By: Kyllan B. Kershaw, Esq.

Seyfarth Synopsis: This weekend Kentucky became the 27th state to pass right-to-work legislation, eliminating the right of unions to collect compelled-dues payments and providing a significant boost to employers hoping to operate union-free.

On Saturday, January 7th, Kentucky’s Governor signed Kentucky House Bill 1 into law, making Kentucky the 27th state in the country to adopt right-to-work legislation and the last state in the South to pass such a law. The new legislation is effective immediately but carves out an exemption for existing collective bargaining agreements.

The law bars making union membership a condition of employment and allows workers in union shops to opt out of paying union dues without fear of losing their jobs. The law also prohibits public employees from going out on strike.

Kentucky House Bill 1 was introduced on January 3 and fast-tracked by Kentucky House Republican leaders, passing by a vote of 58-39 on January 5th and pushed through the full State Senate in a special Saturday session on January 7th. A major factor motivating Kentucky Republicans who introduced the law is that Kentucky’s unemployment figures lag behind those of neighboring right-to-work states such as Indiana and Wisconsin. Likewise, while Kentucky’s overall union membership rates remain on par with the U.S. average, private-sector union membership rates in Kentucky are slightly above the national average. For example, in 2016, 11 percent of employees in Kentucky belonged to a union (right around the national average of 11.1%), while Kentucky’s private-sector employee membership rates hovered slightly above 8 percent, higher than the national average of 6.7 percent.

Overall, right-to-work states are considered more favorable to employers. Specifically, employers in non-right-to-work states experience a higher density of unionization and increased organizing efforts. Likewise, employers in non-right-to-work states often experience greater employment costs associated with doing business. For example, employers in non-right-to-work states: (a) generally pay higher wage rates and benefits to employees, regardless of the employer’s union status; and (b) are subject to increased government regulation of employment, including pro-employee laws and onerous regulations, as unions in these states often possess greater political capital and have additional lobbying capabilities as a result of compelled-dues payments.

Kentucky House Bill 1 follows the 6th Circuit’s recent affirmation of the rights of Kentucky counties to pass right-to-work legislation based on Kentucky’s home-rule powers. See UAW v. Hardin Cty., Docket No. 16-5246 (6th Cir. Nov. 18, 2016). Not surprisingly, Kentucky House Bill 1 restricts the right of local governments to enforce an ordinance contrary to the provisions of the new state law.

Kentucky’s right-to-work legislation comes as Republicans control the state government in Kentucky for the first time in nearly a century. States such as Missouri and Iowa may follow Kentucky’s lead, where Democrats suffered losses in November and state lawmakers have expressed interest in pursuing such laws and creating more employer-friendly climates.

Gavel

By: Ronald J. Kramer, Esq.

Seyfarth Synopsis: Seventh Circuit  finds employer still obligated to contribute to benefit funds for the life of the CBA even though the employees decertified the union.

Employers often assume that when their employees decertify a union, that any obligations an employer had under the operative collective bargaining agreement would disappear. No union, no contract.  Right?

Wrong! In Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Case Nos. 15-2628, -3221, -3861, 16-1870 (7th Cir. Dec. 20, 2016), employees in three separate IUOE bargaining units of the Company voted to decertify in 2013.  At the time, the Union and the Company were party to five year collective bargaining agreements expiring in 2015.  The Company assumed the decertification of the Union, which allowed it to set its own terms and conditions of employment, and ended any contractual obligation to contribute to the multiemployer welfare and pension funds (“Funds”).

The Funds sued, and after they were successful in district court the Company appealed. The Seventh Circuit recognized that the collective bargaining agreements were unenforceable as to the Union, but found nevertheless that the Funds had the right under ERISA to bring a suit for delinquent contributions under 29 U.S.C. § 1145.  The Court based its decision on the idea that when the Funds promised to provide a level of benefits to the employees (presumably by allowing the employer to participate in the Funds under the terms of the CBAs), that created a binding contractual promise.  The Court also recognized that the Funds were third-party beneficiaries to the CBAs and thus entitled to enforce them even if the Union could no longer do so.  “[S]o far as benefit law is concerned the employees were still working ‘under the terms of’ the collective bargaining agreement.”

