United States: Employment Law Commentary, December 2004

End-of-Year Odds and Ends: Meal and Rest Period Regulations, Case Law Developments, Federal Statutory Developments, New OFCCP Policies and Procedures, and Significant N.L.R.B. Decisions

During the past year, there have been many significant developments in the area of employment law. As 2004 draws to a close, we thought that it would be appropriate to dedicate this edition of the Employment Law Commentary to providing a summary of some of these compelling changes which might not warrant an issue all their own. Many of the decisions and advancements that are discussed in this Commentary represent considerable departures from previously held precedent, thus playing a central role in shaping, and to some extent redirecting, the future of employment law.

On December 10, 2004, the California Division of Labor Standards Enforcement ("DLSE") of the Department of Industrial Relations submitted proposed emergency regulations to the Office of Administrative Law ("OAL") that would give more flexibility in scheduling meal periods and would clarify the nature of the penalties imposed for meal and rest period violations.

The DLSE withdrew the proposed emergency regulations and resubmitted the proposal for consideration under the regular rulemaking process on December 20, 2004, the deadline by which the OAL was required to review the proposed emergency regulations, as required by the Administrative Procedure Act ("APA").

Under Labor Code Section 512(a), "[a]n employer may not employ an employee for a period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes." Under a limited exception, if the employee’s total work period is not more than six hours, the meal period may be waived by the mutual consent of the employer and the employee.

The penalties for failure to comply with § 512 can be severe. Under Labor Code Section 553, any person who violates § 512 is also guilty of a misdemeanor. In addition, an employer that fails to provide an employee with a meal period as required must pay the employee an amount equal to "one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided." Cal. Lab. Code § 226.7(b).

Some of the more significant consequences of the proposed regulations include the following:

Section 226.7(b) Imposes Penalty

Under the proposed emergency regulations, the one-hour payment provision described in Labor Code Section 226.7(b) would be treated by the DLSE as a penalty rather than as wages. If treated as a penalty, the amount would be subject to a one-year statute of limitations and would not be subject to tax withholdings. If treated as wages, the position that the DLSE has previously embraced, a three or four-year statute of limitations would apply, and plaintiffs could also recover attorneys’ fees and costs under §§ 218.5 and 218.6.

"Provide" Means "Afford" Rather than "Take"

The proposed regulations clarify that employers will meet their statutory requirement under § 512 of the Labor Code to "provide" meal periods as long as they (1) make the meal periods available to the employees and afford the employees the opportunity to take them, (2) post the applicable order of the Industrial Welfare Commission ("IWC"), and (3) maintain accurate time records for covered employees, as required by the IWC’s wage order. As an added precaution, employers can further establish that they have "provided" their employees with the required meal period if they (1) inform employees of the circumstances under which the employee is entitled to a meal period, and (2) obtain written acknowledgements that the employees understand these rights. Consequently, employers that "provide" meal periods to their employees will not be penalized if their employees elect not to take their meal periods.

Meal Periods Can Begin After the Fifth Hour

Under the proposed regulations, employers would no longer need to require employees to take their meal periods before the sixth hour of work. As long as employers provide the employees with a meal period prior to the sixth hour of work, the employers will not be prohibited from permitting employees to begin their meal periods after the start of the sixth hour. Employers should be aware that under the proposed regulations, a second meal period must be provided if the work period commencing after the end of the initial meal period exceeds five hours.

