Labor Relations Update

Turns Out Attempting To Insert New Term Into Collective Bargaining Agreement Not Agreed To In Negotiations Violates The Law…Who Knew?

As we have noted previously, the make-up of the Board currently stands at four out of five total members, divided evenly between two warring factions making it pretty much impossible to change the law which requires a majority.  It also means the precedent the new General Counsel has highlighted will not be reviewed until a fifth member is confirmed.  The President has appointed attorney John Ring, who awaits confirmation from the Senate.

The Board is issuing decisions on non-controversial cases almost daily.  There haven’t been many of interest, some default cases, others addressing garden variety issues.  Every so often one of the cases catches the eye and is worth discussing.  That is true of the Board’s recent decision in Operating Engineers, Local 501 (Brady Linen Services LLC), 366 NLRB No. 3 (January 23, 2018), which discusses the law concerning the legal duty to reduce a collective bargaining agreement to writing, and then sign it.

Negotiations Fail To Produce An Agreement: Employer Issues Last, Best And Final Offer

The facts are pretty straightforward.  The employer runs a commercial laundry and its employees are represented by the union.  The parties met to negotiate a successor collective bargaining agreement.  One proposal concerned the use of apprentices.  The apprentice proposal consisted of 3 sections.  The employer and the union tentatively agreed on section 1 of the proposal and section 3 but not section 2.  Section 2 concerned whether the employer would pay for apprentices.  The employer’s proposal on section 2 in negotiations left the amount to be paid for apprentices blank.

The parties reached the end of negotiations and did not reach a tentative agreement on a new collective bargaining agreement.   The employer issued a last, best and final offer to the union.  The employer’s last, best and final contained no section 2 of the apprentice provision.  The employer’s cover letter accompanying the offer stated, “Any outstanding union proposals, whether in the form of a formal proposal or in the form of contract language that is not identified above is, formally rejected.”  The last, best and final offer did not include a section 2 in the apprenticeship proposal.

The union submitted the last, best and final for employee ratification.  The employees voted to accept the offer.  The union then stated that it would draft the CBAs for the employer’s review and signature.   The union then submitted for signature a contract which contained section 2 of the apprentice provision.  The employer immediately objected to the inclusion of this provision.  After some back and forth with the union, the employer redacted section 2 and sent the agreement to the union for signature.  The union refused to sign the agreement.  The employer filed charges, alleging that the union’s failure to execute the agreed upon collective bargaining agreement violated Section 8(b)(3) of the Act (which is the corollary to Section 8(a)(5) – requiring the employer to bargain in good faith).

Administrative Law Judge Finds Union Actions Violate Act In Two Different Ways

After a trial the ALJ reviewed the law regarding such issues:

It is well settled that the 8(d) obligation to bargain collectively requires either party, upon the request of the other party, to execute a written contract incorporating an agreement reached during negotiations.  H.J. Heinz Co. v. NLRB, 311 U.S. 514 (1941).  Specifically, the Board has held that under Section 8(b)(3) it is a per se violation for a union to refuse an employer’s request to sign a negotiated agreement.  See Windward Teachers Assn., 346 NLRB 1148, 1150 (2006).

This is known in labor circles as a Heinz violation.

The union raised the defense that there could be no violation because of the dispute over whether the parties intended to include section 2 in the final agreement.  This argument is one of contract law:  that there was no meeting of the minds over the apprentice provision.  Specifically, the union asserted the entire apprentice provision,–all 3 sections,– was “meaningless” if it did not include section 2.  Since the parties agreed upon section 1 and section 3, they must have meant to include section 2.  The judge disposed of this argument summarily, “[i]f the union believed this to be the case it could have communicated this exact sentiment prior to ratifying the agreement.”  The judge also noted that the employer had made clear it was rejecting the all proposals not addressed in its last, best and final offer. The ALJ found the parties did have a meeting of the minds and the union’s failure to execute the redacted version of the collective bargaining agreement was a violation of Section 8(b)(3).

The ALJ also found the union to have separately violated Section 8(b)(3) by its insertion of the provision not agreed upon in negotiations into the draft collective bargaining agreement.  The judge noted the insertion of section 2 was an unlawful attempt by the union to get what it could not get in negotiations:  “The attempt to obtain terms that it deemed more favorable than the terms which it agreed upon by simply unilaterally inserting them constitutes an unlawful refusal to execute a completed contract in violation of the Act.”

Takeaways

The Heinz violation has been around for at least 77 years, so it’s hardly new.  Both employers and unions are required to reduce the agreement they make to writing and sign it or they violate the duty to bargain.  Signing an agreement has special significance in Board law.  Among other things, a signed agreement serves as an absolute bar to employees filing a decertification petition during the term of the agreement (with some timing limitations), while an unsigned agreement does not bar such a petition.   A signed agreement also, obviously, is more easily enforced as it signifies to the entire world that this is the deal, and that the parties signed it after evaluation of its terms.

