United States: Top 10 Targets For Reversal

Last Updated: October 2 2017
Article by Ogletree Deakins

Most observers believe, and almost every employer hopes, that once a new majority is seated at the National Labor Relations Board (NLRB), and once a new General Counsel is confirmed, the agency will turn away from its decidedly pro-labor tilt of the last eight years. Indeed, the hope and belief goes beyond merely a more evenhanded administration of the National Labor Relations Act (NLRA) in the future. Most observers believe that the new Board majority, in particular, will actively undo much of the decisional law and policy of the Obama Board. As the Obama Board's controversial decisions and policies resurface in new cases, the new Board will accomplish this end by substantially modifying, or flat-out reversing, that recent precedent. And, they may even get a legislative assist from a Republican House and Senate that have repeatedly expressed concern over a host of NLRB decisions over the last five years.

With or without help from Capitol Hill, the newly-constituted NLRB will certainly take aim at a number of Obama-era decisions. The list of candidates for the decisional chopping block is a very long one, and no short list will capture them all. However, with that caveat in mind, here is the Advisor's "Top 10":

1. "Ambush" election rule. As we discussed at length in the inaugural issue of the Advisor, the NLRB's revised representation election rule drastically reshaped the procedures for Board-conducted representation elections, sharply curtailing the time between petition filing and election and, in the process, restricting the ability of employers to educate their employees and to effectively express their views on unionization as well as restricting their right to litigate legal disputes prior to the election. Thus far, however, the "ambush," or "quickie," election rule has withstood judicial scrutiny. In 2016, the U.S. Court of Appeals for the Fifth Circuit, in Associated Builders and Contractors of Texas, Inc. v. NLRB, upheld numerous provisions of the revised rule in a challenge brought by a number of trade associations, finding that the new rules and procedures did not exceed the scope of the Board's authority under the NLRA and did not violate the "arbitrary and capricious" standard of the Administrative Procedure Act.

The ambush rules, however, may not survive a new Board, which will now have the ability to engage in its own rulemaking aimed at eliminating the rules' more problematic provisions. If the new Board itself does not have sufficient impetus to act, Congress is certainly not shy about providing it. Thus, for example, in late June, the House Committee on Education and the Workforce advanced the Workforce Democracy and Fairness Act (H.R. 2776), which would roll back the revised representation election procedures (among other Obama Board actions), and the Employee Privacy Protection Act (H.R. 2775), which would reverse the Obama Board expansion and limit the amount of employee contact information that an employer must supply to a union when it petitions the NLRB for an election. While Congress is unlikely to take up a wholesale revision of the NLRA, it will certainly use its processes to pressure the new Board to make changes from within.

2. "Micro" bargaining units. The NLRB's 2011 Specialty Healthcare decision departed from Board precedent and gave unions the ability to organize small groups of workers within single departments or job classifications, instead of requiring the union to convince the employer's entire workforce at a given worksite to join. In allowing for "micro" bargaining units, the NLRB made it much easier for unions to win elections. Specialty Healthcare also made it much harder for employers to challenge the appropriateness of a union's gerrymandered bargaining unit. It also presented employers with the daunting prospect of having to negotiate and administer multiple "micro" collective bargaining agreements covering small pockets of workers.

Employers and business groups have consistently opposed the decision, arguing that organizers ought not to be able to cherry-pick small segments of employees to target in an organizing campaign. Unfortunately, the federal appellate courts have rejected arguments that the Specialty Healthcare standard is fatally flawed. Concluding that the Board had "clarified—rather than overhauled—its unit determination analysis," the Fifth Circuit granted enforcement of a Board order finding that a "micro" bargaining unit was appropriate and that the employer unlawfully refused to bargain. Just a month earlier, the Fourth Circuit affirmed the Board's holding as well. Several other circuits have upheld the Board in challenges to the Specialty Healthcare formulation as well. Any change in the Specialty Healthcare rubric will therefore have to come in the form of an entirely new analysis from the new Board—one that either expressly overrules or fundamentally modifies Specialty Healthcare—or through congressional action. A number of bills have been introduced in Congress to reverse Specialty Healthcare and rein in any profusion of micro- units. Our bet, however, is that the new Board acts first and accomplishes this same end by way of decision.