The Seventh Circuit is not alone in finding that an employer’s contractual obligations to participate in multiemployer funds can survive decertification, withdrawals of recognition, and disclaimers of interest. But there is a competing view.  The Ninth Circuit has recognized that when a bargaining unit ceases to exist, be it by decertification or contract repudiation given the existence of a one person bargaining unit, any existing contract becomes void, not voidable, ending the employer’s obligation to contribute to employee benefit plans. Laborers Health & Welfare Trust Fund v. Westlake Development, 53 F.3d 979 (9th Cir. 1995) (contract repudiation); Sheet Metal Workers’ Int’l Ass’n v. West Coast Sheet Metal Co., 954 F.2d 1506 (9th Cir. 1992) (decertification case were the court held “that the renewal contract became void prospectively as of the decertification of the Union”).  Notably, the Seventh Circuit did not address the Circuit split.

Employers lucky enough to have employees decertify prior to contract expiration cannot assume their obligations to the funds necessarily end. Consult counsel before making any rash moves you may live to regret.

NLRB By: Ashley K. Laken, Esq.

Seyfarth Synopsis: NLRB rules that the operators of the Detroit Masonic Temple unlawfully refused to bargain with a union that represented various engineers and maintenance workers at the temple, even though none of the remaining members of the bargaining unit were union members.

NLRB Chairman Pearce and Members Miscimarra and McFerran unanimously ruled that the Masonic Temple Association of Detroit and 450 Temple, Inc. violated the National Labor Relations Act by refusing to bargain with Local 324 of the International Union of Operating Engineers for a successor collective bargaining agreement. Masonic Temple Association of Detroit, 364 NLRB No. 150 (Nov. 29, 2016).

Facts

The Union had represented employees at the temple since approximately 1968. The most recent collective bargaining agreement covering the temple expired in early 2010, and the Association began operating the temple shortly thereafter.  At the time, there were approximately ten members in the bargaining unit, two of whom were dues-paying Union members.  In mid-December 2010, the Union sent the Association a written request to bargain over a new CBA.  The Association did not respond, and in January 2011, the Union filed an unfair labor practice charge against the Association for refusing to bargain in good faith.  The parties entered into a settlement agreement, with the Association agreeing to recognize the Union and bargain in good faith as a successor employer, and they met approximately once per month between January 2011 and May 2011.

After the last negotiation session in May 2011, the Union was told that a new unnamed entity would take over management of the temple and that the Union should wait until the changeover to negotiate a CBA with that entity. In the fall of 2011, the Detroit Masonic Temple Theater Company took over management of the Temple, and the Union held one negotiation session with that entity in January 2012.  The Association and the Theater Company ended their relationship in November 2012, and shortly thereafter, 450 Temple Inc. took over management of the temple.

From late 2012 until January 2015, the Union made multiple attempts to restart negotiation discussions, but in January 2015, the President of the Association and 450 allegedly told the Union that because Michigan had become a right-to-work state and there were no longer any Union members working for the temple, he did not feel it necessary to and would not bargain with the Union. In response, the Union filed the unfair labor practice charge at issue in this case.

Board’s Decision

An administrative law judge found that the Association and 450 were a single employer, in part because the Association had 100% ownership of 450 and they operated out of the same office, and no exceptions were filed in response to that ruling. Thus, the Board’s decision did not address this issue.

Regarding the merits of the charge, the Association and 450 argued that they did not violate the Act because the Union was not the exclusive representative of a majority of employees in the bargaining unit, pointing to the fact that none of the employees in the bargaining unit were Union members. The Administrative Law Judge (and the Board) disagreed, observing that an employer may rebut the continuing presumption of an incumbent union’s majority status and unilaterally withdraw recognition only on a showing that the union has in fact lost the support of a majority of the employees in the bargaining unit, and that bargaining unit employees’ union membership status is not determinative of the employer’s obligation to bargain.  In other words, evidence of a desire to withdraw from membership in the union is insufficient proof that the union has in fact lost the support of a majority of the unit.

The Board found that there was no evidence of any action taken by the bargaining unit employees to express their lack of support for the Union, such as a petition to decertify the Union or statements by the employees that they no longer wanted to be represented by the Union. The Board ordered the Association and 450 to bargain with the Union on request and to post a notice to employees.