The other main takeaway from this case, and this may be more important than understanding the law about signing the agreement, is that it is very important for parties in negotiations to carefully document what is being offered and what is not being offered.  Had the employer not indicated that all items not addressed in its last, best and final offer were rejected, the union’s argument that there was no meeting of the minds would have more substance behind it.

NLRB Reverses Information Request Decision…After Court Reverses Board Decision

December saw a flurry of decisions (discussed here, here, here and here) by the NLRB as it briefly held a full complement.  The Board currently has only four members and so law-changing decisions are less likely to occur until a new member is confirmed.

Board cases still proceed through the courts.  Sometimes, as we have seen here and here, a federal appeals court refuses to enforce an agency decision.  That happened recently in a case where the Board had made it unlawful for an employer to fail to respond to a clearly irrelevant information request.  This was an expansion of the law, imposing a legal obligation to respond to an information request that did not trigger an obligation to provide the information.  In other words, even though the request for information by the union was not something the employer had a legal obligation to provide, the Board nevertheless found the employer committed an unfair labor practice by failing to “timely respond[] in some timely manner” to the union.    We previously reported on this decision here.

That case was appealed to U.S. Court of Appeals for the District Columbia Circuit and the court refused enforcement. 823 F.3d 696 (D.C. Cir. 2016)  The Board considered the case on remand from the court in Iron Tiger Logistics, Inc., 366 NLRB No. 2 (January 9, 2018).   On remand, the Board (Chairman Kaplan and Members Pearce and McFerran) “accept[ed] the court’s interpretation of the facts and the administrative law judge’s decision” and dismissed the complaint.  In particular, the Board noted:

Given the judge’s unexcepted-to finding that on the day after requesting the information at issue the Union conceded its irrelevance that the request was ‘bulls%*t,’ we conclude that the Respondent was not obligated to do anything more.  A respondent’s obligation with respect to information requests is triggered by requests for relevant information, and the presumption of relevance can be rebutted.

As we reported when the original case was decided, the law regarding information requests applies equally to both employers and unions, so imposing an obligation to respond regardless of the validity of the request can only cause mischief.  It creates an obligation to bargain where none previously existed.  As labor practitioners know, sometimes the information request is merely a tactic to cause leverage.  The Board’s original decision not only furthered, but actually implicitly endorsed, the illegitimate use of information requests.

We will, of course, keep you informed of further developments as they occur.  We still await what will happen with the General Counsel’s new initiatives as well as the Board’s re-examination of the new election rules.

NLRB Restores Ability Of ALJs To Accept Settlement Offers Over Objection of Charging Party and General Counsel- Overrules One Year Old Precedent

In the last few years, December has been a time of change at the NLRB.  The last few Decembers have seen precedent overturned and other sweeping decisions issue from the Board.

This December is no different.  With Chairman Miscimarra’s term ending on December 16, a flurry of decisions issued.  We saw the micro-unit, joint employer and past practice standards all fall unceremoniously.  We also saw the standard for evaluating the lawfulness of employer handbook policies change.  These are all major changes – even if in most cases they merely return to decades of previous law.

Oh yeah, and the Board also may be taking aim at the new election rules.

There are also other decisions issuing that are not as momentous but still deserve mention.

In a recent case, a sharply divided five member panel voted 3-2 to overturn a one year old precedent that took away power of Administrative Law Judges to accept settlement offers if the General Counsel and Charging Party objected.  In UPMC, 365 NLRB No. 153 (December 11, 2017), the Board overruled its decision in United States Postal Service, 364 NLRB No. 116 (2016)(Postal Service).

Background

In UPMC, the Board was confronted with a case involving 22 different unfair labor practice charges filed against a nursing home operator called Shadyside.  The General Counsel also issued complaint against Shadyside’s parent, UPMC under the theory that UPMC was a “single employer” with Shadyside.  UPMC denied that it was a single employer.  Because the single employer issue would involve extensive litigation “possibly taking years to resolve” the Administrative Law Judge severed the single employer issue from the unfair labor practice proceedings.  The trial against Shadyside went forward.  After a trial that lasted 19 days, the ALJ issued a 120-page finding Shadyside had committed several unfair labor practices.  As to UPMC, the Judge noted that “no evidence [was] presented . . .that UPMC independently committed any unfair labor practices.”

After the Administrative Law Judge’s Decision issued, and while the case over the unfair labor practices against Shadyside was on appeal, UPMC filed a Partial Motion to Dismiss in which it moved to dismiss the single employer allegation.  In its motion, UPMC offered to “guarantee performance by . . Shadyside of any remedial aspects of the Administrative Law Judge’s Decision and Order [that] survive the exceptions and appeal process.”  UPMC thus offered to settle the allegation by guaranteeing compliance with any remedy.

In granting this motion, the ALJ reiterated that no evidence was presented at trial that UPMC had committed any unfair labor practices and that, “[i]n my view, accepting UPMC’s offer to serve as guarantor . . is an appropriate way to resolve the single employer allegation.”

The General Counsel and Charging Party filed exceptions to the ALJ’s order.

