By: Michael Berkheimer, Elliot Fink, and Jennifer Mora

On June 1, 2023, in a resounding 8-1 decision, the United States Supreme Court granted employers an important victory by holding that the National Labor Relations Act and prior precedent did not preempt a state court tort action against a labor organization that sanctioned a work stoppage that was timed deliberately to destroy the employer’s property. By allowing the state court action to proceed, the Supreme Court in Glacier Northwest, Inc. v. Teamsters Local Union No. 174 recognized a significant limit on the National Labor Relations Act’s reach and provided a means for employers to sue in state court for damages arising from conduct not protected by the National Labor Relations Act.

The Union’s Well-Timed Work Stoppage

Glacier Northwest sells and delivers ready-mix concrete in Washington State. Once mixed, concrete begins to harden and remains useable for only a short period of time. This is true even if the concrete is rotating in the drum of a truck. If the concrete hardens inside a drum, it becomes useless and may significantly damage a truck.

Teamsters Local Union No. 174 (“Union”) represents Glacier’s truck drivers. On August 11, 2017, the Union called for Glacier’s truck drivers to engage in a strike. The Union called for the strike to begin at a time it knew a work stoppage would be especially damaging to the employer: after the concrete had been mixed, loaded into trucks and sent out for delivery. Glacier instructed the drivers to complete their deliveries. The Union told the drivers to go on strike. At least nine drivers ignored Glacier and abandoned their trucks with drums full of cement.

Glacier was able to safely dump the concrete and prevent damage to its trucks, but suffered the loss of all the previously-loaded concrete. Glacier filed a state court tort action against the Union, alleging that it had intentionally destroyed the concrete. In response, the Union sought dismissal of the state court claims on the grounds that they were preempted by the Act and Supreme Court precedent because the drivers’ conduct was “arguably” protected under the Act and, therefore, could only be heard and resolved by the NLRB. The Washington Supreme Court upheld dismissal of the Union’s lawsuit, finding the lawsuit preempted by the Act applying so-called Garmon preemption.

What is Garmon Preemption?

It is well established and uncontroversial that federal law preempts state law when the two come into conflict. However, in 1959, the Supreme Court held in San Diego Building Trades Council v. Garmon that preemption under the Act is broader than other federal statutes and, thus, encompasses situations when the conduct which is the subject matter of the lawsuit is arguably protected or prohibited by the Act. Under Garmon, if a court finds the conduct is arguably covered by the Act, it must dismiss the suit and allow the matter to be exclusively handled by the NLRB; otherwise the suit may proceed.

However, although the right to strike is generally protected by the Act, some excesses – such as violence on the picket line – are not protected.  As is relevant here, the NLRB has held in a line of cases that the Act does not shield strikers who fail to take “reasonable precautions” to protect their employer’s property from foreseeable, aggravated, and imminent danger due to the work stoppage or other activity believed to be protected by the Act. 

What Did the Supreme Court Decide in Glacier Northwest?

The Supreme Court applied this principle in this case and held that the Union’s conduct was not protected by Section 7 of the Act because the strike was timed and coordinated by the Union so as to inflict intentional damage to Glacier’s property, in the form of the lost cement and potential damage to the trucks. The majority determined that because such conduct did not meet the “reasonable precautions” test, the conduct was not even “arguably protected” by the Act.  Glacier’s suit was therefore not preempted under Garmon and it could proceed on its state law claims.

The Court noted that the Union, as the party asserting preemption, had the burden of proving that the Act arguably protected the contested conduct and putting forth sufficient evidence that the “reasonable precautions” had been made. The Court, accepting the facts as plead by Glacier as true, examined the truck drivers’ conduct and found it was not protected by the NLRA because the Union knew that the concrete was highly-perishable, yet chose a time to strike when the “resulting risk of harm to Glacier’s equipment and destruction of its concrete were both foreseeable and serious.” In other words, the Court viewed the timing of the strike as an affirmative step intended to endanger the employer’s property and thereby rendered the Union’s conduct arguably not protected by the Act.

