By: Ashley Ehman and Paul Galligan

On August 18, 2021, Local Law 2021/087 was enacted to require City human services contractors and subcontractors to enter into labor peace agreements prior to the award or renewal of a City service contract. The Local Law, which serves as an amendment to the Administrative Code of the City of New York, is likely to have a significant impact on covered employers.

The Local Law applies to any contractor or subcontractor that bids on a City human services contract or seeks a renewal of such a contract. Human services contracts include those concerning day care, foster care, home care, health or medical services, housing and shelter assistance, preventative services, youth services, the operation of senior centers, employment training and assistance, vocational and educational programs, legal services and recreational programs. However, the Local Law carves out an exception for building service employees and subcontractors whose primary task is the care or upkeep of a building or property.  Such employees may instead be covered the City’s prevailing wage law.

The centerpiece and most critical component of this Local Law is the labor peace agreement requirement. Covered employers engaging in City human services contracts must enter into labor peace agreements with labor organizations in which both the union and the employer agree to ensure the continuous delivery of services under the contract. According to the Local Law, covered employers must submit an attestation no later than 90 days after the award or renewal of a City service contract to confirm its compliance with the labor peace agreement requirement. The attestation shall state that either: (i) the covered employer has joined one or more labor peace agreements with a labor organization; or (ii) the covered employer’s employees are not represented by a labor organization and no labor organization has sought to represent them. If the covered employer has entered into one or more labor peace agreements, the employer is required to identify the classes of employees covered by the labor peace agreements, the classes of employees not represented by a labor organization, and the classes of employees currently undergoing labor peace agreement negotiations. This attestation must be updated on a yearly basis.  City agencies will be required in the future to include a provision in future City services contracts to the effect that failure to comply with the Local Law may constitute material breach.  The City Comptroller may also provide for additional remedies after investigation.

Labor peace agreements make it significantly easier for unions to organize employers, because in exchange for the union party’s commitment to ensure labor peace (i.e. no strikes or picketing), the union party typically insists on the employer party’s neutrality in any organizing campaign and requires employers to forego rights afforded to them by the National Labor Relations Act of 1935 (the “Act”), replacing the secret ballot election with a card check and providing union access to the employer’s facilities and employee information, with all disputes subject to arbitration. It should be noted that labor peace agreements typically do not dictate provisions in collective bargaining agreements that have to be negotiated after the union has organized a covered employer’s employees.

Unless the covered employer is already unionized, the labor peace agreement requirement of Local Law 2021/087 presents many new challenges for covered employers. However, further changes may be in store as a result of Prevailing Wage Bill 2137. If enacted, covered employers will be required to pay its City-contracted human services employees no less than the prevailing wage as established by the Comptroller.  Given the current political make-up of the City Council, this bill is likely to pass and be signed into law by the Mayor who recently issued an Executive Order requiring all large retail or food service employers operating on the premises of a City development project to sign labor peace agreements.

By: Jennifer L. Mora

As previously reported here, on August 12, 2021, the National Labor Relations Board’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to certain issues to her office for consideration. The GC’s memorandum highlighted more than 40 Trump-era decisions that are up for reconsideration, based on Abruzzo’s view that they overruled legal precedent and are not consistent with the basic purpose of the National Labor Relations Act to foster unionization.

Making good on President Biden’s promise to become the “strongest labor President you have ever had,” on September 8, 2021, the GC issued yet another memorandum advising regional offices to seek a variety of remedies to address alleged violations of the Act. The list is not exhaustive — “Regions should request from the Board the full panoply of remedies available to ensure that victims of unlawful conduct are made whole for losses suffered as a result of unfair labor practices.”

  • In cases involving unlawful terminations, the memorandum advises regions to seek compensation for consequential damages, front pay, and liquidated backpay.
  • If the aggrieved employee is an undocumented worker, the memorandum recommends that regions seek compensation for work performed under unlawfully imposed terms, employer sponsorship of work authorizations, and other remedies designed to prevent unjust enrichment.
  • If the matter involves unlawful conduct during a union organizing drive, the memorandum suggests that regions seek a wide range of remedies. They include, among others:

(a) granting unions contact information for and access to employees, including bulletin boards and equal time to address employees during an employer’s “captive audience” meeting about union representation;

(b) requiring employers to reimburse unions for costs incurred as part of their organizing effort, including costs associated with any re-run election;

(c) requiring an employer to read (with the union present) the “Notice to Employees and Explanation of Rights” (“Notice”) to employees, supervisors and managers, or possibly a video recording of the reading of the Notice, with the recording being distributed to employees by electronic means or by mail;

(d) requiring an employer to publish the Notice in newspapers and other news media (including social media) at the employer’s expense; and

(e) requiring employers to provide management and supervisor training on the NLRA.

