UPDATE: NLRB Regional Director Issues Complaint Against USC, Pac-12, and the NCAA

By Adam Lupion, Joshua Fox, Ross Evans and Ryan McGill on May 20, 2023 Posted in NLRB

On May 18, 2023, Region 31 of the National Labor Relations Board (“Board”) issued an unfair labor-practice complaint against USC, the PAC-12, and the NCAA for allegedly misclassifying college athletes as non-employees and suppressing their Section 7 rights under the National Labor Relations Act (“Act”).

While significant, this development comes as no surprise: As we covered here, Region 31 issued a finding of merit in this case in December 2022, which under Board procedure, signals that complaint will issue if the parties cannot reach a settlement.

And before that, in September 2021 (as we also covered here), NLRB General Counsel Jennifer Abruzzo—who guides and oversees prosecutorial decisions across all Board Regions, including Region 31—issued a memorandum asserting that college athletes are employees under Section 2(3) of the Act; announcing that the Board would pursue unfair labor practice charges in appropriate cases against universities that fail to classify student athletes as employees under the Act; and instructing the Regions to submit all cases involving the misclassification of college athletes to the Board’s Division of Advice (enabling GC Abruzzo and her office to help shape policy on this issue).

The charges at issue here were initially filed in February 2022 by the National College Players Association (“NCPA”), a nonprofit advocacy organization, which claimed that USC—along with alleged joint employers, the PAC-12 and the NCAA—misclassified college athletes as “non-employees,” and suppressed their Section 7 rights under the Act, including the right to speak about compensation and working conditions. A Board determination that college athletes are employees could lead to a renewed effort by college athletes to organize and join a labor union for purposes of collective bargaining, as well as expose universities to potential liability under the Act for conduct engaged in vis-à-vis college athletes.

A critical component of Region 31’s complaint is its allegation that the PAC-12 and NCAA—the athletic conference and governing body of which USC is a member—are, along with the university, joint employers of college athletes at USC. Indeed, a determination that PAC-12 and the NCAA are joint employers of college athletes not only could subject both entities to potential liability under the Act (both at USC and other universities) but also could establish a possible legal basis for college athletes to seek to collectively bargain at the conference (or NCAA) level—setting up a potential end-run vis-à-vis the Act’s coverage-exemption for public-sector employers, such as public/state universities.

The next major step will be a hearing before an ALJ, scheduled for November 7, 2023. If filed, an appeal would be heard by the Board, then to the U.S. Circuit Court of Appeals, and lastly to the U.S. Supreme Court.

We will continue to monitor and provide updates to this and other cases addressing the status of college athletes.

Tags: athlete, college, Employee, General Counsel, NCAA, NLRB, PAC-12, sports, university, USC

NLRB Flips (Again), Reinstates Context-Specific Standards For Employee Misconduct

By Mark Theodore, Joshua Fox and Ross Evans on May 8, 2023 Posted in NLRB

On Monday, the National Labor Relations Board (“Board”) issued a decision making it riskier and more complicated for employers to discipline employees for abusive workplace conduct alleged to have arisen within the context of protected activity under Section 7 of the National Labor Relations Act (the “Act”). In Lion Elastomers, 372 NLRB No. 83 (2023), the Board—reasoning that a “fundamental difference” exists between “employee misconduct committed during Section 7 activity and misconduct during ordinary work”—overturned recent Board precedent from the previous administration and reinstated the use of a trio of context-specific standards for determining whether an employer violates the Act by disciplining an employee for abusive conduct occurring in three specific settings: (1) in employee conversations or interactions with management in the workplace; (2) in employee social-media posts (and in most employee workplace discussions among co-workers); and (3) on picket lines. As will be seen, the first two settings are particularly problematic.

