The National Labor Relations Board 2023 Year In Review – An Overview of Major Developments in Labor Law

by Adam Santucci,  Micah Saul and Conner Porterfield Introduction 2023 may prove to be a landmark year for U.S. labor law. There were several significant changes in the law that left employers reeling. The breadth and depth of these changes were staggering even for seasoned practitioners. The National Labor Relations Board finalized two significant rule changes. The board continued to issue decisions reversing established precedent and the board’s general counsel continued to issue memoranda offering her view on key labor issues, setting the course for even more changes. The relentless pace of the implementation of the pro-labor agenda was hard to keep up with at times. We will detail some of the most significant developments below. In fiscal year 2023, the board issued 246 cases, 161 unfair labor practice charge-related decisions and 85 decisions in representation cases. This represented a slight increase in the number of cases compared to last year. According to its Annual Performance and Accountability Report, the board received 321 unfair labor practice charges and election petitions during its last fiscal year. Unfortunately, the board also reported a 36 percent increase in its backlog of pending cases at the end of the year. That has resulted in a frustrating reality for many employers. The board reported that about 90 percent of elections were held within 56 days of the filing of the petition. Critically for employers, unions won 76 percent of the time when they filed a petition for election last fiscal year. The number of election petitions continues to be high, and the union win rates are shockingly high as well. Last year, the board did its part to ensure that the win rate remains high. The board issued pro-labor final rules speeding up the election process and relaxing the standard for determining whether an employer is a “joint employer” of a group of employees. The board also reported that it recovered overall $56 million on behalf of employees, and 983 employees were offered reinstatement. The board issued some critical decisions throughout the year, and in many cases reversed recently established or long-established precedent. A lot of employers are feeling the whiplash as the agency rolled back rules and precedent. We summarize the key labor law developments from 2023 below. General Counsel Advice Memoranda General Counsel Jennifer Abruzzo continued to pursue an aggressive, pro-labor agenda and regularly used advice memoranda to outline her plans. Below we have summarized some of the key advice memoranda issued last year. GC Memorandum 23-08 Non-Compete Agreements that Violate the National Labor Relations Act On Feb. 21, 2023, the board issued McLaren Macomb, 372 NLRB No. 58 (2023), which held that employers violate the National Labor Relations Act (NLRA or Act) when they offer employees severance agreements that require employees to broadly waive their rights under the act. Specifically, the board held that where a severance agreement conditions receipt of severance benefits on the waiver of rights under the act, the mere proffer of the agreement itself violates Section 8(a)(1) of the act. The board held that such an offer has a reasonable tendency to interfere with or restrain the prospective exercise of those rights. On March 22, 2023, Abruzzo issued Memo 23-08 to provide guidance on implementing McLaren Macomb. In the memo, the general counsel confirmed that severance agreements themselves are not unlawful, but confirmed that merely offering a severance agreement with certain provisions would represent a per se violation of the act regardless of surrounding circumstances. As a reminder, McLaren Macomb held that the severance agreement at issue contained overly broad non-disparagement and confidentiality clauses. Specifically, the non-disclosure provision contained a non-disparagement clause that advised the employees that they are prohibited from making statements that could disparage the employer. The confidentiality clause advised employees that they were prohibited from disclosing the terms of the agreement to anyone unless compelled by law to do so. The severance agreement included sanctions for breaches of these provisions. Keep in mind that for the most part, the act only protects employees and not supervisors, as defined by the act. Thus, in nearly all cases, offering a severance agreement to a supervisor that contains confidentiality and non-disparagement provisions will not run afoul of the act. GC Memorandum 23-08 Non-Compete Agreements that Violate the National Labor Relations Act In July 2021, President Joe Biden signed an executive order on “Promoting Competition in the American Economy” that, among other things, directed the Federal Trade Commission (“FTC”) to consider curtailing the use of non-compete agreements. Then, in January of 2023, the FTC responded to the executive order by proposing a broad and sweeping rule that would prohibit employers across the country from entering into non-compete agreements with their workforce. Now, GC Abruzzo has joined this growing chorus, stating that non-compete agreements violate the act except in limited circumstances. GC Memorandum 23-08 outlines the argument that non-compete agreements are overbroad and may violate the act “when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work.” GC Abruzzo reasons that this denial of access to employment opportunities chills protected activity under Section 7 because: (1) employees know they will have greater difficulty finding another job if they are discharged for exercising their rights to organize and act together to improve working conditions; (2) their bargaining power during strikes, lockouts and other labor disputes is undermined; and (3) as former employees of an employer, they are unlikely to “reunite” at a local competitor and encourage each other to exercise statutory rights to improve working conditions at their new employer. Moreover, the general counsel argued that non-compete agreements chill employees from engaging in five specific types of protected activity:

• They chill employees from concertedly threatening to resign to demand better working conditions.
• They chill employees from carrying out concerted threats to resign or otherwise concertedly resigning to secure improved working conditions.
• They chill employees from concertedly seeking or accepting employment with a local competitor to obtain better working conditions.
• They chill employees from soliciting their co-workers to go work for a local competitor as part of a broader course of protected concerted activity.
• They chill employees from seeking employment, at least in part, to specifically engage in protected activity (e.g., union organizing) with other workers at an employer’s workplace.

In the general counsel’s view, the “proffer, maintenance, and enforcement” of non-compete agreements that would reasonably tend to chill employees from engaging in these activities would violate the act unless they are “narrowly tailored to special circumstances justifying the infringement on employee rights.” The general counsel did not explain what she believes might constitute “special circumstances,” although she provided examples of what likely would not: avoiding competition from former employees, retaining employees and protecting special investments in employee training. Those activities, according to the general counsel, would not justify the use of a non-compete agreement. The general counsel also acknowledged that employers have a legitimate business interest in protecting proprietary or trade secret information, but noted that such interests can be protected by narrowly tailored “workplace agreements.” She also allowed that some non-compete agreements might not violate the act if they do not restrict employment relationships, such as if they restrict ownership interests in a competing business or independent contractor relationships, or under “special circumstances” (again, undefined) that justify a narrowly-tailored non-compete. Again, while the NLRA protects “employees” (union and non-union), it does not protect “supervisors” who are excluded from Section 7’s protections. As such, non-compete agreements with supervisors or managers should not be affected by the memorandum. That said, the general counsel is looking for a case to bring to the board and in that regard, directed the regional offices to submit to the Division of Advice cases involving non-compete agreements that are “arguably unlawful” under her analysis. Whether the general counsel’s position ultimately carries the day remains to be seen. Although the current employee-friendly board may be sympathetic to her position, the federal courts of appeals – which review board decisions – may not. We anticipate that there will be legal challenges by employers to an adverse board decision. GC Memorandum 24-01 and GC 24-02 Last year, GC Abruzzo also issued GC Memorandum 24-01, Guidance in Response to Inquiries about the board’s decision in Cemex Construction Materials Pacific, LLC and GC Memorandum 24-02, Guidance Memorandum on 2023 election rule representation case procedure changes. We cover the Cemex decision and the 2023 Election Rule procedures in more detail below. Rule Makings Board Adopts Lax Joint Employer Standard Whether two entities are “joint employers” is an important question under the Act. In a Final Rule published on Oct. 27, 2023, the board revised the standard for determining whether another employer may be the joint employer of a group of employees. The final rule establishes that two or more entities may be considered joint employers of a group of employees if each entity has an employment relationship with the employees, and if the entities share or codetermine one or more of the employees’ essential terms and conditions of employment. The effective date of the new rule is Feb. 26, 2024. The final rule follows a notice of proposed rulemaking, which was published on Sept. 6, 2022, and rescinds and replaces the 2020 final rule that was promulgated by the prior board and which took effect on April 27, 2020. Clearly, the board’s standard for determining joint-employer status has shifted over the past several years with each new presidential administration. For at least 30 years prior to 2015, the board’s longstanding rule was that an employer could be considered a joint employer of a separate employer’s employees only if it exercised “direct and immediate” control over those employees’ essential terms and conditions of employment (e.g., wages, benefits, hours of work, hiring, discharge). Indirect control or a reserved but unexercised right to control, was insufficient. The 2023 final rule reverses that long-held view. The 2023 rule considers the alleged joint employers’ authority to control essential terms and conditions of employment, whether such control is exercised and without regard to whether any such exercise of control is direct or indirect. The final rule included the following list of essential terms and conditions of employment:

1. Wages, benefits, and other compensation;
2. Hours of work and scheduling;
3. The assignment of duties to be performed;
4. The supervision of the performance of duties;
5. Work rules and directions governing the manner, means and methods of the performance of duties and the grounds for discipline;
6. The tenure of employment, including hiring and discharge; and
7. Working conditions related to the safety and health of employees.