NLRB Decides Postal Service Calling Into Question The UPMC Judge’s Decision To Accept The Offer To Settle

While the case was on appeal, a divided NLRB decided Postal Service in which it held that judges are no longer permitted to accept a respondent’s offered settlement terms over the objection of the General Counsel and the Charging Party or parties unless the offer constitutes “a full remedy of all of the violations alleged in the complaint.”  Then Member Miscimarra dissented to this holding.

NLRB Reverses “Full Remedy” Standard as “ill-advised and counter-productive”

In reversing Postal Service, the Board reviewed the history of settlement practice at the NLRB and noted that the policy of the agency to encourage peaceful and non-litigious resolution of disputes which has “been pursued with great success.”  In this regard, the majority noted that the Board “has balanced all factors and equities in light of the policies of the Act” and has “regularly approved settlement agreements that would provide less than would be awarded if the General Counsel were to prevail on every allegation of the complaint.”  This longstanding approach, which found its roots in several decades of law, was confirmed 30 years ago in Independent Stave, 287 NLRB 740 (1987).  In Independent Stave, the Board set forth a multi-factor approach to determine whether a settlement agreement was reasonable.  In that case the Board emphasized that there should not be  “too narrow a focus” on whether a settlement provided a full remedy” because of a faulty presumption that “the General Counsel would prevail on every allegation in the complaint.”  Id. at 742.  In other words, the risk of litigation, among other factors should be taken into consideration.  The Board in Independent Stave identified the following factors that should go into reviewing whether a settlement would effectuate the purposes of the Act, including:

  1. Whether the charging part(ies), respondent(s) have agreed to be bound, and the position taken by the General Counsel regarding the settlement;
  2. Whether the settlement is reasonable in light of the nature of the violations alleged, the risks inherent in litigation, and the stage of the litigation;
  3. Whether there has been any fraud, coercion, duress by any of the parties in reaching the settlement; and
  4. Whether the respondent has engaged in a history of violations of the Act or has breached previous settlement agreements.

You can see a previous discussion of the application of these factors here.

The Board then concluded that the majority panel in Postal Service had adopted an “ill-advised standard less likely to effectuate the purposes and policies of the Act than the Board’s balancing of factors set forth in Independent Stave.”

The Board majority listed the following reasons for its decision to return to the previous standard:

First, “it advances the purposes and policies of the Act to permit judges to accept settlement terms proffered by the respondent –even though the General Counsel and charging party or parties object to those terms–if the judge determines the settlement is reasonable under Independent Stave, a determination that is subject to review by the Board.”

Second, “the Board’s acceptance of reasonable settlement terms may well be in the best interest of the parties who object to a consent settlement agreement, especially where those parties are unreasonably discounting the risks associated with litigation.”  The Board majority here noted that the Independent Stave highlighted some of some of the vagaries of litigation:

witnesses may be unavailable or uncooperative; procedural delays may occur; the issues may be coplex or novel; supporting documentation may have been destroyed or lost; and credibility resolutions may have to be made by the administrative law judge.  By operating on a rigid requirement that the settlement must mirror a full remedy we would be ignoring the realities of litigation.

Independent Stave, 287 NLRB at 742-43.

Third, “by refusing to approve less-than-full-remedy consent settlements that are nevertheless reasonable, the majority opinion in Postal Service tied the hands not only of administrative judges but also of the Board itself.”  The Board saw this as taking away its power to determine the reasonableness of settlements.

Fourth, “reasonable settlement terms reached at an early stage–even if the terms are less than complete–will often leave parties in a better position than would result from a Board adjudication, considering the substantial burdens and time involved in Board proceedings.”  This is a critical standard, especially given the fact that in Board litigation the “substantial burdens” fall mostly on respondents who have to comply with discovery obligations while the General Counsel has no such parallel obligation.

Fifth, Postal Service rested on a faulty premise that it was returning to a previous standard of law.

Applying Independent Stave, Board Majority Finds UPMC’s Offer To Guarantee Reasonable

After reversing Postal Service, the Board concluded its application should be retroactive.

The Board then applied the factors found in Independent Stave to find UPMC’s offer to guarantee the remedy of the unfair labor practices reasonable, and therefore, acceptable.  While the General Counsel and Charging Party refused to be bound by the offer, this was “important” weighing against settlement but not determinative. Factors “3 and 4 favor approval” because there are no allegations of fraud and no evidence UPMC had ever previously violated the Act or breached a settlement agreement.  As to the “reasonableness” of the offer (factor 2) the Board found it was the “most important ” consideration and that this factor weighed in favor of reasonableness because “when a parent company is found to be a single employer with its subsidiary, the parent company is liable for the subsidiary’s unfair labor practices to the same extent as the subsidiary.”  The Board noted that the General Counsel sought to hold UPMC responsible through the single employer allegation and by guaranteeing the remedy of any unfair labor practice findings of Shadyside, UPMC was giving a remedy “as effective as” a finding of single employer status.  The Board adopted the ALJ’s approval of the offer.