Background

Just a few years ago (as we covered at the time), in General Motors, 369 NLRB No. 127 (2020), the Board rejected the use of these same context-specific standards in the strongest of terms—explaining that “setting-specific standards” not only had “failed to yield predictable, equitable results,” but also, in some cases had “conflicted alarmingly with employers’ obligations under federal, state, and local antidiscrimination laws.” Accordingly, the Board replaced the use of context-specific standards with a uniform standard traditionally used to assess whether an employer’s conduct is discriminatory under the Act—the burden-shifting Wright Line standard—which is conceptually similar to the standard used to evaluate discrimination claims and generally turns on whether an employer would have taken the same challenged action in the absence of the employee’s protected activity. The Board explained that the Wright Line standard “promises more reliable, less arbitrary, and more equitable treatment of abusive conduct,” while still “ensur[ing] that employees’ Section 7 rights continue to be protected.”

The Return Of Context-Specific Standards

As noted earlier, prior to its July 2020 General Motors decision, the Board employed context-specific standards for determining whether an employer violated the Act by disciplining an employee for abusive conduct arising in three specific settings. With its Lion Elastomers decision, the Board has restored the law to its pre-General Motors state, re-adopting the context-specific framework in which it determines whether abusive conduct is severe enough to lose the protection of the Act by applying one of the following tests, depending on the context of the activity at issue:

The Atlantic Steel test—which is used when abusive conduct occurs in the course of otherwise-protected workplace conversations with management—and considers: (1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s outburst; and (4) whether the outburst was, in any way, provoked by an employer’s unfair labor practice.
The totality of the circumstances test, which is used when abusive conduct takes place on social media or in workplace discussions among coworkers.
The Clear Pine Moldings test, which is used when the abusive conduct takes place on the picket line. Under this test, an employee loses the Act’s protection where “the misconduct is such that, under the circumstances existing, it may reasonably tend to coerce or intimidate employees in the exercises of rights protected under the Act.”

Takeaways

Board precedent over the years has found protected a number of outbursts that would not be tolerated in any other setting. The latest in a string of precedent-reversing decisions, the Board’s decision here in Lion Elastomers—which applies retroactively to all “abusive conduct” cases currently pending—re-establishes an exemption under Atlantic Steel for otherwise-sanctionable employee outbursts when the conduct is bound-up in Section 7 protected activity, making it tougher for employers to predict the consequences of disciplining employees in such situations. (And, as we have previously noted, the application of the Atlantic Steel test has led to some strange results.)

Said differently, by once again evaluating employee conduct with different standards—based on whether the employee’s outburst is bound up with Section 7 activity—Lion Elastomers makes it harder for employers to evaluate the risk of imposing discipline. Worse still, however—as Member Kaplan emphasized in his dissent—is that the decision could result in employers being required “to continue to employ individuals who have engaged in such abusive conduct any reasonable employer would have terminated them for that conduct.”

UPDATE: Fifth Circuit Affirms NLRB Ruling In Tesla Case, Ordering Elon Musk to Delete Union-Related Tweet

By Joshua Fox and David Gobel on April 3, 2023 Posted in NLRB

On March 31, 2023, the United States Court of Appeals for the Fifth Circuit affirmed a National Labor Relations Board (“NLRB”) decision issued in 2021 (previously discussed here), which held that Tesla Inc. violated the National Labor Relations Act (“NLRA”) by (1) prohibiting employees from contacting the media in accordance with an overbroad confidentiality policy, and (2) its CEO, Elon Musk, tweeting the following to his 22 million followers in 2018, which the Fifth Circuit agreed was unlawfully coercive:

“Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues and give up stock options for nothing? Our safety record is 2X better than when plant was UAW & everybody already gets healthcare.”

As we previously discussed, the NLRB delivered a three-part holding in its 2021 decision:

Tesla violated the NLRA after prohibiting employees from talking to the media;
Tesla did not violate the Act by calling employees into a meeting to discuss their potential unionization; and
Musk must delete his tweet about the employees’ attempt to unionize because it was unlawfully coercive in violation of the Act.

In response, Tesla challenged the first and third holdings, while the Union challenged the second.

The Fifth Circuit, in a per curiam opinion, found that the NLRB’s findings were supported by “substantial evidence”—the appellate standard for such agency decisions— and granted the NLRB’s cross-application to enforce its Order.

