Labor Relations Update

Thorough Employer Investigation Helps Establish Employer’s “Honest Belief” of Employees’ Picket Line Misconduct

The Board is now operating at a full complement and is issuing decisions on a fairly regular basis.  Nothing earth shattering in terms of law (which is kind of a relief) but there are some interesting issues worth discussing.  A frequent topic of discussion here is the often blurry line between what constitutes “protected” versus “unprotected” employee conduct and how difficult it can be to defend claims that a discipline or termination violated the Act.  See some examples here, here and here.  When there is an ongoing labor dispute, such as a strike, it can be difficult to discipline or discharge an employee for misconduct that is bound up with the dispute.

In a recent NLRB decision, the employer’s thorough and complete investigation helped establish the lawfulness of its termination of some employees whose misconduct occurred in the midst of a strike.

In Kapstone Paper and Packaging Corporation, 366 NLRB No. 63 (April 20, 2018) the Board was confronted with a situation where negotiations over a new contract stalled and a strike occurred.  During the few days of the strike four employees were terminated for misconduct.  These terminations formed the basis of the charges alleging the employer discriminated against the employees in violation of Section 8(a)(3) of the Act.

The Employer’s Operation

Employer operates a paper and pulp mill in the state of Washington where approximately 1,000 unionized employees work.  The employer’s operation is “situated in a remote location, accessible by a single, one-mile road–Fiber Way.”  The road does not have any residential or commercial development and all employees drive their private vehicles to the plant.

Union Negotiations Break Down; a Strike Is Called

The parties were “embroiled” in contract negotiations which failed to produce an agreement.  The union threatened a strike, to which the employer responded by writing a letter to the union warning that “any employee who engages in serious strike misconduct (e.g., violence damage to property, threats of bodily harm) or violations of the law” would be subject to discipline or discharge.

The union eventually went out on strike.  The union held required training sessions for all employees which reinforced that union members were to “exhibit normal, respectful behavior on the picket line.”  Strikers were also given the union’s “Picket Line Dos and Don’ts” which further detailed appropriate picket line conduct.  These rules specifically stated, among other things, that strikers were not to “swarm” vehicles entering/exiting the plant, which was defined as standing collectively in front of or surround vehicles or obstruct vehicles’ entrances or exits.

Employee Kicks One Vehicle Causing Damage and Jumps on the Hood of Another

One striker who had attended training on dos and don’ts was on picket line duty with approximately 10-15 other strikers.  A pickup truck from one of the employer’s contractors entered the mill and the employee kicked the passenger side rear panel which appeared to cause damage.

In a separate incident occurring an hour later the employee and some of other picketers gathered in front of a vehicle leaving the mill.  One picketer stated, “there’s another one” a presumed reference to the fact the vehicle belonged to a contractor.  When the vehicle stopped the employee jumped on the hood and as he did so his picket sign made contact with the windshield.  When the picketers parted the vehicle accelerated throwing the picketing employee off.

Both incidents were caught on videotape.

The Employer Obtains an Injunction

The kicking incident and others formed the basis for the employer’s application for and grant of a state court injunction which stated, in part, that “No one will attempt to block or impede traffic entering or leaving the. . . mill site.”

Three Employees Block Exiting Semi-truck

After the injunction was issued, three picketers, all of whom had received the union’s training, decided to position themselves in such a manner so as to block larger trucks that needed to make a wide turn onto the access road from the mill gate.  Although the three employees were on the access road “right of way” they knew that by standing where trucks had to turn they would cause a “choke” point which would force the driver of the truck have to make a choice between hitting some parked cars or hitting the picketers.  One truck physically could not make the turn and could not back up so the picketers effectively blocked all ingress and egress to the mill.  Law enforcement was called and after an exchange the picketers finally moved.

The Employer Investigates the Incidents and Decides to Terminate the Four Employees

The employer’s security manager, who had conducted numerous investigations for the employer, conducted the investigation into these incidents.  The security manager reviewed all the videotape and spoke to witnesses. The security manager inspected the truck in the kicking incident and determined there was damage to the vehicle.  In the second truck incident (where the employee landed on the hood), the security manager observed the broken windshield but after review of all the evidence could not conclude when the windshield had been broken by the striker.

The security manager asked all four employees to provide written statements of their version of events.