Takeaways -Settlement Just Became, Well, More Reasonable and Easier

The major result of UPMC, of course, is that it restores the ability of a respondent to offer a settlement to the ALJ which can be accepted over the objection of the General Counsel.  Under Postal Service, the Charging Party and General Counsel had a veto power over any settlement that didn’t cover 100% of the allegations.  Such power is unreasonable in litigation where settlement is only possible when there is some compromise.

The whole reason a respondent might offer a settlement directly to the judge is because the General Counsel and/or charging party might be acting too rigid when it comes to resolution of a case.  Experienced Board practitioners know full well that there are situations where a complaint is filed involving situations where the charging party might never approve of a settlement due to the nature of the parties’ relationship.  It is thus a good outlet to be able to offer to resolve the case and have it accepted after evaluation of the reasonableness of the offer by the judge.

If you are considering making a settlement, make sure to go through the Independent Stave factors in any argument made to a judge.

The standard in Postal Service which required that a settlement fully remedy all allegations in a complaint probably acted to inhibit settlement leading to more litigation. Postal Service only survived one year and so it is unlikely to have had too much of an impact.

Of course, most cases are settled directly with the General Counsel and Independent Stave still applies.  It remains to be seen what the new General Counsel’s posture is on settlement.

A Return to Clarity: Traditional Joint Employer Test Reinstated

As we noted last week, one of the more controversial Obama-Board rulings expanding joint employer liability was overruled this past week.  In a widely-predicted 3-2 decision (Miscimarra, Kaplan, Emanuel), the NLRB, in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (Dec. 14, 2017), reinstated the traditional standard that had been followed for more than 30 years.

Under the reinstated standard, a joint employer finding will once again require proof that the alleged joint employer actually exercises direct and immediate control over the essential terms and conditions of employment of the employees in question.  The ruling not only restores clarity on this important question, but also casts doubt upon the NLRB’s ability to argue, as it has in the much publicized McDonald’s litigation, that franchisors are joint employers with franchisees.

Let’s take a closer look at how the pendulum has swung on this issue through the years.

Traditional Joint Employer Standard

Beginning in 1984 and continuing until the NLRB’s 2015 Browning-Ferris decision, the NLRB and the courts determined whether two separate entities were joint employers by assessing whether each exerted such direct and significant control over the same employees that they could be said to “share or codetermine those matters governing the essential terms and conditions of employment. . .”  The Board applied this analysis by evaluating whether an alleged joint employer “meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction” and whether that entity’s control over such matters was direct and immediate.  And it deliberately distinguished direct and immediate control from situations where the alleged joint employer’s supervision was limited and routine.

The Browning-Ferris Standard:  Reserved, Potential or Indirect Control is Enough

In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), citing “changing economic circumstances, particularly the recent dramatic growth in contingent employment,” the NLRB significantly broadened the joint employer standard.  The Board  jettisoned the actual conduct of the parties and decided to base NLRB decisions not on what actually happened in the workplace but on hypothetical concepts; whether the alleged joint employer had the “potential” to control aspects of the workplace, either “directly or indirectly”, even though it never had exercised that authority.

That standard would have allowed the NLRB to impose joint employer liability after the fact based upon legal conclusions about the contractual relationships between the parties, as opposed to what actually happened in the workplace.  Indeed, in Hy-Brand, the majority observed that the Board had done exactly that in CNN America, Inc., 361 NLRB 439 (2014), (which was overturned on appeal by the D.C. Circuit) where the Board “imposed after-the-fact joint employer obligations contrary to the parties’20-year bargaining history, applicable collective bargaining agreements, relevant services contracts and the Board’s own prior union certifications.”

At the time, this sweeping departure from precedent created potentially unforeseen liability under the Act, as well as bargaining obligations for entities that had never even attempted to control the workplace. The impact of this decision upended decades of bargaining history and parties’ relationships.

Actual Exercise of Direct and Immediate Control Is Now Needed

The Board restored the pre-Browning-Ferris paradigm that had existed for nearly 30 years.  Now, joint employer liability is based upon the actual conduct of the parties, as opposed to hypothetical after the fact legal conclusions about retained but unexercised control.

The majority opinion in Hy-Brand, borrowing heavily from then-Member Miscimarra’s dissent in Browning-Ferris, is an extensive catalogue of the many reasons the Browning-Ferris standard was both practically unworkable and inconsistent with the common law and Congressional intent.  The House of Representatives apparently shared that view by passing, earlier this year, H.R. 3441, the Save Local Business Act, which would reinstate the traditional joint employer test under both the NLRA and the FLSA.  H.R. 3441 has not yet been voted on by the Senate, and in light of the Hy-Brand decision, it may not be a priority.  The Hy-Brand ruling should also moot the D.C. Circuit’s consideration of Browning-Ferris itself, which was argued in February 2017, but never decided.