The Final Rule provides that either indirect or reserved control is enough to find joint employer status, including situations in which an alleged joint employer maintains authority to control essential terms and conditions of employment but has not yet exercised such control. We liken this to imaginary control. Certainly, the new rule will result in many more joint employer relationship findings under the act. However, the new standard will only be applied to cases filed after the Feb. 26, 2024, effective date. Board Reinstates Ambush Election Rules Effective Dec. 26, 2023, the board rolled back the 2019 Representation Election Rules and reinstated the prior rules, first adopted in 2014, which had become known as the “Quickie” or “Ambush” election rules. The time period between the initial filing of a petition for election and the actual election is often critical for employers. It may be the only opportunity the employer has to present its side of the unionization question. The less time before the election, the less time to educate employees. The final rule was published on Aug. 25, 2023, and became effective Dec. 26, 2023. The final rule allows pre-election hearings to happen more quickly, most often in seven days, or approximately 10 days sooner than under the 2019 rule. In addition, regional directors will have more limited discretion to postpone pre-election hearings. The final rule also requires the employer to post and distribute the notice of petition for election to inform its employees about three days sooner than under the 2019 rule. The final rule also strives to limit pre-election litigation and instead, to hold more hearings after the election. This can be problematic for employers for a number of reasons, including when considering who is eligible to vote and who is not. Under the final rule, generally, only issues necessary to determine whether an election should be conducted will be litigated in a pre-election hearing. The Final Rule also implements additional changes that are designed to ensure that elections are held more quickly. For example, under the new rule, regional directors will ordinarily specify the election details (the type, date(s), time(s), and location(s) of the election and the eligibility period) in the decision and direction of election and will ordinarily simultaneously transmit the notice of election with the decision and direction of election. This is much earlier in the process. The final rule also eliminated the 20-business-day waiting period between the issuance of the decision and direction of election and the election. Regional directors are now required to schedule elections for “the earliest date practicable” after issuance of a decision and direction of election. It is clear that all of the above changes, and some we did not highlight, are designed to assist labor unions in winning more elections despite the fact that unions are already winning over 70 percent of the time that a petition is filed. A Summary of the Board’s Significant Decisions With a majority of democratic members in place, it was widely expected that the board would reverse decisions issued by the board during the Trump Administration. In large part, that expectation became a reality in 2022. Not only did the democratically controlled board reverse Trump-era decisions, in some instances it also created some new, historically unrecognizable standards. Some of the decisions most impactful to employers are discussed here. The Stakes Have Been Raised for Repeated or Egregious Violations of the National Labor Relations Act On April 20, 2023, the board issued another labor-friendly decision in Noah’s Ark Processors, LLC, 372 NLRB 80. The decision makes clear that the board is prepared to wield its considerable authority in sanctioning employers who commit either repeated or egregious violations of the NLRA. In Noah’s Ark, the board considered an unfair labor practice charge filed by the union that alleged that the employer bargained in bad faith with the union during contract negotiations in January of 2020. The charge was filed against the backdrop of contentious negotiations that first began in 2018. During the 2018 and 2019 negotiations, the employer declared impasse and unilaterally implemented its last, best and final offer. In early 2019, the union filed its first unfair labor practice charge arising out of the parties’ bargaining efforts. On that charge, the board concluded that the employer had bargained in bad faith by declaring impasse when one did not exist. It issued an injunction against the employer, requiring it to bargain with the union in good faith. During a 2019 bargaining session after the board’s first injunction, the employer presented regressive proposals to the union and further sought to remove employee benefits and union rights. The employer presented this as its last, best and final offer in January 2020. When the union rejected the offer, the employer again declared impasse and implemented the regressive proposal, prompting the union to file a second unfair labor practice charge. Unsurprisingly, the board found that the employer committed a second unfair labor practice charge by failing to comply with the injunction and refusing to bargain with the union in good faith. In the April 2023 decision, the board held that when it finds unfair labor practices justify a broad cease and desist order – typically issued when an employer is a repeat offender or engages in egregious misconduct under the NLRA – it will consider several additional remedies. The non-exhaustive list of remedies published by the board includes:

• Adding a comprehensive Explanation of Rights to the remedial order that gives employees a more extensive description of their rights under the NLRA;
• Requiring the employer to read and distribute the notice of the board’s decision any Explanation of Rights to employees (including potentially requiring supervisors or particular officials involved in the violations to participate in or be present for the reading and/or allowing presence of a union agent during the reading);
• Mailing notice of the board’s decision and any Explanation of Rights to directly to employees’ homes;
• Requiring a person who bears significant responsibility (e.g. senior management officials or executives) in the respondent’s organization to sign the Notice;
• Publication of the Notice in local publications of broad circulation and local appeal (such as newspapers);
• Requiring that the Notice/Explanation be posted for an extended period of time;
• Visitation requirement, permitting representatives of the board to inspect the respondent’s bulletin boards and records to determine and secure compliance with the board’s order;
• Reimbursement of the union’s bargaining expenses, including making whole any employees who lost wages by attending bargaining sessions conducted in bad faith.