In October of this year, the Court of Appeal for the Second Appellate District held in Westside Concrete Company, Inc. v. Dept. of Industrial Relations ¹ that the lower court erred in sustaining the DLSE’s demurrers to Westside’s initial complaint with respect to the claim that DLSE opinion letters interpreting an IWC wage order governing meal breaks constituted unlawful rulemaking in violation of the Administrative Procedure Act (APA). The Westside Concrete court noted that the record supported plaintiff Westside’s contention that the broad language of the DLSE’s letters suggested that the agency’s "interpretations" stated new policy that was intended to apply statewide. The court found that the record contained sufficient evidence such that Westside should have been afforded the opportunity to show that the letters were more than "mere summaries of [the DLSE’s] prior decisions or restatements of its prior positions in specific cases," and that therefore, the letters violated the procedural requirements for rulemaking that are outlined in the APA. ²

In response to this opinion, Gregory Rupp, the Acting Deputy Chief of the DLSE, issued a memorandum on December 20, 2004, that indicates that the DLSE intends to replace the specific opinion letters at issue in the Westside Concrete case with the formal rulemaking process outlined in the APA. This action, Rupp states, is necessary because the opinion letters have general industry-wide application. Rupp has directed that the opinion letters be removed from all enforcement manuals and from the DLSE website.

Pursuant to the requirements of the APA for formal rulemaking, the DLSE has issued a notice of proposed rulemaking. This notice informs interested parties about the details of the notice and comment period that will precede the DLSE’s determination of whether or not the proposed regulations should be adopted. Three hearings for public comment are scheduled to be held in February of 2005. In addition, interested parties may submit written comments until the written comment period closes at 5:00 p.m. on February 14, 2005.

In a settlement agreement entered into by the Equal Employment Opportunity Commission ("EEOC") and the California law firm of Luce, Forward, Hamilton & Scripps ("Luce Forward"), the EEOC approved, with some minor revisions, Luce Forward’s mandatory arbitration agreement. The settlement agreement marks a departure from the EEOC’s previously held position opposing the use of mandatory arbitration plans to resolve employment disputes.

The settlement agreement followed the Ninth Circuit’s decision in EEOC v. Luce, Forward, Hamilton & Scripps. ³ In EEOC v. Luce, Forward, the Ninth Circuit overruled prior precedent in holding that Luce Forward was not precluded by Title VII of the Civil Rights Act either from requiring applicants to agree to arbitrate Title VII claims or from enforcing existing mandatory arbitration agreements. Although the EEOC has not expressly revoked its 1997 policy statement that articulates its opposition to the use of mandatory arbitration agreements to resolve employment disputes, the Luce Forward settlement agreement indicates that the EEOC may be more willing to approve an employer’s mandatory arbitration plan than it has been in the past.

In Claxton v. Waters, ⁴the California Supreme Court ruled that: (1) the standard preprinted release form used to settle workers’ compensation claims does not release the employers from liability for claims asserted in separate civil actions; and (2) parties may not use extrinsic evidence to show that the parties intended the form to apply to other claims. The court limited its holding by announcing that the new rule regarding the inadmissibility of extrinsic evidence would only apply prospectively.

Factual and Procedural Background of Claxton

Plaintiff Carolyn Claxton worked as an office assistant for defendant Pacific Maritime Association ("PMA"). Her supervisor was defendant Ray Waters. In December of 1997, Claxton filed a workers’ compensation claim against PMA for an injury she suffered from a slip and fall earlier that year. In January of 1998, Claxton filed a second, independent workers’ compensation claim against PMA for injury to "psyche due to sexual harassment." ⁵ Claxton filed a civil action against Waters and PMA for sexual harassment in violation of the Fair Employment and Housing Act ("FEHA") in September of 1998.

In February of 1999, Claxton and PMA settled both of her workers’ compensation claims for $25,000. As a required part of the settlement agreement, Claxton executed a preprinted compromise and release form, which was approved by a workers’ compensation judge in March of 1999. Neither the form nor the judge’s order mentioned the case number of the pending civil action, though both contained the case numbers of both of Claxton’s workers’ compensation claims.

After the workers’ compensation judge approved Claxton’s compromise and release form, defendants PMA and Waters moved for leave to file an amended answer that incorporated, among other things, an affirmative defense that the execution of the workers’ compensation compromise and release nullified Claxton’s civil sexual harassment claims against PMA and Waters.