3. Access to employer email. In a significant setback for employer property rights, the NLRB's sharply-divided 2014 decision in Purple Communications, Inc. held that if an employer provides employee access to company email systems, it must allow those employees to use the company email system for NLRA-protected activity, such as union organizing, during nonwork time. The decision overruled the Board's Register Guard precedent, which held that employees do not have a statutory right to use their employer's email systems for NLRA-protected purposes. A divided three-member panel reaffirmed its stance in a March 2017 decision on remand. In a dissenting opinion, Philip Miscimarra, the Board's then sole Republican member, argued that Purple I was wrongly decided and that its standard was both legally incorrect and practically unworkable. He urged a return to the rule of Register Guard, which held that employers may lawfully control the uses of their email systems, provided they do not discriminate against NLRA- protected communications by distinguishing between permitted and prohibited uses along Section 7 lines. With Miscimarra now serving as Board Chair and soon sitting in the majority, he will be in a position to effectuate a return to precedent once a suitable email access case makes its way to the Board.

4. Demoting "supervisors." The question whether groups of workers are "supervisors" under Section 2(11) of the NLRA (and thus excluded from union organizing) is particularly vulnerable to political turnover at the Board, given the rather elastic statutory definition of the term. The Obama Board construed the "supervisor" exclusion quite narrowly, so that fewer individuals were supervisors and more were statutory "employees" subject to inclusion within a bargaining unit—even in cases in which those individuals appeared to meet the Board's traditional criteria for supervisory status. For example, under well- established Board precedent, an individual is a supervisor if he or she exercises or effectively recommends one or more of the indicia of supervisory status set forth in Section 2(11). However, in G4S Government Solutions, Inc., the Obama Board majority concluded that nuclear power plant security lieutenants—the highest-ranking officers on-site during nights and weekends—lacked authority to "responsibly direct" other guards, and therefore were not supervisors.

The NLRB continued to narrowly construe the definition in subsequent rulings, including Veolia Transportation Services, Inc., in which it held "road supervisors" for a van shuttle service were not supervisors. The road supervisors observe drivers, ensure they abide by the policies and procedures of the local transit authority, and prepare written reports if the drivers breach these policies. But the majority reasoned that the reports were nothing more than "counselings" and did not amount to meaningful discipline sufficient to establish supervisory status. Miscimarra dissented in Veolia and raised the critical and perhaps obvious question: If the road supervisors were not supervising the van drivers, then who was supervising them? He urged that in determining supervisory status, the Board should ask this question as a matter of policy. Miscimarra and his Republican colleagues are now in a position to implement that recommendation and may do so rather quickly since supervisory issues come before the Board constantly.

5. Students are "employees." According to the Obama NLRB, university graduate students who teach courses, grade papers, and perform other academic duties are employees, although they are clearly, first and foremost, students. In a divided 3–1 decision, The Trustees of Columbia University in the City of New York, the Board applied a new standard under which graduate and undergraduate teaching assistants who have a common- law employment relationship with their private university are employees under the Act. The majority reasoned that statutory coverage exists by virtue of an employment relationship; it is not foreclosed by the existence of some other, additional relationship that the Act does not reach— such as the primarily educational relationship between the students and the universities. Therefore, the Board majority reversed its long-standing contrary holding in Brown University. The decision unleashed a significant amount of union organizing activity at private colleges and universities. The majority view in Columbia University has been widely criticized from both a legal and policy perspective, and many have advocated for a return to the Brown University standard. A majority of Board seats will soon be filled by individuals who likely think that way as well.

6. Stripping employers' managerial control. The Obama Board has imposed additional constraints on employers' management rights—in the period before a collective bargaining agreement (CBA) has been negotiated, during the mid-term period, and following the expiration of a contract. In Total Security Management Illinois 1, LLC, the Board held that an employer must bargain with a newly-certified union before it can impose "discretionary" discipline such as a suspension, demotion, or termination—even before a CBA is in place. 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." A divided four-member NLRB held in E.I. Du Pont de Nemours that the employer violated the Act when it made unilateral changes to bargaining unit employees' benefit plans after the operative CBA expired, issuing a doctrinal edict that "discretionary unilateral changes ostensibly made pursuant to a past practice developed under an expired management rights clause are unlawful." The majority overturned several Bush- era NLRB decisions along the way and rejected the long-standing "past practice" defense. Under the ruling in DuPont de Nemours, once a contract expires, the management rights clause is no longer in effect and can no longer justify unilateral changes.