The kicker/hood leaper wrote: “[the contractor] was honking his horn antagonizing picketers.  I believe I kicked at the vehicle while it was entering the contractor gate.”  As to the hood incident, he “jumped onto the hood of the vehicle because he was afraid of being hit.”

The other three employees in their written statements about the truck blockage stated the driver “cursed and yelled profanities” at the picketers while another blamed the driver’s poor driving:  “[she] cut the corner short in an attempt to get me and my fellow union brothers off the picket line…this driver shut down the semi, in my opinion to blow things out of proportion.”

The security manager assembled a report recommending discharge.  Here’s how the judge described the investigation and decision to discharge:

After [the manager] received the…discharge recommendation together with the investigative reports, photographs, the witnesses’ statements, the employees’ written statements, and the fact-finding notes, he conducted an independent review of the materials relative to the incidents involving [the four employees].  He also conferred with [the security manager] who conducted the fact-finding meetings and compiled the investigative reports.  He subsequently agreed with [the manager’s] assessment regarding the incidents. . .

Charges were filed and the NLRB took the matter to trial.

The ALJ, Board Dismiss Complaint

The ALJ stated legal test for discipline during a strike was one of discrimination.  The General Counsel has “the overall burden of proving discrimination” and must establish first that the employees were strikers and that the employer “took action against them for conduct associated with the strike.”  If the threshold case is established the “burden shifts to the employer to establish that it had an honest belief that the employees in question engaged in the conduct for which they were discharged.”  The employer’s burden, importantly, is “no more than that and it does not require it to prove that the strikers did in fact engage in misconduct.”

Applying this standard, the ALJ found that in both incidents the General Counsel established the threshold case.

As to the employee who kicked the truck the ALJ found the employee “intended to instill fear on the contractor’s part” not to return to the worksite during the strike.  This finding was bolstered by the fact the employee admitted the conduct in his written statement and “knew” that his conduct was prohibited because both the union and employer had issued warnings.   The judge found the conduct was “sufficiently egregious” to warrant his termination.

With respect to the three employees who blocked the truck the judge noted that the employees defended by stating the driver had “hurled insults and profanities” at them and they had a right to “stand their ground.”  The ALJ evaluated this defense and discredited the employees’ version.  The ALJ upheld the termination finding that even if the three employees were somehow provoked by the driver they would not be privileged to block the driveway and that by doing so they intended to intimidate the driver not to return while the stiker was ongoing.

On appeal, the Board upheld the dismissal of the complaint.

Takeaways

Labor disputes are chaotic and it can be very risky to discipline or discharge an employee for misconduct for the simple reason that the engaging in strike activities, such as picketing, is protected.  The decision is noteworthy for a couple of reasons.  First, the ALJ took pains to describe the legal standard as being one of “honest belief” that misconduct occurred rather than proving that the event actually occurred.  While this has been the legal standard for many years one cannot always be confident that standard will actually be applied.  It is much harder to prove that an employee actually engaged in certain misconduct. Indeed, the physical nature of the misconduct played a large role in this case (there was damage to a vehicle and the strikers standing in a certain position on the narrow access road in and out of the plant).  If the misconduct was verbal only the case likely would have turned out differently as the Board is willing to condone a great deal of verbal misconduct as part and parcel of a labor dispute.

Second, the thoroughness of the employer’s investigation was very helpful.  There are several elements of the employer’s investigation in this case which undoubtedly helped immensely in its defense, and of course, establishing its “honest belief” the discharged employees engaged in the misconduct.  These elements are:

  • Having an experienced investigator conduct the investigation.  Such a person knows the order of interviews, how to weigh evidence, etc.
  • Giving the accused the opportunity to provide his or her version in a written statement.  If the accused provides a statement the employer has the version to consider; if no statement is provided, the employer can at least say it tried to get the employee’s version but could not compel participation.  In this case, the employee who kicked the car admitted he did it.  The other employees claimed their actions were warranted by provocation which sounded like more of an excuse to engage in misconduct.  The fact due process is given is very important.
  • Discounting certain allegations based on the evidence.  In this case, the vehicle that had the employee jump on the hood had a broken windshield.  It would be easy to conclude that the employee’s conduct was responsible but the investigator could not be certain after watching the tapes and so appropriately did not attribute the act to the employee.
  • Layer of review.  This is very important.  After the investigation was completed, and a recommendation of termination was made, another manager independently reviewed all of the evidence and came to his own conclusion.  Independent review allows the employer to see if two managers see the same set of facts the same way.