Employer Takeaway

The decision highlights the fact that there is a distinction between an employee’s desire to be a member of a union and his or her desire to be represented by a union.  Even if the majority of employees in a bargaining unit are not union members, that does not necessarily mean the union has lost its majority support.  Employers that have questions about the status of an incumbent union’s support should connect with their labor attorney to ensure they do not engage in conduct that would run afoul of the Act.

By: Ronald J. Kramer, Esq.

Seyfarth Synopsis:  In Weavexx, LLC the Board deferred to an arbitrator’s finding that the employer had the right to change its payday and pay cycle without first bargaining.  The bigger question is how much longer will such charges be deferred pending arbitration, and the extent to which the Board will defer to an arbitrator’s award.

The Board in a 2-1 decision reversed an ALJ and deferred to an arbitrator’s finding that an employer did not violate its collective bargaining agreement by unilaterally changing its employees’ payday and pay cycle.  Weavexx, LLC, 364 NLRB No. 141 (Nov. 2, 2016) (here).  In Weavexx the employer argued that its management rights clause gave it the ability to make the unilateral changes, and the arbitrator ultimately found that the “Company’s use of managerial discretion was proper and should not be seen as a violation of a binding past practice.”

So how did this “bread and butter” contract case get to the Board?  The arbitrator apparently did a very poor job of making it clear that he applied the contract to find the employer had the right to make the change.  The arbitrator framed the arbitration issue as whether the employer’s change violated a binding past practice.  While the arbitrator set forth the employer’s contract argument, and listed the management rights provision as one of the contract sections at issue, apparently in his analysis the arbitrator really only expressly addressed an employer’s “noncontractual inherent management prerogatives” and past practice instead of addressing how the management rights clause authorized the employer’s actions.

This, along with some confusion as to whether the arbitrator addressed both the pay cycle and payday change, was enough for the Regional Director and the ALJ to determine that deferral was not warranted under Speilberg Mfg. and Olin Corp. because the evidence failed to reflect that facts relevant to resolving the ULP were presented, considered or decided by the arbitrator.  Dissenting Chairman Pearce agreed, and focused more on arbitrator’s failure “to make any finding whatsoever” on the key issue of whether the management rights clause or other contract language authorized the employer’s unilateral actions.  The Board majority worked around the arbitrator’s failing by finding that there was enough evidence within the decision to determine that he did rely upon the management rights clause, and that the arbitrator adequately considered the ULP given that the contractual issue and evidence were factually parallel to the ULP.

There are three takeaways from this decision.  First, in any arbitration involving a deferred charge it is important to argue, address and get the arbitrator to rule on the issues and contract language, such as the management rights clause, at issue in the ULP.  Common law reserved management rights claims will not cut it.  Second, while in this case there was no agreed issue and the arbitrator just worked from the union’s position, how the issue is crafted is important.  Third, note the Regional Director, an ALJ and the Board Chairman opposed deferring to the award.  The Board and its Regions are scrutinizing deferral over contract disputes much more closely than in the past.  Not only will this make deferral more difficult, at some point the Board may opt to revise its deferral standards similar to what it did for deferring Section 8(a)(3) matters in Babcock & Wilcox Construction Co., 361 NLRB No. 132 (2014).  Deferral may be an endangered species.

 

By: Paul Galligan, Esq. & Samuel Sverdlov, Esq.

Seyfarth Synopsis: By filing a complaint against Postmates, Inc. challenging their arbitration waiver, the NLRB assumed that couriers for Postmates are employees, rather than independent contractors.

Earlier this month, the National Labor Relations Board (“NLRB”) filed a complaint and notice of hearing against Postmates, Inc. (“Postmates”) (12-CA-163079), an on-demand company, similar to Uber, that has a network of couriers delivering goods.  The complaint alleges that Postmates violated the National Labor Relations Act (“NLRA”) by requiring employee drivers to enter into arbitration agreements as a term of employment.  The complaint further alleges that Postmates interfered with the Section 7 rights of Customer Services Associates (“CSA”) by prohibiting them from discussing terms and conditions of employment.

Although the substance of the NLRB’s allegations – the challenged arbitration agreement – is interesting in and of itself (to read more on our extensive coverage of this issue, please see our articles here, here, here, here, and here), the critical importance of the NLRB’s complaint is far more subtle.

