United States: Disinformation - It’s A Matter Of Federal Labor Policy

Recent events in Afghanistan have raised the awareness of disinformation as an instrument of National Defense. While the popular media has spent substantial energy flogging the government, the Department of Defense, and the American psyche over the efficacy or morality of providing disinformation in the defense of human life, this same energy has not been expended in the context of disinformation as a matter of federal labor policy. In fact, disinformation (or lying) is inculcated in federal labor policy, has received the endorsement of the National Labor Relations Board, and the Federal Courts.

In Hoffman Plastic Components v. NLRB, No. 00-1595, (Sup.Ct. March 27, 2002), by the narrowest of margins – five to four – the Supreme Court held a federal criminal statute precluded the NLRB from ordering an employer to pay back-pay to an employee who had obtained employment using fraudulently obtained documents.

In 1989 the employer laid-off Jose Castro, because he had engaged in certain activities in support of a labor organization. The NLRB ordered Hoffman to offer reinstatement and back-pay to Castro. The NLRB then conducted a compliance hearing before an Administrative Law Judge to determine the amount of back pay owed to Castro. In the compliance hearing, conducted in 1993, Castro testified that he had never been legally admitted to or authorized to work in the United States. He admitted gaining employment with Hoffman Plastics by tendering a birth certificate belonging to a friend. He admitted he had used this birth certificate to fraudulently obtain a California driver’s license and a social security card. In addition he had used this same birth certificate to fraudulently obtain employment following his lay-off by Hoffman Plastics.

The Administrative Law Judge determined he was precluded from awarding Castro back pay or reinstatement given Castro’s testimony regarding his immigration status. The NLRB reversed. It determined that in order to remedy the unfair labor practices, it should treat Castro the same as any other employee. It ordered the payment of back-pay plus reinstatement through the date Hoffman Plastics first learned of his undocumented status. The Court of Appeals denied the employer’s Petition for Review.

The Supreme Court majority reviewed the history of judicial review of Board remedies dating from its decision in NLRB v. Fansteel Metallurgical Corp., 306 U.S. 240 (1939). In its view of this history, it had consistently set aside awards of reinstatement or back-pay to employees found guilty of serious illegal conduct in connection with their employment. The Court characterized its most recent decision addressing this issue, Sure-Tan, Inc. v. NLRB, 467 U.S. 883 (1984), as prohibiting the NLRB from "rewarding a violation of immigration laws" by ordering the reinstatement of workers not legally authorized to enter or reenter the United States.

The Court characterized the NLRB’s position before it as requesting the Court to "allow it to award back-pay to an illegal alien for years of work not performed, for wages that could not lawfully had been earned, and for a job obtained in the first instance by criminal fraud." It determined this request should be denied. In the Court’s view, awarding back-pay would condone and encourage future violations of the immigration statutes.

The Court also rejected the NLRB’s argument that absent a monetary penalty, its remedies would be insignificant. The Court did so by finding: (i) a Cease and Desist Order, (ii) a requirement that Hoffman Plastics conspicuously post a notice to employees, and (iii) the fact Hoffman Plastics would be subject to contempt proceedings should it fail to comply with these orders, would provide sufficient deterrence to an employer.

The dissenting opinion written by Justice Breyer, and joined by Justices Stevens, Souter, and Ginsberg, found persuasive the NLRB’s argument that back-pay was such a significant weapon that employers would conclude that in its absence they could violate labor laws "at least once with impunity". In the dissenter’s view, the NLRB had discretion to remedy labor law violations by awarding back-pay award and leaving the enforcement of criminal law to ordinary criminal penalties.

The dissent and the majority wrestled with the Court’s prior decision in A.B.F. Freight Systems, Inc. v. NLRB, 517 U.S. 317 (1994). In that case the NLRB had ordered an employer to pay back-wages to an employee who conceededly had perjured himself during the NLRB’s compliance proceeding. The majority characterized the decision as whether the NLRB was obligated to adopt a "rigid rule" that employees who falsely testified under oath automatically forfeit NLRA remedies. The majority distinguished the A.B.F. decision in three grounds:

The decision in Hoffman Plastics will not likely have much effort on practioners in the Seventh Circuit. The Seventh Circuit has long held an illegal worker cannot collect back-pay under the National Labor Relations Act. See, Del Rey Tortilleria v. NLRB, 976 F.2d 1115 (7^th Cir. 1992).

In the same term, the Supreme Court decided Ragsdale v. Wolverine World Wide, Case No. 00-6029 (March 19, 2002). Again, the decision was by a five to four vote. Ms. Ragsdale had cancer, thus this case involved the "serious health condition" reason for a FMLA leave. In Ragsdale, Justice Kennedy joined by Chief Justice Reinquist and Justices Stevens, Scalia and Thomas, invalidated a Department of Labor Regulation mandating the employer designate leave periods as FMLA leave contemporaneously with the leave under penalty of an extension of the leave. For purposes of this discussion, the majority’s musings on the penalty are illuminating. Recall that under the FMLA an employee is eligible to receive the protections of the Act for his own health only if he has a serious health condition. By definition a serious health condition must render the individual unable to perform his regular job duties.

