The National Labor Relations Board 2016 Year in Review – Whitepaper
February 21, 2017
In comparison to recent history, 2016 was a tame year for the National Labor Relations Board (“NLRB” or “the Board”). While continuing to issue decisions that left employers scratching their heads, the Board was unable to maintain its torrid pace of prior years. The number of decisions issued by the Board in fiscal year 2015-2016 actually decreased as compared to 2014-2015, despite the fact that a total of 23,850 charges were filed in 2015-2016. That said, about 90 percent of those charges settled without litigation. That statistic may be indicative of the chances that employers believed they faced if claims were litigated before the Board.
Nevertheless, there still were key developments that impacted union and non-union employers alike, and the Board continued to overturn years of precedent.
Below, we summarize some of the most important labor law developments from 2016, with a focus on the Board’s decisions that will have the most impact moving forward.
The DOL’s Failed Attempt to Expand the Persuader Reporting Rules
Before we turn to the Board’s key decisions and the important decisions of the courts of appeal, we must review a very important development from the United States Department of Labor that almost had a significant impact on labor law. Thankfully, the DOL’s efforts to expand the scope of the Labor-Management Reporting and Disclosure Act were blocked by a federal judge before the new rule could take effect. The Rule would have dealt quite a blow to employers.
Under the proposed Rule, consultants, and specifically lawyers, would have been required to report labor relations advice and services as “persuader activity” any time the advice or service was offered in the context of union organizing campaigns. Previously, attorney-client relationships were exempt from the reporting requirements.
Information that would have been subject to the expanded mandatory reporting requirements included the identity of the employer, a description of the services rendered to the employer, and the fee arrangement between the employer and the consultant or attorney.
The rule was set to become effective on July 1, 2016. Fortunately for employers and management-side labor attorneys everywhere, a United States District Judge in Texas issued a nationwide temporary injunction barring the Department of Labor from enforcing the rule. The court held that the revised rule could have obligated attorneys to violate the attorney-client privilege by disclosing clients’ identities, fee arrangements, and the nature of the advice and services provided. The court also noted that the revised Persuader Rule adversely impacted employers’ First Amendment Rights to free speech and association, as well as their Fifth Amendment Rights to due process. The court subsequently entered a permanent injunction.
The Department of Labor appealed to the Court of Appeals for the Fifth Circuit, and the appeal is still pending. It will be interesting to see whether the Trump administration exerts any energy to undo the injunction.
The General Counsel Continued to Serve as the Spearhead
As noted in last year’s edition, the Board’s General Counsel has been the main force behind the Board’s advancement of a pro-union, pro-employee agenda. 2016 was no different. And even with the change in Presidential administration, this may not change until late in 2017, because the General Counsel’s term does not expire until November.
The General Counsel spent 2016 actively pursuing several high-profile issues: “class actions” against national retailers and fast food restaurants, increased compensation for discriminatees, and coverage of graduate student teaching and research assistants under the National Labor Relations Act. As with prior years, the General Counsel also issued unsolicited “guidance” in the form of memoranda. Some of the issued guidance related to internal Board procedures, but as you will see, the General Counsel also used this mechanism to attempt to reset established law. Memorandum GC 16-01, for example, mandates the submission of certain cases to the Board’s Division of Advice and directs that other cases and issues of particular interest are flagged for prosecution by the Board’s General Counsel.
Similarly, Memorandum GC 16-03 outlined a new procedure to be followed for investigating an employer’s withdrawal of recognition from a union, based on a claim that the union lost majority support. Not surprisingly, the new procedure is not employer-friendly and it would overturn decades of precedent.
On the substantive side, in an Advice Memorandum released in late August 2016, the General Counsel advanced a position that would significantly expand the protections afforded by the Act. The memo asserts that employers who misclassify employees as independent contractors also violate Section 8(a)(1) of the Act by restraining the employees’ Section 7 rights to engage in concerted, protected activity. This memo could have significant ramifications for many employers. If the legal position advanced by the General Counsel were adopted, employers could face potential liability from charges filed by contractors. This memo proves our point – the General Counsel was again very aggressive in seeking to advance a pro-employee agenda and expand the protections of the Act.