The trial court granted defendants’ motion for summary judgment on the basis of the standard release form signed by Claxton. The Court of Appeal reversed the trial court’s holding.

Legal Analysis of Claxton

The California Supreme Court evaluated the concerns that arise when an injured employee enters into a release. The court then explained that these concerns are implicated to an even greater extent when an employer seeks to apply the preprinted workers’ compensation release language to claims that fall outside the workers’ compensation scheme. The court went on to discuss several cases in which the Court of Appeal had rejected the attempts of employers to extend the language of the workers’ compensation release to prevent employees from bringing causes of action outside the workers’ compensation system. Based in large part upon the reasoning explained in these cases, the court held that the standard language included on the preprinted form used to settle workers’ compensation claims releases only those claims that are within the scope of the workers’ compensation system. The language does not extend to claims asserted in separate civil actions.

Prior to the Claxton decision, case law had supported allowing parties to present extrinsic evidence to prove whether or not the parties had intended for the preprinted release to also encompass civil claims outside the workers’ compensation system. The Claxton court determined that extrinsic evidence should not be admissible. The court reasoned that allowing such extrinsic evidence was unduly burdensome on the courts and was unfair to unwary injured employees. Most injured employees, the court presumed, would not understand that when they signed the workers’ compensation release form, the release also applied to claims outside the workers’ compensation system. Furthermore, the court noted that prohibiting extrinsic evidence would not be detrimental to the parties, who could easily execute a separate document that referred to the causes of action outside the scope of workers’ compensation law and clearly indicated that those claims had been settled.

The Claxton ruling with respect to the inadmissibility of extrinsic evidence is a departure from a settled rule upon which the parties to the action relied. As a result, the court determined that this rule would apply only prospectively.

In Toscano v. Green Music, ⁶ the Court of Appeal for the Fourth Appellate District held that a plaintiff, under a promissory estoppel theory, is entitled to recover damages stemming from a defendant employer’s unfulfilled promise of employment, which induced the plaintiff to resign from an at-will employment position with his or her former employer. A plaintiff in this situation would be entitled to recover lost wages based on what the plaintiff would have earned from his or her prior employer to the time of his or her retirement, to the extent that the damages are not speculative or remote and are supported by substantial evidence. Prior to the Toscano decision, the issue of whether such damages were recoverable on a promissory estoppel theory was unresolved under California law.

Factual and Procedural Background of Toscano

Toscano was employed as the general manager at a Fields Pianos store ("Fields"). Because he was unhappy with his job, Toscano decided to seek new employment. Toscano contacted Michael Greene, the president of Greene Music. After many conversations during the summer of 2001, Greene offered Toscano a sales management position, which was to begin on September 1, 2004. On August 1, 2004, Toscano resigned from his position at Fields in reliance on his job offer from Greene. In mid-August, Greene withdrew his offer of employment.

Toscano sued Greene Music for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) promissory estoppel, and (4) interference with prospective economic advantage. Toscano’s claim for promissory estoppel was the only claim that survived summary adjudication.

Legal Analysis of Toscano

It is settled authority that an employee in Toscano’s position may not recover future lost wages from the prospective employer that induced him or her to resign from his or her former position. However, the court found that because of the prospective employee’s justifiable detrimental reliance on the prospective employer’s offer of employment, an employee in Toscano’s position is entitled to recover the future lost wages that he or she would have earned from his or her former employer, provided that those wages are not "speculative, remote, contingent or merely possible." ⁷ By analogizing Toscano’s claim for lost future wages to a claim for lost profits, the court concluded that such lost future earnings are recoverable only "where the evidence makes reasonably certain their occurrence and extent." ⁸

The court flatly rejected Greene Music’s contention that because Toscano’s employment with Fields was "at-will," he was per se barred from recovering the future wages he would have recovered had Greene Music’s promise of employment not induced him to resign from his employment.