While the NLRB has made clear that misclassification of independent contractors could result in an unfair labor practice (“ULP”) (to read more on this issue, please see our articles here and here), in this case the NLRB simply assumed that Postmates’s couriers are employees, rather than independent contractors, without holding a hearing or allowing any briefing on the issue.  This is significant because the NLRB does not have jurisdiction to file complaints on behalf of independent contractors.

Outlook

The Postmates complaint should put employers in the on-demand economy (and generally, employers utilizing independent contractors) on notice that the NLRB will likely gloss over the employer’s characterization of independent contractor status, and file a ULP when it believes that workers are “employees” under the NLRA, and that a violation of the NLRA has occurred.

Accordingly, employers in the on-demand economy should: (1) make sure that their classification of couriers as independent contractors is consistent with the law; and (2) avoid having overly-broad or vaguely defined employment policies that could be interpreted to infringe on the Section 7 rights of potential employees. This “belt and suspenders” approach could help on-demand companies avoid lengthy and costly battles at the NLRB.

 

By: Michael Rybicki, Esq.

Seyfarth Summary: The relevance of the National Labor Relations Act to industries and business sectors that have not traditionally had to deal with its implications – such as hedge funds.

The New York Times recently ran on the front page of its business section a lengthy article discussing the National Labor Relation’s Board challenge to a number of provisions of an employment agreement that Bridgewater Associates, the world’s biggest hedge fund firm, requires each full-time employee to sign. Under the headline Confronting Wall Street’s Secretive Culture – N.L.R.B. Challenges Confidentiality Clauses, the article notes that the Board is challenging Bridgewater’s confidentiality, non-disparagement, and arbitration clauses and went on to state “[t]he unusual action is calling into question longstanding practices and prompting some companies to re-examine their employment agreements.”

With all deference to The Times, however, for a number of years the Board has been finding confidentiality provisions (see e.g., Target Corporation, 359 NLRB No. 103 (2013)) and non-disparagement clauses (see Dish Network Corporation, 359 NLRB No. 108 (2013)) unlawful and has steadfastly maintained, despite much criticism from the courts, that clauses restricting employees to arbitrating disputes are unlawful (D. R. Horton, Inc., 357 NLRB 184 (2012)). If anything is “unusual” – if unsurprising – it is that the Board is going after a hedge fund.

Although many employers (and some of their attorneys) think that the application of the National Labor Relations Act is limited to union-represented employees or at least limited to union or union-related activities, such as collective bargaining, union organizing, or union strikes, hand billing, picketing, or boycotts, the Act’s coverage is much broader. As the Board’s website notes:

  • The NLRA applies to most private sector employers, including manufacturers, retailers, private universities, and health care facilities.
  • Employees at union and non-union workplaces have the right to help each other by sharing information, signing petitions and seeking to improve wages and working conditions in a variety of ways.See NLRB Website: FAQ’s.

The Complaint against Bridgewater (Case Number: 01-CA-169426 (06/30/2016)) is not the first one in the financial sector. For example, as Seyfarth Attorney Ashley Laken noted, the D.C. Circuit recently upheld the Board’s finding that the confidentiality and non-disparagement provisions of Quicken Loan’s employment agreements (see our earlier blog post here) violated the Act.

Confidentiality agreements, for example, can be drafted to lawfully prohibit the disclosure of a wide variety of confidential information, see e.g., GC MEMORANDUM OM 12-31, Case 7 (pp. 17-18) (a rule by a drugstore chain prohibiting the disclosure of confidential information lawful where the rule was clearly in the context of not disclosing personal health information); see also GC MEMORANDUM OM 12-59, p. 20 [Walmart, Case 11-CA-067171] (finding lawful a rule requiring employees to maintain the confidentiality of the employer’s trade secret and confidential information where rule was sufficiently contextualized by examples of prohibited disclosures (i.e., information regarding the development of systems, processes, products, know-how and technology, internal reports, policies, procedures or other internal business-related communications) for employees to understand that it does not reach protected communications about working conditions).

