The NLRB’s “contract coverage” standard for determining whether a collective bargaining agreement privileges an employer to unilaterally change terms and conditions of employment received support last week from a federal court of appeals, further solidifying the legitimacy of the relatively new standard at a time when the Board is undergoing a change in leadership and policy objectives. As announced last Thursday, the new General Counsel wants to revisit the Second Circuit-approved “contract coverage” standard, suggesting that this employer-favorable development may be fleeting when it comes to the NLRB. IBEW Local 43 v. NLRB, Case No. 20-1163 (2d Cir. Aug. 12, 2021).

Procedural History

The union filed an unfair labor practice charge against the employer, claiming the employer violated the Act by implementing a 6-day workweek without first giving it notice and an opportunity to bargain. While the administrative law judge (ALJ) concluded the employer did violate the Act, the Board reversed the ALJ’s decision and dismissed the complaint. Shortly before deciding this case, the Board abandoned its long-standing “clear and unmistakable waiver” standard for evaluating the lawfulness of employer’s unilateral changes to terms and conditions of employment and adopted the “contract coverage” test.

Applying the new “contract coverage” standard, the Board determined that the parties’ collective bargaining agreement permitted the employer to change employee schedules without first bargaining with the union. Reading the management rights provision, which granted the employer the exclusive right to “determine the reasonable amount and quality of work needed”, together with a provision providing for the payment of overtime wages for work performed “weekly in excess of forty (40) hours, or on scheduled days off,” the Board held that the CBA authorized the employer to determine the amount of work it needed employees to perform and to require employees to work in excess of 40 hours a week.

Legal Analysis

On review, the Court considered both the Board’s adoption of the new “contract coverage” standard and its application of this standard to the facts. In considering which interpretive method should be applied to determine whether a CBA grants an employer the right to act unilaterally, the Court found the Board’s reasoning for breaking with its precedent to be “thorough and carefully reasoned” and adopted the “contract coverage” test.

Agreeing with the Board’s assessment, the Court explained that the previous “clear and unmistakable waiver” standard tended to undermine contractual stability by denying the effect of contract provisions that failed to meet this “exacting” standard. Under the “clear and unmistakable waiver” analysis, the CBA had to “unequivocally and specifically” permit the employer’s action in order for the Board to find that the union waived its right to bargain over the action at issue. With respect to the “contract coverage” standard, which considers whether the employer’s action falls within the “compass or scope” of the CBA, the Court reasoned that the Board’s new test comports with ordinary principles of contract interpretation “while preserving meaningful limits on unilateral employer action”. As such, the Court adopted the Board’s “contract coverage” standard as the governing standard for unilateral changes.

Applying the “contract coverage” standard to the facts before it, however, the Court disagreed with the Board’s interpretation of the parties’ collective bargaining agreement. The Court found that the plain language of the CBA placed restrictions on employees’ hours and work schedules, providing that “[t]he workweek shall be forty (40) hours during any one workweek or eight (8) hours during any workday” and specifying that employees’ normal schedule will consist of either a 5-day workweek of 8-hour shifts or a 4-day workweek of 10-hour shifts. While the CBA stated that certain specified deviations from this normal work schedule were permissible, it required the employer to follow a two-step process before making the limited changes permitted by the CBA. Contrary to the Board, the Court did not interpret the contractual right to determine the “amount” of work needed and the requirement to pay overtime wages for work in access of 40 hours in a week as giving the employer the right to mandate overtime work. Therefore, the Court held that the CBA did not privilege the employer to unilaterally impose a 6-day workweek and vacated the Board’s dismissal of the complaint.

Takeaways

The Second Circuit’s approval of the Board’s “contract coverage” test may take on greater significance as the composition of the NLRB changes under the Biden Administration. As we discussed here, the newly sworn-in General Counsel of the NLRB, Jennifer Abruzzo, recently issued a memo outlining the Board’s enforcement priorities. Among other directives, the memo requires NLRB Regions to submit cases involving application of the “contract coverage” standard to the Office of the General Counsel for advice prior to any decision. The memo signals a likely change to the Board’s standard for employer unilateral changes, meaning the Board may return to its prior standard requiring a “clear and unmistakable” waiver of a union’s right to bargain before an employer may act unilaterally. However, favorable decisions from federal courts of appeal like this offer a glimmer of hope for employers where decisions by the Board can be appealed, and potentially vacated, by a federal appellate court on review. As always, we will continue to monitor and report on developments at the NLRB.

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Photo of Paul Salvatore Paul Salvatore

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors/trustees, senior executives and general counsel in such areas as labor-management relations, litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

Paul negotiates major collective bargaining agreements…

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors/trustees, senior executives and general counsel in such areas as labor-management relations, litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

Paul negotiates major collective bargaining agreements in several industries, including real estate and construction. He represents the NYC real estate industry’s multi-employer organization, the Realty Advisory Board on Labor Relations (RAB), and its principal trade organization, the Real Estate Board of New York (REBNY). In 2022, he helped the RAB reach a new collective bargaining agreement with SEIU Local 32BJ, covering more than 30,000 residential building employees. Paul also represented the Cement League, a multiemployer group of NYC area superstructure contractors, in halting an illegal strike by the Carpenters Union and negotiating a significant new, more competitive, collective bargaining agreement. He previously negotiated, on behalf of The Related Companies with 18 New York City construction unions, a landmark project labor agreement (PLA) for Hudson Yards on Manhattan’s West Side, the largest private real estate development in U.S. history. In 2019, he assisted Related in resolving the very public labor disputes at Hudson Yards in time for its grand opening. He also represented REBNY in negotiating its 2019 landmark “Statement of Principles” with NYC’s construction unions. For his work in this sector, City & State magazine has named him one of the most powerful lawyers in New York.