Because Toscano did not sufficiently establish with reasonable certainty that his employment with Fields would have continued until his retirement, the court vacated the trial court’s award of future earnings and remanded the case for a new trial on the issue of damages. This holding indicates that although lost wages might be available to a plaintiff in Toscano’s situation, the substantial evidence required to support an award for such damages may often be difficult for such a plaintiff to demonstrate.

Practical Impact of the Toscano Decision

Although the court ultimately held that Toscano had not established with reasonable certainty the amount of his lost future earnings, the court’s holding that plaintiffs in Toscano’s position can recover the lost wages that they would have received from the former employer from whom they were induced to resign is quite significant. In light of the Toscano decision, employers should exercise increased caution and discretion when making offers of employment to prospective employees.

In Reeves v. Hanlon, ⁹ the California Supreme Court resolved a conflict among the California Courts of Appeal and held that a plaintiff may recover damages for tortious intentional interference with an at-will employment relation. In holding defendants Hanlon and Greene liable for such intentional interference, the court also reevaluated the sorts of actions that courts may consider to be "independently unlawful conduct."

Factual Background of Reeves

Defendants Daniel P. Hanlon and Colin T. Greene were attorneys at plaintiff Robert L. Reeves’s firm, Robert L. Reeves & Associates, A Professional Law Corporation. In June of 1999, Hanlon and Greene resigned from Reeves’s firm and started a new firm, Hanlon & Greene, A Professional Corporation ("H&G"). Defendants allegedly persuaded some of plaintiff’s employees to join H&G. Nine employees left plaintiff’s firm, and six of those were subsequently employed by H&G. In addition, plaintiff’s complaint alleged that defendants personally solicited plaintiff’s clients, misappropriated plaintiff’s trade secrets, destroyed computer files and data, and withheld plaintiff’s property, including a corporate car.

Legal Analysis of Reeves

The primary issue in Reeves concerned defendants’ interference with plaintiff’s at-will employee relations. The court held that a plaintiff may recover for intentional interference with an at-will employment relation under the same standard applicable to tortious interference with prospective economic advantage. In so holding, the court articulated that in order to recover for such interference with an at-will employment relation, "a plaintiff must plead and prove that the defendant engaged in an independently wrongful act—i.e., an act ‘proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’" ¹⁰ In its reasoning, the court referred to the "so-called privilege of competition," which states that "[e]ven though the relationship between an employer and his employee is an advantageous one, no actionable wrong is committed by a competitor who solicits his competitor’s employees or who hires away one or more of his competitor’s employees who are not under contract, so long as the inducement to leave is not accompanied by unlawful action." ¹¹ The court recognized that where "either the defecting employee or the competitor uses unfair or deceptive means to effectuate new employment, or either of them is guilty of some concomitant, unconscionable conduct, the injured former employer has a cause of action to recover for the detriment he has thereby suffered." ¹²

In evaluating the conduct of Hanlon and Greene, the court did not limit the scope of the tort of intentional interference to situations in which the actual solicitation of plaintiff’s employees was wrongful. Instead, the court found that a showing that defendants had engaged in other, related wrongful actions that were designed to interfere with the at-will employment relations was sufficient to establish liability. Looking at the nature of the actions taken by Hanlon and Greene as a whole, the court found that the Court of Appeal had properly upheld the award of damages attributable to defendants’ wrongful conduct.

The court also found that defendants had violated the Uniform Trade Secrets Act ("UTSA") by misappropriating trade secret client information for the express purpose of soliciting clients to leave plaintiff’s firm. The court drew a distinction between announcing a change of employment, which is permitted under the UTSA, and using confidential client lists to solicit clients, which is a violation of the UTSA. After weighing the evidence, the court concluded that Hanlon and Greene improperly used plaintiff’s trade secret client lists to mislead and solicit plaintiff’s clients.