The Fifth’s Circuit’s Opinion reinforces the risks that employers and supervisors take when they communicate publicly about unionization efforts, particularly on social media. Musk’s tweet that Tesla employees “would give up stock options for nothing” if they vote to join the union rose to the level of an unlawful threat according to the NLRB and Fifth Circuit; it did not constitute a mere communication about a potential consequence of good-faith bargaining, which would have been within the bounds of the NLRA. The Fifth Circuit, like the NLRB, rejected Tesla’s argument that Musk’s subsequent social media posts provided more context that illustrated the tweet was not a threat; since the subsequent tweets were not “contemporaneous” with the threating tweet, the purported “context” did not provide a sufficient safe harbor for Tesla and Musk.

Tags: 5th Circuit, Elon Musk, Fifth Circuit, Musk, NLRA, NLRB, Tesla, tweet

UPDATE: NLRB GC Abruzzo Makes Clear All Non-Disparagement and Confidentiality Clauses Are At Risk After NLRB’s McLaren Decision

By Michael Lebowich, Joshua Fox and Alexander J. Blutman on March 26, 2023 Posted in NLRB

Earlier this month, the National Labor Relations Board (“NLRB”) issued its decision in McLaren Macomb, 372 NLRB No. 58 (2023), holding that not only are most non-disparagement and confidentiality clauses signed by employees covered by the National Labor Relations Act (“Act”) void as a matter of policy, but merely including one in a proposed severance agreement to an employee violates the Act.

The decision left a number of questions to be answered as to how this decision would be enforced going forward, and, on March 22, 2023, National Labor Relations Board General Counsel Jennifer Abruzzo issued a Memorandum to Regional Directors proving, once again, that the current Board would be taking an extremely aggressive, pro-employee perspective on enforcement.

While this Memorandum does not have the same effect as a NLRB decision, it sheds light on how the Office of the General Counsel and the Regions will respond to potential unfair labor practice charges concerning these issues and gives plaintiffs’ and union counsel a strong basis for resisting any effort to include non-disparagement and confidentiality provisions in future agreements.

According to the General Counsel:

The decision applies retroactively. GC Abruzzo noted that agreements entered into prior to February 21, 2023 could be invalidated because the NLRB did not state that “manifest injustice” prevents retroactive application. Section 10(b) of the Act provides for a six (6) month statute of limitations, but GC Abruzzo stated that she viewed an employer as committing a continuing violation for maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions. This interpretation could effectively extend the limitations period beyond six months. Abruzzo remarked that employers may consider remedying potential violations now by proactively contacting former employees subject to severance agreements that contain overly broad provisions and advising them that the provisions are null and void and that the employer will not seek enforcement of such restrictions. In the case a charge is subsequently filed, Abruzzo noted that such measures could form the basis for consideration of a merit dismissal by the NLRB.
Confidentiality provisions are lawful under only limited circumstances. According to GC Abruzzo, lawful confidentiality provisions in separation agreements must be: (1) “narrowly tailored”; (2) targeted to proprietary or trade secret information; (3) limited in temporal scope; and (4) based on legitimate business justifications.
Only “non-defamation” clauses are lawful now. GC Abruzzo stated that “public statements by employees about the workplace are central to the exercise of employees’ rights under the Act.” With this as the backdrop, she observed that a “narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be found lawful.”
Unlawful provisions are severable—even without a severability clause. GC Abruzzo noted that Regions should seek to have offending provisions voided out of the agreement, as opposed to nullifying the entire agreement—regardless of whether the agreement contains a severability clause.
This is not waivable. So, you cannot propose or negotiate a clause with a Union or an employee’s counsel. GC Abruzzo reiterated multiple times that the Board “protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.” She concluded, therefore, that even if employees themselves request broad clauses or a Union agrees to such provisions in separation agreements, such provisions remain unlawful.
A “savings clause” or disclaimer will not save overbroad provisions. Abruzzo suggested that, without an express statement of the rights afforded to employees under the Act, a clause or disclaimer indicating that certain provisions “do not apply to an employee’s Section 7 rights” would not save overbroad language.
While the decision generally applies to severance agreements proffered to statutory “employees” under the Act, it could stretch to supervisors and managers in one very limited situation. While GC Abruzzo conceded that “supervisors are generally not protected by the Act,” she noted that Board precedent protects supervisors from retaliation if the supervisor refuses to act on the employer’s behalf in committing an unfair labor practice. In such a case, GC Abruzzo posited that a separation agreement offered to a supervisor in connection with that supervisor’s protected conduct could be subject to the standards set forth in McLaren.
Other types of provisions may be at risk. Abruzzo also suggested that non-compete clauses, non-solicitation clauses, no-poaching clauses, and other similar provisions might interfere with employees’ Section 7 rights and could be subject to future challenge and evaluation by her Office.