A Summary of the Board’s Significant Decisions
The Board Further Expanded Joint Employer Liability
Last year we reported on the Board’s groundbreaking joint employer liability decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015). In that case, the Board concluded that a group of temporary staffing agency workers were statutory employees of both the staffing agency and the recycling facility to which they were assigned. We predicted that the Browning-Ferris decision would significantly increase the likelihood that there could be a joint employer finding in a number of common scenarios, and unfortunately in Retro Environmental, Inc., 364 NLRB No. 70 (2016), the Board proved us right. The consequence of a joint employer finding, of course, is that both employers can be held liable for violations under the Act and both could be required to negotiate with any union representing the workers.
This year, the Board took Browning-Ferris a step further. In Miller & Anderson, Inc., 364 NLRB No. 39 (2016), reviewing established precedent, the Board held that the consent of both staffing agency and host employer is no longer required to combine workers from two employers into a single unit. The Board concluded that if the employees share a community of interest (a long-standing Board test used to determine bargaining unit appropriateness) and seek to combine, then the employees can be included in the unit even without the consent of both employers.
The holding in Miller & Anderson obviously will make it easier to organize a group of workers, and will lead to significant headaches for employers trying to negotiate the terms and conditions of employment for groups of workers operating under very different terms and conditions of employment. The consequences could be grave for both staffing agencies and organizations that utilize groups of temporary employees.
After Trashing Arbitration Agreements, the Board Turned to Non-Compete Agreements
In Minteq International, Inc., 364 NLRB No. 63 (2016), the Board held that the “at-will” employment provision and non-solicitation provisions of a non-compete agreement violated the Act. Incredibly, the Board held that the non-solicitation provision could be interpreted as a restriction on employee efforts to address the terms and conditions of employment. To that we say, “Huh?”
As to the non-solicitation clause, the Board explained that under the Act, employees are permitted to seek customer or supplier boycotts and the prohibitions on interfering with customer relationships in the non-solicitation provision of the agreement could be construed to prohibit such activity. We thought that was a stretch, and so did the ALJ who initially reviewed this matter. The ALJ had rejected this argument, but the Board reversed.
With the at-will provision, the Board concluded that employees would be discouraged from engaging in protected activity, because the agreement implied that the employees could be discharged without cause. The Board somehow failed to account for the fact that it would be against the law to terminate employees who engaged in protected activity with or without an at will employment statement. Again, we really think this is a stretch. Regardless, the Board has added two more very common employment provisions to its toxic waste list. In the short term, employers will have to think carefully about how post-employment restrictive covenants may be impacted by Minteq, but a significant overhaul may not be necessary in light of the changes in the Presidential administration.
Employee Rights to Use Employer Email Expanded In 2014, we reported on the Board’s Purple Communications, 316 NLRB 126 (2014), decision, which held that employees were permitted to use the employer’s email system to engage in concerted protected activities, even in the face of a published policy prohibiting use of the email system for any non-business purpose. This year, we can report that the Board has begun to further expand upon Purple Communications, and employees’ ability to use an employer’s email system for organizing purposes.
In T-Mobile USA, Inc., 363 NLRB No. 171 (2016), the Board found an employer policy that limited access to electronic records and resources to authorized individuals was unlawful, because it would prohibit employees from sharing information with coworkers and union organizers. Also, in Blommer Chocolate Co., the Board concluded that a rule prohibiting employees from expressing personal opinions in emails was overly broad and prohibited by the Act.
Although disappointing, these decisions were not surprising. In light of the Board’s Purple Communications decision, employers should expect that the Board will look closely at any attempt to restrict employee use of email. In addition, the Board has continuously rejected employer rules that it has deemed “overly broad,” because the Board believes such rules will chill the exercise of projected activities.
The Board’s email jurisprudence is yet another hurdle for employers simply looking to get employees to work and to use employer provided tools and equipment for work related purposes.