Remarkably, the memorandum also suggests that regions consider instatement (hiring) of a qualified applicant of the union’s choice in the event a discharged employee is unable to return to work.

  • In unlawful failure to bargain cases, the GC advises regions to seek remedies that include requiring the respondent to submit to a bargaining schedule, submit status and progress reports to the NLRB, reimburse the other party’s collective-bargaining expenses, reinstate unlawfully withdrawn proposals, and submit to other broad cease-and-desist orders.

In her announcement, the GC advised that she plans to issue another memorandum relating to remedies that regional offices should include in settlement agreements.

Since being sworn in on July 22, 2021, the GC has lived up to President Biden’s commitment to “a cabinet-level working group that will solely focus on promoting union organizing and collective bargaining.” All of her suggested remedies reflect a major change in the remedies typically available under the NLRA. While the memorandum cites to Board decisions that have awarded some of these unusual remedies, they involved extremely egregious violations of the Act. Despite that, the GC suggests that these harsh remedies be the rule rather than the exception. As the GC’s various memoranda reflect an intent to act immediately in pursuit of her pro-labor agenda, employers would be well-advised to take notice of and plan for the GC’s aggressive stance.

By: Jennifer L. Mora and Jeffrey A. Berman

With a new President comes a shift in the balance of power at the National Labor Relations Board. To start, shortly after President Biden took office in January, the NLRB’s sole Democrat, Chairman McFerran, issued several dissents that provided a window into what the future would look like under a Biden Board. Those dissents addressed confidentiality in arbitration agreements (here), implementation of employee handbooks (here), investigative confidentiality rules (here), standards for determining whether a party has engaged in bad faith bargaining (here), and policies prohibiting recordings in the workplace (here).

On August 12, 2021, the NLRB’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to certain issues to her office for consideration. Nobody should be surprised at Abruzzo’s desire to overturn several important Trump Board decisions, as this happens each time a new NLRB majority is established.  However, the memorandum, which includes all of the issues flagged by Chairman McFerran in her dissents, goes much further.

The GC’s memorandum highlighted more than 40 Trump-era decisions that are up for reconsideration, based on Abruzzo’s view that they overruled legal precedent and are not consistent with the basic purpose of the National Labor Relations Act to foster unionization. They include, among many others:

  • The Boeing Co. (2017) and the appropriate standard for determining the legality of workplace/employee handbook rules. This will include any Trump Board decision that analyzed a rule or handbook provision under the Boeing standard. As we previously reported, Chairman McFerran espouses a return to the analytical framework in Lutheran Heritage Village-Livonia — the mere maintenance of a neutral work rule will violate the Act if employees would reasonably construe the rule to prohibit union and other protected concerted activity.
  • Baylor University Medical Center (2020), which found lawful separation agreements containing confidentiality and non-disparagement provisions, in addition to Trump-era decisions addressing confidentiality rules relating to workplace investigations and confidentiality provisions in arbitration agreements. In recent dissents, McFerran has been highly critical of any confidentiality provisions, opining that they require employees to “suffer in silence at work.”
  • Various decisions discussing the appropriate standard for determining whether an employee has engaged in Section 7 protected activity. Importantly for employers, a desire to return to Purple Communications will likely mean protecting more than just communications in emails, but also other electronic communications and videoconferencing platforms.
  • Decisions addressing the standard to prove violations of the Act under Wright Line.
  • Tobin Center for the Performing Arts (2019) — the extent to which property owners can deny access to third parties seeking to engage in Section 7 activity.
  • Valley Hospital Medical Center (2019) — the right of an employer to cease deducting union dues upon expiration of a labor agreement.
  • MV Transportation (2019), which abandoned the clear and unmistakable waiver standard to determine whether an employer’s unilateral action was permitted, and instead adopting a “contract coverage” standard, under which unilateral action is permitted if it falls within the compass or scope of certain contractual language in the labor agreement.
  • SuperShuttle DFW, Inc. (2019) — the standard for determining whether an individual is an independent contractor. The memorandum also suggests that the simple act of misclassifying a worker as an independent contractor can be an unfair labor practice. A shift in precedent relating to this issue ups the ante for companies operating in the gig economy.