* * * * *

This guidance from the General Counsel’s Office provides helpful insight into how the General Counsel and the Regions likely will view a number of issues associated with the McLaren decision. However, it remains to be seen how the NLRB and, eventually, the Courts will evaluate these issues when presented in pending cases.

Please stay tuned for further developments regarding these important issues, or reach out to any of us with specific questions you may have.

Tags: confidentiality, GC, McLaren, NLRA, NLRB, non-disparagement, separation agreement, severance agreement

GC Update: Abruzzo Issues New Memorandum Outlining Her Objectives

By Joshua Fox and David Gobel on March 23, 2023 Posted in NLRB

On March 20, 2023, NLRB General Counsel Jennifer Abruzzo released a new Memorandum, updating all Regional Directors, Officers-in-Charge and Resident Officers regarding which issues must be submitted to the NLRB Division of Advice—and which need not, because Advice and/or the NLRB addressed them in the last several years.

Specifically, the Memorandum served as a follow-up to the General Counsel’s Memorandum issued in August 2021, less than one month after she was sworn in. The August 2021 Memorandum (discussed here), outlined a wide variety of issues that Abruzzo required all Regional Offices to submit to Advice prior to issuing any decisions. In the August 2021 Memorandum, Abruzzo separated the issues she specifically wanted to address into the two broad categories: (1) subject matter areas where, in the last several years, the Board overruled legal precedent; and (2) new initiatives that the General Counsel would like to carefully examine.

Now, Abruzzo outlined only 15 issues from the original August 2021 Memorandum which must be sent to Advice. Abruzzo identified 46 topics on which the Division of Advice has already issued guidance, either “in the form of Significant Advice Memoranda or inserts to be used in briefs to ALJs and/or the Board, for around 46 Board decisions identified in the initial mandatory submission memo and in later GC memos.”

The 15 issues that remain at the forefront of Abruzzo’s prosecutorial agenda are as follows:

Cases involving the applicability of Ridgewood Health Care Center, Inc., 367 NLRB No. 110 (2019) (overruling Galloway School Lines, 321 NLRB 1422 (1996) and finding that a successor employer that discriminates in refusing to hire a certain number of the predecessor’s workforce to avoid a Burns successorship bargaining obligation does not necessarily forfeit the right to set employees’ initial terms).
Cases involving the applicability of Pittsburgh Post-Gazette, 368 NLRB No. 41, slip op. at 3, n.5 (2019) (distinguishing Finley Hospital, 362 NLRB 915 (2015) in determining whether the post-contract status quo required increases to employer fund contributions).
Cases involving the applicability of Brevard Achievement Center, Inc., 342 NLRB 982 (2004) (declining to extend the Act’s coverage to individuals with disabilities on grounds that these individuals, where working in a rehabilitative setting, are not employees within the meaning of Section 2(3) of the Act).
Cases involving the applicability of United States Postal Service, 371 NLRB No. 7 (2021) (Board refusing to find a pre-disciplinary interview right to information, including the questions to be asked in the interview, as a purported extension of Weingarten).
Cases involving the applicability of ABM Onsite Services-West, 367 NLRB No. 35(2018) (Board, after initially asserting jurisdiction and certifying the union as representative of the employer’s airport bag jammer technicians and dispatchers, reversed course and deferred to a National Mediation Board advisory decision in which NMB found Railway Labor Act jurisdiction under traditional six-factor carrier control test and overruled NMB cases requiring carrier control over personnel decisions).
Cases involving a refusal to furnish information related to a relocation or other decision subject to Dubuque Packing (see former Chairman Liebman’s dissent in Embarq Corp., 356 NLRB No. 125 (2011) and OM-11-58).
Cases involving the applicability of Shaw’s Supermarkets, Inc., 350 NLRB 585 (2007) (to assess whether this case should be overruled. The case permits midterm withdrawals of recognition where they occur after the third year of a contract of longer duration).
Cases involving the applicability of Wal-Mart Stores, 368 NLRB No. 24 (2019) (broadly defining an intermittent strike).
Cases involving the applicability of Service Electric Co., 281 NLRB 633 (1986) (allowing an employer to unilaterally set terms and conditions of employment for replacements even where those terms are superior to those that had been paid to striking unit employees).
Cases involving the applicability of Ex-Cell-O Corp, 185 NLRB 107 (1970) (declining to provide a make whole compensatory remedy for failures to bargain).
Cases involving the applicability of Cordua Restaurants, Inc., 368 NLRB No. 43 (2019) (Board finding, among other things, that an employer does not violate the Act by promulgating a mandatory arbitration agreement in response to employees engaging in collective action).