The Court also rejected the Union’s arguments that its holding would impose special obligations on strikers who handle perishable products, whose loss is always foreseeable. In doing so, the Court emphasized the unique nature of the ready-mix concrete in this situation, where the drivers’ reporting to work prompted the creation of the perishable product. The drivers’ subsequent work stoppage after the concrete was mixed and poured in the truck not only destroyed the concrete, but also placed the cement trucks in harm’s way. Moreover, the Court noted that this analysis looks at the risk of potential harm versus the realization of the same.

Another issue concerned the effect of a parallel NLRB adjudication concerning the Union’s well-timed strike and whether it was protected under the Act. Though Justice Jackson emphasized in her lengthy dissent the NLRB General Counsel’s issuance of an administrative complaint in those parallel proceedings, the Glacier Northwest majority side-stepped the question and noted in a footnote that the question had not been properly briefed before the Court.

What Does Glacier Northwest Mean for Employers?

Glacier Northwest provides employers a greater ability to bring suit in state court to recover damages when employees and/or unions engage in conduct not protected by the Act. The ability to have their claims heard by a state court has several advantages for employers: (1) to bring tort and other state law claims not available under the Act; (2) to recover damages not available under the Act; and (3) to have their case heard in state court rather than by the current Biden NLRB.

What the Court may have done was to move the line between arguably protected conduct and unprotected conduct. Its rationale, that the timing of the strike sought to inflict maximum pain was clearly directed to physical harm, and the Court said that it was not disturbing the Board’s precedent that a union cannot be held responsible if the employer regularly has perishable goods that are lost when employees strike.  But there are certainly examples of strikes timed to inflict maximum damage — for example professional athletes striking on the eve of playoffs — which have always been found to be an acceptable tactic in the “economic warfare” sanctioned by the Act.  It remains to be seen whether this was just a singular set of facts or whether the Court may have moved the line to include other strike cases involving intentional damage.

Finally, the concurrence authored by Justice Thomas and joined by Justice Gorsuch also shows that there are at least half the necessary votes for the Court to “reexamine whether the law supports Garmon’s ‘unusual’ pre-emption regime.” If the Court were to overrule Garmon and bring preemption under the Act into accord with its standard preemption principles, it would grant employers even greater ability to bring state court actions than under the majority’s holding. Given this possible shift in jurisprudence by the Court, employers may wish to give greater consideration to filing state court actions when beset with potential property damage and to more frequently challenge decisions finding such actions to be preempted by Garmon.

By: Cary Burke, Sul Ah Kim, and Olivia Jenkins

Seyfarth Synopsis: Recently, the National Labor Relations Board issued a decision that grants employees broad leeway to make lewd, lascivious, racist, or otherwise inappropriate comments at work, so long as those comments are connected in some way to wages, hours, terms and conditions of employment, or other protected concerted activity under the National Labor Relations Act.  For that reason, employers should tread carefully before doling out discipline on the basis of statements that are uncivil (or worse). 

When seeking to turn Luke Skywalker to the dark side, Emperor Palpatine infamously instructed Luke, “Let the hate flow through you.”  In a striking decision, the National Labor Relations Board (“NLRB” or “Board”) seemingly now offers the same coaching to employees. 

In Lion Elastomers LLC II, 372 NLRB No. 83 (May 1, 2023), the Board overruled General Motors’s (369 NLRB No. 127 (2020)) plain and sensible approach of inquiring into the employer’s motive in disciplining an employee who engaged in misconduct during protected activity regardless of the context, and announced a return to a trio of context-specific standards for determining whether egregious employee misconduct that occurs in the course of protected concerted activity causes the employee to lose the protections of the National Labor Relations Act (“NLRA” or “Act”). Spoiler alert: with limited exceptions for truly wild behavior, it basically doesn’t.  Employers, now, must seemingly tolerate a host of disturbing rhetoric and behavior, such as racist, sexist, or homophobic invective, to the extent such conduct occurs during arguably protected concerted activity, and continue to employ employees engaged in such abusive conduct. To that end, this decision also raises practical questions for employers on how to maintain civility in the workplace while respecting the Board’s seemingly broad and nonsensical view of employees’ protected outbursts under the Act.

