Labor Relations Update

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.

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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.

NLRB: Employer Did Not Unlawfully Discontinue Christmas Bonus

Summer is winding down but the NLRB continues to be a source of vigorous activity.  The Board recently issued a sweeping decision regarding the lawfulness of arbitration agreements.  Also, the Board announced its intention to change the so-called ambush election rules.  Of course, the Board continues to issue decisions on a regular basis.  Discussion of some of the Board’s recent decisions can be found, here, here and here.  September 30 is the final day of the Board’s fiscal year and so one can expect an uptick in the issuance of decisions in the coming weeks.

Earlier this summer the Board issued a decision related to a union’s challenge to an employer’s discontinuance of a Christmas bonus.  The Christmas bonus case is such a staple of labor law that most practitioners will encounter a similar issue in the course of their careers.  The basic premise is simple:  In a unionized environment, the employer has in the past offered some kind of bonus for the holidays, it could be cash or it also could be in the form of a free turkey or ham.  When this bonus is not offered one year, the union files a charge alleging a unilateral change of a term or condition of employment.  We have covered this type of case in a prior post.

In Bob’s Tire Co., Inc. 368 NLRB No. 33 (July 31, 2019), the Board was faced with  a situation where in the context of other more serious unfair labor practices, the employer did not pay a Christmas bonus.  The evidence in the record consisted of the testimony of a former employee who testified that he had received a cash Christmas bonus in amounts varying between $20 and $100 every year from 2008 to 2014.  In 2015 the employer did not pay any bonus.  The failure to pay the bonus was alleged to be a violation of Section 8(a)(5) because the employer did not notify the union of the discontinuance of the bonus or offer to bargain.

The Administrative Law Judge found a violation of the Act, stating the “bonus was paid with sufficient regularity that employees that employees would have been justified in expecting to receive such a bonus as part of their wages.”

On appeal, a unanimous panel of the Board (Chairman Ring and Members McFerran and Kaplan) reversed this finding.  The Board noted that the analysis of whether such a bonus is actually a term or condition of employment that must be bargained over before it can be changed relies on two factors.  First, the regularity of the bonus.  Second, whether the “bonus was tied in any way to employment -related factors.”  This would include measurable metrics.  The Board held that while there was evidence of regularity, there was no proof that the amount of the bonus was tied to any particular factor or factors.  The Board concluded that under the circumstances no violation occurred.

While hardly a major decision, it does provide another illustration that the current Board continues to  look very carefully at the quality of proof provided to support a claim, and will require specific evidence to support particular allegations.

NLRB Issues “Epic” Decision Concerning the Intersection of Mandatory Arbitration Agreements and NLRA Section 7 Rights

On August 14, 2019, the NLRB issued its first decision addressing employer conduct related to mandatory arbitration agreements and Section 7 activity since the Supreme Court decided Epic Systems Corp v. Lewis, 584 U.S. __, 138 S.Ct. 1612 (2018).  In Epic Systems (discussed more fully here), the Supreme Court held that agreements between employers and employees which include mandatory arbitration clauses and waivers of class and collective action rights do not violate the NLRA, and are enforceable as written under the Federal Arbitration Act.

In Cordúa Restaurants, Inc., 362 NLRB No. 43 (2019), the Board (Chairman Ring and Members Kaplan and Emanuel joining the majority; Member McFerran joining in part and dissenting in part) answered important questions of first impression regarding mandatory arbitration decisions in the wake of Epic Systems, including:

  • whether employers are permitted to promulgate mandatory arbitration agreements in response to Section 7 activity;
  • whether employers are permitted to inform employees they may be discharged if they refuse to sign such an agreement; and
  • whether employers violate the Act by discharging an employee for filing a class or collective action pertaining to wages, hours, or other terms and conditions of employment.

Factual Background

Prior to January 2015, employer Cordúa Restaurants, Inc. maintained mandatory arbitration agreements for all of its employees that prohibited commencing or joining Rule 23 class action lawsuits, but did not explicitly prohibit opting into collective actions under the Fair Labor Standards Act (“FLSA”).  Consequently, in January 2015, a group of employees initiated and opted-in to a collective action alleging wage violations under the FLSA and the Texas Minimum Wage Act.  In response, Cordúa issued a new, modified arbitration agreement, which stated in pertinent part:

I agree that I am waiving my right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act (“FLSA” collective action in any civil court or arbitration proceeding) . . . Therefore, I agree that I cannot file or opt-in to a collective action under this Agreement, unless agreed upon by me and the Company in writing.