It seems reasonably clear, however, that too often the implications of the NLRA for industries and sectors that have not traditionally had to deal with issues arising under the Act are not considered. Further, even where they are at least considered, frequently all that is done is to include a so-called “savings clause,” stating in effect that nothing contained in an employment agreement, handbook, or work rule, shall be construed as restricting activity protected by the National Labor Relations Act. The Board, however, routinely finds such clauses ineffective. Chipotle Services LLC d/b/a Chipotle Mexican Grill, 364 NLRB No. 72 (2016); see also ISS Facility Services, Inc., 363 NLRB No. 160 (2016).

As noted, the National Labor Relations Act applies to most private sector employers, including industries and business sectors that have not traditionally had to deal with issues arising under its provisions. However, because it provides for only compensatory damages and generally does not offer the opportunity for attorney’s fees, it has generally been ignored by the Plaintiff’s Bar. But in today’s digital age, where employees can readily become aware of the Act’s scope via social media and online content providers, the Act’s implications need to be considered by almost all private sector employers when drafting employment agreements, handbooks, and work rules –  areas into which the Board clearly is looking to expand its effective reach.

By: Jade M. Gilstrap

In the midst of what appears to be a proliferation of “micro-units,” on Tuesday, October 18, 2016, the NLRB declined to reconsider its decision to certify a unit of 14 service technicians employed by the Buena Park Honda dealership in Buena Park, California. Sonic-Buena Park H, Inc. d/b/a Buena Park Honda, 21-RC-178527.  In doing so, the Board rejected the employer’s argument that additional employees, particularly lube technicians, should be included in the unit, finding the two types of workers did not share “an overwhelming community interest,” necessitating their inclusion in the same unit.

Relying heavily on Specialty Healthcare & Rehab. Center of Mobile, 357 NLRB 934, 938 (2011), enfd. 727 F.3d 552 (6th Cir. 2013), the majority of the three-member board ruled that the petitioned-for unit of service technicians was appropriate based on an application of the “overwhelming community-of-interest” standard.  As articulated in Specialty Healthcare:

When employees or a labor organization petition for an election in 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 after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit, despite a contention that employees in the unit could be placed in a larger unit which would also be appropriate or even more appropriate, unless the party so contending demonstrates that employees in the larger unit share an overwhelming community of interest with those in the petitioned-for unit.

Because the facts clearly did not establish that the lube technicians shared an “overwhelming community of interest” with the service technicians, the dealership could not meet this burden. The Board noted that unlike the lube technicians, the service technicians were more skilled, paid substantially higher wages, and required to routinely update and maintain their training and skills, making them “clearly identifiable and functionally distinct.”  Accordingly, the Board held, “[i]n denying review, we find that petitioned-for employees are an appropriate unit and the Employer has not sustained its burden of establishing that any of the disputed classifications, either individually or collectively, share an overwhelming community of interest with the petitioned-for employees such that their inclusion in the unit is required.”

Although board member Philip A. Miscimarra agreed that “the interests of the service technicians [were] sufficiently distinct from the excluded employees and otherwise appropriate for inclusion in a separate unit,” he disagreed with the application of Specialty Healthcare and the “overwhelming community of interest” standard to evaluate whether the petitioned-for unit should be required to include additional employees.  Instead, Member Miscimarra argued that the Board should have applied its traditional principles, believing “bargaining unit determinations should be circumscribed and guided by industry-specific standards where applicable.”

By: Bryan Bienias, Esq.

Seyfarth Synopsis: The Office of the General Counsel for the NLRB has asked the Board to adopt a sweeping new test that will significantly broaden the protections granted to employees who engage in frequent, short-term strikes during the same labor dispute. 

In a purported effort to update existing law to meet the realities of modern labor disputes, the Office of the General Counsel for the National Labor Relations Board last week announced that it will ask the Board to adopt a new test for determining whether intermittent and partial strikes are protected under the National Labor Relations Act. The GC distributed to all regional directors and officers a 15-page model brief to be inserted into filings before the Board and ALJs laying out its new test and also urges the Board to distinguish between “partial” and “intermittent” strikes (as the terms have be used interchangeably over the years).

