United States: NLRB Settlements Can Be Tricky, Especially If You Don't Inform The Agency

The last few decisions issued by the NLRB have addressed a wide spectrum of rather unique situations. Just in the last several days we saw decisions involving a combative registered nurse and a human resources representative threatening unionization. So, perhaps, one of the Board's most recent decisions is not all that unusual....it simply involves a case where parties to an unfair labor practice proceeding sought to have the matter withdrawn two years after settlement, and after the NLRB had ruled on the merits of the case. It appears no one let the agency know the matter had been settled.

Once an unfair labor practice charge is filed, any settlement of the matter must be approved by the agency, even if it is a "non-board settlement," a private settlement agreed to by the non-agency parties. This is because unfair labor practices charges ultimately are to vindicate the public policy under the National Labor Relations Act. The agency generally evaluates the terms of the non-board settlement based on the standard of whether the agreement will "effectuate the purposes and policies of the Act" pursuant to factors set forth in its decision in Independent Stave Co., 287 NLRB 740, 741 (1987). These factors include whether the parties voluntarily entered into the agreement and whether it "substantially remedies" the unfair labor practices alleged in the complaint.

In Food Services of America, Inc., 365 NLRB No. 85 (May 26, 2017) the Board evaluated a non-board settlement made under unusual circumstances. The case concerned a matter that started in 2011 when the employer discharged two employees, boyfriend and girlfriend. The girlfriend had been fired for using an instant messaging application to assist a co-worker having a problem with a supervisor. After she was fired, the girlfriend asked her boyfriend to help develop a case against the employer. Boyfriend went above and beyond and forwarded to his girlfriend hundreds of company emails to her private account, many of which contained confidential information about employer's vendors and customers, product prices and product specifications. After employer discovered boyfriend's actions, he too was terminated. The couple filed charges alleging their terminations were unlawful. The NLRB alleged both discharges were motivated by protected activity in violation of Section 8(a)(1).

Litigation Over the Emails – 2013

While the NLRB litigation was pending, the employer sued both employees in federal court alleging violation of the Arizona Trade Secrets Act. The U.S. District Court found that both boyfriend and girlfriend had misappropriated trade secrets. A trial was scheduled over the damages.

Employer And Couple Reach Settlement – February 2014

Facing damages for the misappropriation of the trade secrets, the boyfriend and girlfriend were more inclined to reach a settlement with employer. The couple and the employer entered into a global, non-board settlement that resolved the unfair labor practice charges and the email litigation. As part of the settlement, the unfair labor practice charges were to be withdrawn. Settlement was reached three months prior to the Board issuing decision. None of the parties to the settlement informed the Board.

Board Issues Its Decision In Termination Case – May 2014

The Board, oblivious to the global non-board settlement, decided the unfair labor practice case (reported at 360 NLRB 1012). It found the girlfriend's discharge was unlawful because she was engaged in concerted protected activity when she advised a co-worker using instant messaging on how to deal with the supervisor (even though, ironically, the co-worker caused discharge by showing the instant messages to the supervisor). The Board determined, however, that the boyfriend's conduct was not protected and that his termination was unlawful.

Parties Seek Withdrawal Of Charges

A two member majority (Miscimarra and Pearce) approved the withdrawal. Although they noted their "displeasure" with the fact the charging parties and employer had not let the Board know about the settlement, they nonetheless found settlement was appropriate because:

(1) the Charging Party, the individual discriminatees, and the Respondent have all agreed to be bound by the settlement; (2) the settlement resolved not only the present unfair labor practice charges but also related state law claims by the Respondent as to which a court had previously granted summary judgment against the alleged discriminatees and had scheduled a trial to determine economic damages; (3) the General Counsel, the official charged with prosecuting claims under the Act, moves the Board to give effect to the settlement and to remand the case for approval of the Charging Party's withdrawal request [and no opposition was filed]; the risks inherent in continued litigation. . .; (5) the long passage of time since the events in question took place; (6) the absence of fraud, coercion, duress in securing the settlement; and (7) the absence of proof that Respondent has a history of violating the Act or breaching settlement agreements.

Member McFerran dissented, noting that the "General Counsel won this case . . . in important part. He now seeks to abandon it. . ." Although the majority did not outline the terms of the settlement, McFerran's dissent gives some insight that the boyfriend and girlfriend probably were not compensated nor were they offered reinstatement: "That settlement provides no remedy at all for the violations of the National Labor Relations Act that the Board found."

Takeaways

The facts of this particular case are unusual in that the boyfriend and girlfriend were facing monetary damages in a separate proceeding for their actions with respect to the email. Most non-board settlements will require some kind of remedy to the underlying unfair labor practice charges in order for the agency to approve the settlement. When attempting to settle Board litigation privately, bear in mind that in order for the Board litigation to be resolved, approval must be obtained. That is why it is a good idea to condition the settlement on approval by the Regional Director or Board because one would hate to enter into an binding agreement only to have the Board refusal approval (which happens).

Oh, and it's probably a good idea to let the Board know that you've settled the matter.

NLRB Settlements Can Be Tricky, Especially If You Don't Inform The Agency

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