In addition, Abruzzo confirmed that Regions are still required to submit to the “Division of Advice cases involving electronic surveillance or algorithmic management that interferes with the exercise of Section 7 rights.”

This new Memorandum provides an important checkpoint in Abruzzo’s tenure, reflecting on the progress her Office has achieved since her appointment in July 2021, and the work that remains until her term concludes in 2025. Employers should be particularly cognizant of issues that arise, which may touch on the prior precedent highlighted above, and evaluate the potential that if such issues were litigated before the NLRB, then they could become fodder for reversal by the current Board.

We will keep you informed of any new developments that arise at the NLRB.

Tags: ABRUZZO, GC, General Counsel, NLRA, NLRB

Board Rescinds Four Provisions to 2019 Election Rule Following Federal Appeals Court Vacating the Provisions

By Steven Porzio, Yonatan Grossman-Boder and Austin McLeod on March 13, 2023 Posted in NLRB

Thursday, the NLRB issued a notice to rescind four provisions from the Board’s Rules and Regulations contained in its Final Rule published in December 2019 (the “2019 rule”). The Board’s notice rescinding all four provisions, which were struck down by the Court of Appeals for the D.C. Circuit in January (discussed here), resurrects the previous regulations.

The 2019 rule contained several provisions pertaining to the “quickie” election rules of 2014 (the “2014 rule,” which we discussed here). However, the Court of Appeals affirmed a federal district court decision vacating three provisions to the 2019 rule as improperly enacted without notice and comment and further held a fourth provision was contrary to the NLRA. The four provisions (and the first three provisions’ 2014 rule predecessors) were as follows:

allowing employers up to five business days to furnish the voter list following the direction of election (from two business days under the 2014 rule);
precluding Regional Directors from issuing certifications following elections if a request for review is pending or during the time in which a request for review could be filed (the 2014 rule directed Regional Directors to certify elections regardless of whether a request for review had been filed);
limiting a party’s selection of election observers to individuals who are current members of the voting unit whenever possible (the 2014 rule permitted any observer of the parties’ choosing, subject to the Regional Director’s limitations); and
providing for automatic impoundment of ballots under certain circumstances when a petition for review is pending. Practically, if an employer fails to get a pre-election hearing and quickly goes to an election, the ballots will not be impounded pending the employer’s request for review of the election. If the challenged ballots are not greater than the difference in “Yes” vs “No” votes, the Region could certify the union even while the employer is in the process of appealing to the full Board.

The Board’s movement regarding these changes is swift. While normally there would be at least a thirty-day delay of implementation of the final rule, the Board stated it had good cause to waive that requirement as “this rule implements a court order….” (See here for the Final Rule)

The Federal Register also filed for public inspection a notice staying the effective date of two provisions of the 2019 rule pertaining to pre-election litigation of certain disputes (voter eligibility, unit scope, and supervisory status) and election scheduling (establishing a presumptive waiting period of twenty business days between the Regional Director directing an election and the election date). These provisions never went into effect, having been enjoined by the District Court.