The Board Placed New Restrictions on Replacement of Striking Workers
Since 1964, employers have been permitted to permanently replace striking workers and refuse to reinstate workers, unless the employer was motivated by an “independent unlawful purpose” when making the replacement. For decades, employers were permitted to refuse to reinstate striking workers, as long as that decision was justified by a legitimate business concern. This principle, set forth in Hot Shoppe, Inc., 146 NLRB No. 93 (1964), essentially allowed employers to respond to the workers’ economic weapon of a strike with a weapon of its own. Employers were permitted to fight fire with fire.
In American Baptist Homes of the West, 364 NLRB No. 13 (2016), while the Board affirmed an employer’s right to permanently replace striking workers, it significantly expanded the exception to this rule, thus exposing employers who elect to hire permanent replacements to significant liability. The Board held that the independent unlawful purpose analysis will now include consideration of whether the employer intended to discriminate against union members, to discourage union membership, or whether the decision was motivated by any purpose that violates the Act.
This new reading of the independent unlawful purpose test effectively eliminates the employer’s ability to hire permanent replacement strikers, because virtually any decision to hire replacements could be subject to a challenge that it was motivated by an intention to discriminate against the striking workers or to discourage union membership.
College Research Assistants Can Form Unions
Our friends in academia thought the Board’s decision last year to stay out of college athletics was too good to be true. As it turns out, these folks were right. In Columbia University, 364 NLRB No. 13 (2016), the Board ruled that students at private colleges and universities who are paid to perform work for a university can form and join labor unions under the Act. The Board essentially held that these students, including teaching assistants and research assistants, are more like employees than students. As such, the Board held that it would be inappropriate to deprive the student workers of the protections of the Act. The decision does not apply to public universities that are governed by state labor law.
The Board Claimed Jurisdiction Over Public Charter Schools
In two related decisions, Hyde Leadership Charter School, 364 NLRB No. 88 (2016) and Pennsylvania Virtual Charter School, 364 NLRB No. 87 (2016), the Board declared that it would exercise jurisdiction over charter schools even though the charter schools were viewed as public institutions created under the state law.
Political subdivisions are excluded from the list of “employers” subject to the Act. According to the Supreme Court of the United States, an entity is a “political subdivision” if it was created directly by the state, so as to constitute departments or administrative arms of government, or it is administered by individuals who are responsible to public officials or to the general electorate.
In Pennsylvania Virtual Charter School (“PVCS”), the Board held that PVCS was not created directly by the Commonwealth of Pennsylvania, and for that reason, among others, PVCS was not a political subdivision. It reached a similar conclusion in Hyde Leadership Charter School in examining a school created under New York law.
PVCS actually argued that the Board should decline jurisdiction because cyber charter schools do not have a substantial effect on commerce and exercising jurisdiction would supplant state control. It should come as no surprise to those of you who follow our annual reports that the Board disagreed and determined that there was sufficient justification for it to maintain jurisdiction. As such, the Board held that PVCS should be subject to the same federal regulations as other private employers.
The Board Affirmed Obligation to Bargain Over Discipline Prior to First Contract
In Total Security Management Illinois 1, LLC, 364 NLRB No. 106 (2016), the Board affirmed its Alan Ritchey Inc., 359 NLRB No. 40 (2012) decision, which had been invalidated because it was issued when the Board was not operating with a quorum. In affirming Alan Ritchey Inc., the Board confirmed that employers are required to bargain over employee discipline with a newly recognized union, even before the parties have agreed to the terms of a first collective bargaining agreement. While the Board recognized some exceptions for lower levels of discipline and emergency circumstances, in the vast majority of cases, an employer must negotiate with the new union before imposing disciplinary action.
