United States: More Leverage To Labor

Last Updated: January 12 2017
Article by Brian E. Hayes

A number of National Labor Relations Board (NLRB) decisions in 2016 gave labor unions significantly more leverage in their relationships with employers. For example, the Board issued rulings that will hinder employers in exercising their long-recognized legal right to permanently replace economic strikers and that will allow unions to challenge an employer's pre-contract authority to discipline employees, its post-contract right to act unilaterally in accord with past practice, and its mid-contract right to act unilaterally. Other decisions will restrict the unilateral ability of an employer to protect its business through the use of noncompete agreements and may hamper the purchaser of a business from unilaterally altering existing working conditions under the "perfectly clear successor" doctrine. Further still, Board decisions last year will make it much more difficult for employers to effectively address problematic behavior that occurs during the exercise of employees' Section 7 rights.

Putting the thumb on the union side of the scale

Permanent replacements: mining for motive. In May 2016, a divided NLRB issued its decision in American Baptist Homes of the West dba Piedmont Gardens, a significant case affecting the right of employers to replace striking workers. An employer's right to permanently replace economic strikers has been well-settled for decades and an employer's motive in exercising its replacement rights has largely been treated as immaterial. In American Baptist, however, a Board majority has now held that an employer's motive in replacing strikers is a critical factor in determining whether such a right was lawfully exercised.

In the case itself, the employer had permanently replaced economic strikers; however, there was evidence that agents of the employer had claimed that the employer hired the permanent replacements to "teach striking employees a lesson" and/or to "prevent future strikes." The Board majority held that such statements demonstrated that the employer did not replace the workers for a legitimate business purpose, but did so in furtherance of an "independent unlawful purpose"—to retaliate against the strikers and to discourage future protected activity. The dissent in American Baptist noted that virtually every strike situation involves hard feelings and a degree of animus and, most importantly, that the phrase "independent unlawful purpose" had always been construed to mean purposes unrelated to the strike itself.

Linguistic disputes aside, the case now casts considerable uncertainty over a given employer's decision to permanently replace strikers. Now, if an employer does permanently replace economic strikers it can anticipate that its motives will be second-guessed by the NLRB, the statements of its supervisors and agents will be reviewed and analyzed for evidence of "bad motive," and it may be called upon to provide a "neutral" business justification for its replacement decision. If an employer's decision to permanently replace is ultimately found unlawful, the employer could be required to dismiss workers to whom it promised "permanent" positions and could face backpay liability under certain circumstances. By injecting the element of after-the-fact second-guessing as to an employer's subjective motive, the case is likely to chill many employers from exercising their replacement rights. This, in turn, may adversely affect an employer's ability to maintain effective operations during a strike, thus giving striking unions a significant amount of new negotiating leverage.

"Negotiating" discipline. In the wake of the Board's decision in Total Security Management Illinois 1, LLC, newly organized employers, once again, face novel bargaining obligations with respect to employee discipline. The case resurrects the bargaining obligation first articulated in Alan Richey, a 2012 case that was eventually invalidated because it was decided by a legally deficient Board quorum. Specifically, the Board majority in Total Security again held that a newly organized employer that has not yet negotiated and executed a collective-bargaining agreement with its employees' union representative, must notify and bargain with that representative whenever it intends to impose "discretionary" discipline on a bargaining unit member.

Thus, during the period when parties are negotiating an initial collective-bargaining agreement, the Board will require an employer to give the incumbent union notice and an opportunity to bargain over each and every discretionary disciplinary action it intends to take prior to the imposition of the sanction. Any form of discretionary discipline, such as a suspension, demotion or termination, that alters an employee's terms of employment triggers the interim bargaining obligation.

Although the Board decision clearly imposes the obligation, it frustratingly sheds little light on the nature, scope, and duration of the requisite interim bargaining, and likewise offers scant guidance to differentiate between "discretionary" and "mandatory" discipline. Newly unionized employers that have not negotiated a complete collective-bargaining agreement will either have to negotiate an interim disciplinary process with the incumbent union or be prepared to handle most disciplinary matters through ad hoc bargaining. Both paths afford a newly certified union with a degree of new negotiating leverage.