Under the new test, the Act would explicitly protect employees who engage in multiple short-term strikes, particularly those addressing the same labor dispute, where: “(1) they involve a complete cessation of work, and are not so brief and frequent that they are tantamount to work slowdowns; (2) they are not designed to impose permanent conditions of work, but rather are designed to exert economic pressure; and (3) the employer is made aware of the employees’ purpose in striking.” Under current Board law, workers who strike multiple times, especially in the same labor dispute, can lose the Act’s protections and face discipline or termination.

Citing the need for certainty in the face of the increasing use of intermittent strikes by non-union workforces, as well as employers’ increasing use of temporary employees, the GC’s proposed test significantly broadens the protections granted to employees who engage in intermittent and partial strikes, while providing little guidance for employers as to how existing methods for addressing strike activity could reasonably combat the disruptions and uncertainty caused by frequent, short-term strikes.

The GC notes its test “recognizes that there is a point at which intermittent strikes are so frequent and brief that they enable employees to effectively reap the benefits of a strike without assuming the attendant risks,” citing examples of a ten-minute strike every thirty minutes, or an hourly work stoppage once employees reach daily production quotas. Beyond these extreme examples, however, the GC provides little in the way of practical limitations as to how frequently employers may strike during the same labor dispute before losing the Act’s protections.  Is a 45-minute strike every day protected?  A two-day strike every week?  As of now, it’s anybody’s guess.

The GC also claims that employers are “not helpless in the face of such strikes,” having traditional strategies of permanent replacement, lockouts, subcontracting, etc. at their disposal. But the question remains how practical or effective such traditional strategies would be in the face of frequent, short-term strikes multiple times per week or per month.

While we do not know whether the Board will ultimately adopt the GC’s proposed test, employers can expect to see these arguments raised in future NLRB proceedings. In the meantime, employers should consult with counsel regarding lawful strategies for minimizing risk and potential disruptions caused by employees’ and unions’ increasing use of intermittent or partial strikes during labor disputes.

Coffin  By: Monica A. Rodriguez, Esq.

Seyfarth Synopsis: New York district court judge in Krupinski v. Laborers Eastern Region Org. Fund, No. 15-cv-00982 (S.D.N.Y. Sept. 30, 2016), grants union’s summary judgment dismissing former union organizer’s FLSA claims.  

Former union organizer of LEROF, a non-profit organization associated with the Laborers International Union of North America (“LIUNA”) sued the Union for unpaid wages under the FLSA.

Did the Union properly classify the union organizer as exempt? This was the question at issue before the court. Both the Union’s summary judgment motion and Plaintiff’s partial summary judgment motion focused on the answer to this question. The court agreed with the Union that the Union organizer’s job duties were duties of an exempt employee.

The court first reviewed Plaintiff’s primary duties. As an organizer, Plaintiff’s primary objective was to motivate, educate, and train construction workers and to convince non-union workers to join LIUNA. Plaintiff frequently worked off-site to participate in “rat and casket” actions. According to the organizer, these actions, or demonstrations, were organized to protest poor working conditions at non-unionized worksites and used inflatable rats and coffins as props.

Plaintiff argued that the physical labor in setting up the inflatable rats, constantly adjusting and maintaining the rats, and carrying and unloading the caskets rendered his duties mostly manual in nature. The court rejected his argument noting that the physical tasks were merely incidental to the primary, non-manual duty of organizing workers.

The court also found that the undisputed facts showed that plaintiff’s primary duties were to increase LIUNA’s membership and market share. Organizers were essentially the face of LIUNA to the public and non-unionized workers. The court noted that his duties, thus, mirrored several duties listed in the Secretary of Labor’s regulation as examples of exempt type of work.

The court also analyzed Plaintiff’s discretion and independent judgment on matters of significance. Plaintiff identified target workers and potential candidates for house calls during union campaigns, searched for and reported potential health code violations at non-union job sites, and varied his approach during organizing campaigns depending on the situation. The court found that Plaintiff undoubtedly exercised discretion and independent judgment when engaging in this work. Moreover, because labor union organizing campaigns are of significance to the Union, the court noted, Plaintiff’s role in these campaigns was important for determining his status as an exempt employee.

The court concluded that the Union successfully showed that its former organizer was an exempt administrative employee. As a result, the court granted the Union’s summary judgment motion burying the union organizer’s FLSA claims six feet under.