The absence of any one of these elements certain could give rise to the charge that the investigation was “results oriented” and therefore a pretextual reason made up to hide the discriminatory reason for the discharge.

Gridlock Broken: Senate Confirms John Ring as Newest Member of NLRB

By a vote of 50 to 48  the U.S. Senate confirmed Republican John Ring as a Member of the National Labor Relations Board, giving the agency a full five member complement.  Member Ring, whose term expires December 16, 2022, takes the seat previously held by Chairman Miscimarra.

The addition of Member Ring means, of course, that the Board now consists of a 3-2 majority favoring employers and can issue decisions changing current case law, something it could not do with four members split evenly along party lines. During the brief three month period when the agency last had five members (September-December 2017), it issued many decisions overturning precedent (which, to be fair, had been overturned or “clarified” in the previous 8 years). During those 90 days the Board, among other cases, eliminated micro units, restored the ability of ALJs to accept settlements over the objection of the Charging Party or General Counsel, and set forth a new standard for evaluating the legality of handbook language.

More such precedent correction can be expected in the coming months.

Unicorn Sighting: NLRB Overturns ALJ Credibility Determination

As we have seen, there are few things that can be counted on in labor relations.   Oftentimes, several experts look at the same problem and come to vastly different conclusions (here, here and here are some examples).  What is (almost) guaranteed, however, is that the NLRB rarely disturbs the determinations made by an Administrative Law Judge of witness credibility made during testimony at trial.  This is mainly because the ALJ, as the sole fact finder, is the only person in a position to observe the demeanor of the witness and evaluate credibility.

In a fairly rare case, the NLRB recently refused to adopt an ALJ’s credibility determinations concluding that a judge’s determination that a charging party-witness was not credible was not something that could stand because it relied on “improper bases.”

In International Longshoremen’s Assn, Local 28, 366 NLRB No. 20 (February 20, 2018) the Charging Party was a female union member who claimed in a charge that her union discriminated against her in the referral of work and training opportunities for reasons related to her gender.

Charging Party Claims Sexual Harassment as Reason for Denial By Union of Work Opportunities.

The union operated hiring hall in which it dispatched union members to jobs.  The union also sponsored training to allow its members to gain skills to perform additional jobs.  Charging Party was a truck driver member of the union.

In the charge that initiated the case, the Charging Party stated that the union representative “unlawfully refused to allow . . .[Charging Party” to be placed on the certification list . . [and] refer …[Charging Party] to any jobs for unfair, arbitrary , and invidious considerations.”  As with all unfair labor practice charges, the Charging Party had to swear under penalty of perjury the allegation was correct.  After investigation, the General Counsel issued complaint and the matter went to trial.

The evidence established that for a period of years the Charging Party had received some work referrals through the union hall although on what amounted to a part-time basis.   Part of getting additional work had to do with being certified to perform additional jobs, the skills for which required training.  The Charging Party asserted that she had repeatedly requested the union to place her in training but the union denied these requests.  Charging Party stated that on 10 separate occasions during a 5 year period when she went to the union representative’s office to discuss training and she was subjected to physical assault of a sexual nature in what she described in her testimony as a “never-ending cycle” of grabbing and groping.

The alleged harasser, a union representative, testified that he did not engage in any sexual harassment. The union also demonstrated Charging Party had in fact been referred to jobs through the union hiring hall which appeared to contradict the statement in the charge that Charging Party had not been referred to “any” jobs.

Thus, the case turned credibility of these two opposing witnesses.  The ALJ recommended dismissal of the complaint after concluding Charging Party’s testimony was not credible.

ALJ Gives Three Reasons as to Why Charging Party’s Version was not Credible

In his decision, the judge noted first that Charging Party was a “highly uncooperative witness, who effortlessly answered virtually all of the General Counsel’s direct examination queries, but then responded to equally simple cross-examination questions with delays, pauses, additional questions, recollection issues, and reported confusion.”  Had this basis formed the entirety of the judgment’s assessment that Charging Party was not credible the ruling likely would have been upheld on appeal.