Application of the Hy-Brand Standard

Interestingly, the Board concluded that the two employers in HyBrand were joint employers due to the exercise of actual control by both entities over employment conditions.  The Board further held that they had unlawfully terminated employees who struck one of their businesses.  This prompted the dissenters in Hy-Brand­ – Members Pearce and McFerran, both part of the Browning-Ferris majority – to argue that there was no need to overturn Browning-Ferris to reach the correct result in the case itself.  The dissenters also claimed that the Board should have allowed public notice before changing the Browning-Ferris standard, citing to the fact that advance notice and extensive public briefing had been provided in Browning-Ferris in 2014.  Neither those claims nor the argument that Browning-Ferris was correctly decided carried the day.

Impact on Pending Litigation and Commercial Relationships

Significantly, and unsurprisingly, given the way the Board has ruled in recent days, the Hy-Brand holding is retroactive, meaning it applies to all current and pending cases.  The most highly publicized of these cases is the McDonald’s litigation, in which the General Counsel is arguing that McDonald’s is the joint employer of franchisee employees across the country.  The trial in McDonald’s before an NLRB Administrative Law Judge has been ongoing since March 10, 2016.  This ruling certainly calls into question the continuing vitality of that litigation, as well as the scores of additional unfair labor practice charges against franchisors and/or franchisees now siloed at the NLRB awaiting a McDonald’s ruling.  Newly-appointed NLRB General Counsel, Peter Robb, will have to decide whether to pursue that litigation (and the many pending charges) under the traditional joint employer standard, or expend the agency’s resources in a different fashion.  We will keep you posted on how this sea-change ruling impacts these cases.

For employers, return to the direct and immediate control standard is vitally important, as it provides much needed certainty in commercial contracting relationships.  Businesses contracting for services can avoid joint employer liability by ensuring that they do not control the essential terms and conditions of employment of the employees in question.  Hiring, firing, discipline, supervision and direction of employees should be left to the direct employer, as should decisions about compensation and benefits.  The majority in Hy-Brand clarified that cost-plus contracts involve indirect control and are not in themselves proof of a joint employer relationship.  While gray areas will always remain in these fact-based cases, precise contract drafting and care in observing the separate spheres of authority within the workplace should allow contracting entities to avoid claims of joint employment under the NLRA, as was the case prior to the 2015 Browning-Ferris decision.

“Micro-Units” Eliminated: NLRB Overturns Specialty Healthcare

Adding to the list of falling precedents in the waning days of Chairman Miscimarra’s term, on Friday, the NLRB reversed another of the seminal decisions of the Obama-Board when it overruled the highly controversial Specialty Healthcare and Rehabilitation Center of Mobile, 357 NLRB 934 (2011) decision.   The 3-2 decision in PCC Structurals, Inc., 365 NLRB No. 160 (2017) erased the much derided concept of “micro-units” and reinstated the traditional community of interest test for use in determining the appropriate bargaining unit in representation cases.  The newly-readopted traditional test considers factors such as functional integration, employee skill, employee interchangeability, working conditions, wages and benefits, common supervision, and bargaining history to determine whether a proposed unit of workers shares a community of interest.

In challenging a petitioned for bargaining unit, Specialty Healthcare had required an employer to demonstrate that employees that a union did not shared an “overwhelming” community of interest with the petitioned-for group of employees in order for the excluded employees to be eligible for inclusion in the union’s unit.  The Board used the traditional test only as the starting point of the inquiry, also requiring the employer to prove that the petitioned-for unit was “truly inappropriate.”  As a result, the Specialty Healthcare decision led to an influx of smaller bargaining units comprised of, for example, a single department of employees instead of the more traditional broader units of employees sharing interests across an organization.

The Board, in PCC Structurals, abandoned the “overwhelming” community of interest standard, reasoning that the traditional standard “that the Board has applied throughout most of its history” allows the Board to “evaluate the interests of all employees – both those within and those outside the petitioned-for unit.”

Like the other decisions from the Board in the last two days, this decision was not a surprise. Indeed, the departing Chairman Miscimarra hinted in May that Specialty Healthcare could be on its last legs when he noted that he believed Specialty Healthcare was wrongly decided.  Given that Chairman’s term is set to expire on Saturday, December 16, he was able to reverse the perceived wrong he saw in Specialty Healthcare on his way out the door.

Just as in the other Obama-Board holdings that have fallen in recent days, Members Pearce and McFerran forcefully dissented in the decision.

On A Roll: Board Finds No Bargaining Obligation Attaches to Unilateral Actions Consistent with Past Practice

On the eve of Chairman Miscimarra’s departure, the Board has been churning out decision after decision, many of them reversing precedents from the last 8 years.

Today, the NLRB, in Raytheon Network Centric Systems, 365 NLRB No. 161 (December 15, 2017), returned to the longstanding law of the NLRB that there is no duty to bargain over “changes” made pursuant to a past practice. The Board expressly overruled a year-old decision in E.I. du Point De Nemours, 364 NLRB No. 113 (2016) (DuPont), and reinstated the law that had existed for years. Now, employers may act consistently with an established past practice regardless of whether the parties’ collective bargaining agreement is in effect or expired.

In Raytheon, the parties had a collective bargaining agreement, as many do, that incorporated the right to change benefit plans and costs. The employer had exercised this right during the term of the contract. In this case, during a contract hiatus period, the employer made unilateral changes to health benefit plans and costs just as it had done in the past.  The ALJ found this to be a violation under the reasoning of DuPont which held that such past practices triggered a duty to bargain.  The employer appealed.