Noncompetes as a bargaining subject. In Minteq International, Inc., the NLRB held that an employer acted unlawfully by requiring new employees to sign a noncompetition and confidentiality agreement as a condition of employment without first giving the incumbent union notice and the opportunity to bargain over the agreement.

The Board held such agreements are a mandatory subject of bargaining and that the management rights clause in the parties' collective-bargaining agreement was not sufficiently specific to show that the union waived its right to bargain over the noncompete at issue. The Board rejected the argument that no bargaining was required because the management rights clause gave the employer the unilateral right to promulgate work rules. The noncompete, the Board reasoned, affected employees' terms and conditions of employment in ways that extended far beyond mere work rules governing employee conduct in the workplace.

The decision is significant as one of many in which the current Board rejects the notion of a bargaining waiver based on contract language and, instead, requires additional bargaining during the term of the contract. It is further significant because noncompetition/nondisclosure agreements play a significant role in protecting an employer's economic self-interest. As such, employers may be willing to make additional bargaining concessions in other areas in order to achieve agreement with respect to a noncompete agreement, thus giving unions enhanced bargaining leverage.

"Perfectly clear" successes and failures. Under the United States Supreme Court's 1972 decision in National Labor Relations Board v. Burns International Security Services, Inc., even a "successor employer" is not bound by the substantive terms of a collective-bargaining agreement negotiated by its predecessor and is ordinarily free to set initial terms and conditions of employment unilaterally. However, as the case notes, there are instances in which it is "perfectly clear" that the new employer plans to retain all of the employees in the unit, and, under such circumstances, the new employer must first bargain with the union before changing existing terms and conditions of employment. The determination of whether a successor is a "perfectly clear" one or not is obviously critical since it directly impacts the right of an employer that acquires a new business to make immediate unilateral changes to wages, hours, and working conditions. It also implicates significant liability issues in those instances where the new employer believes it is not a "perfectly clear" successor and makes such changes without first bargaining, only to find out later that its belief was incorrect.

Last year, the Board examined the "perfectly clear" successor doctrine on a number of occasions. While the cases reached differing results, they all demonstrate the often confusing, but consistently detailed, fact analysis underpinning a "perfectly clear" finding.

For example, in Paragon Systems Inc. the Board found that an employer was not a "perfectly clear" successor under Burns because it did not show an intent to retain a predecessor's security officers when it posted a job fair memo seeking to hire guards. On its face, the memo did not state that security officers who completed the application or attended the job fair would be offered employment. Because the memo did not suggest that hiring was inevitable, it was not an invitation to accept employment. Similarly, a federal contractor in Data Monitor Systems, Inc. did not become a perfectly clear successor, the Board found, because it did not promise continued employment and did not communicate in any way that filling out an employment application was simply an administrative formality that would ensure continued employment. In this instance, because the contractor's actions clearly communicated that it had not yet made its hiring decisions, it was under no obligation at that point to make a simultaneous announcement of its intent to change terms and conditions of employment in order to avoid "perfectly clear" successor status.

On the other hand, in Nexeo Solutions, LLC, the Board found an employer was a "perfectly clear" successor as of the date when bargaining unit employees were informed they would be transferred to a new business and the employer said it would provide equivalent salaries and benefits comparable in the aggregate to those provided by a predecessor. In this case, the Board held the employer was obligated to bargain with a union, and so it violated the Act when it made unilateral changes to pension and benefit plans after taking control of operations. A Board majority reached a similar result in Creative Vision Resources, LLC, where it determined that an employer was a perfectly clear successor to a group of related companies and violated Section 8(a)(5) of the National Labor Relations Act by failing to provide a union with notice or an opportunity to bargain before imposing initial terms and conditions of employment that differed from those under the predecessor's collective-bargaining agreement.

Management rights wronged. A divided four-member NLRB held in E.I. Du Pont de Nemours, Louisville Works that the employer violated the Act when it made unilateral changes to bargaining unit employees' benefit plans after the governing collective-bargaining agreement expired. The Board majority held that "discretionary unilateral changes ostensibly made pursuant to a past practice developed under an expired management rights clause are unlawful." In so holding, the majority overturned several Bush-era NLRB decisions.