Cordúa required all employees to sign the new agreement.  In December 2015, Assistant Manager Alex Nyuyen informed employees they would be removed from the schedule and terminated if they did not sign the agreement.

Around this time, Cordúa terminated three employees who had opted-in to the collective action, asserting that Steve Ramirez was terminated for dishonesty; Rogelio Morales due to customer complaints; and Searone Lewis due to inappropriate conduct.  The NLRB General Counsel argued the employer’s proffered motivations were pretextual, and they were terminated due to their involvement in the FLSA collective action, which the GC argued was protected activity under the NLRA.

The Administrative Law Judge’s Decision

The Administrative Law Judge issued her decision on December 9, 2016, before Epic Systems was decided.  As such, the ALJ found that the arbitration agreement was an unlawful interference on employees’ Section 7 rights pursuant to Board precedent, and did not reach the issue of whether or not the promulgation of the new agreement in response to the FLSA collective action was unlawful.  The ALJ further found that Assistant Manager Nguyen’s statements to employees regarding signing the new arbitration agreement were coercive and unlawful.

With respect to the allegedly unlawful employee discharges of Ramirez and Lewis, the ALJ found that the General Counsel established a prima facie case under Wright Line, 251 NLRB 1083 (1980), which Cordúa failed to adequately rebut by demonstrating it would have terminated the employees for legitimate business reasons notwithstanding their protected activity.

Regarding the discharge of Morales, however, the ALJ upheld the termination, finding that although Morales was engaged in protected activities due to his involvement in the collective action, Cordúa legitimately terminated him due to a customer complaint, not his protected activities.

The Board’s Review

Promulgation of the New Mandatory Arbitration Agreement

Based on the Supreme Court’s landmark holding in Epic Systems, the Board first found that Cordúa’s maintenance of a mandatory arbitration agreement that contained class and collective action waivers was lawful under the Act, reversing the ALJ’s finding based on pre-Epic precedent.

The Board then held that because Epic established that mandatory arbitration agreements with class and collective action waivers do not restrict Section 7 rights in any way, and because opting into a collective action is “merely a procedural step” to participating in a FLSA collective action, “it follows that an arbitration agreement that prohibits employees from opting in to a collective action does not restrict the exercise of Section 7 rights and, accordingly does not violate the Act.”

Although the Board acknowledged it has held in other cases that an employer may violate the Act by promulgating an otherwise lawful rule in response to protected activity (citing cases involving no-solicitation rules, rules prohibiting employees from making secret audio recordings, among others), the Board distinguished those cases because they involved the promulgation of rules that did restrict the exercise of Section 7 rights.  Here, by contrast, the Board found, the promulgation of the revised arbitration agreement “had no such effect” on Section 7 rights given the Supreme Court’s holding in Epic Systems.

Assistant Manager Nguyen’s Statements

Because, under Epic Systems, employers are permitted to condition employment on employees signing mandatory arbitration agreements, the Board also found that Nguyen’s statements to employees did not constitute unlawful threats.  On the contrary, the Board found that “his statements amounted to an explanation of the lawful consequences of failing to sign the agreement and an expression of the view that it would be preferable not to be removed from the schedule.”

Discharges of Ramirez, Lewis, and Morales

With regard to the discharge of Ramirez, the Board adopted the ALJ’s finding that he was engaged in protected activity when he filed the FLSA collective action.  Further, although Epic Systems permitted Cordúa to distribute the lawful new agreement in response to Section 7 activity, the case did not govern discipline or discharge of employees engaging in the underlying protected activity—in this case, the filing or participation in the collective action.  The Board agreed that Cordúa’s stated reason for Ramirez’s discharge was pretextual, that his termination was motivated by his protected activity, and Cordúa failed to proffer a legitimate reason it would have discharged him notwithstanding his protected activity.  The Board held Ramirez’s termination thus violated the Act.

The Board also affirmed the ALJ’s findings and conclusion that Cordúa’s discharge of Morales was lawful.  However, as to the discharge of Lewis, the Board reversed the ALJ’s decision, finding that Cordúa adequately established it would have discharged her even absent her protected activity, thus successfully rebutting the General Counsel’s prima facie case under Wright Line.