In Lincoln Lutheran of Racine, a divided five-member decision, the Board held an employer unlawfully ceased checking off union dues after a CBA had expired. The majority reasoned that, like most other terms and conditions of employment, an employer's obligation to check off union dues continues after expiration of the CBA that establishes such an arrangement. Under the Board's long-standing Bethlehem Steel rule, an employer's obligation to check off union dues ends when the CBA expires. But the majority overruled Bethlehem Steel and its progeny to the extent they stood for the notion that dues checkoff does not survive contract expiration under the "status quo" doctrine. In its place, the Board established a new rule: An employer's obligation to refrain from unilaterally changing mandatory subjects of bargaining, such as dues checkoff, applies both when a union is newly certified and the parties have yet to reach an initial agreement and when the parties' existing CBA has expired and negotiations have yet to result in a subsequent agreement. The dissenting Republican Board members noted that Lincoln Lutheran abandoned long-standing precedent and argued that the Bethlehem Steel exception was justified by both statutory and policy considerations.

The extent of, and any limits to, management rights is, perhaps, the most significant NLRB issue for unionized employers. Those employers have been on the losing end of this equation for a number of years, but expect that will change dramatically under the new Board.

7. Mining for motive. Another divided NLRB decision sharpened the focus on an employer's motive in deciding whether it violates the NLRA by permanently replacing economic strikers—and dramatically tilted the playing field in favor of unions. American Baptist Homes of the West d/b/a Piedmont Gardens threatened to open the floodgates to second-guessing an employer's reasons for retaining permanent replacement workers. If it were to stand, the decision would chill the hiring of long-term replacements and hamper employers' ability to maintain operations during an economic strike. The right to hire permanent replacements for economic strikers is well- settled; and prior to the Board's decision in American Baptist Homes, an employer's motivation for doing so was essentially "immaterial." Now, however, to lawfully exercise its right, an employer may be required to justify its legitimate business reason for hiring replacements, and its "motive" will be subject to endless second-guessing by the NLRB, which will look to isolated statements and other "evidence" of an unlawful discriminatory or retaliatory motive. Since the economic consequences of being wrong are so significant, by making the "right" to utilize permanent replacements turn on unpredictable, after-the-fact, and subjective second-guessing by the Labor Board, American Baptist has made the "right" more an illusion than a reality. The business necessity to hire permanent replacements during an economic strike is as clear as the law that extends that right to employers. A Trump Board is very likely to restore such clarity.

8. Scrutinizing work rules. One of the defining trends of the Obama NLRB was its unprecedented scrutiny of employers' handbook policies and other workplace conduct rules. In case after case, the Board found seemingly benign handbook provisions and other common employment policies to have unduly interfered with employees' protected rights—and in doing so, expanded the very notion of what constitutes protected, concerted activity under the NLRA. The foray into employee handbooks also marked an aggressive expansion of the Board's statutory mission into nonunion employer territory. We took a detailed look at Board case law in this area in the Fall 2016 issue of the Advisor and discussed the troublesome implications of these rulings for employers. Miscimarra has been a frequent dissenter in these handbook cases, and, in a lengthy dissent in William Beaumont Hospital, outlined a detailed path the Board could follow to fundamentally change the way the Board analyzes these cases. It would be surprising if he did not lead his new Republican colleagues down this path in short order.

9. Hamstringing employee discipline. The Obama NLRB oftentimes seemed almost incapable of finding that any type of employee behavior, no matter how outrageous, exceeded the bounds of statutory protection if it took place in the context of pursuing some form of concerted activity. Unfortunately, these conclusions have been treated with deference by reviewing federal courts, which have routinely upheld the Board. In DirecTV, Inc. v. NLRB, for example, the D.C. Circuit upheld the Board'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 appeals court acknowledged the tension between employees' right to engage in protected, concerted activity and an employer's reasonable expectation of loyalty from its employees; nonetheless, it affirmed the Board's findings 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" and were not intended to "unnecessarily tarnish their employer."