DisciplineBy: Ronald J. Kramer, Esq. & Kaitlyn F. Whiteside, Esq.

Seyfarth Synopsis: The Board reaffirmed, prospectively, the Alan Ritchey doctrine requiring employers to bargain over discretionary discipline issued to newly organized employees pre-first contract and mandated prospective make-whole relief including reinstatement and back pay for future violations.

The Board in Total Security Management Illinois 1, LLC, 364 NLRB No. 106 (Aug. 26, 2016) reaffirmed its prior decision in Alan Ritchey Inc., 359 NLRB No. 40 (Dec. 14, 2012), requiring employers to bargain over discretionary discipline issued to newly organized employees prior to the execution of a first contract or a separate side letter addressing discipline. Alan Ritchey was previously invalidated by the Supreme Court’s decision in NLRB v. Noel Canning.

Considering the issue de novo, the three-member majority led by Chairman Pearce, who also served as Chairman when Alan Ritchey was issued, reiterated that employers must provide notice and an opportunity to bargain to the union before imposing discipline (with limited exceptions for minor discipline and exigent circumstances).  We previously covered the obligations under Alan Ritchey here.

The majority emphasized the importance of protecting employees’ rights during the pre-first contract phase of the bargaining relationship. Allowing the employer to exercise discretion in imposing discipline during this time would, according to the majority, “demonstrate to employees that the Act and the Board’s processes implementing it are ineffectual, and would render the union…impotent.” Total Security, 364 NLRB No. 106, slip op. at 10.

The Board found that the discharges in Total Security met the standard established in Alan Ritchey for pre-imposition bargaining and that no such bargaining took place.  The Board declined, however, to order retroactive enforcement of its decision, holding that such enforcement would constitute manifest injustice. Id. at 12.

The majority in Total Security also set forth, for the first time, the remedies available for future Alan Ritchey violations.  In addition to standard remedial relief, i.e. cease-and-desist orders, a requirement to bargain, and notice-posting, the Board opined that make-whole remedial relief, including reinstatement and back pay, would also be appropriate. Id.  Where post-violation the parties did bargain and later reached agreement on discipline, the majority indicated the back pay remedy generally would run from the date of unilateral discipline until the date of the agreement to the extent the agreement did not provide for such back pay.  An agreement providing less than full lost back pay and purporting to settle the pre-discipline bargaining violation would be subject to review under the Board’s standards for non-Board settlement agreements if challenged.  In the event the parties, post-violation, bargained in good faith to impasse over the discipline, back pay would run until the date of impasse. Id. at 13.

Such make-whole relief would, however, be subject to an employer’s affirmative defense that the discipline was “for cause” under the Act. The majority’s new “for cause” defense places the burden on the employer, during the compliance phase of the case, to show “(1) the employee engaged in misconduct, and (2) the misconduct was the reason for the suspension or discharge.” Id. at 15.

The burden of proof then shifts to the General Counsel and the charging party to challenge the employer’s showing by demonstrating, for example, disparate discipline for the same behavior or other reasons for leniency. The employer may rebut such evidence by proving that the employee would have received the same discipline regardless.  The ultimate burden of persuasion remains, at all times, with the employer.

In a 25 page dissent longer than the decision itself, Member Miscimarra asserted the majority took a “wrecking ball to eight decades of NLRA case law.” He not only addressed how the majority erred in reaffirming Alan Ritchey, but he also criticized the majority’s creation of the affirmative defense.  Member Miscimarra argued that Section 10(c) of the Act requires the General Counsel to demonstrate the absence of cause in order to find a violation rather than placing the burden on the employer to show cause in order to avoid liability.  Moreover, Member Miscimarra asserted that that cause issue must be addressed as part of the liability phase of the proceedings as opposed to the remedial phase.

The reaffirmation of Alan Ritchey is no surprise, although the provision of a back pay remedy and the new employer burden during the compliance phase to prove a “for cause” defense is.  Given the complaint against the employer here was dismissed as the ruling was prospective in nature, it likely will be some time before this new rule is actually appealed to the courts.

Moving forward, employers negotiating first contracts risk an unfair labor practice finding if they do not comply fully with Alan Ritchey’s bargaining requirements for any discipline that could even arguably be seen as discretionary.