest with unit members, their interests must be “near-indistinguishable.”  This is a much higher standard to meet than simply showing that including the excluded employees would make for a more optimal, efficient, or appropriate unit.

Takeaways

The primary effect of the Board’s decision is that it will now be more difficult for employers or other parties to challenge the appropriateness of petitioned-for units.  It is likely to cause a rush in petitions for “micro units” tailored to union-sympathetic employees, as it is easier for a union campaign to win the approval of fewer employees.  This could fracture workplaces as different employee sub-groups negotiate their own agreements with the same employer.

As always, we will continue to keep you posted.

A Direct Hit: NLRB Expands Make-Whole Remedies to Cover All “Direct or Foreseeable” Financial Harm

In a decision, Thryv, Inc., 372 NLRB No. 22, that was foreshadowed by recent invitations for briefs and prosecutorial conduct by NLRB General Counsel Jennifer Abruzzo (see our prior posts here and here), the National Labor Relations Board (“NLRB” or “Board”) issued a significant ruling on December 13, 2022, that the standard make-whole remedy for employees harmed by an employer’s unfair labor practice (“ULP”) may include compensation for “all direct or foreseeable pecuniary harm” as a result of the ULP.

Prior to this decision, where an employee was wrongfully discharged in discriminatory fashion for exercising their rights under the National Labor Relations Act (“NLRA” or “Act”), the employer was typically required only to make the employee whole through back-pay and/or reinstatement.  Now, employees can seek recovery of all other financial harms they can show that they have suffered as a direct result of the wrongful termination.

This decision applies retroactively to every case in which the Board’s standard remedy would include make-whole relief for employees, and is sure to have significant consequences for employers faced with an unfair labor practice charge.

The underlying case, involving a finding that a particular layoff violated the Act was not remarkable.  But, the Board used the case to “revisit and clarify our existing practice of ordering relief that ensures affected employees are made whole for the consequences of an employer’s unlawful conduct.”  The Board expressly ordered that the respondent employer must compensate all affected employees “for all direct or foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice.”

The Board did not detail the specific categories or types of damages that could be received in a case.  Instead, in addition to the standard make-whole remedies like reinstatement and/or back-pay, the NLRB General Counsel can, after there is a finding of liability, present evidence as to the amount of actual pecuniary harm, the direct or foreseeable nature of that harm, and why that harm is due to the respondent’s ULP.  Once that is presented, the employer can present evidence challenging the amount of money claimed, argue that the harm was not direct or foreseeable, or that it would have occurred regardless of the ULP.

The rationale provided by the Majority in changing decades of case law (Chairman McFerran and Members Wilcox and Prouty, with Members Ring and Kaplan dissenting) was that this standard satisfies the Board’s statutory obligation to provide “meaningful, make-whole relief for losses incurred” as a result of the respondent’s unlawful conduct, and is consistent with the manner in which the Board has previously exercised its remedial authority under the Act.

In particular, the Board noted that employees who were laid off in violation of the Act may be forced to incur significant financial costs, such as out of pocket medical expenses, credit card debt, or other costs simply in order to make ends meet.  Again, the NLRB declined to describe every type of conceivable remedy that could be ordered pursuant to this standard and left that to be interpreted based on the standard issued here and the body of precedent.

The NLRB went out of its way to say that it was not requiring an award of “consequential damages,” noting that it is a term of art used to refer to a specific type of legal damages awarded in other areas of the law (like in torts and contracts) and fails to describe the make-whole remedy the Board has espoused here.

Finally, and critically, the Board made clear that this shift in remedial authority for make-whole relief is not to be exercised only in “extraordinary” or “egregious” cases—rather, it should be the standard applied in every make-whole case.  Indeed, the Board claimed that these types of remedies are not punitive, intending only to punish “bad actors,” but are intended to rectify the harms actually incurred by the victims of the ULPs and are restorative in nature.

 Takeaways

The NLRB’s directive opens a Pandora’s Box for employers.  Application of this new standard will make the calculation of potential liability difficult to predict for employers, because the damages owed may vary based on the individual financial circumstances of a particular employee and the impact of the adverse employment action on that employee.

Application of this new standard will put a greater focus at the post-trial ULP compliance stage, and might make settling ULPs more difficult given the uncertainty of these types of damages.  While the NLRB General Counsel will have to satisfy its burden of proof with evidentiary support to substantiate the employees’ claims for pecuniary harm, such as through receipts, invoices, bills, and other financial statements, the fact that the NLRB made clear that any ambiguity or uncertainty in the evidence must be resolved in favor of the wronged party—not the wrongdoer—compounds the impact of this decision on employers.

