United States: NLRB Deems Micro-Unit An Appropriate Bargaining Unit In Retail Industry

The National Labor Relations Board (the "Board" or NLRB) recently issued a pair of decisions applying its Specialty Healthcare test to determine if petitioned-for units in two large department stores were appropriate for bargaining purposes. The Board reached different outcomes in these cases, relying heavily on how the employers organized their employees for administrative purposes.

The Board ruled on July 22, 2014, that a unit sought by the union—comprising only cosmetics and fragrances employees at a Macy's store—was an appropriate unit despite the retailer's contention that the group was too narrow, and despite the decades-long presumption that the only appropriate unit in retail department store settings is a wall-to-wall unit.

The Board stated that its decision in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB No. 83 (2011), enfd. sub nom. Kindred Nursing Centers East, LLC v. NLRB, 727 F.3d 552 (6th Cir. 2013), applies in cases like this one, in which the union contends that a segment of what could be a larger unit is an appropriate bargaining unit and the employer contends that the unit must include additional employees beyond those in the petitioned-for unit.

The Board explained in Specialty Healthcare that when a union seeks to represent a unit of employees "who are readily identifiable as a group (based on job classifications, departments, functions, work locations, skills, or similar factors), and the Board finds that the employees in the group share a community of interest [], the Board will find the petitioned-for unit to be an appropriate unit ... ." 357 NLRB No. 83, supra, slip op. at 12. If the petitioned-for unit satisfies that standard, the burden is on the employer who seeks a larger unit to demonstrate that the additional employees it seeks to include share an "overwhelming" community of interest with the petitioned-for employees, such that there "is no legitimate basis upon which to exclude certain employees from" the larger unit because the traditional community of interest factors "overlap almost completely." Id. slip op. at 11–13, fn.

Applying the principles of Specialty Healthcare to Macy's, the Board concluded that the cosmetics and fragrances employees were a readily identifiable group who shared a community of interest. Further, the Board emphasized that the unit sought by the union conformed to the departmental lines established by Macy's, comprising all of the sales employees in the cosmetics and fragrances department. The Board further concluded that Macy's had not met its burden of demonstrating that other employees it sought to include in the unit shared an "overwhelming community of interest" with the cosmetics and fragrances employees so as to require their inclusion in the unit.

In so holding, the Board effectively opened the way for multiple "micro-units" within a single workforce.

Macy's

Macy's had maintained that the cosmetics and fragrances employees were not "readily identifiable as a group" and did not share a community of interest. Instead, Macy's contended that the smallest appropriate unit must include all employees at the store (i.e., a "wall-to-wall unit") or, alternatively, all selling employees at the store. Macy's further maintained that by deviating from the wall-to-wall presumption, the Board would essentially be allowing the extent of organization to control, in violation of Section 9(c)(5) of the National Labor Relations Act.

Macy's also contended that the Board should overrule Specialty Healthcare, or at least refrain from applying it to the retail industry.

Majority:

In concluding that the petitioned-for unit was an appropriate unit, the majority found that: (1) the cosmetics and fragrances employees were a readily identifiable group and shared a community of interest; (2) other employees did not share an overwhelming community of interest with the cosmetics and fragrances employees; and (3) Board precedent concerning the retail industry did not require a wall-to-wall unit.

Concerning the first and second factors, the Board noted the absence of regular contact between the cosmetics and fragrances employees and other employees, and it highlighted the fact that the cosmetics and fragrances employees worked in the same department and had common supervision. The Board further concluded that there were "clear distinctions between the petitioned-for employees and other selling employees."

Regarding the third factor, the Board maintained that its precedent regarding retail department stores has evolved away from any presumptions favoring wall-to-wall units. The Board stated that as long as the petitioned-for unit is appropriate, "it is not significant that in other cases, based on different facts, the Board has previously approved units of all selling or nonselling employees, or that other less-than-storewide units have involved groups of employees not involved in selling merchandise."

Dissent:

Board member Philip Miscimarra dissented, stating that the petitioned-for unit "is not appropriate under any standard," and that "this case illustrates the frailties associated with the Specialty Healthcare standard regarding what constitutes an appropriate bargaining unit." Miscimarra further stated that he would refrain from applying Specialty Healthcare in this or any other case.

Bergdorf Goodman

In the second case involving the application of the Board's Specialty Healthcare decision, the Board ruled on July 28, 2014, in favor of The Neiman Marcus Group, Inc., which operates Bergdorf Goodman, and concluded that a unit comprising all Salon and Contemporary shoes employees at the retailer's Manhattan store was inappropriate because the petitioned-for employees did not have a community of interest.

Bergdorf made the same arguments as Macy's, namely that the petitioned-for unit was inappropriate under established law, and that the petitioned-for employees shared an overwhelming community of interest with other selling employees. Bergdorf contended that an appropriate unit must include, at a minimum, all selling employees, including not only all sales associates, but also personal shoppers and sales assistants.

Unlike the situation present at Macy's, however, the Board found that the petitioned-for unit did "not resemble any administrative or operational lines drawn by the Employer." The Board explained that, although the Salon shoes employees constituted the whole of their department, the petition sought to "carve out" the Contemporary shoes employees out of a second department, Contemporary Sportswear, excluding other sales associates in that department. Also, unlike the cosmetics and fragrances employees at Macy's, the Salon and Contemporary shoes employees at Bergdorf were located on different floors, and did not have interchange, contact and common supervision.

What This Means for Employers

Both Specialty Healthcare and Macy's allow unions to control the composition of a bargaining unit and permit multiple smaller bargaining units, drawn along such distinct groupings as department, job classification, work location and perhaps even particular shifts.

The Bergdorf decision demonstrated that there are some limits to how far the Board will go in endorsing a union's petitioned-for unit and that the Board will not allow a union to cobble together two departments that are not interrelated out of an entire retail store based on a union's extent of organizing. The decision appears to indicate, however, that had the union sought to include only the Salon shoes employees in the unit, the Board would have approved the petition.

On a practical level, multiple bargaining units within an organization will likely lead to increased labor disputes, work interruptions, competitive and nearly constant bargaining, risk of strikes and so on. Macy's, for example, which has 11 primary sales departments (comprising juniors, ready-to-wear, women's shoes, handbags, furniture, home, men's clothing, bridal, fine jewelry, fashion jewelry, and cosmetics and fragrances), could be compelled to bargain with 11 different unions and be subject to 11 different collective bargaining agreements.

The same situation could apply to all other industries.

In light of the above, employers should consider revisiting their union-free strategies and reviewing their organizational structures to increase the chances that the Board would find that a larger unit shares "an overwhelming community of interest" with a smaller, petitioned-for unit.

Below are some steps for employers to consider:

  • examine the organization to determine which job classifications or departments share skill levels so that they can be combined to make broader identifiable groupings,
  • flatten the management organization so that more employees report to the same managers,
  • develop compensation plans or productivity measurements that cover the larger groupings,
  • cross-train employees in the putative larger unit so that they can move easily across traditional job classifications/departments,
  • permit and facilitate the ability of employees to transfer among departments and
  • establish compensation grids and promotional opportunities that are common for all employees in the larger unit.

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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