Member McFerran’s Dissent

While Member McFerran agreed with the majority’s conclusions regarding, inter alia, the discharges of Ramirez, Lewis, and Morales, she dissented as to the findings regarding the arbitration agreement and Nguyen’s related statements.  Disagreeing with the majority’s assessment, Member McFerran argued that Board precedent holding an employer violates the Act by imposing a new rule in response to Section 7 activity, even if the rule is otherwise lawful, should apply and govern the outcome in the instant case.  McFerran argued that under such precedent, it is irrelevant to the analysis whether the rule restricts Section 7 rights or not. Under McFerran’s analysis, the distribution of Cordúa’s new arbitration agreement was therefore unlawful.

McFerran also argued that Nguyen’s statements to employees regarding the agreement constituted unlawful threats, regardless of whether the revised agreement was lawful.  To McFerran, a “reasonable employee would have understood this conversation as a threat” of removal or discharge “for raising concerns about” and opposing the terms and conditions of employment related to the agreement.  Because Section 7 protects employees’ rights to question and object to employer policies, and employees would have understood Nguyen’s statements as a threat intended to suppress that activity, McFerran concluded his statements violated the Act.

Takeaways

As we learned in Epic Systems, mandatory arbitration agreements that include class and collective action waivers are lawful under the Act.  However, the Board’s decision in Cordúa Restaurants adds important clarity as to the limits of lawful employer conduct surrounding such agreements.

  • Under Cordúa, employers are permitted to promulgate or revise mandatory arbitration agreements to employees, even if done in response to Section 7 activity, such as the filing of a class or collective action wage claim.
  • Moreover, employers are permitted to condition employment on the signing of such agreements, and may inform employees of the consequences of refusing to sign the agreement.
  • However, employers are prohibited from disciplining or discharging employees for filing, initiating, or taking part in a class or collective action based on terms and conditions of employment—and employers should be aware of prohibitions against retaliating against employees who exercise their statutory rights under the respective wage-and-hour laws.

The Board may have more to say on Epic Systems and mandatory arbitration agreements and class/collective action waivers, and we’ll be sure to update you if it does.

NLRB Announces Three Proposed Rulemaking Amendments Aimed at Overhauling Union Election Procedures – With More to Come!

The National Labor Relations Board published a Notice of Proposed Rulemaking (“NPRM”) on Monday, August 12, 2019, proposing three amendments to its current rules and regulations aimed at addressing representation election procedures – with potentially more to come.  The NLRB made sweeping changes to the election procedures through rulemaking in 2014, which have been criticized as shortening the time between the filing of a petition and the election and thus not allowing ample time for information about representation to be shared with employees.  The current NLRB made it known that it was likely to change these rules in 2017.  The NPRM issued this week represents a start to the intended changes to the rules.

The three proposed amendments include: (1) replacing the current blocking charge policy with a vote-and-impound procedure; (2) modifying the immediate voluntary recognition bar and reinstating the Dana notice and open-period procedures; and (3) in the construction industry, requiring the showing of positive evidence of majority employee support, rather than just contractual language, in order to transition an initial Section 8(f) bargaining relationship to a Section 9(a) bargaining relationship.

The Board’s 113-page Notice of Proposed Rulemaking states that the status quo “constitute[s] an overbroad and inappropriate limitation on the ability of employees to exercise their fundamental statutory right to the timely resolution of questions concerning representation through the preferred means of a Board-conducted secret ballot election.”

The Board argued that these policy changes were far better suited to informal notice-and-comment rulemaking, as opposed to adjudication, for a number of reasons.

  • First, the Board will be better able to make an informed judgment as to the impact of the policies after receiving public comment on the issues—whereas if the issue were raised in a case, then only the parties and amici could have their voices heard.
  • Second, the Board pointed out that rulemaking, unlike adjudication, cannot be mooted by developments in a specific pending case. On this point, the Board cited to Lowshaw Thermal Technology, LLC, Case 05-CA-158650, where the Board was unable to address what level of proof should be required to establish a Section 9(a) bargaining relationship in the construction industry after the union withdrew its charge.
  • Third, the Board argued that rulemaking removes the uncertainty that the legal regime may change “on a moment’s notice (and possibly retroactively) through the adjudication process.”