But the memorandum goes beyond evincing an intent to overturn the Trump Board’s precedent – it also “identifies other initiatives and areas that, while not necessarily the subject of a more recent Board decision, are nevertheless ones I would like to carefully examine.” Those include:

  • Two issues relating to Weingarten rights: their application to non-union workforces and whether an employer must provide the union with its interview questions in advance of the interview.
  • Information requests when an employer intends to relocate its operations.
  • The right of an employer to withdraw recognition after the third year of a contract of longer duration.

Abruzzo’s memorandum also signals a critical modification to the existing card check rules- requiring regional offices to send to her office cases where an employer refuses to recognize and bargain with a union if the employer has either engaged in unfair labor practices or cannot “explain its reason for doubting majority status in rejecting the union’s demand.” If adopted, this standard would make it more difficult for an employer to insist on an election rather than bargain with a union in the face of a showing of majority support.

The fact that the new General Counsel has requested that regional offices forward cases raising certain issues to her does not automatically mean that the Board will either reverse a decision of the Trump Board or extend the protections of the NLRA further than they currently exist.  However, given the makeup of the newly-constituted Biden Board, there is little question what the future holds.

Friday, July 30, 2021
2:00 p.m. to 3:30 p.m. Eastern
1:00 p.m. to 2:30 p.m. Central
12:00 p.m. to 1:30 p.m. Mountain
11:00 a.m. to 12:30 p.m. Pacific

On July 9, 2021, the PBGC issued its interim final rule on ARPA’s Special Financial Assistance (“SFA”) Program for financially troubled multiemployer pension plans.  The new regulations provide guidance on the application process for Special Financial Assistance and the related restrictions and requirements, including the priority in which applications will be reviewed.  The guidance also sets forth special rules regarding employer withdrawals and withdrawal liability settlements for plans receiving Special Financial Assistance.

In this webinar, Seyfarth attorneys review the interim final rule, address what it means for multiemployer plans, and discuss what it means for employers participating in those plans.

Topics will include:

  • Plan eligibility;
  • The amount of SFA;
  • The application process;
  • Conditions and restrictions on receipt of SFA, including limitations on reductions in contributions and increases in benefits, and investment restrictions;
  • Withdrawal liability considerations; and
  • What’s Next

Register Here

By: Seong Kim, Ronald Kramer, and Alan Cabral

Seyfarth Synopsis:  On July 9, 2021, the PBGC issued its interim final rule on ARPA’s Special Financial Assistance Program for troubled multiemployer pension plans. This rule governs the application and administration of SFA, and includes special rules regarding employer withdrawals and withdrawal liability settlements for plans receiving SFA. Please see our companion Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act here.

On July 9, 2021, the Pension Benefit Guaranty Corporation (PBGC) announced its interim final rule implementing the American Recue Plan Act’s Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans. The rule provides guidance to plan sponsors on the SFA application process, including what plans need to file to demonstrate eligibility for relief; calculating the amount of SFA; actuarial assumption requirements; the PBGC’s review of SFA applications; and other restrictions and conditions.  The PBGC also sets forth in the regulations the order of priority in which applications will be reviewed.  Among other things, the regulations provide much anticipated clarification on the calculation of withdrawal liability, and the assumptions to be used for SFA.  There will be a thirty day public comment period from the rule’s publication in the Federal Register on July 12, 2021.

Seyfarth has issued a detailed Legal Update summarizing the interim final rule which can be accessed here.  It is recommended reading.  (Our earlier Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act can be accessed here.)  In addition, Seyfarth will hold a webinar on Friday, July 30, 2021, at 1:00 central to review the regulations in more detail, as well as any considerations for plan sponsors and contributing employers.  Stay tuned to this site for more details.

For those that have been solely concerned about the possible impact SFA may have on withdrawal liability, below are the four key takeaways from the final interim rule as to withdrawal liability.

1.      The PBGC Rejected Disregarding SFA in the Withdrawal Liability Calculation

Given that earlier drafts of ARPA provided that SFA would not be counted when calculating withdrawal liability, many interested parties expected that restriction to be included in the regulation.  Nevertheless, the PBGC considered and then apparently rejected a requirement that SFA assets be disregarded in the determination of unfunded vested benefits for the assessment of withdrawal liability.  Despite acknowledging the benefits of such a restriction, the PBGC simply stated:  “This alternative was determined to be more administratively complex and therefore less desirable.”  Instead, at least for now, it adopted two other conditions: a restriction on withdrawal liability interest assumptions, and a requirement for PBGC approval of certain withdrawal liability settlements.