Although the NLRB cautioned that it has faith in the compliance proceeding to expeditiously and sensitively deal with the more expansive process that will result when trying to resolve these issues, it is conceivable that ordering these additional remedies will delay resolution of the ULP and/or unnecessarily intrude on the privacy rights of the employees, given the types of evidence that might be required.

This will certainly be an important area to monitor as the case law develops and the Board and ALJs issue case-specific rulings based on this new standard from the Board.

Member John Ring’s term ends on December 16, 2022, so we expect the Board to issue a number of decisions that have been pending with the full 5-member Board before the end of the year.

As always, we will continue to keep you posted.

 

SCOTUS Denies Review and Leaves Seattle’s “Play-or Pay” Ordinance Intact

On November 21, 2022, the Supreme Court declined to review whether federal law preempts a Seattle Ordinance mandating that large hotels offer their employees health insurance coverage or increased pay.  This left the Ninth Circuit’s ruling, which found that the particular ordinance was not preempted, as the last word on the issue (at least for now).

Background Regarding the Seattle Ordinance

The Seattle Ordinance mandates that covered employers in the hotel sector make minimum monthly healthcare expenditures on behalf of their covered employees.  Employers can satisfy the Ordinance in one of three ways:

  1. by making the minimum monthly payments to a third party, such as an insurance carrier;
  2. by including covered employees in a self-funded healthcare plan offering average per-capita monthly expenditures for the covered employees that match or exceed the mandated minimums; or
  3. by making direct monthly payments to their covered employees that match or exceed the mandated minimums.

The Ninth Circuit’s Decision

In March 2021, the Ninth Circuit held that the Seattle Ordinance was not preempted by ERISA.  In so ruling, the Court reasoned that a local ordinance mandating that employers in the hotel industry offer workers certain minimum monetary payments for healthcare expenditures is not tantamount to a state or local law mandating the creation of an ERISA-covered benefit plan because an employer “may fully discharge its expenditure obligations by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to [a third party].”

Petitioner’s Arguments in Support of SCOTUS Review

The ERISA Industry Committee (“ERIC”), a trade association representing large employers who sponsor ERISA-covered plans, petitioned the Supreme Court to review the Ninth Circuit’s decision, urging that review was necessary to preserve “ERISA’s national uniformity” and to settle a circuit split between, on the one hand, the Ninth Circuit, which found that the Seattle Ordinance was not preempted by ERISA and, on the other hand, the First and Fourth Circuits, which found that similar local ordinances in Massachusetts and Maryland, respectively, were preempted by ERISA.

ERIC argued that the Seattle Ordinance makes “reference to” ERISA-covered plans and thus is preempted by ERISA.  ERIC explained that, even though the Seattle Ordinance had an “or pay” option, most covered employers—especially the large hotel employers targeted by the Ordinance —already “have pre-existing ERISA plans,” and, therefore, complying with the Seattle Ordinance will invariably necessitate amendments to employers’ existing ERISA plans.  As ERIC explained, that was precisely the reason the First and Fourth Circuits concluded that similar laws were preempted by ERISA:

  • In Retail Industry Leaders Ass’n v. Fielder, 475 F.3d 180 (2007), the Fourth Circuit held that a Maryland law that required a single employer (Wal-Mart) to spend 8% of total wages on state health insurance costs or else pay an equivalent shortfall to the state was preempted by ERISA, finding that despite the “or pay” option, the law offered employer no rational choice but to alter their ERISA plans in order to avoid paying a penalty.
  • Similarly, in Merit Construction Alliance v. City of Quincy, 759 F.3d 122 (2014), the First Circuit found a local ordinance preempted by ERISA, where it regulated apprenticeship programs, because “employers could comply only by using an existing ERISA apprentice plan or establishing a separate plan” —in this case, unlike with respect to the Seattle Ordinance, the law did not provide an “or pay” option.

ERIC further cautioned that, in the absence of preemption, state or local laws like the Seattle Ordinance will “impose burdensome, locality-specific obligations on employers” akin to “the pre-ERISA state of affairs” in which the nation lacked a uniform plan administration regulatory scheme.

Solicitor General’s Arguments Against Certiorari

At the invitation of the Supreme Court, the Solicitor General submitted a brief on behalf of the United States, requesting that the Court deny ERIC’s request for review.  The Solicitor argued that the Ordinance did not make an impermissible reference to, or have an impermissible connection with ERISA plans because “the Ordinance itself establishes specific expenditure amounts that apply to all covered employers and employees, regardless of whether the employer has an ERISA plan or the employee participates in it.”  Additionally, the Solicitor argued that the “or pay” option permits employers to comply without establishing an ERISA plan, and does not “single out ERISA plans or sponsors for differential treatment.”