The judge’s second reason for deciding Charging Party was not credible was the “glaringly false statement in her ULP charge.”  This was a reference to the body of the charge which said Charging Party had not been referred to “any” jobs when, in fact, she had been sent to jobs.

The third reason the ALJ gave for the Charging Party’s lack of credibility was the “implausibility of several parts of her story.”  In this regard, the ALJ noted that it was unbelievable that the Charging Party, “a tough woman who performs stevedoring work…and previously drove a truck in Iraq, would have meekly allowed [the union representative] to harass her a whopping 10 times, without an utterance.”

After the complaint was dismissed, the General Counsel appealed on the grounds that the judge’s credibility determinations were “based on sex stereotypes and demonstrated bias.”

A three member panel of the Board (Kaplan, Pearce and Emmanuel) agreed and set aside the decision.  The Board remanded the case to the chief administrative law judge to assign to another judge to rehear the case.

Takeaway-It’s Still Hard To Attack A Credibility Determination

The burden to overturn a credibility determination is very high and that the Board’s general standard is not to disturb such determinations unless “a clear preponderance of the all the relevant evidence convinces [the Board] that they are incorrect.”  Usually, when judges discredit testimony it is because of the demeanor of the witness which is nearly impossible to challenge.

This is an unusual and interesting case because the ALJ gave much more detailed reasons for his denial of the claim which ultimately led to reversal.  In this case, the second and third reasons given by the judge were not typical.  For example, using the statement in the charge as a basis to conclude the charging party was lying would open up many charges to attack.   Such apparent conflicts between the charge allegation and the trial testimony are not usually given much weight for the simple reason that the literal words used on an unfair labor practice form, a document that does not require specificity and is often filled out without any expert assistance, would open up an entire new line of defense.  Charging Party’s statement in her charge that she did not get “any” work opportunities when she in fact had been referred work was more along the lines of an exaggeration rather than an outright lie.

The third reason, that Charging Party’s accounts of harassment were “implausible” was the obvious focus of the Board in its reversal.  The Board did not want to endorse a ruling that stated because an alleged victim of sexual harassment did not complain about each instance of harassment meant the allegations were “implausible.”

The case is an interesting insight into the determination of credibility, however.

Impulse Control? NLRB Finds Employee’s Misconduct To Be Deliberate and “Predetermined” and Not Protected

The past few weeks on the Labor Board front have been fairly routine, save for, of course, the high drama associated with the NLRB reversing its own decision (lest anyone think this is a super significant development, remember that this agency had scores of decisions overturned for lacking a proper quorum only to wait, quietly, and simply re-affirm the vast majority).

Legal drama is not as fun, or as interesting, as the day to day labor situations.  A frequent topic here has been the intersection of protected activity and misconduct.  More specifically, when does an employee’s otherwise protected activity become unprotected?  There are endless situations and this is the stuff that makes labor relations interesting (and vexing, at times).  The Board recently issued a decision in what we’ll call “the case of the unauthorized passcode use.”

In KHRG Employer LLC, 366 NLRB No. 22 (February 28, 2018), a hotel employer had been faced with an ongoing organizing drive.  Many employees participated.  One employee, a server at a restaurant on hotel premises, had engaged in protest activities, which included presenting a petition to hotel management inside the hotel lobby and picketing outside the hotel.  The server had not been disciplined for any of these activities.

Server Uses Passcode To Allow Delegation To Enter Secured Area

On one occasion the server led a delegation of nine employees and five non-employees into the hotel to present another petition to the hotel’s General Manager who was in her office in a secure area of the hotel’s basement. The server did not know the names of all the folks in the delegation.  The group was challenged by a security guard who informed the delegation that only 4 employees could proceed to the secure area of the hotel.  Although the server was aware there were non-employees in the delegation, he falsely informed the security guard that all 14 of the group were employees and that they all had  “right” to deliver the petition.  The security guard let the group pass.

The secured area of the hotel is behind a locked door and is the place where the employer stores cash, corporate checks, guest contracts and personnel files.  It is also the area of where hotel managers had their offices.  In order to enter the secured area the server had to use a passcode, which he did.  The server then led the delegation to the General Manager’s office where the petition was delivered.  The entire sequence of events took 5 to 10 minutes, 2 of which were spent in the secured area.

Several employees complained that the delegation had entered the secure area, emailing both the server and management.  The server was fired for a “serious security breach.”  The server then filed charges.