Takeaways

While litigation remains pending regarding the legality of two provisions, the Board’s step to rescind the four provisions signals a concession by the Board to the Court of Appeals ruling. As a result, this dims hope for the time being that these provisions of the 2019 rule would return bargaining parties to an era before the “quickie” election rules of 2014. The Board is still considering whether it will revise or repeal the 2019 rule. In the meantime, parties will continue to operate under the 2014 rule provisions, largely to the detriment of the employer.

As always, we will continue to monitor any developments.

NLRB Announces New Information-Sharing Partnership to Identify Employer Surveillance

By Joshua Fox and David Gobel on March 9, 2023 Posted in NLRB

On March 7, 2023, the National Labor Relations Board (“NLRB”) and Consumer Financial Protection Bureau (“CFPB”) announced that the two agencies have signed a Memorandum of Understanding (“MOU”) creating a formal partnership that allows the two agencies to share data with each other. The agencies highlighted this new partnership’s potential to protect American workers from:

employer surveillance and monitoring
data collection
employer-driven debt created from the purchase of equipment, supplies, or required training

The MOU will allow the NLRB to access nonpublic data from the CFRB. This includes any relevant ongoing CFRB investigations, matters, and proceedings. The CFRB was founded in 2011 in the aftermath of the 2008-09 financial crisis, and ensures that “markets for consumer financial products are fair, transparent, and competitive for American workers”.

The MOU will remain in effect indefinitely. Either agency, however, can decide to withdraw from participating in the agreement after giving 30 days notice to the other agency.

The partnership follows an October 2022 memo from NLRB General Counsel Jennifer Abruzzo, which also focused on the potential dangers of employer surveillance on workers. In the October memo, Abruzzo identified the CFRB as a potential collaborator, because of the agency’s past experience investigating employer monitoring and productivity tracking technology. Abruzzo, in a public statement accompanying the MOU, stated that she was concerned over employers’ use of artificial intelligence to chill workers from exercising their labor rights.

This also is not the first partnership the NLRB has made during the Biden Administration. In January 2022, the NLRB partnered with the Department of Labor on a similar information sharing initiative. Following that partnership, Abruzzo indicated in a February 2022 memo that she intended to strengthen partnerships with other federal agencies to better protect worker rights.

As always, we will keep you informed of any updates on this interagency collaboration.

Tags: AI, CFPB, information, NLRA, NLRB, surveillance

Drafter Beware: NLRB Finds That Employers Who Offer Severance Agreements With Broad Non-Disparagement or Confidentiality Restrictions Violate The NLRA

By Mark Theodore, Joshua Fox and Raymond Arroyo on February 23, 2023 Posted in NLRB

The National Labor Relations Board (“Board”) issued a ruling on February 21, 2023, in McLaren Macomb, 372 NLRB No. 58 (2023), which in effect finds broad confidentiality and non-disparagement clauses in severance agreements violate Section 8(a)(1) of the National Labor Relations Act (“Act”).

The decision applies to all employers regardless of union status. However, the decision applies only to “employees” under the Act—not separation agreements involving managers or supervisors, who are not afforded Section 7 rights under the NLRA. In light of this ruling, employers should carefully consider how to approach drafting new severance agreements, as this decision raises a number of issues (discussed below).

The Board Majority Returned to Prior Precedent

The employer furloughed employees without notifying or giving the union representative an opportunity to bargain over the changes. Further, the employer offered the laid-off employees severance agreements without bargaining with the union.

All four Board members agreed the employer violated the Act by not bargaining with the union over the layoffs or the severance agreement.

The Board majority (Chairman McFerran and Members Wilcox and Prouty), however, went further and expressly overruled Baylor University Medical Center, 369 NLRB No. 43 (2020) and IGT d/b/a International Game Technology, 370 NLRB No. 50 (2020) criticizing the decisions as focusing too sharply on the outside circumstances, such as whether the employer discriminated against the employee or exhibited animus, without analyzing the “specific language in the challenged provisions of the severance agreements.”