In Plaza Auto Center, Inc., a divided Board panel ruled that an auto salesman's outburst while engaged in otherwise- protected activity did not cost him the NLRA's protection. The salesman had been complaining regularly about the lack of breaks during "tent sales," challenging the commission structure, and engaging in other "negative stuff." In a raised voice, he called the owner a "f***ing crook" and an "a**hole" and, for good measure, added that the dealership's manager was "stupid" and that "nobody liked him." Then he stood up, pushed his chair aside, and said that if the owner fired him, he would regret it. The owner called his bluff and discharged him—in violation of the NLRA, according to the Board majority. Reapplying the four-factor Atlantic Steel test for determining when an employee's improper conduct strips the employee of the Act's protections, the majority found his activity remained protected despite the outburst.

More recently, the Second Circuit affirmed the Board's finding that a caterer unlawfully discharged an employee because he fired off comments on Facebook during his work break, disparaging his supervisor and insulting the supervisor's mother: "Bob is such a NASTY MOTHER F***ER don't know how to talk to people!!!!!! F*** his mother and his entire f***ing family!!!! What a LOSER!!!! Vote YES for the UNION!!!!!!!." While his conduct sat at the "outer-bounds of protected, union-related comments," it was not so "opprobrious" as to lose the protection of the NLRA, the appeals court concluded in NLRB v. Pier Sixty, LLC. The profane outburst came on the heels of what the employee regarded as the latest instance of management's continuing disrespect for employees, the court reasoned; moreover, it explicitly protested that mistreatment and exhorted coworkers to take action.

Noting that "impulsive behavior" by picketing employees is expected, and termination for picket-line conduct violates the NLRA unless the conduct coerces or intimidates employees from exercising their protected rights under the Act, a divided Eighth Circuit in Cooper Tire & Rubber Co. v. NLRB enforced a Board order finding that an employer unlawfully fired a locked-out picketer who yelled racist remarks at a van carrying African-American replacement workers. The employee shouted, "I smell fried chicken and watermelon," in addition to similar comments. He kept his hands in his pockets the whole time and made no overt gestures. In the absence of threats or violence, the court deemed his conduct "totally uncalled for and very unpleasant" but found it could not objectively be seen as an implied threat of the kind that would coerce or intimidate a reasonable replacement employee from working. The court majority was unswayed by the employer's concern that reinstating the employee would conflict with its Title VII obligations. Even if the comments had been made in the workplace instead of on the picket line, they would not have created a racially hostile work environment under Eighth Circuit precedent, the majority reasoned. A dissenting judge argued the decision was tantamount to requiring the employer to violate Title VII and other discrimination laws, adding: "No employer in America is or can be required to employ a racial bigot."

The new Board majority is likely to be far more sensitive to the need for greater civility in the workplace, the necessity of toning down workplace rhetoric, and the need to protect the rights of all employees. Almost everyone anticipates a less myopic and more balanced approach to the question of where the boundary for protected conduct should be drawn. Hopefully, the more balanced views of the Trump Board will receive the same deferential treatment by the courts of appeals as did the views of their predecessors.

10. Class action waivers. The Obama NLRB confounded employers in December 2012 when it issued its D.R. Horton decision, asserting the novel proposition that class action waivers in mandatory arbitration agreements interfere with employees' rights under Section 7 of the NLRA. The Board remained adamant in this stance over several years of case adjudication and, despite an early rebuke from the Fifth Circuit, the agency found support for its position in several circuits, including some employment cases in which the NLRB itself was not involved. The Supreme Court of the United States has agreed to consider the issue early in its coming term, setting oral argument for its opening week. Given the high court's consistent holdings on the supremacy of the Federal Arbitration Act, and the right to enter into agreements to individually arbitrate claims, most observers expect the justices will reject the NLRB's stance. Watch for an in-depth discussion of the class action waiver cases before the Supreme Court in the next issue of the Advisor.

"The business community is hopeful that a new NLRB will review the previous Board's dramatic policy shifts on these and other issues," said James J. Plunkett, Senior Government Relations Counsel in the Washington, D.C., office of Ogletree Deakins. However, if Congress and the courts act before a new Board does, Plunkett notes that "they could establish the contours for what the Board can or cannot do in these areas."

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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