The ALJ recommended dismissing the complaint although she applied the test normally reserved for evaluating whether employee speech is protected.  The General Counsel appealed.

NLRB:  The Server’s Actions Were Not Impulsive But Predetermined

A three person panel of the Board (Kaplan, McFerran and Pearce) voted unanimously to affirm the dismissal.  The Board began its analysis by noting that “[t]here is no dispute that the delivery by the petition by employees constituted protected concerted activity.”  The Board then noted that the employer had defended that the delivery of the petition was not the reason for the discharge; rather, the security breach constituted misconduct for which the employee deserved to be terminated.  The Board noted:

When, as here, an employer defends a discharge based on employee misconduct that is a part of the res gestae of the employee’s protected concerted activity, the employer’s motive is not at issue.  Instead, such discharges are considered unlawful unless the misconduct at issue was so egregious as to lose the protection of the Act.  See, e.g., Consumers Power Co., 282 NLRB 130, 132 (1986).

To answer this question, the Board “balances employees’ right to engage in concerted activity, allowing some leeway for impulsive behavior, against employers’ right to maintain order and respect.”  Piper Realty Co.,  313 NLRB 1289, 1290 (1994).

Applying this standard, the Board noted that while the delegation was non-disruptive, “the dispositive point is that it advanced to the secure area only because [the server] misrepresented to the security guard that the delegation consisted only of employees and the delegation was able to enter the secure area only because [the server] used the passcode to provide the group unauthorized access.”  The Board evaluated whether the employer had previously condoned unauthorized entry into the secured area, finding that while vendors and some family members of employees used the passcode, these individuals were all known to the employer.  By contrast, the server had let in a “significant” number of non-employees, some of whom he did not personally know.

In dismissing the complaint, the Board noted that the “breach of security cannot be dismissed as an impulsive act.  It was a predetermined course of action” which lost protection of the Act.

Takeaways

This case joins that of the errant human resources manager and the strident union adherent as another example of the complicated matters that confront employers when employees invoke protected concerted activity to justify behavior.  Note, for example that the security guard relented and allowed a 14 person delegation proceed when the employee-server invoked the “rights” of “employees” to deliver a petition.

What made this case somewhat easier to decide (it is a rare 3-person panel made up of 2 Democrats and 1 Republican) is that it had to do with conduct as opposed to an evaluation if employee speech.  The Board found it significant that the server did not know the names of the persons he was letting into the secured area.  In this day and age, employers have an obligation to secure their premises.  Of equal importance was that the employer had not allowed such breaches to occur.  Of course, had the Board ruled that the discharge was unlawful, then it would have opened up potential floodgates where any access of an employer in the name of protected activity might have to be condoned.

The case illustrates the importance of articulating the reason for the discharge,–here “serious security breach.”  The fact that the employer had not intertwined the delegation or other protected activities into the reason for the discharge very likely helped keep the focus on the misconduct.  Of equal importance is that the case was not cluttered with other allegations of unlawful conduct such as threats or discipline for protected activities.  What the Board had before it was an employer that understood that employees have the right to engage in certain activities; the employer simply could not condone the security breach.

ABOUT FACE! Under Pressure, NLRB Vacates Joint Employer Standard and Returns to Browning-Ferris

In an unexpected and critical turn of events, after extensive political pressure, the NLRB, sitting as a three-member panel comprised of Chairman Kaplan and Members Pearce and McFerran, vacated last year’s decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (Dec. 14, 2017) due to Member William Emanuel’s participation in the decision. Prior to joining the Board, Member Emanuel was a partner at Littler Mendelson, and his firm represented one of the unsuccessful parties in the Browning-Ferris case—which established the “joint employer” standard that Hy-Brand overturned. The Board concluded that Emanuel should have recused himself from the decision.

The Hy-Brand decision, which we previously reported on here and here, reinstated the traditional joint-employer standard that was significantly relaxed under the Obama-era Board in Browning-Ferris. As a result of the Board’s order to vacate, Hy-Brand’s overruling of Browning-Ferris is of “no force or effect.” So for the time being, Browning-Ferris returns to being the law of the land, and this outcome could have far-reaching implications to future cases by the Board involving potential conflicts of interest involving Board members. Continue Reading

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.

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