The American Jobs Creation Act of 2004 (the "Act") was signed into law by President Bush on October 22, 2004. The Act contains, among other things, a provision that will permit a taxpayer to make an "above-the-line" deduction of his or her attorneys’ fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving "unlawful discrimination."

Section 703 of the Act defines "unlawful discrimination" to include acts that are unlawful under the provisions of specific delineated statutes, and also includes a sweeping catch-all at the end of the list. The amendments made by Section 703 apply to costs and fees paid after the date of the enactment of the Act with respect to any judgment or settlement occurring after such date.

Because an "above-the-line" deduction of attorneys’ fees is permitted, a taxpayer involved in an employment discrimination lawsuit will now be able to offset his or her recovery with his or her attorneys’ fees and costs. Previously, California law was settled that attorneys’ fees were largely non-deductible. As a result, the attorneys’ fees were taxable both to plaintiffs and their attorneys. The new provision in the Act remedies this deficiency by eliminating this "double taxation."

On December 8, 2004, President Bush signed an omnibus appropriations bill that provides funding for most federal agencies, including the Labor Department ("Department"), through fiscal year 2004. This bill includes the H-1B Visa Reform Act of 2004, which provides a limited exemption from an already exhausted cap on H-1B visas.

The 65,000 annual cap on the H-1B visa program was reached even before fiscal year 2005 began on October 1, 2004. The limited exemption in the omnibus measure makes available 20,000 additional H-1B visas, but limits eligibility to foreign masters and doctoral degree candidates who are currently enrolled in American colleges and universities.

Though the application forms currently do not demonstrate as much, this exemption also imposes additional fees on employers. Under the new law, employers seeking H-1B workers are required to pay a filing fee, which has been increased from $1,000 to $1,500 per foreign worker. ¹³ This increase is currently in effect, which means that employers must comply with the new fees, even though the changes are not yet reflected in the filing form. In addition to the increased filing fee, the omnibus measure also imposes an additional $500 "fraud fee" on employers for each H-1B application that they file. This fraud fee will go into effect on March 8, 2005. Furthermore, the H-1B provision in the omnibus measure effects a change upon current H1-B law by requiring employers to pay H-1B workers 100% of the "prevailing wage," as determined by the Department of Labor, rather than 95%, as previously required.

Another significant consequence of the H-1B Visa Reform Act of 2004 is that it gives the Department the authority to initiate investigations of those employers that it believes are violating H-1B law. The Department would have sixty days to conduct such an investigation. Upon determining that an employer has failed to comply with H-1B law, the Department may file a determination against the employer. An employer that has had a determination filed against it would then be afforded a hearing on the matter.

The U.S. Department of Labor, Office of Federal Contract Compliance Programs ("OFCCP"), has informed the Federal Contractor Community that it is going to use a new letter to provide advanced compliance evaluation notification. This "Corporate Scheduling Announcement Letter" ("CSAL") will be provided to corporate headquarters, notifying the corporation that some of its federal contractor establishments are on the list of establishments that have been selected to undergo a compliance evaluation within the next 12 months. The list of establishments is generated from the OFCCP’s new Federal Contractor Selection System ("FCSS"), formerly referred to as the Equal Employment Data System ("EEDS").

The FCSS will schedule compliance evaluations for no more than twenty-five establishments per contractor during each scheduling cycle of approximately 12 months. In order to further reduce the likelihood that a contractor will be subjected to several compliance reviews at once, the FCSS will stagger the scheduling of the compliance evaluations for these establishments.

The OFCCP has stated that the purposes of the new CSAL are to:

• Provide the contractor’s internal Equal Employment Opportunity ("EEO") staff with notice to obtain management support for EEO and self-audit efforts;

• Encourage contractors to take advantage of OFCCP compliance assistance offerings;

• Encourage contractors to focus on self-audit efforts that, if problems are adequately analyzed and corrected, save OFCCP time/resources when it does an evaluation; and

• Help contractors manage/budget the amount of time required for evaluation activity.