The Board also went a step further in Total Security, and held that, in the event that an employer failed to bargain prior to issuing disciplinary action, the appropriate remedy would be a make whole remedy, and not just a notice posting where the employer would agree to “do better.” A make whole remedy typically would include reinstatement and back pay, among other things. In the event of a challenge, employers will have the opportunity to set forth an affirmative defense by showing that the discipline was appropriate. To establish this defense, the employer must show that the employee engaged in misconduct, and that the misconduct was the reason for the suspension or discharge. In addition, any settlement of the disciplinary matter between the employer and the union would be subject to review by the Board.
ALJ Decisions to Watch
ALJs Continue the Board’s Assault on Employer Policies
As we have reported the last few years, the Board has declared a number of innocuous, standard employer policies to be unlawful under the Act, where those policies could be “reasonably construed” to prohibit protected activity. In our opinion, the Board’s interpretation of many of these policies is anything but reasonable, but rather is instead an effort to stretch the protections of the Act to their outer limits. Taking their cue in 2016, the Board’s Administrative Law Judges (“ALJ”) issued a number of decisions further expanding the protections of the Act, and declaring even more employer policies unlawful.
For example, in Wynn Casinos LLC, No. 28-CA-155984 (Sept. 26, 2016), a Board ALJ found that a rule prohibiting “inappropriate conduct” was overly broad and could be interpreted by employees to restrict activities protected by Section 7 of the Act. As such, the rule could have a chilling effect on employees seeking to engage in protected activity, and the rule was therefore unlawful.
The ALJ also found that a no-photographing rule was unlawful. According to the ALJ, the rule was not narrowly tailored to protect the casino’s legitimate interests in customer privacy, safety, security, and the integrity of the gaming processes. Again, the ALJ found that the rule could be interpreted in a way that it would violate the Act, and therefore, could chill employee activity.
Also, in Casino Pauma, 21-CA-161832 (July 18, 2016), an ALJ found that an employer rule prohibiting employees from conducting “personal business” while on the employer’s premises violated the Act. The ALJ also held that a policy restricting solicitation activities that resulted in discomfort for other employees and required prior approval for solicitation was overly broad and therefore, violated the Act.
These are just a couple of examples of ALJs taking the Board’s cue and stretching the protections of the Act even further. It is not hard to discern who benefits from these decisions, and that the cumulative impact is that union organizing activity has gotten easier and easier over the last few years.
ALJs Further the Board’s Efforts to Protect Nearly All Employee Conduct
The assault on common workplace policies also has been accompanied by a series of decisions reversing employee discipline for misconduct, where the Board found that the misconduct was protected activity.
Quicken Loans, Inc., 28-CA146517 (Mar. 17, 2016) involved an employee who was discharged for using inappropriate language and complaining about a customer in an area in the workplace that was open to customers.
In examining the employee’s profanity filled tirade about a customer, a Board ALJ somehow concluded that the communication at issue was really a discussion about the terms and conditions of the employee’s employment! In addition, while the comments were made to another employee in the bathroom, the rant was apparently designed to improve the employees’ terms and conditions of employment. The ALJ concluded that the employees were engaged in protected activity under the Act, and as such the disciplinary action issued was unlawful.
For many of those following the Board’s expansive trends over the past several years, this decision is not surprising. We agree, but this case could be an avenue for the Trump Board to start to begin to roll back a key initiative of the Obama Board.
The Board Decisions on Appeal
As in past years, efforts in 2016 to overturn the Board’s decisions on appeal have been hit or miss, and the Board did not seem to flinch when its decisions were reversed. In many cases, the Board continued to apply the same logic and decision making despite a reversal. This year, we expect that the United States Supreme Court will address one of the Board’s most controversial positions.
The Board’s Quickie Election Rules Sustained
Over the past couple of years, we have reported on the Board’s efforts to amend its rules to help unions gain advantages during organizing campaigns. The rule amendments, often referred to as the Quickie Election rules or the Ambush Election rules, had some fits and starts, but formally took effect in April of 2015. There were several challenges to the rules, and in June of 2016, the United States Court of Appeals for the Fifth Circuit, affirmed their legality.