The Solicitor also disagreed with ERIC’s assertion of a Circuit split “because the laws involved in the cases on which petitioner relies differed in material respects from the one in this case.” Namely, the Solicitor argued that First and Fourth Circuit cases are distinguishable because the regulations at issue in those cases did not provide meaningful non-ERISA alternatives for compliance—whereas here, employers could comply by making payments directly to employees.

Takeaways

In declining to review the Ninth Circuit’s decision, the Supreme Court leaves unanswered concerns raised by ERIC about plan uniformity and administration in the face of so called “play-or-pay” laws like Seattle’s Ordinance.  In the absence of future judicial intervention or federal legislation, and as ERIC explained in its petition to the Supreme Court, these state and local laws are likely to have a significant economic impact on employers providing benefits.

Not Just Starbucks—Federal Judge Grants 10(j) Injunction against Amazon Based on Employee Termination

As we previously discussed in June 2022, the National Labor Relations Board (“NLRB” or the “Board”) pursued a 10(j) injunction against a Starbucks in Buffalo, New York after it fired workers for allegedly engaging in union organizing activities—an action taken based on an initiative articulated by NLRB General Counsel Jennifer Abruzzo (see more information on this initiative here). Since then, Starbucks has faced numerous petitions for injunctive relief from the NLRB in regions across the country. Well, it looks like Starbucks is not the only high-profile company experiencing pressure from the GC in the form of 10(j) petitions for their conduct—Amazon has just found itself in the situation.

On November 18, 2022, Judge Diane Gujarati of the Eastern District of New York (“EDNY”) partially granted a temporary injunction pursuant to Section 10(j) of the National Labor Relations Act (“NLRA” or “Act”) against Amazon after it fired one of its workers for allegedly engaging in union-related activities in violation of Section 8(a)(3) of the NLRA. Amazon fired a warehouse worker in its Staten Island facility in April 2020 based on an alleged verbal altercation between him and another co-worker. The Amazon employee filed an unfair labor practice charge on June 17, 2020 in Region 29, claiming that he was fired as a result of his organizing activity.

The Regional Director found merit in the charge and issued a complaint against Amazon. In April 2022, Administrative Law Judge Benjamin Green held that Amazon’s firing was a “discriminatory discharge” in vi0lation of the Act, and ordered Amazon to reinstate him. Amazon appealed the decision and the case was transferred to the Board.

On July 8, 2022, the Regional Director for Region 29 petitioned for a 10(j) injunction in the EDNY against Amazon seeking to force Amazon to, among other things:

  • cease and desist from activity that violates the Act;
  • read such cease and desist order to employees;
  • reinstate the warehouse employee to his position; and
  • expunge the adverse employment action from the individual’s employment records.

In her November 18th decision, Judge Gujarati held that the evidence “amply support[ed]” the Board’s position that the employee was discharged in violation of the Act and, therefore, granted part of the Board’s 10(j) petition requiring Amazon to cease and desist from activity that violates the Act. Judge Gujarati also ordered that Amazon post the order within its Staten Island warehouse and read the order aloud during a facility meeting with the “widest possible employee attendance.” However, Judge Gujarati denied the remaining portions of the Board’s petition requesting that Amazon perform remedial actions related to the worker’s employment, including reinstating him. The Board argued that the worker’s termination not only discouraged employees from engaging in protected activity, but also discouraged them from garnering support for the union and, therefore, reinstatement and an expungement of the employee’s record was necessary. Judge Gujarati disagreed to implement the requested injunction as to these issues, finding that the Board did not present evidence that the termination continued to have any “appreciable effect” on the union’s efforts or on employee willingness to engage in protected concerted activity.

While a 10(j) injunction is generally referred to by the Board and the courts as an “extraordinary remedy,” the current NLRB General Counsel has favored the use of this remedy on numerous occasions over the past couple of years, and she has indicated as much in her public memoranda.  The Board’s recent successful use of 10(j) injunctive relief against companies like Starbucks and Amazon for alleged unfair labor practices during the midst of union organizing campaigns appears to indicate that this may continue in the future.  This could have potentially significant ramifications for employers who could be routinely hauled into federal court for alleged labor law violations and be subjected to potential penalties of contempt of court for failing to comply with federal court orders if the companies engage in future violations.

As always, we will continue to keep you apprised of any updates in this developing area.

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