2.      Withdrawal Liability Interest Assumptions

The interest assumptions used to determine unfunded vested benefits and calculate withdrawal liability must be the PBGC’s mass withdrawal interest assumptions that approximate the market price that insurance companies charge to assume a similar pension-benefit like liability.  Plans receiving SFA must use those interest assumptions for withdrawal liability calculations until the later of 10 years after the end of the plan year in which the plan receives payment of SFA or the last day of the plan year in which the plan no longer holds SFA or any earnings thereon in a segregated account.  Given plan termination interest rates are generally much lower than rates most plans use to calculate withdrawal liability, this will likely increase a withdrawing employer’s liability — although whether that increase will necessarily offset the impact of the SFA may depend upon the employer and the plan.

The PBGC determined that without the interest assumption change “the receipt of SFA could substantially reduce withdrawal liability owed by a withdrawing employer,” and “could cause more withdrawals in the near future than if the plan did not receive SFA.”  Payment of SFA “was not intended to reduce withdrawal liability or to make it easier for employers to withdraw.”

3.      PBGC Approval of Certain Withdrawal Liability Settlements

Any settlement of withdrawal liability during the SFA coverage period (generally, the date of application through 2051) is subject to PBGC approval if the present value of the liability settled is greater than $50 million.  The PBGC will only approve such a settlement if it determines that: (1) it is in the best interests of the participants in the plan; and (2) does not create an unreasonable risk of loss to PBGC.  The information the PBGC will require in order to review a proposed settlement includes: the proposed settlement agreement; the facts leading to the settlement; the withdrawn employer’s most recent 3 years of audited financials and a 5-year cash flow projection; a copy of the plan’s most recent actuarial evaluation; and a statement certifying the trustees have determined that the proposed settlement is in the best interest of the plan, its participants and beneficiaries.

4.      Promise of Additional PBGC Regulations as to Assumptions for All Plans

Last but not least, in its explanation of the final interim rule the PBGC noted that it plans to use its authority under Section 4213(a) of ERISA to propose a separate rule of general applicability setting forth actuarial assumptions which “may” be used to determine an employer’s withdrawal liability.  Presumably, this general rule would be applicable to all plans, not simply those that receive SFA.  This could have a significant impact on how withdrawal liability is calculated in the future.

Mark your calendars for the webinar on Friday, July 30, 2021, at 1:00 central, and stay tuned to this site for more details about the webinar.

By David Wilson, Timothy M. Hoppe, Nick Geannacopulos, and Jeffrey Berman

Seyfarth Synopsis: California agricultural employers won big before the United States Supreme Court on Wednesday. In Cedar Point Nursery v. Hassid, the Court deemed unconstitutional a California labor regulation which required agricultural employers to allow union organizers onto their property to solicit membership. The case, while focused on private property not opened to the public, could provide employers a tool to limit labor access to other types of private property as well.

In a 6-3 decision authored by Chief Justice John Roberts, the United States Supreme Court held that California Code of Regulation title 8, section 20900(e) amounts to a per se taking under the Fifth Amendment. The regulation requires agricultural employers to allow union organizers onto their property for the purpose of meeting and soliciting union membership. Specifically, it permits labor organizers to “take access” to the employer’s property for up to three hours per day, during four 30-day periods in a calendar year. An employer’s violation of the regulation amounts to an unfair business practice under the California Labor Relations Act of 1975.

Precedential Background

In 1976, this same regulation was upheld by the California Supreme Court in Agricultural Labor Relations Board v. Superior Court. Justice Mosk penned the 4-3 decision, emphasizing the fact that “incidental damages to property resulting from governmental activities, or laws passed in the promotion of the public welfare are not considered a taking.” However, the ensuing 45 years has seen a shift in Takings Clause jurisprudence which ultimately paved the way for Cedar Point Nursery. The Rehnquist and Roberts Courts established a per se takings rule when a regulation imposes a permanent physical occupation or deprives an owner of all economically beneficial use of the property. This stands in contrast to the Penn Central three-factor test, in which courts consider (1) the economic impact of the regulation, (2) its interference with reasonable investment-backed expectations, and (3) the character of the government action in determining whether a regulation has “gone too far.”