The Quickie Election rules dramatically shorten the time between the filing of a petition for an election and the actual election, which means that employers have less time to exercise communication rights protected by Section 8(c) of the Act and launch a counter campaign. This is particularly harmful to employers, because a union organizing campaign may have been underway for months behind the scenes. The new rules also authorize electronic petition filing and require employers to respond within seven (7) days to all pre-election issues, among other things. In addition to changing the actual election procedures, the new rules also add additional information disclosure requirements, including the requirement that employers provide additional voter information (such as email addresses) within two days of any direction of election.
In Associated Builders & Contractors of Tx. v. Nat’l Labor Relations Bd., 826 F.3d 215 (5th Cir. 2016), the court of appeals affirmed the ruling of the district court and rejected a challenge by a number of business groups seeking to set aside the rules. Essentially, the court held that the new rules were not a violation of the Act, and that the Board acted within its authority in adopting the Quickie Election rules. The ruling of the Fifth Circuit was consistent with the ruling of the Court of Appeals for the D.C. Circuit in 2015. For now, it looks like the Quickie Election rules are here to stay.
The Board’s Micro-Unit Ruling Upheld
The Fifth Circuit Court of appeals also delivered another victory for Board when it upheld the Board’s controversial “micro-unit” standard. In Macy’s v. Nat’l Labor Relations Bd., 824 F.3d 557 (5th Cir. 2016), the court held that the Board properly allowed a very discrete subgroup of Macy’s employees, those working the fragrance counter, to form a union, despite Macy’s argument that the decision reversed decades of Board precedent. Macy’s argued that, consistent with Board precedent, the bargaining unit should have consisted of a broader group of all customer service employees, not just those who happened to work at the fragrance counter.
No doubt the union targeted this smaller group because it knew it had majority support within that group, but was unsure as to broader support.
A number of business groups joined Macy’s in challenging the Board’s adoption of a new “micro-unit” approach for bargaining unit certification. Unfortunately, the court rejected these challenges and sustained the Board’s new test for determining the appropriateness of a bargaining unit.
The micro-unit concept is a real problem for employers looking to remain union free, because it allows unions to cherry pick susceptible groups of employees, and avoid having to persuade a larger number of employees to vote in favor of union representation. And worse, an employer could be left with several different bargaining units of employees, and be forced to negotiate with a number of different unions representing groups of employees working alongside one another.
One Court of Appeals Sanctions the Board for Tactics
It was not all bad news for employers in the appellate courts. In Heartland Plymouth Court MI v. Nat’l Labor Relations Bd., 838 F.3d 16 (D.C. Cir. 2016), the court reversed a Board decision and in doing so offered some pretty hostile criticisms of the Board.
At issue was the Board’s apparent efforts to reverse clear precedent regarding its standard related to allegations that an employer refused to bargain over mandatory subjects of bargaining. The Board was attempting to apply a new standard, which would have considered whether an employer’s refusal to bargain on a matter allegedly covered by the terms of a collective-bargaining agreement was supported by a “clear and unmistakable” waiver in the language of the agreement. However, as noted in the court’s decision, that test had been repeatedly rejected by the courts.
Clearly frustrated by the Board’s refusal to follow its prior holdings, the court noted that its ruling should not come as a surprise to the Board, and that it had a “fundamental and long-running disagreement with the Board.” The court made clear that the Board’s longstanding “non-acquiescence” toward the law was unjustifiable and offensive. The court went on to call the Board’s tactics “an instrument of oppression” and that those tactics sent a message that the Board did not care about the law. Wow!
After unleashing this torrent of criticism, the court reversed the Board’s holding and ordered the Board to pay the employer’s attorneys’ fees!
D.C. Circuit Also Takes the Board to Task for Overly Broad Interpretation of the Act
In Consolidated Comms. v. Nat’l Labor Relations Bd., 837 F.3d 1 (D.C. Cir. 2016), the Court of Appeals for the D.C. Circuit again criticized the Board for applying the wrong legal standard and ignoring precedent. Consolidated involved an employer’s efforts to address employee misconduct during a strike. The strike followed unsuccessful negotiations for an initial labor contract after the union was certified as the bargaining representative. Following the strike, the employer did reinstate striking employees but disciplined several individuals for their conduct during the strike. The union filed unfair labor practices, alleging that the employer’s disciplinary actions were unlawful.