The OFCCP has made it very clear that the CSAL is not a Compliance Evaluation Scheduling Letter ("CESL"). The CSAL is a notification through which the OFCCP provides the following information:

• A brief description of the new FCSS it has implemented;

• A list of contractor establishments selected to undergo a compliance evaluation within the next twelve months; and

• An announcement of the availability of various compliance assistance activities.

Not every corporation on the scheduling list will receive a CSAL. Rather, the OFCCP will mail CSALs only to corporations with two or more establishments on the scheduling list.

Statistical evidence released by the OFCCP indicates that the agency has become more aggressive in its pursuit of financial remedies for victims of discrimination. In November of 2004, the OFCCP announced that financial remedies recovered for victims of unlawful discrimination increased by 31% over the previous fiscal year. The agency conducted more than 6,500 investigations during fiscal year 2004, which covered more workers than any year since 1991 and yielded $34,567,070 in financial remedies for 10,729 victims of unlawful discrimination.

In the 2004 fiscal year, the OFCCP recovered nearly $18 million in financial remedies for 6,150 women and more than $11.7 million for nearly 3,000 workers through cases litigated by the Office of the Solicitor.

As a result of the OFCCP’s more assertive commitment to combating systematic discrimination in the workplace, employers should be aware that pay disparities that the OFCCP might have previously elected to ignore in compliance reviews may now be aggressively pursued.

In IBM Corp., ¹⁴ the National Labor Relations Board ("N.L.R.B." or the "Board") ruled that employers have no obligation under the National Labor Relations Act ("N.L.R.A.") to accommodate a nonunionized employee’s request that a coworker be present at an investigatory interview that might lead to discipline. This holding overrules the Board’s 2000 decision in Epilepsy Foundation, which held that the Weingarten right extends to nonunion settings.

The Weingarten Right

In N.L.R.B. v. J. Weingarten, ¹⁵ the United States Supreme Court held that the N.L.R.A. required employers in unionized workplaces to permit employees to have a coworker present at an investigatory interview that the employee reasonably believed might result in discipline. Since the Weingarten decision in 1975, the N.L.R.B. has modified its position four times on the issue of whether the Weingarten right should be limited to union employees. ¹⁶ Prior to its decision in IBM Corp., the Board most recently addressed the issue in Epilepsy Foundation of Northeast Ohio. ¹⁷ In Epilepsy Foundation, the Board reversed its previously held position and found that nonunionized employees must be afforded the Weingarten right.

Factual and Procedural Background of IBM Corp.

IBM Corp. received a letter from a former employee that contained allegations of harassment. In its investigation of these accusations, IBM Corp. conducted two sets of interviews of each of the three persons who had been implicated in the letter (the "Charging Parties" in the IBM Corp. action). Prior to the second interviews, each of the Charging Parties requested to have a coworker present during their interview. IBM Corp. denied their requests. Each of the Charging Parties was discharged approximately one month after the interviews.

The Administrative Law Judge who initially heard the IBM Corp. matter applied Epilepsy Foundation and determined that IBM Corp. had violated Section 8(a)(1) of the N.L.R.A. when it denied the Charging Parties’ requests to have a coworker present during the investigatory interviews. The case was subsequently brought before the N.L.R.B., which adopted IBM Corp.’s argument that policy considerations supported overruling Epilepsy Foundation. In rejecting the Epilepsy Foundation decision, the N.L.R.B. returned to prior Board precedent, which adopts the position that the Weingarten right does not extend to workplaces where the employees are not represented by a union.

Legal Analysis of IBM Corp.

In its analysis of IBM Corp., the N.L.R.B. first noted that the text of the N.L.R.A. permitted the Board to determine whether it should extend Weingarten rights to nonunion settings or whether it should decline to do so; both interpretations were permissible constructions of the N.L.R.A.. Therefore, the Board determined that it had the discretion to determine which of the two permissible interpretations to adopt.