Chairman Ring and Members Kaplan and Emanuel issued the proposed amendments, and Member McFerran issued a stern dissented critiquing the amendments in every respect.

The public may submit comments on the three proposed amendments for 60 days following its publication in the Federal Register on August 12, 2019.

Replacing the Blocking Charge Policy with a Vote-and-Impound Procedure

As we recently previewed here, the Board first proposes to replace the existing (and much-criticized) blocking charge policy with a vote-and-impound procedure.

The blocking charge policy permits a party (typically a union) to block an election indefinitely by filing an unfair labor practice charge.  In practice, the policy allows an incumbent union to use an unfair labor practice charge to delay a decertification election.  The current blocking charge policy is not set forth in the NLRB’s rules and regulations.

In comparison, a vote-and-impound procedure would allow an election to be held regardless of whether an unfair labor practice charge was pending and a blocking request had been filed.  Then, if the charge has not been resolved before the election is held, the election would nevertheless be conducted and ballots would be impounded until the Board makes a final determination as to the merits of the charge.  The Board stated that by avoiding unnecessary and potentially lengthy delay, the vote-and-impound procedure would better protect employees’ free choice than the current blocking charge policy.

In her dissent, Member McFerran condemned the majority for proposing to eliminate an “80-year old doctrine” and replacing it with a new policy that would “require regional directors to run – and employees, unions, and employers to participate in – elections conducted under coercive conditions that interfere with employee free choice.”

Modifying the Immediate Voluntary Recognition Bar and Reinstating Dana Rule

The second proposed amendment would modify the immediate voluntary recognition bar established in Lamons Gasket, Co., 357 NLRB 739 (2011) and return to the rule outlined in Dana Corp., 351 NLRB 434 (2007).

In Dana Corp., the Board held that employees who become represented by a union pursuant to a voluntary recognition agreement have a period of 45 days, after receiving notice, where they may reject that representation through a secret ballot election.  As with the blocking charge policy, the voluntary recognition bar is not currently set forth in the NLRB’s rules and regulations.

The ruling in Dana Corp. was previously overturned by the Obama-Board in Lamons Gasket.  In Lamons Gasket, the Board reinstated the immediate voluntary recognition election bar, which requires “a reasonable period” of time to pass before representation may be challenged.  The Board defined “a reasonable period” of time as no less than six months, but no more than one year.

In the Notice of Proposed Rulemaking, the Board stated that “[t]his modification does not diminish the role that voluntary recognition plays in the creation of bargaining relationships but ensures that employee free choice has not been impaired by a process that is less reliable than Board elections.”

In contrast, Member McFerran argued in her dissent that the proposed amendment will discourage “the establishment of stable collective bargaining relationships by creating unnecessary procedural hurdles undermining a union that has already lawfully secured recognition.”

Requiring Positive Evidence of Majority Employee Support for Section 9(a) Recognition in the Construction Industry

Finally, the third proposed amendment would require positive evidence of majority employee support in order to convert an initial bargaining relationship under Section 8(f) to a Section 9(a) bargaining relationship in the construction industry.  Thus, the proposed amendment would overturn the ruling in Staunton Fuel, 335 NLRB 717 (2001).

In Staunton Fuel, the Board held that a construction industry union could prove Section 9(a) recognition by merely executing a collective bargaining agreement with the employer.  There was no requirement to provide positive evidence of majority support amongst employees beyond the language in the contract.

In the Notice of Proposed Rulemaking, the Board stated that requiring positive evidence “that a union unequivocally demanded recognition as the Section 9(a) exclusive bargaining representatives in an appropriate bargaining unit, and that the employer unequivocally accepted it as such, based on a contemporaneous showing of support from a majority of employees in an appropriate unit” will restore protections of employee free choice in the construction industry.

Member McFerran disagreed and argued in her dissent that the proposed amendment runs counter to “well-established Board law in unfair labor practice cases” and purports to solve a “non-existent problem.”

More Potential Rulemaking in the Future

It appears this is just a start.  The three proposed amendments addressing union election procedures are part of a series of regulations that were announced by the Board on May 22, 2019.  Other potential topics for rulemaking include the Board’s current representation-case procedures, the standard for determining whether students who perform services at private colleges or universities in connection with their studies are “employees” within the meaning of Section 2(3), and the standards for access to an employer’s private property.  Stay tuned!

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