The 3-2 majority (with Members Pearce and McFerran dissenting) reversed DuPont and any cases upon which DuPont relied. Applying the pre-DuPont standard to the facts of the case, the Board held that an employer’s modifications to employee healthcare benefits after contract expiration did not violate the Act because similar changes were enacted every year for the last 12 years.

This result was predictable, of course, and this case falls within the category of “low hanging fruit” in thatDuPont overruled years of past practice law.  This result also was foreshadowed in NLRB GC Robb’s recent memo outlining one priority of the agency as revisiting cases where the law had been changed over dissent during the last 8 years.

The law of past practice was very well-developed prior to DuPont and employers will now be able to make decisions without fear of a bargaining violation so long as it is something that has been a practice.

As Chairman Miscimarra’s term is set to expire Saturday (12/16), this may not be the last we hear from the full-Board until then…

Handbook Wars – Common Sense Returns NLRB Overhauls Standard for Legality of Work Rules

We have noted many times over the years how the NLRB’s zeal to review employer policies, or more correctly, fragments of employer policies, for lawfulness has led to nettlesome issues that rarely, if ever, involve actual employees.  The results have been absurd and have raised an entire cottage industry of attacks on language by unions and vetting of employer policies for lawfulness.

This may be ending.  As we noted yesterday, the NLRB issued a significant decision that will have far-reaching implications for both unionized and non-unionized workplaces.  In Boeing Company, 365 NLRB No. 154 (2017), the Board established a new standard for evaluating whether facially lawful workplace rules, policies or employee handbook provisions unlawfully interfere with employees’ exercise of Section 7 rights.  In so doing, the Board placed in doubt the applicability of scores of decisions issued in the 13-years since Lutheran Heritage, 343 NLRB 646 (2004), was decided.  We previously identified this issue as a case that the NLRB would revisit once a new majority was installed.

“Reasonably Construe” Standard

For the last 14 years the Board evaluated whether an employee would “reasonably construe” the language of a work rule to prohibit the exercise of NLRA rights.  If it did, then the rule—regardless of whether it actually restricted Section 7 activity—was found unlawful.  Applying this standard, an inconsistent line of cases developed.  Take, for instance, a sampling or recent decisions concerning “civility in the workplace.”  A rule prohibiting “abusive or threatening language to anyone on Company premises” was lawful, while a rule restricting “loud, abusive or foul language” was not.  And, as noted, a policy or fragment of a policy could be found unlawful even if there was no evidence that employees read the policy or were even aware of its existence.  It was, in terms of the NLRA, a victimless crime.

Policy Considerations Behind Abandoning The Lutheran Village Standard

The new three member Board majority (Miscimarra, Kaplan and Emmanuel) decided to change this standard because employers were often held to an impossible standard of precision in drafting language in which they would need to foresee any potential impact on any Section 7 right, regardless of how remote.  An employer would have to foresee the future, which the majority characterized as requiring “perfection that literally is the enemy of the good.”  The Lutheran Heritage standard has been criticized as unworkable by many in the employer community, and by various Board members over the years.  So it is not surprising that that a new standard was on the agenda.

New Balancing Test

The Board abandoned the singularly-focused and vague “reasonably construe” standard, in favor of a new balancing test, which would consider the impact of the rule on NLRA rights and an employer’s business justification for the rule.  Going forward,  in order to provide greater clarity and certainty to all parties, the Board indicated it would categorize the results of future decisions in three ways:

  • Category 1: Lawful rules because (i) when “reasonably interpreted,” the rule does not prohibit or interfere with the exercise of NLRA rights or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.  Examples of these types of rules include the no-camera requirement in the Boeing case, where the employer supported its rule with multiple business and security justifications.  The Board also found that a rule requiring employees to have “harmonious interactions and relationships” in the workplace, and other rules requiring employees to abide by basic standards of civility would be categorically lawful.
  • Category 2: Rules warranting individual scrutiny on a case-by-case basis.
  • Category 3: Unlawful rules because they would prohibit or limit NLRA-protected conduct, and the adverse impact is not outweighed by legitimate business justifications (e.g., a rule prohibiting discussion of wages or benefits with another).

The Board proceeded to use this new framework to find that Boeing’s policy restricting the use of camera-enable devices was justified in light of the employer’s security concerns.  As it does in every case in which it overrules precedent and/or sets a new standard, the Board weighed whether to apply this new test retroactively, and decided to apply the standard to all pending cases in whatever stage.

Impact of this Decision

It will be some time before the full impact of the decision will be felt as rules are evaluated under the new standard.  However, the fact Lutheran Heritage was overruled likely will inhibit unions from attacking employer policies as the forum for these sorts of claims is less receptive.

Because the Board will evaluate the purpose for the rule, employers should consider clearly articulating the reasons for a rule in the policy.