Generally, an employer’s discipline of an employee for strike conduct constitutes an unfair labor practice if (i) the employee was at the time of the alleged misconduct “engaged in a protected activity,” (ii) the employer knew the employee was engaged in a protected activity, (iii) the alleged misconduct during that protected activity provided the basis for discipline, and (iv) the “employee was not, in fact, guilty of that misconduct.” Nat’l Labor Relations Bd. v. Burnup & Sims, Inc., 379 U.S. 21, 23 (1964). In Consolidated, the Board held that strike-based disciplinary actions must be rescinded. However, the court held that the Board failed to appropriately apply the standard, at least in one case.
The court agreed with the Board with respect to three disciplined employees, but reversed the Board’s decision with respect to a striker with road rage. The court held that this employee’s conduct, which amounted to nearly running a truck off the road, did not qualify for the protection of the Act. In addition, the court held that the Board had inappropriately placed the burden on the employer to establish that the employee’s conduct lost the protection of the Act. In the end, the court concluded that the Board’s failure to apply the appropriate standard to striker misconduct required the reversal of the Board’s decision.
Supreme Court to Decide if the Board’s Class Arbitration Ban Lawful
Among the Board’s more strident positions is that the Act prohibits employers from entering into employment agreements that require employees to waive the right to pursue class or collective actions. The Board’s case of D.R. Horton, 357 NLRB No. 184 (2012), sets forth the Board’s position that the Act protects employees’ right to bring class actions and trumps the provisions of the Federal Arbitration Act (“FAA”) that allows for the waiver of class and collective action proceedings in favor of arbitration proceedings. Despite the holdings of the Second, Fifth and Eighth Circuit Courts of Appeals, among other courts, reversing the Board’s position on arbitration agreements, the Board has stridently continued its crusade.
The Board was able to gain some support for its position from the Seventh and Ninth Circuits, and now, the Supreme Court of the United States has decided to settle the Circuit split. Although the legal arguments regarding the appropriate consideration of the FAA and the National Labor Relations Act are nuanced and complex, the issue to be decided is clear: does the NLRA prohibit employees from waiving rights to pursue class or collective actions and agreeing to proceed with individual arbitration to resolve workplace disputes? Stay tuned.
The Trump Board – A Look Ahead
We anticipate a thorough overhaul of the Board under President Trump. President Trump will have the opportunity to fill two current Member vacancies on the Board as soon as he gets down to work. In addition, he will have the opportunity to replace the current general counsel whom we covered above. While it may take some time, we believe that the tide will eventually turn and some of the more controversial decisions of the Obama Board will be reversed. What is harder to predict is exactly which decisions and when the reversals of those decisions might come. At this point, given the damage done to employer policies and management’s rights to police the workplace, any pro-employer decision would be welcomed.
In so many ways, the Obama Board made history. A review of our Year End Review pieces over the last few years demonstrates that history has not been kind to employers. The Board expanded and contorted the language of the Act in ways many never predicted in an effort to protect more employees and more employee activities. The Board and the General Counsel waged an all-out assault on employer policies and employer efforts to police employee social media activity. And if that weren’t enough, the Board and others fought hard, through rule making and decision making, to further tilt the playing field in favor of unions in organizing efforts.
It was quite a ride for the most pro-union and pro-employee Board in history. But now that the party is over, how long will the hangover last? While we have seen a number of courts of appeals reject the Board’s aggressive positions, we have also seen some courts affirm some of the Board’s key agenda initiatives. As more decisions make it to the appellate courts, we will gain a greater understanding of the long-term impact of the Obama Board. In addition, we will have a front row seat as the Trump Board seeks to dismantle that legacy. We will keep you updated throughout the year on our blog: www.palaborandemploymentblog.com.