The Board found that on balance, policy considerations supported its decision to deny the Weingarten right in nonunionized workplaces. First, the Board observed that because of new statutory requirements and because of new security concerns that have developed since the Weingarten decision, employers have increasingly found themselves faced with the obligation of conducting investigatory interviews. The Board then noted that the considerations that support Weingarten are not present in the nonunionized setting. The Board outlined four specific reasons that the rationale underlying the Weingarten decision does not apply to employees who are not represented by a union:

1. Coworkers do not represent the interests of the entire work force.
2. Coworkers cannot redress the imbalance of power between employers and employees.
3. Coworkers do not have the same skills as union representatives.
4. The presence of a coworker may compromise the confidentiality of information.

The employer has a legitimate interest in conducting workplace investigations in a prompt, efficient, thorough, and confidential manner. On balance, the Board found that this right outweighs the nonunionized employee’s right to the presence of a coworker during such investigations.

In H.S. Care L.L.C. d/b/a Oakwood Care Ctr. ¹⁸ ("Oakwood Care"), the N.L.R.B. held that bargaining units that combine employees who are solely employed by a user employer and employees who are jointly employed by the user employer and a supplier employer constitute multiemployer units which require the consent of both the user and the supplier employers. The Oakwood Care decision overrules the Board’s decision in M.B. Sturgis. ¹⁹

Factual and Procedural Background of Oakwood Care

Oakwood operates a long-term residential care facility in Oakdale, New York. Some of Oakwood’s employees are jointly employed by Oakwood and N&W Agency, a personnel staffing agency. Other employees are solely employed by Oakwood. The unit sought in this case consisted of both solely employed and jointly employed workers. On October 20, 2003, the Regional Director for Region 29 issued a Decision and Direction of Election, finding the petitioned-for unit appropriate. Oakwood requested a review of the Regional Director’s decision on February 11, 2004.

The Sturgis Decision

Prior to the N.L.R.B.’s decision in Sturgis, controlling precedent established that involuntary combinations of groups of employees who shared one employer in common, but also included one or more groups that had an additional joint employer not shared by the others, constituted inappropriate bargaining units. ²⁰ In Sturgis, the Board reversed prior settled precedent and held that some units combining jointly employed and solely employed workers could be properly considered to be "single employer units." The Sturgis court reasoned that such a bargaining unit was an "employer unit" because all of the employees had an employment relationship with the client employer. In Oakwood Care, the Board found that Sturgis had been "wrongly decided," and returned to prior precedent.

Legal Analysis of Oakwood Care

Section 9(b) of the N.L.R.A. authorizes the N.L.R.B. to determine appropriate units for the purposes of collective bargaining. In its decision in Oakwood Care, the Board found that of the permissible categories of "units" defined in Section 9(b) of the N.L.R.A., the broadest category is the "employer unit." The Board further reasoned that the statutory language of the N.L.R.A. does not permit the N.L.R.B. to unilaterally find that units that comprise employees of more than one employer are appropriate. Multiemployer bargaining is proper only in situations where the parties have voluntarily consented to the arrangement. In deciding Oakwood Care, the Board concluded that solely employed and jointly employed workers are essentially employed by different entities. Therefore, the inclusion of these workers in the same bargaining unit constitutes a multiemployer unit that requires a voluntary agreement in order to be found legitimate.

One of the primary problems that the Board recognized in making its determination in Oakwood Care is that the interests of the joint and sole employees were not sufficiently aligned. The Board included in its decision examples of situations in which the interests and bargaining positions of jointly employed workers and solely employed workers would conflict. In addition, the Board noted that treating such bargaining units as single "employer units" would give rise to adversarial situations between the joint employers. Because of the difficulties involved in adequately representing the interests of the jointly employed workers and the solely employed workers in a single union, the Board held that combined units of jointly employed and solely employed workers are multiemployer units that are statutorily permissible only with the consent of both the user and the supplier employers.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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