Also, employers may feel less constrained by the thicket created by the previous standard; however, the true impact of Boeing likely will be felt once the host of pending cases work their way through ALJs and the Board under this new paradigm.  Only then will employers understand how the Board’s new categories will work.  We will keep you posted…there is sure to be more to follow.

Here We Go: The Full Board Finally Starts to Make Its Mark

 NLRB Reverses Precedent on Joint Employer Liability and Standard Governing Employee Handbooks

This afternoon, just two days prior to the end of Chairman Philip Miscimarra’s term, the NLRB issued a pair of 3-2 decisions overruling significant precedent regarding joint-employer status and the legal standard governing whether workplace rules violate the exercise of Section 7 rights under the Act.  A more detailed analysis will follow, but here are the main takeaways.

Joint-Employer StatusHy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017)

The Board completely rejected the standard set forth in Browning-Ferris Industries, 362 NLRB No. 186 (2015), and now returns to the far more rigorous showing that had been required for years to establish joint-employer status:

  • Proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control);
  • The control must be “direct and immediate” (rather than “indirect”); and
  • Joint-employer status will not result from control that is “limited and routine.”

The Board reverted to the standard that pre-dated Browning-Ferris and explained that this standard aligns with common law, would best “foster stability in labor-management relations” and is consistent with holdings of state and federal courts.  Applying this new standard, the Board nevertheless found that the two entities in the case were joint employers under the Act.

Workplace and Employee Handbook PoliciesBoeing Company, 365 NLRB No. 154 (2017)

The Board also overruled the “reasonably construed” to prohibit the exercise of NLRA rights standard that had been used by the Board to determine whether workplace rules unlawfully interfered with the exercise of Section 7 rights since its decision in Lutheran Heritage, 343 NLRB 646 (2004).

Now, when interpreting a facially neutral policy, rule or handbook provision, the Board will use its newly established balancing test requiring it to weigh the nature and extent of the potential impact of the rule on NLRA rights and legitimate employer justifications associated with the rule.

In order to provide clarity in applying this standard, the Board identified three categories of the types of employee workplace rules:  (1) lawful rules (e.g., no-camera rule, rules regarding basic standards of civility), (2) rules that require individualized scrutiny, and (3) unlawful rules (e.g., rules prohibiting employees from discussing wages or benefits with each other) that it expects all future cases to fall within

These were two of several issues foreshadowed by General Counsel Robb’s December 1st Memo.  The complete 5-member Board remains intact only until the end of the day on Saturday, so more activity may be forthcoming.  Stay tuned…

NLRB Hints That “Ambush” Election Regulations May Be Rescinded

Things are moving fast and furiously at the NLRB.  Last week we saw the new General Counsel issue a sweeping memo which rescinded many policy guidelines and initiatives of his predecessor and highlighted the Board precedent from the last eight years that may be overturned.

This week the NLRB posted a Request For Information on its website, soliciting comments about whether the controversial election regulations (sometimes called “ambush” or “quickie” election rules) should be changed or rescinded.  The Request invites comments on three questions:

  1. Should the 2014 Election Rule be retained without change?
  2. Should the 2014 Election Rule be retained with modifications?  If so, what should be modified?
  3. Should the 2014 Election Rule Be rescinded?  If so, should the Board revert to the Representation Election Regulations that were in effect prior to the 2014 Election Rule’s adoption, or should the Board make changes to the prior Representation Election Regulations.  If the Board should make changes to the prior Representation Election Regulations, what should be changed?

The submission window is open from December 13, 2017 to February 12, 2018.

The 2014 election rules are, like many things in labor law in the current climate, controversial, which is an understatement among understatements.  The average time in which an election was held under the prior rules was around 35 days from the date of petition.  The new rules substantially shortened the time for elections and also delegated to the Regional Director a great amount of discretion to decide things like whether a hearing would be held, whether briefs could be filed, etc.  Unions claim the new regulations  brought a long needed fix to the system that allowed employers to delay representation elections.  Employers claim that the rules dispense with much of the due process involved in litigating an important issue and bring about elections so quickly that it barely allows for communication about the issue.  Whatever the case, the Board has struggled to consistently interpret the new rules.

The quiet manner in which comments are solicited on this important issue are reminiscent of the Department of Labor’s notice to rescind the persuader regulation, which is to say there was hardly any fanfare associated with it.  We will keep you posted of further developments.

NLRB GC Boldly Defines Direction of Board Prosecution in New GC Memo

The new NLRB General Counsel Peter Robb has been fast at work.  A short two weeks after being sworn in on November 17, 2017, the new General Counsel issued a memorandum making clear his intention to re-examine much of the legal precedent that was changed during the last 8 years,–and to undo many other initiatives of his predecessor.

As we recently pointed out, the NLRB has wide prosecutorial discretion and the future direction can usually be divined from the types of cases the GC mandates should be sent to the Division of Advice.

In Mandatory Submissions to Advice GC Memorandum 18-02 (December 1, 2017) the GC Robb had quite a bit to say about the direction of the agency going forward.  GC Robb started by noting that he had previously worked for the NLRB and that during his career he had “worked as a [NLRB] field attorney in Region 5, a supervisor for the FLRA and a Chief Counsel to a Board Member;” he also handled many NLRA issues as a private practitioner.

