United States: D.C. Circuit Affirms NLRB's Order To Employer To Reimburse All Of Union's Bargaining Expenses As Remedy For Unfair Labor Practices

In HTH Corporation v. NLRB, the U.S. Court of Appeals for the D.C. Circuit rejected the National Labor Relations Board's attempt to expand the remedies under the National Labor Relations Act for unfair labor practices to include an award of litigation expenses (attorneys' fees and costs).  In Camelot Terrace, Inc. and Galesburg Terrace, Inc. v. NLRB, decided June 10, 2016, the court again rejected the Board's award of litigation expenses, relying on its decision in HTH Corp.  However, the court affirmed the Board's order that Camelot Terrace, Inc. and Galesburg Terrace, Inc. (the Companies) reimburse the bargaining expenses incurred by the Service Employees International Union (SEIU) as an appropriate remedial measure for having engaged in bad faith bargaining with the union, addressing the question directly for the first time.

The Companies both operate nursing homes in Illinois.  In 2007, the SEIU was certified as the exclusive representative of employees at both facilities.  During the next two years, the Companies, primarily through the conduct of their common owner, allegedly bargained with the union in bad faith.  The Board's Office of the General Counsel (OGC) got involved, leading to a settlement agreement that detailed specific bargaining requirements for the Companies.  When the Companies failed to abide by the agreement, the OGC issued a complaint charging the Companies with numerous NLRA violations.  After holding a hearing and concluding the Companies had violated the Act, the administrative law judge ordered the Companies to reimburse the Board and the union for all costs and expenses incurred in the investigation, preparation and conduct of the case before the Board and the courts.  The judge also ordered the Companies to reimburse the union for all costs incurred in collective bargaining negotiations from January 2008 to the parties' last bargaining session.

The Companies filed exceptions with the Board, challenging the imposition of these two remedies.  In a two-to-one decision, the Board held it was authorized to impose both remedies and did so.  The Board concluded the bargaining-costs remedy was a necessary exercise of its general remedial power to restore the union's previous financial strength and consequent ability to effectively carry out its responsibilities as the employees' representative.  As for the litigation-costs remedy, the Board concluded it had "inherent authority to control its own proceedings, including the authority to award litigation expenses through the application of the 'bad faith' exception to the American Rule."

In their petition to the D.C. Circuit for review, the Companies did not contest the Board's conclusions that they violated the Act.  Rather, they challenged two of the remedies the Board imposed:  (1) reimbursement of litigation costs incurred by both the Board and the union during Board proceedings; and (2) reimbursement of "all" of the negotiation expenses the union incurred during its bargaining sessions with the Companies.  The Companies asserted that the Board was without authority to impose either remedy.  Alternatively, they argued the amount of the bargaining-costs remedy ("all" of the expenses) exceeds the amount necessary to remedy the harm caused by the parties' conduct and was improperly punitive.

For the reasons discussed in HTH Corp. v. NLRB, the D.C. Circuit agreed that the Board did not have statutory or inherent authority to award litigation expenses as a remedy for an unfair labor practice.  Citing its decision in HTH as controlling, the court reiterated that the Board has no extra-statutory inherent authority.  It noted that Section 10(c) of the Act neither explicitly nor implicitly authorizes the Board to award litigation expenses.  The court denied enforcement of the litigation-costs order.

The D.C. Circuit concluded, however, that the Companies failed to adequately raise to the Board its argument regarding the extent of the award of "all" of the union's bargaining costs, and therefore the court lacked jurisdiction to entertain this argument.  Thus it turned to the one remaining question:  whether the Board ever has the authority to require a party to reimburse another's bargaining costs.  The Companies argued that bargaining costs were indistinguishable from litigation costs, both representing the price of attempting to vindicate substantive legal rights.  In contrast, the Board argued that requiring a party that has engaged in particularly egregious bad-faith bargaining to reimburse another party's bargaining costs is well within its remedial power under section 10(c) of the Act.

The D.C. Circuit agreed with the Board, noting that section 10(c) of the Act gives the Board the discretion to fashion appropriate remedies when a party has committed an unfair labor practice.  The court noted that an award of bargaining expenses remedies an unfair labor practice by ensuring that, upon resolution of the unfair labor practice charge, the injured party can return to negotiations on the same footing it occupied before the violation of the Act occurred.  The court opined that a more traditional remedy, such as a bargaining order, is of little value if one party can drain another of its resources by bargaining in bad faith and then extracting concessions as the money wanes. 

As with the decision in HTH Corp. v. NLRB, employers can take a measure of solace from the court's continued rejection of Board efforts to assess litigation expenses in unfair labor practice cases.  However, employers and practitioners are now on notice that the Board can, and likely will, assess bargaining costs in cases of egregious bad-faith bargaining.

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