The Facts

The Petitioners are two California farms. Cedar Point Nursery is a strawberry farm near the Oregon border, and Fowler Packing is a Fresno-based grower of table grapes and citrus. The farms employ roughly 500 and 2,500 workers, respectively. At both facilities, none of the workers live on the premises. In 2015, organizers from the United Farm Workers attempted to access Fowler’s property in order to solicit membership, but the company blocked them from entering. In anticipation of another visit by UFW, the growers filed suit, requesting declaratory and injunctive relief prohibiting the Board from enforcing the regulation and allowing the union onto their farm.

The Decision

The Court held that a physical invasion of real property, even if temporary, can constitute a per se appropriation of property and require just compensation under the Takings Clause. This holding is founded on two related premises: first, that private property consists of several discrete rights, and second, that the ability to exclude is “one of the most essential sticks in the bundle of rights.” Since the regulation interfered with one of the most important aspects of owning private property, it did more than merely restrain the grower’s use of the land. An appropriation like this, the Court said, deserves per se treatment under the Fifth Amendment.

It is not dispositive, Roberts noted, that the invasion was only temporary and intermittent, as “[t]he duration of an appropriation—just like the size of an appropriation—bears only on the amount of compensation,” and not whether an appropriation has occurred. It is also irrelevant that there was no formal easement granted to union representatives. In the majority’s view, an easement and the revocation on the right to exclude are two sides of the same coin.

The Dissent

In his dissent, Justice Breyer took issue with the majority’s characterization of section 20900(e) as an appropriation of property. Instead, he viewed the regulation as a restriction on the use of the land—an aspect of the police power which is typically evaluated under the more deferential Penn Central test. Further, as a matter of administrability and policy, Breyer expressed concern that the majority’s reasoning could be used to restrict health and safety inspections, since these also involve temporary restrictions on the right to exclude.

What Should Employers Do

This decision is significant for agricultural employers, as well as other private property owners faced with the prospect of labor activities on their properties. For agriculture businesses, a burdensome labor code regulation has been struck down which restricted the activities they could exclude from their workplaces.

And while Cedar Point Nursery involved access to rural agricultural sites, the reasoning of the case—in particular the protection of the private property right to exclude—may affect current and future legislation aimed at restricting other property owners’ ability to exclude labor activities from their premises. For example, California’s Moscone Act (Cal. Code of Civil Procedure § 527.3), which the California Supreme Court has construed to allow for union activities on private retail properties, and other regulations like it, may now be subject to challenge.

By: Jennifer L. Mora and Jeffrey A. Berman

The National Labor Relations Board’s sole Democrat, Chairman Lauren McFerran, has issued two new dissents that portend how a Biden Board likely will reverse precedent established by the Trump Board. This update is our fourth in a multi-part series discussing how Chairman McFerran’s dissents are likely to become the law once President Biden appoints new Board members and the Democrats are in the majority (see here regarding confidentiality in arbitration agreements, here regarding implementation of employee handbooks, and here regarding investigative confidentiality rules). The latest examples appear in separate Board decisions issued on April 30, 2021 (The George Washington Univ. Hospital) and May 3, 2021 (AT&T Mobility, LLC).

In George Washington, the Republican majority dismissed a complaint alleging that the employer had engaged in surface bargaining (i.e., going through the motions of negotiating a collective bargaining agreement with no intent of actually reaching a deal). In sum, according to the majority:

The [employer] met with the Union for 30 bargaining sessions, made many of its initial proposals at the outset of the negotiations, solicited counterproposals from the Union, made concessions in response to the Union’s bargaining positions, and never refused to bargain over any mandatory bargaining subject—and all the while it calmly answered the Union’s bellicose conduct by continuing to bargain.

Noting that the Board “does not sit in judgment of a party’s bargaining proposals,” and faced with this evidence, the majority rejected the administrative law judge’s reliance on the substance of the employer’s proposals (primarily an initial request for substantial concessions) in finding bad faith bargaining, pointing to the fact that “not one of the … proposals was unlawful in and of itself.”

McFerran disagreed, pointing to the substance of the employer’s proposals, especially as they related the management rights clause, the no-strike provision, union security, and the grievance and arbitration process. What the majority described as a permissible “wish list, throw-in-the-kitchen-sink” proposal, McFerran’s dissent characterized as an “attempt to disrupt the process to reach an agreement.”