DuPont argued that it was privileged to make the unilateral changes in question because doing so was consistent with past practice. And, DuPont pointed out that the Board had previously sanctioned a past practice defense to unilateral benefits changes made post-contract expiration in its 2004 Courier-Journal cases. The Board majority, however, held that the "past practice" at issue was based on changes that were implemented pursuant to the management rights clause and that the management rights clause allowing such unilateral actions effectively expired when the contract ended. The majority attempted to distinguish the Courier-Journal cases by noting that the past practice in those cases had been to make unilateral changes both during the contract period and during hiatuses between contracts. Since employers are now precluded from making post-expiration changes based on an expired management rights clause, DuPont provides unions with considerably enhanced negotiating leverage.

What more can I say? In Graymont PA, Inc., a Board majority held that an employer was not privileged to promulgate mid-term changes to its absenteeism policy in reliance on a contractual management rights clause giving it the right to establish "reasonable workplace rules and regulations." The majority concluded the management rights language was not specific enough to infer that the union "clearly and unmistakably" waived its right to bargain, midterm, over implementation of the new absenteeism policy. The decision significantly diminishes the utility of management rights provisions and raises serious questions about the degree of specificity that is required in such clauses to allow unilateral employer action. The decision virtually guarantees that more mid-term management decisions will be subject to bargaining, yet again giving unions increased leverage as employers try to effectively manage the workplace. Graymont is also the next chapter in the long-running debate over the "clear and unmistakable waiver" theory and the "contract coverage" theory of mid-term bargaining obligation. (See "Circuit court pushback" on page 11.)

Diminishing control over misconduct

In 2016, the NLRB continued to extend legal protection to problematic and disruptive employee behavior, and, in one instance, a federal appellate court affirmed the Board's view. In DirecTV, Inc. v. NLRB, for example, a divided panel of the United States Court of Appeals for the D.C. Circuit—while acknowledging the tension between employees' right to engage in protected, concerted activity and an employer's reasonable expectation of loyalty from its employees— nonetheless upheld the NLRB's conclusion that a group of television installation technicians did not lose the protection of the Act when they aired a dispute with their employer over a new pay-docking policy on the local news. The appellate court affirmed a Board decision finding that the employees' actions were not "flagrantly disloyal" or "wholly incommensurate" with their underlying grievance and that their comments to the media were not "maliciously untrue." Notably, the majority said the Board could permissibly consider the employees' intent and find that the employees had merely sought to win over viewers to their cause, not induce them to cancel their satellite service or to "unnecessarily tarnish their employer."

Hospital picketing protected. Over the years federal courts have admonished the Board that in assessing the protected nature of employee conduct in the health care setting, it must be mindful that hospital patients require a quiet and nondisruptive environment in which to heal. Nevertheless, in Capital Medical Center, a divided Board found that a hospital employer unlawfully interfered with informational picketing by off-duty employees at nonemergency entrances by threatening the employees with discipline and arrest. The Board determined that the employer did not meet its burden of showing that prohibiting the type of picketing that occurred in this case was necessary to prevent patient disturbance or disruption of health care operations. At bottom, the majority's position is that on-premises picketing by off-duty employees is protected activity absent a demonstration by the employer that the picketing was, in fact, disruptive.

In-store work stoppage. A "sit-down" strike in which employees stop working but do not leave an employer's premises has traditionally been deemed to be unprotected. However, in the instance of a modern-day "sit down" in a retail store, a divided NLRB reached the opposite result. In Wal-Mart Stores, Inc., the discount retailer was found to have unlawfully disciplined six store employees because they stopped work before and during the store's grand reopening to protest alleged mistreatment by a supervisor and to pressure the employer to give some temporary workers permanent positions. The Board majority concluded that the protest did not lose the protection of the Act since it was relatively small, brief, peaceful, and confined to the early morning opening hours.

As the line between protected and unprotected activity becomes fuzzier, unions and employee activists are often encouraged to continue to "push the envelope." The decision may thus invite more on-site protests.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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