The memo then acknowledged the reality of the last several years:

As you know, the last eight years have seen many changes in precedent, often with vigorous dissents. The Board has two new members who have not yet revealed their views on many issues. Over the years, I have developed some of my own thoughts. I think it is our responsibility to make sure that the Board has our best analysis of the issues. To that end, I have developed the following guidelines which will serve as my mandatory Advice submission list, in the tradition of my predecessors as General Counsel. For convenience, I have tried to group the issues. If you have further questions, please contact Advice.

No Intention To Disturb Cases That Have Been Fully Submitted, But. . .

The memo states that the GC respects existing legal precedent does not intend to disturb pending cases that have been fully briefed before the Board or courts in order to avoid delay of processing.  However, with respect to all other cases, those that involve “significant legal issues” should be submitted to Advice.  The GC defined “significant legal issues” as “cases over the last eight years that overruled precedent and involved one or more dissents, cases involving issues that the Board has not decided, and any other cases that the Region believes will be of importance to the General Counsel.”

Alternative Theories To Be Advanced In Newer Cases

Interestingly, the GC noted, “Cases where complaint issuance is appropriate under current Board law, but where we might want to provide the Board with an alternative analysis, may be submitted at any time after the complaint issues, but must be submitted prior to the Region filing a brief or other statement of position to the Board on that issue.”  The memo lists fifteen examples of cases where under current law submission of a complaint is warranted but where an alternative theory could be provided.  These are the cases that would give the Board an opportunity to reverse the case law which reversed precedent or expanded the scope of existing precedent.  Of the 15, we can see some issues that commonly vex employers:

– Common employer handbook rules found unlawful

o Rules prohibiting “disrespectful” conduct. . .
o Rules prohibiting use of employer trademarks and logos . . .
o No camera/recording rules  . . .
o Rules requiring employees to maintain the confidentiality of workplace investigations . . .
o Other rules where the outcome would be different if Chairman Miscimarra’s proposed substitution for the Lutheran Heritage test was applied (see dissent inWilliam Beaumont Hospital, 363 NLRB No. 162 (2016))

and

– Purple Communications

o Finding that employees have a presumptive right to use their employer’s email system to engage in Section 7 activities (361 NLRB No. 126 2014)

and

–  Total Security

o Establishing duty to bargain before imposing discretionary discipline where parties have not executed initial collective bargaining agreement (364 NLRB No. 106 (2016))

and

-Duty to provide witness statements to union

o Finding that witness statements must be disclosed if that would be appropriate under the Detroit Edison balancing test (Piedmont Gardens, 362 NLRB No. 139 (2015), overruling Anheuser-Busch, 237 NLRB 982 (1984))

among others….

Seven GC Guidance Memos Rescinded

And, the memo continues, “new General Counsels have often identified novel legal theories that they want explored through mandatory submissions to Advice. I have not yet identified any such initiatives, but I have decided that the following memos shall be rescinded. . .”  The memo then rescinds 7 GC memos that provide guidance under current law, including:

  • GC 16-03 (Seeking Board Reconsideration of the Levitz Framework).  This memo seeks to explore the possibility of overturning the established legal framework which permits an employer to withdraw recognition of a union when it has a good faith basis to believe the union has lost representative status in favor of making a decertification election the only way for employees to end union representation; and
  • GC 15-04 (Report of the General Counsel Concerning Employer Rules).  This is the memo that gives guidance on all handbook policies.  Given that handbook policy cases are now subject to “alternative theories” this is a pretty clear signal the Board will ease up on finding portions of employer policies, without any context, to be unlawful.

What does it mean that these GC Memos have been rescinded?  Not much in the near term.  While many employers (and unions) rely upon GC Memos for guidance and support in existing cases, such pronouncements are not binding.  If Board cases exist that hold a handbook provision to be unlawful then the precedent stands.  As the GC pointed out, he intends to respect existing law but is signaling, like many others, that change is coming.

Five Types Of Cases Will No Longer Be Pursued

Finally, the GC’s new memorandum rescinds five initiatives sent to Advice by the previous General Counsels including:

  • seeking to extend Purple Communications to other electronic systems (e.g., internet, phones, instant messaging) if employees use those regularly in the course of their work; and
  • arguing that an employer’s misclassification of employees as independent contractors, in and of itself, violates Section 8(a)(1) (but Regions should submit to Advice any case where there is evidence that the employer actively used the misclassification of employees to interfere with Section 7 activity); and
  • seeking to apply Weingarten in non-union settings (which we previously reported was likely to happen)

This can be construed as an abandonment of the attempt to change the law in these areas.

More To Come

A lot to digest for sure.  While it isn’t exactly a roadmap of the future,–everyone could predict that the new Board would take aim at the precedent changes during the last several years,–it is more like a well marked trail.  The GC likely will signal his priorities in future memoranda.  We will keep you posted on further developments.

 

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