On this critical point,  McFerran argued that “employer proposals which, taken as a whole, would leave employees with fewer rights than they would have without a contract are clearly designed to frustrate the collective-bargaining process.” She would have found a violation based solely on the employer’s presentation of its proposals relating to management rights, strikes, and grievance and arbitration procedures.

McFerran also would have found a violation based on the employer’s proposal to remove union security and dues-checkoff clauses from the agreement. And while the Board faulted the union for not responding to certain employer proposals (opining that the union had decided early on that the employer wasn’t interested in reaching a deal), McFerran stated that the majority was improperly “giv[ing] out points for politeness” and engaging in victim blaming.

The George Washington decision provides a good example of the stark contrast between how Republican and Democrat members view the same facts. It also serves as a reminder to employers to work with experienced labor counsel to develop a bargaining strategy that will withstand scrutiny under the soon-to-be Biden Board.

In AT&T Mobility, LLC, the Republican majority dismissed part of the complaint alleging that the employer violated the National Labor Relations Act by maintaining a work rule stating that employees “may not record telephone or other conversations they have with their co-workers, managers or third parties unless such recordings are approved in advance by the legal department.” Applying the Board’s 2017 Boeing decision, the Board balanced the employer’s justification for a policy the Board deemed to be neutral on its face against employees’ Section 7 rights. The Board upheld the policy concluding that, “[a]lthough the policy may prevent recording of some protected conversations, the vast majority of conversations covered by the policy bear no relation to Section 7 activity.”

In dissent, Chairman McFerran signaled that the analytical framework for analyzing handbook policies under Boeing is likely to be jettisoned by the Biden Board. Specifically, she described the rule as “unlawfully overbroad” and asked the Board to “reject the analytical framework of Boeing,” stating that it was “so forgiving to employers that it cannot be reconciled with the Act’s guarantees to employees.”

The fundamental flaw with Boeing, according to McFerran, “is that it permits employers to maintain rules that reasonably tend to chill employees in the exercise of their rights under the Act, while failing to require that employers narrowly tailor their rules to serve demonstrated, legitimate interests.” In comparing the standard for considering work rules before and after Boeing, she wrote:

Until Boeing, an employer was required to tailor workplace rules so that workers would understand that they were free to engage in activity protected by the NLRA without subjecting themselves to discipline or discharge. After Boeing, workers must not only be brave enough to engage in protected activity, but they must also be brave enough to knowingly violate workplace rules and so subject themselves to the threat of discipline. A clearer recipe for stifling protected activity is hard to imagine. (Emphasis in original.)

It is anticipated that, consistent with McFerran’s dissent, the Biden Board will overturn Boeing and return to the Obama Board’s framework for considering employee work rules. According to McFerran, the no-recording rule in AT&T Mobility would have been unlawful under pre-Boeing precedent. As such, employers, including those with non-union workforces, would be well-advised to review their handbook policies in anticipation of a possible dramatic shift in Board law.

By: Jennifer L. Mora and Jeffrey A. Berman

Once again, the National Labor Relations Board’s sole Democrat, Chairman McFerran, has issued a dissent that sheds light on how a Biden-Board likely will reverse precedent established by the Trump-Board. This update is our third in a multi-part series discussing how Chairman McFerran’s dissents are likely to become the law once President Biden appoints new Board members and the Democrats are in the majority (see here regarding confidentiality in arbitration agreements and here regarding implementation of employee handbooks). The latest example of this appears in the Board’s April 16, 2021 decision, Alcoa Corporation, which considered the enforceability of an employer’s investigative confidentiality rules.

Alcoa interviewed a handful of employees as part of an investigation into the alleged misconduct by one of their co-workers. The company interviewer told each employee that the conversation was confidential, and that the conversation should not be shared with others, including supervisors and other employees. The employees also were told to decline to answer questions if asked. Alcoa’s stated reason for the confidentiality directives was that “historically hourly employees did not write out statements on other hourly employees” (even though there was no evidence of this).

These directives subsequently were challenged as restraining and coercing the witnesses in violation of Section 8(a)(1) of the National Labor Relations Act. After a trial, the administrative law judge agreed, finding the directives particularly problematic because they were not limited by time or place because they did not tell the witnesses that they could speak about the investigation once it was over.