In addressing the Secretary of Labor’s argument in support of its regulations, the Court’s Majority analyzed a variety of options an employee might face when confronted with notice of designation. It contrasted those options with the penalty which Secretary had imposed on the employer. Thus, employees who would have chosen to work on an intermittent basis, under the Secretary’s view, would be able to claim an entitlement of twelve weeks of leave instead of six weeks. The Majority went on to say that twelve more weeks of leave might be an appropriate entitlement as a penalty were the employee not to have taken any leave at all if notice had been given. Of course, that employee would have fraudulently obtained the leave in the first instance. Apparently, that fraud was acceptable to the Secretary of Labor and the Court’s Majority.¹

There are several cases involving disinformation or fraud decided by the Seventh Circuit which appear consistent with this general concept that disinformation is a legitimate part of federal labor policy.

In Hartman Brothers Heating & Air Conditioning v. N.L.R.B., 01-1321, the Seventh Circuit found a "lie" on an employment application was no bar to employment. The issue in Hartman involved a union practice known as "salting".² There the union salt had lied on his application. The Seventh Circuit characterized the decision presented by the case before it as "whether a salt may lie to get a job". It answered this question at least partially in the affirmative. It held the salt could lie as to his status as a union organizer or a union supporter. The Seventh Circuit, however, drew the line as to the salt’s qualifications for the job. Demonstrating the hypothesis of this paper, the Seventh Circuit went even further however. The employer in Hartman had argued an Indiana statute made it a crime for a person to "knowingly or intentionally make a false or misleading written statement with an attempt to obtain employment." The Seventh Circuit brushed aside this state law argument finding the state statute requiring truth was "preempted by the National Labor Relations Act."

We have come to a transition case between Hoffman Plastics and BE&K Construction. In Federal Security, 336 NLRB No. 52 (2002) the NLRB found an employer had unlawfully filed a lawsuit against several individuals who had been witnesses in an unfair labor practice trial held several years earlier. The facts were fairly straightforward. The employees of Federal Security, a security guard company providing armed security guards to the CHA, had struck the employer. After several years of litigation, the Seventh Circuit determined that the employer had not acted unlawfully by discharging the striking employees.

Approximately six months after the Seventh Circuit’s decision, one of the owners of Federal Security had a chance encounter with one of the guards who had testified at the NLRB hearing. This guard allegedly told the owner that the guards had lied during the NLRB trial. According to the owner’s account of this conversation, the guard stated that the employees had met with a labor attorney and had began to discuss the circumstances precipitating the now-illegal walkout. The lawyer purportedly advised the discharged strikers that unless they were all on the same page, they would not be able to make out a case before the NLRB, that he was leaving the room and that when he returned, he would talk to the employees. According to another employee who surfaced later, the employees discussed and agreed upon the reason for the walkout. Because she would not agree to execute an affidavit attesting to this reason, she was directed to leave, and did so.

The owners of the company, which was now dissolved, then brought suit in state court alleging malicious prosecution against the witnesses. The owners obtained a default judgment against approximately half of the witnesses. The state court denied a motion to dismiss filed by the remaining plaintiffs. The NLRB sought an injunction under Section 10(j) of the National Labor Relations Act which was denied by the United States District Court. Notwithstanding the failure of its request for injunctive relief, the ALJ and then the Board determined there was a federal definition of malice which had to met in a malicious prosecution case and that the allegations of the complaint in the state court which had survived a motion to dismiss were not sufficient to take the case out of this preemption. The employer was ordered to vacate the default judgment, was ordered to dismiss the lawsuit and to pay plaintiffs the attorneys’ fees they had incurred in the defense of the state court action.

We now come to BE&K Construction. The issues presented in BE&K Construction v. NLRB also involve the NLRB’s expertise and the proper level of the court’s deference to that expertise - assuming it exists.

BE&K Construction was a non-union employer which was hired to modernize a steel mill. Various unions launched a corporate campaign against BE&K at this project. The unions’ corporate campaign consisted of lobbing for the adoption of a toxic waste emission standard for the construction project, picketing and hand billing the project, encouraging employees of sub contractors to engage in a strike, and filing lawsuits in state court alleging violation of California Health & Safety Code. In 15 of the 29 lawsuits filed, the unions were successful.

BE&K then filed suit in federal district court against various unions. Eventually all of its claims were dismissed or were withdrawn. Now enter the NLRB. It determined BE&K had violated §8(a)(1) of the Act by filing the lawsuit and ordered it to reimburse the unions the attorneys fees incurred in defending the lawsuits. (The 9^th Circuit earlier had reversed the district court’s award of Rule 11 sanctions against BE&K.)

Two issues are presented by the NLRB’s order. First, does the § 8(a)(1) guarantee to employees of the right to engage in concerted activities basis for mutual aid and protection extend to unions. If effect, a standing issue – or an issue of statutory interpretation. Second, does §8(a)(1) make it an unfair law practice to interfere with rights guaranteed by the First Amendment to the Constitution. Or, to restate it, does the NLRB have the expertise to be the arbitrator of First Amendment Law?

If Hoffman Plastics is any guide, I predict the result will be:

Regardless of the outcome, and regardless of whether my two predictions are right or wrong, BE&K is unlikely to have a significant impact on the development of the law outside the administrative law context.