Shamrock Foods Company, 369 N.L.R.B. No. 5 (January 7, 2020) is the latest in the National Labor Relations Board’s series of employer-friendly decisions.  In Shamrock Foods, the Board held that an employer did not violate Sections 8(a)(3) and (1) of the National Labor Relations Act by offering and entering into a settlement agreement with an unlawfully-discharged employee who waived his right to remedial reinstatement in exchange for a large cash payment.  In doing so, the Board affirmed its longstanding policy favoring the compromise and settlement of unfair labor practice charges.

Factual Background

During an active campaign by a union to organize a distribution warehouse, the employer fired an employee, a key figure in the union’s campaign.  An administrative law judge later found this discharge to be unlawful.  The employee remained active in the union’s efforts after his discharge, and soon became a focal point for union supporters, who picketed with signs including the slogan, “Workers United to Bring [Employee] Back”.  Thereafter, as part of an NLRB injunction proceeding, a federal court issued an order reinstating the employee to his position while the matter was in litigation.  Union supporters viewed the order as a win, and distributed flyers around the warehouse.

Initially, the employer complied with the court order and offered the employee reinstatement.  The employer then changed its position and offered the employee a settlement of $178,000 in exchange for waiving his right to reinstatement.  The figure also included settlement of a separate disability charge the employee had filed with the EEOC over his termination.  The employee rejected the offer and countered with $350,000 as well as 3 years of medical coverage.  Eventually, the two parties agreed on $214,270.30, which the employee accepted.  This settlement figure represented more than four times the amount of remedial back pay the employee could have received as part of the NLRB litigation.  The employer stated several times during negotiations that it did not want the employee back.

The union filed additional charges alleging the settlement constituted an unlawful bribe in violation of the Act.

Analysis

In determining whether the settlement agreement constituted an unlawful bribe in violation of the NLRA, the Board noted that this was an “unusual case warranting careful scrutiny.”

The Board found substantial evidence that the employer had used the settlement offer as a means of preventing the employee from returning to work.  The evidence was clear the employer knew that the employee was a well-known and active supporter of the union’s efforts.  In addition, the employer was not raising typical defenses to remedial reinstatement—that employee’s work was deficient, or that his reinstatement would cause friction with other employees or management.  The employer also knew that the employee’s reinstatement had become a prominent issue among warehouse employees, and its prevention would deal a setback to the union’s efforts.  Finally, the employer offered the employee more than four times the amount of his lost pay and related expenses, and failed to present any witnesses to explain its reasons for offering such a large sum.  The Board noted that put together, these facts raise “at least a colorable basis for finding that [employer’s] settlement offer to [the employee] was unlawful.”

However, the Board distinguished several cases in which they had declined to give effect to settlement agreements conditioned upon prospective waivers of Section 7 rights.  In this case, the employee waived no rights; he was only asked to decline re-employment.  The Board also found significant that the employee had independently negotiated with the employer regarding the settlement figure, and had the option of refusing, forcing his employer to reinstate him or be held in contempt.  Finally, though the settlement figure was substantially larger than the sum of the employee’s remedial back pay, it also included compensation for the resolution of his disability claim with the EEOC.

In reaching its conclusion, the Board emphasized its longstanding policy to encourage compromise and settlement, as established in Independent Stave and related cases.  Ultimately, given the evidence on both sides, the Board decided that its policy favoring settlements tipped the scale, and adopted the ALJ’s dismissal of the union’s allegation.

Takeaways

This is an interesting case involving an allegation that an employer used its economic resources to buy-off a union supporter. Absent the context of a settlement of NLRB litigation, this payment clearly would be an unlawful bribe.  However, making such a payment as part of a settlement made it acceptable.  Parties settle litigation for all sorts of reasons, and this is not the first time an employer has been willing to pay a premium to have an employee waive reinstatement.

The case does put a spotlight onto the competing interests in NLRB settlements.  The union clearly saw the outsized payment as a deliberate attempt to thwart its organizing efforts by removing a strong pro-union adherent.  The employer had openly expressed that it did not want the employee to come back to work.  The employee, for his part, had a price he was willing to accept to waive reinstatement, and that figure ultimately was met by the employer.

In the end, the strong preference to settle litigation won out.  If the union’s allegation had been found to have merit, the settlement payment would be put into jeopardy and the employee might have been faced with reinstatement to a job with some lower amount of backpay.

The Board’s decision was a continuation of a long line of cases approving settlements in which the employee waives reinstatement in exchange for a larger remedial payment from the employer.

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Photo of Mark Theodore Mark Theodore

Mark Theodore is a partner in the Labor & Employment Law Department. He has devoted his practice almost exclusively to representing management in all aspects of traditional labor law matters throughout the U.S. He is Co-Chair of Proskauer’s Labor-Management and Collective Bargaining Practice…

Mark Theodore is a partner in the Labor & Employment Law Department. He has devoted his practice almost exclusively to representing management in all aspects of traditional labor law matters throughout the U.S. He is Co-Chair of Proskauer’s Labor-Management and Collective Bargaining Practice Group.