The Board majority, consisting of two Republican Members, disagreed, relying on two recent Board decisions:  Apogee Retail LLC (2019), and Watco Transloading LLC (2020). In Apogee, the Board held that investigative confidentiality rules that, by their terms, apply only for the duration of any investigation are categorically lawful. That holding did not, however, extend to rules that would apply to non-participants or that would prohibit employees from discussing the event or events giving rise to the investigation. Watco held that the Apogee framework applied to an employer’s one-on-one confidentiality instruction to an employee, but noted that in the context of an oral directive, “it is appropriate for the Board to assess the surrounding circumstances to determine what employees would reasonably have understood concerning the duration of required confidentiality.”

In finding lawful the confidentiality directive given to employees, the Alcoa Board disagreed with the ALJ that the directives were unlawfully unlimited in time and place. In reaching this conclusion, the Board noted that the employer ultimately provided notes of the interviews to the union and took no action against a union steward for discussing the interview. Thus, according to the Board, these facts demonstrated that “employees would reasonably understand that the confidentiality restriction was limited to the duration of the investigation.” The Board declined to consider whether the employer’s stated need for the confidentiality directive outweighed employees’ Section 7 rights, noting that “[t]he need to encourage participation in an ongoing workplace investigation is self-evident.”

In what she referred to as “an especially tortured effort to excuse an employer’s obvious infringement of the Act,” Chairman McFerran wrote a lengthy dissent, arguing against the Apogee and Watco holdings, and also finding that even under those decisions, Alcoa violated Section 8(a)(1). In terms of the Board’s finding that employees would have understood that the confidentiality directives were limited to the duration of the investigation, McFerran pointed to the lack of evidence that any employee knew that the employer had shared witness summaries or that a union steward had escaped discipline for talking about the interviews.

As did her dissents in the two earlier cases, McFerran’s dissent in Alcoa sets the stage for what the standard is likely to be under a Biden Board. Specifically, citing to previous Board law addressing the employees’ Section 7 right to discuss investigations with coworkers and their union, McFerran explained that “[t]raditionally, the Board has protected that right by allowing employees to impose confidentiality requirements only if they could prove that a legitimate and substantial business justification outweighed employees’ rights in the circumstances of a particular case.” This framework prevents a bright line rule as each case will depend on its facts. Summarizing her dissent in Apogee, McFerran wrote in Alcoa:

I endorsed the Board’s existing approach, exemplified in cases like Banner Estrella, which required employers to proceed on a case-by-case basis in imposing investigative-confidentiality restrictions on employees. This approach properly accommodated the competing interests of employers and employees. It focused the Board, the employer, and employees on the relevant circumstances of each case and so tended to minimize the chilling effect on employees, who would better understand not just “why nondisclosure is being requested, but also what matters are not appropriate for conversation.”

As the McFerran dissent is likely to become Board law once Biden appoints new Members, employers should review their investigative policies and practices. Notably, McFerran pointed out that “[r]ank and file employees do not generally bring law books to work or apply legal analysis to company rules as do lawyers, and cannot be expected to have the expertise to examine company rules from a legal standpoint.”

In this podcast episode, Ashley Cano, Partner in the Labor and Employment department of Seyfarth’s Chicago office, and John Phillips, Senior Associate in the firm’s Houston office, discuss the National Labor Relations Board’s changing view of the scope of protected concerted activity.

With a new Acting General Counsel in charge at the NLRB, the Board is already beginning to shift its focus and promote a more worker- and union-friendly agenda. On March 31st, Acting General Counsel Peter Sung Ohr issued a memorandum to all Regional Directors setting forth an expansive view of workers’ rights to engage in protected, concerted activity. He also promised to “vigorously” prosecute retaliation against workers who engage in such activity. In this podcast, Ashley and John explore what employers can expect moving forward.

Listen to the podcast here.

By Molly Gabel

Seyfarth Synopsis: The National Mediation Board’s new decertification rule survived the first round of legal challenge. In 2019, the NMB issued a final rule providing a direct decertification process under the Railway Labor Act and a two-year period of repose under which the NMB cannot conduct an election following a decertification. The Transportation Trades Department, AFL-CIO and its member unions challenged the rule through a lawsuit against the NMB in the United States District Court for the District of Columbia, alleging that the rule violated the RLA and the Administrative Procedures Act. The Court granted summary judgment for the NMB and against the TTD on March 31, 2021.