In other words, the board will now consider remedial action against repeat or egregious offenders that includes public and potentially costly consequences. The Board Continues Imposing Limits on Employers’ Ability to Act Unilaterally The board’s string of union-friendly decisions continued in two decisions issued on Aug. 30, 2023; Wendt Corp., 372 NLRB 135, and Tecnocap LLC, 372 NLRB 136. Those decisions overruled different aspects of the board’s 2017 decision in Raytheon Network Centric Systems, 365 NLRB No. 61. Under Raytheon, employers had the ability to make discretionary unilateral changes to the terms and conditions of bargaining unit employees’ employment during negotiations for a first contract with a newly elected labor union and after the expiration of an existing collective bargaining agreement. The only caveat was that these unilateral changes were required to be consistent with the employer’s past practice. Raytheon also authorized employers to act unilaterally after the expiration of an existing labor agreement if its action was consistent with a past practice established under the management rights clause of the expired contract. Under Wendt and Tecnocap, such unilateral action is now unlawful. The employer’s workforce in Wendt had recently elected to be represented by a union. While the employer was negotiating an initial contract with the newly elected union, the employer implemented layoffs that included members of the new bargaining unit. The employer’s decision to lay these employees off was consistent with a practice that it had established before its employees organized. The employer therefore believed that the layoffs were lawful under Raytheon. The board had other ideas. It took advantage of the opportunity to overturn Raytheon’s acceptance of an employer making unilateral actions while negotiating an initial labor contract with a newly elected union. The board held that now, employers can only make such unilateral changes when it “has shown the conduct is consistent with a longstanding past practice and is not informed by a large measure of discretion.” In other words, if significant management discretion informs the decision to make a unilateral change when a labor contract is not in effect, the change violates the NLRA. The board went one step further and clarified that employers cannot justify a unilateral change that would otherwise violate the NLRA by relying on a past practice that was established before its employees organized. Tecnocap arose out of a situation wherein an employer attempted to justify a unilateral change to employee work schedules based on a past practice that was established under the management rights clause of an expired labor agreement. During negotiations of a successor contract, the employer sought to alter the length of bargaining unit employees’ shifts. When the expired contract was in effect, there was no question that such unilateral action was permissible. However, the board clarified that when a past practice is established under the terms of an expired contract’s management rights clause, the practice itself does not survive expiration of the labor contract. Thus, the board concluded that the employer violated the NLRA by changing its employees’ schedules. Wendt and Tecnocap will remain the law of the land for the foreseeable future. As long as those decisions remain valid, employers are well-advised to carefully consider making any unilateral changes to the terms and conditions of bargaining unit employees’ employment in the absence of a valid labor agreement authorizing such action. The NLRA Protects Employees Who Advocate for Non-Employees The current board further expanded workers’ rights in its Aug. 31, 2023, decision in American Federation for Children, Inc., 372 NLRB 137. There, the board overturned its 2019 decision in Amnesty International, 368 NLRB No. 112. Broadly, Section 7 of the NLRA assures employees the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” In Amnesty International, the board clarified that an employee’s advocacy for a non-employee was not protected activity under Section 7. The board changed its stance in American Federation for Children. In that case, a current employee was lobbying support for a former employee, whose employment was terminated after she was no longer authorized to work in the U.S. The former employee regained her work authorization and applied for reemployment. According to the employer, one of its current employees told others that one of the company’s managers was racist for not supporting the re-hire of the former employee. The employer disciplined its current employee for making incendiary and unjustified comments about the manager. The board determined that the discipline violated Section 7 of the NLRA. In so doing, it clarified that the former employee was covered by the NLRA because the act covers job applicants. But the board did not stop there. It went further to explain that even if the former employee was not an applicant (and thus, not an “employee” for purposes of the act), the current employee’s advocacy for her former colleague would still be protected activity under Section 7. This is because the board found that such advocacy was for the “mutual aid and protection” of current employees because the former employee “was desired as a co-worker [and] her rehire would have improved the employment terms and conditions of the employees working with her.” It must be emphasized that Section 7 rights extend to most private sector employees in the U.S., including those who are not members of labor unions. As a result, all employers must carefully weigh disciplinary action arising out of employee engagement in group activity, even when that activity relates to non-employees. Board (Again) Changes Retaliation Analysis Under NLRA Now more than ever, it seems that employees are willing to express themselves. While open communication with and among employees is usually a good thing, sometimes an employer’s rules are broken in the process. A worker might call her supervisor a nasty name while complaining about her production team’s overtime assignments. An employee could use profanity to describe working conditions in a social media post. An employee on strike may threaten a company executive. In such cases, an employer is likely to consider disciplining the employee for breaking its rules, but if those employees were engaged in activity protected by the act, the employer’s attempt may run afoul of the law. But that was not always the case. During the Trump Administration, the board announced that it would apply the same test when determining whether disciplinary action is lawful, regardless of the context in which the employee’s misconduct occurred. In General Motors, LLC, the board held that in order to prove that disciplinary action violates the act, an employee was required to show that:

1. the employee engaged in Section 7-protected activity;
2. the employer knew of that activity; AND
3. there is a causal connection between the discipline and the Section 7 activity.

If an employee met this initial burden, an employer could still avoid liability by proving that it would have taken the same action in the absence of protected activity. Many employers welcomed this universal test, as it standardized the law regardless of the context in which the employee’s misconduct happened. But, alas, the General Motors standard is no more. The board issued its ruling in Lion Elastomers LLC II, which overruled General Motors and adopted in its place setting-specific tests to evaluate the propriety of employee discipline. Now, the setting of an employee’s misconduct once again determines the standard by which disciplinary action will be judged. The setting-specific tests are set forth below. First, when discipline arises out of an employee’s conduct toward management in the workplace, the board will apply the test originally established in Atlantic Steel. That test considers the following four factors:

1. The place of the interaction between employee and management;
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.

Next, when discipline arises out of an employee’s misconduct on social media or while interacting with a co-worker in the workplace, the board will apply its “totality of the circumstances” test without regard to any particular factor. This test was originally enunciated in Pier Sixty, LLC. Finally, when discipline arises out of an employee’s misconduct on the picket line, the board will again consider the Clear Pine Mouldings standard. Under that test, the board examines the totality of the circumstances to assess whether non-striking employees reasonably would have been coerced or intimidated by the misconduct. If so, discipline is proper. As the current board continues to unwind many of the employer-friendly rules established by the previous board, employers must now remember that context matters when disciplining employees for conduct that occurs during otherwise protected activity. One size no longer fits all. Board’s Cemex Standard Breaks New Ground and Turns Union Organizing On its Head In what may prove to be the most significant decision of 2023, the board cast aside over 50 years of established law and created a new standard that will further tilt the playing field in favor of labor unions in the union election process. In Cemex Construction Materials Pacific, LLC, the board not only changed the standard union election process, but also adopted a new standard that will result in more bargaining orders, which will force employers to bargain with a union despite the employees’ preference to remain union free. At the urging of its general counsel, the board overturned the rule it established in 1971 in a case known as Linden Lumber, which permitted an employer to refuse a union’s demand for voluntary recognition based upon a showing of cards signed by a majority of employees in the bargaining unit and, instead, insist upon a board-conducted election in order to determine whether the employees actually wanted to be represented by the union. Notably, the board’s decision in Linden Lumber was subsequently affirmed by the U.S. Supreme Court. The board’s decision in Cemex Construction Materials overrules Linden Lumber and replaces it with a new, pro-union standard. Here is what the board said: Under the standard we adopt today, an employer violates Section 8(a)(5) and (1) by refusing to recognize, upon request, a union that has been designated as Section 9(a) representative by the majority of employees in an appropriate unit unless the employer promptly files a petition pursuant to Section 9(c)(1)(B) of the Act (an RM petition) to test the union’s majority status or the appropriateness of the unit, assuming that the union has not already filed a petition pursuant to Section 9(c)(1)(A). We conclude that an employer confronted with a demand for recognition may, instead of agreeing to recognize the union, and without committing an 8(a)(5) violation, promptly file a petition pursuant to Section 9(c)(1)(B) to test the union’s majority support and/or challenge the appropriateness of the unit or may await the processing of a petition previously filed by the union. Essentially, this means that if a union asserts that it has majority status, which is typically done by offering to demonstrate that a majority of employees in the proposed unit have signed union authorization cards, the employer must either recognize and bargain with the union or file a petition to request that the board conduct an election. This now puts the onus on the employer to trigger the board’s election process. But wait, there is more! The board went on to hold that if the employer commits an unfair labor practice that requires setting aside the election, the petition (whether filed by the employer or the union) will be dismissed and the employer will be subject to a remedial bargaining order. Previously, such an extraordinary meas