Now, the offer of an agreement, the provisions of which could waive an employee’s Section 7 rights, violates Section 8(a)(1) of the Act. In explaining its holding, the Board Majority stated:

Where an agreement unlawfully conditions…severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the Act, because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain employed.

The Board emphasized that whether an employee accepts a severance agreement is immaterial to the analysis, noting that if acceptance were required it would create an “obstacle to the effective protection of Section 7 rights.”

Application of the New Standard

Applying this new standard to the severance agreement at issue, the Board evaluated the confidentiality and non-disparagement provisions.

The confidentiality provision stated:

Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

The Board majority found that the confidentiality language restricted the furloughed employees’ Section 7 rights because it prohibited employees from disclosing the terms of the agreement to any third party, which the majority concluded reasonably would coerce the employee from not filing an unfair labor practice charge or assisting a Board investigation into the Employer’s use of the severance agreement.

The Board also found that the confidentiality provision prevented the furloughed employees from assisting their former coworkers who may also be determining whether they want to accept the severance agreement.

The non-disparagement provision stated:

Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

(Emphasis added).

The Board majority concluded this provision substantially interfered with the furloughed employees’ Section 7 rights to make “statements to [the] Employer’s employees or to the general public [including to the NLRB] which could disparage or harm the image of [the] Employer.”

The Board took issue with several other aspects of the non-disparagement clause:

The provision failed to limit the scope of the agreement to matters regarding past employment with the employer.
The provision did not provide a definition of “disparagement” that comports with existing Board precedent—i.e., defining “disparagement” as communications that are so “disloyal, reckless or maliciously untrue,” so as to lose protection of the Act.
The disparagement clause was overly broad in that it extended to the employer’s “parents and affiliated entities and their officers, directors, employees, agents and representatives.”
The provision’s term continued in perpetuity, which the Board found excessive.

Key Takeaways

We have seen this type of decision in the context of the Board’s handbook cases, which have been addressed by this blog many times, including here, here, here, and here. In sum, the Board is returning to a standard that finds a hypothetical harm and then addresses it as a violation of the law.

As employers consider how to draft separation agreements in light of this ruling, this decision raises a number of issues, including:

Whether a savings clause carving out NLRA issues, Section 7 activity, and/or charges before the NLRB will be sufficient to allow the inclusion of broad confidentiality and non-disparagement provisions.
The manner in which the NLRB applies this standard to confidentiality clauses and/or non-disparagement provisions that are more narrow in scope compared to the broad provisions at issue in this case.
Whether the current ruling impacts existing separation agreements. The decision did not explicitly state that it would apply retroactively.
Whether separation agreements with broad confidentiality and/or non-disparagement clauses are permissible if offered to the Union first, rather than directly to the employee.
Whether an employee who seeks the advice and counsel of a lawyer—which is often a requirement of severance agreements—can effectively waive Section 7 rights.

It is also likely a harbinger of the manner in which the Board will rule in the still-pending Stericycle case (see our prior discussion here), which may result in the overturning of the Boeing standard that currently applies to the evaluation of the lawfulness of workplace rules.

As always, we will keep you posted as new developments occur.

Tags: confidentiality, disparagement, Employee, manager, NLRA, NLRB, separation agreement, severance agreement, supervisor

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

By Mark Theodore and Dixie Morrison on January 19, 2023 Posted in NLRB

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

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

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

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

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

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

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

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

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

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

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

Takeaways

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

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

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

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

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

Tags: Appeal, D.C. Circuit Court of Appeals, elections, NLRA, NLRB

No Limits: Board Finds Hotel Improperly Limited Bargaining Subjects

By Joshua Fox and Megan Childs on December 21, 2022 Posted in NLRA, NLRB, Section 7, Section 8(a)(5)

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

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

Factual Background

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

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

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

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

Majority Decision – Company Violated the NLRA

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

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

Dissent – Company Did Not Violate the NLRA

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

Takeaways

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

Tags: collective bargaining, duty to bargain, economic, Hotel, NLRA, NLRB, non-economic

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