Paul tries arbitrations and litigations, and argues appeals, arising from labor-management relationships. Paul argued and won before the U.S. Supreme Court 14 Penn Plaza LLC v. Pyett. In a 5-4 decision of importance to employers, the Court held a collective bargaining agreement that explicitly requires unionized employees to arbitrate employment discrimination claims is enforceable, modifying 35 years of labor law. In 2016, he argued and won NBC Universal Media, LLC v. NLRB, where the D.C. Circuit — rejecting the National Labor Relations Board’s (NLRB) analysis — found “the reasoning supporting the [NLRB’s] judgment … incomprehensible.” In 2017, Paul argued and won T-Mobile v. NLRB where the Fifth Circuit refused to enforce the NLRB’s ban on certain common sense employee handbook policy provisions, finding the NLRB’s analysis to be unreasonable.

Paul represents universities and colleges in their labor and employment relations, including in the currently active areas of graduate student and adjunct faculty union organizing. He represented Yale, Duke, Chicago, Washington University in St. Louis and other universities in their response to graduate student unionization after the NLRB’s controversial 2016 decision finding graduate teaching/research assistants to be employees under the labor law. He has negotiated innovative non-NLRB election agreements at Cornell and Brown Universities.

An honors graduate of Cornell’s School of Industrial and Labor Relations (ILR) and the Cornell Law School, Paul served eight years on Cornell’s Board of Trustees, including on its Executive Committee. Upon completion of his terms, he was elected Trustee Emeritus and Presidential Councilor. Paul presently serves as a Trustee Member of the Board of Fellows of Weill Cornell Medicine, as well as on the Law School and ILR Deans’ Advisory Councils. In 2002, ILR awarded him the Judge William B. Groat prize, the school’s highest honor.

At Proskauer, Paul was elected to its Executive Committee and served as co-chair of its global Labor & Employment Law Department, named by The American Lawyer and Chambers USA as one of the premier U.S. practices. He is widely recognized as a leading U.S. labor and employment lawyer in such publications as Chambers Global and USA (Band 1), and Legal 500 (“Hall of Fame”). The National Law Journal selected Paul as one of “The Decade’s Most Influential Lawyers” – one of only three in the labor and employment law field. His peers elected him to the College of Labor and Employment Lawyers.

Paul counsels business groups, including the U.S. Chamber of Commerce and its Litigation Center. An active speaker and writer on labor and employment law issues, his publications include “One Dozen Years of Pyett:  A Win for Unionized Workplace Dispute Resolution” in the American Bar Association Labor & Employment Law Journal, Volume 36, Number 2 at 257. He is an Adjunct Professor at the Cornell Law School.

Photo of Steven Porzio Steven Porzio

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract…

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract negotiations, arbitrations, and representation and unfair labor practice cases before the National Labor Relations Board.

Steve has experience conducting vulnerability assessments and providing management training in union and litigation avoidance, leave management, wage and hour, and hiring and firing practices. He provides strategic and legal advice in certification and decertification elections, union organizing drives, corporate campaigns, picketing and union contract campaigns. Steve has represented employers in a number of different industries, including higher education, health care, construction and manufacturing in successful efforts against unions in election and corporate campaigns.

In addition to his traditional labor law work, Steve assists companies with handbook and personnel policy drafting and review, daily management of employee disciplines and terminations, and general advice and counsel on compliance with federal and state employment laws.

Steve’s litigation experience includes work on matters before state and federal courts, the Equal Employment Opportunity Commission, the Connecticut Commission on Human Rights and Opportunities, the New York State Division of Human Rights and various other administrative agencies. He has litigated matters involving age, race, national origin, gender and disability discrimination, wage and hour, whistleblower and wrongful termination claims.

While attending the Syracuse University College of Law, Steve served as the editor-in-chief of the Syracuse Science and Technology Law Reporter. He also received the Robert F. Koretz scholarship, awarded in recognition of excellence in the study of labor law.

Photo of Elizabeth Dailey Elizabeth Dailey

Elizabeth Ann Dailey is an associate in the Labor & Employment Law Department. Elizabeth assists clients in a variety of labor and employment matters, including motion practice, administrative proceedings, internal investigations, labor-management relations, and claims of employment discrimination. As part of her labor-management…

Elizabeth Ann Dailey is an associate in the Labor & Employment Law Department. Elizabeth assists clients in a variety of labor and employment matters, including motion practice, administrative proceedings, internal investigations, labor-management relations, and claims of employment discrimination. As part of her labor-management relations practice, Elizabeth has assisted in representation proceedings before the NLRB and has experience responding to unfair labor practice charges, conducting labor-related business risk assessments, and assisting with collective bargaining negotiations.

Elizabeth frequently represents clients across a variety of industries and sectors, including educational institutions, sports entities, news and media organizations, entertainment companies, healthcare institutions, and real estate companies.

Elizabeth earned her J.D. from the University of Pennsylvania Law School, where she completed a certificate program in business management from The Wharton School. While attending Penn Law, Elizabeth interned with the National Labor Relations Board Region 2 where she conducted investigations into unfair labor practices and recommended case dispositions to the Regional Director.