Unlike the National Labor Relations Act, the RLA does not contain an express decertification provision. Section 2, Ninth of the RLA merely establishes the NMB and enables the agency to hold elections and resolve election disputes. 45 U.S.C. § 152, Ninth (“If any dispute shall arise among a carrier’s employees as to who are the representatives of such employees designated and authorized . . . it shall be the duty of the Mediation board, upon request of either party to the dispute, to investigate such dispute and to certify [the representatives] . . . .  In such an investigation, the Mediation Board shall be authorized to take a secret ballot of the employees involved . . . .”). The Supreme Court, however, has interpreted Section 2, Ninth to give employees the right to decertify. See, e.g., Brotherhood of Ry. & S.S. Clerks, Freighthandlers, Express & Station Employees v. Association for the Benefit of Non-Contract Employees, 380 U.S. 650, 670 (1965) (Railroad employees have the “right to determine who shall be the representative of the group or, indeed, whether they shall have any representation at all.”).

Before 2019, employees who wanted to decertify their union needed to follow a confusing “straw man” process. An individual employee seeking to decertify the union would need to file an election application, win an election, be certified as the representative, and then disavow representation. The ballot included three options in this scenario: (1) for the existing representative; (2) for the straw man; or (3) for “no union.” The straw man would need to choose whether the straw man would direct employees to vote for the straw man or for “no union” (to ensure the vote was not split between the straw man and “no union”), communicate that choice and instruction to employees, and then ensure that choice won a majority of votes in order to achieve decertification. One can imagine how confusing this process was for employees.

The NMB sought to change this through formal rulemaking. In 2019, the agency finalized formal, notice-and-comment rulemaking under the APA. The final rule enables the NMB to accept a direct decertification application from employees and to run a decertification election.  The rule further extended the period of repose to two years, prohibiting elections absent “unusual or extraordinary circumstances” following a decertification for two years. 84 Fed. Reg. 35,987; 29 C.F.R. § 1206.4.

The TTD and its member unions filed suit on October 16, 2019 (Case No. 1:19-cv-03107 (CJN) (D.D.C.)), alleging that the final rule violated Section 2, Twelfth of the RLA and was arbitrary and capricious under the APA. Plaintiffs claimed that Section 2, Twelfth allows the NMB to conduct elections only to certify a representative. See 45 U.S.C. § 152, Twelfth (“The Mediation Board, upon receipt of an application requesting that an organization or individual be certified as the representative of any craft or class of employees, shall not direct an election . . . unless the Mediation Board determines that the application is supported by a showing of interest from not less than 50 percent of the employees in the craft or class.”) (emphasis added).

The Court disagreed, first concluding that the NMB’s interpretation of Section 2, Ninth and Section 2, Twelfth was entitled to Chevron deference because the agency had engaged in formal rulemaking subject to extensive notice and comment procedures and because Section 2, Ninth and Section 2, Twelfth is silent on decertification and does not “unambiguously preclude the direct decertification method adopted in the Final Rule.” Slip Opinion at 8. The Court went on to hold that the NMB had adequately explained as part of the rulemaking process why it interpreted Section 2, Ninth and Section 2, Twelfth to allow for decertification elections. The Court concluded that the agency’s interpretation of these two statutory provisions was entitled to deference.

In reaching this holding, the Court reasoned that Section 2, Ninth grants the NMB the power to hold elections—not Section 2, Twelfth—and “the Board enjoys exceptional latitude when acting within its proper sphere of Section 2, Ninth power.” Railway Labor Execs. Ass’n v. National Mediation Bd., 29 F.3d 655, 662 (D.C. Cir. 1994). The Court stated that Section 2, Twelfth provides only a carveout within the NMB’s authority under Section 2, Ninth, namely that the agency cannot hold an election unless the application is supported by at least half of the employees in the applicable craft or class. Slip Opinion at 7-8.

The TTD further argued that there was no rational basis for the NMB to extend the one-year period of repose following a decertification to a two-year period of repose. The Court also disagreed with this argument, ruling that the NMB had adequately explained its rationale for extending the election bar: the two years matches the period of repose following certifications so that employees can have time to “judge the advantages and disadvantages of their decision without the turmoil of an immediate organizing campaign.” 84 Fed. Reg. 35,986.

Ultimately, the Court entered summary judgment for the NMB in full and denied the unions’ cross-motion for summary judgment in its entirety. It remains to be seen whether the unions will appeal or whether a Biden Administration majority NMB—when one is seated—will undo the rule. For the time being, however, the rule remains in effect, and railroad, air carrier, and derivative carrier employees have a direct decertification process under the RLA.