Some recent highlights of his career include:

  • Successfully defended client against allegations that it had terminated a union supporter and isolated another. T-Mobile USA, Inc., 365 NLRB No. 15 (2017).
  • Successfully appealed NLRB findings that certain of client’s written policies violated the National Labor Relations Actions Act.  T-Mobile USA, Inc., 363 NLRB No. 171 (2016), enf’d in part, rev’d in part 865 F.3d 265 (5th Cir. 2017).
  • Represented major utility in NLRB proceedings related to organizing of planners.  Secured utility-wide bargaining unit. Bargained on behalf of grocery chain.  After negotiations reached an impasse, guided the company through lawful implementation of five year collective bargaining agreement.
  • Coordinated employer response in numerous strike situations including a work stoppage across 14 western states of the client’s operations.

Mark has extensive experience representing employers in all matters before the NLRB, including representation petitions, jurisdictional disputes and the handling of unfair labor practice charges from the date they are filed through trial and appeal. Mark has acted as lead negotiator for dozens of major companies in a variety of industries, including national, multi-unit, multi-location, multi-employer and multi-union bargaining. Mark has handled lockout and strike situations, coordinating the clients efforts.

In addition, Mark has handled hundreds of arbitrations involving virtually every area of dispute, including contract interest arbitration, contract interpretation, just cause termination/discipline, benefits, pay rates, and hours of work.

Photo of Joshua Fox Joshua Fox

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several…

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several Major League Baseball Clubs in all aspects of the salary arbitration process, including the Miami Marlins, Boston Red Sox, Los Angeles Dodgers, Kansas City Royals, San Francisco Giants, Tampa Bay Rays and Toronto Blue Jays. In particular, Josh successfully represented the Miami Marlins in their case against All-Star Catcher J.T. Realmuto, which was a significant club victory in salary arbitration. Josh also represents Major League Baseball and its clubs in ongoing litigation brought by current and former minor league players who allege minimum wage and overtime violations. Josh participated on the team that successfully defended Major League Baseball in a wage-and-hour lawsuit brought by a former volunteer for the 2013 All-Star FanFest, who alleged minimum wage violations under federal and state law. The lawsuit was dismissed by the federal district court, and was affirmed by the U.S. Court of Appeals for the Second Circuit.

Josh also has extensive experience representing professional sports leagues and teams in grievance arbitration proceedings, including playing a vital role in all aspects of the grievance challenging the suspension for use of performance-enhancing drugs of then-New York Yankees third baseman Alex Rodriguez. Josh also has counseled NHL Clubs and served on the trial teams for grievances alleging violations of the collective bargaining agreement, including cases involving use of performance-enhancing substances, domestic violence issues, and supplementary discipline for on-ice conduct. He has played a key role in representing professional sports leagues in all aspects of their collective bargaining negotiations with players and officials, including the Major League Baseball, National Hockey League, the National Football League, Major League Soccer, the Professional Referee Organization, and the National Basketball Association,.

In addition, Josh has extensive experience representing clients in the performing arts industry, including the New York City Ballet, New York City Opera, Big Apple Circus, among many others, in collective bargaining negotiations with performers and musicians, the administration of their collective bargaining agreements, and in grievance arbitrations.

Josh also represents a diverse range of clients, including real estate developers and contractors, pipe line contractors, hospitals, hotels, manufacturers and public employers, in collective bargaining, counseling on general employment matters and proceedings before the National Labor Relations Board, New York State Public Employment Relations Board and arbitrators.

Josh has also recently served as an adjunct professor at Cornell University’s School of Industrial Labor Relations for the past two years, teaching a course regarding Major League Baseball salary arbitration.

Prior to joining Proskauer, Josh worked for a year and a half at the National Hockey League, where he was involved in all labor and employment matters, including preparations for collective bargaining, grievance arbitration, contract drafting and reviewing and employment counseling. Josh also interned in the labor relations department of Major League Baseball and at Region 2 of the National Labor Relations Board. He was a member of the Brooklyn Law Review and the Appellate Moot Court Honor Society and served as president of the Brooklyn Entertainment and Sports Law Society.

Photo of Scott Tan Scott Tan

Scott Tan is a law clerk in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.

Scott earned his J.D. from the UCLA School of Law, where he served as a problem developer and member of…

Scott Tan is a law clerk in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.

Scott earned his J.D. from the UCLA School of Law, where he served as a problem developer and member of the Moot Court Honors Board. He also worked as a research assistant for Dean Jennifer Mnookin and Professor Hiroshi Motomura.