Facts and History

For context, the employer in Lion Elastomers I disciplined an employee based on his continued misbehavior during a safety meeting and the investigatory meetings that followed. Specifically, the employee was agitated, continued to interrupt meetings with repeated questions, raised his voice, refused to allow others in the room to complete their statements, attempted to leave the room, and used an accusatory tone when addressing others in the room. In response, the Board’s General Counsel filed a Complaint against the employer, and the Board found that the employer’s decision to discipline the employee violated Sections 8(a)(3) and (1) of the Act. Importantly, the Board found that the employee did not lose the protection of the Act when he raised concerns about the employees’ working conditions (i.e., engaged in protected and concerted activity). The Board then sought an order from the U.S. Fifth Circuit Court of Appeals enforcing its ruling. 

While that application for enforcement was pending, the Trump Board issued its decision in General Motors, wherein it held that an employer can defend against a retaliatory or discriminatory discipline or discharge claim by showing the employee would have been disciplined or terminated even absent their protected concerted activity (i.e., an inquiry that focused on the employer’s motivation). In other words, the Trump Board held that employee discipline and discharges should be evaluated under the traditional Wright Line framework, irrespective of context or setting.

Back To The Context-Specific Standards

This Board in Lion Elastomers II, though, has thrown out the Trump Board’s straightforward analysis (even though the speech content here was arguably permissible under General Motors) and returned to an amorphous standard for evaluating misconduct. Specifically, the Board returned to a trio of setting-specific standards for determining whether the employee who engages in “protected” abusive conduct (1) towards managers in the workplace, (2) towards other employees or on social media, and/or (3) on the picket line loses the protection of the Act. In reality, this new standard essentially allows employees to engage in hateful and even discriminatory rhetoric so long as their actions are bound up in protected concerted activity. While forcefully positing that “rough language” or tough talk permeate the workplace and ought not to offend employers, the Board tacitly acknowledges that race-based or sexually harassing comments made in the course of arguably protected concerted activity now enjoy the Act’s protections. For context[1] and as a reminder of what is at stake, the Board also embraced a return to the days of Pier Sixty LLC (362 NLRB 505 (2015)), in which a prior Board held that the following social media comments about a supervisor were protected, thus insulating the employee there from discipline:

Bob is such a NASTY MOTHER FUCKER don’t know how to talk to people!!!!!! Fuck his mother and his entire fucking family!!!! What a LOSER!!!! Vote YES for the UNION!!!!!!!

Id (emphasis in original).

Implications for Employers

Top of mind for many employers will be how to comply with federal and state antidiscrimination and anti-harassment laws, maintain civility in the workplace, and enforce certain workplace policies after this ruling.  The Board acknowledges this challenge, but effectively disclaims ownership of a solution to the problem it has created unnecessarily.  It is not difficult to imagine a scenario where an employee hurls racist or gender-based invective towards a manager when discussing, for example, a wage dispute, or when an employee yells sexually harassing remarks towards another employee when discussing a union. That invective could or would likely create a hostile work environment, in violation of Title VII of the Civil Rights Act or state anti-discrimination laws, or even hate speech laws.  Even so, this decision likely would still immunize the employee from discipline or discharge.

Going forward, employers ought to take great care when considering whether and how to discipline or discharge employees for typical out-of-bounds conduct, especially if the conduct is connected to protected concerted activity.  Indeed, this ruling seems to suggest that a sliver of protected conduct provides an employee with a shield to engage in a slew of improper and potentially unlawful behavior, while employees who are not engaged in protected activity yet commit similar misconduct face discipline or termination.  Bottom line, the aggressive and uninhibited current Board appears to value union organizing or other protected activity over a civil workplace and laws that protect workers against unlawful discrimination and harassment and require them to take remedial action against those engaging in such conduct.  And, the tacit encouragement for bad behavior offered by the Lion Elastomers II decision offers incredible latitude for bad actors to violate perfectly normal workplace rules and myriad other laws.   

Contact Seyfarth labor lawyers for advice and training before you have to deal with the implication of the Lion Elastomers II decision in the workplace.

[1] Cautionary Authors’ Note – We chose to use the real words from a real case to demonstrate a point and we apologize for having done so.  But this is not without reason, for if indeed the words used by an offending employee are deemed acceptable by the Board, then it is difficult to imagine it would be inappropriate to repeat them in an article about the Board’s decision.  Of course, the reality is that the words simply are not acceptable in the workplace or when addressing co-workers.

By: Grayson Moronta, Glenn Smith, and Howard Wexler

Seyfarth Synopsis: On April 24, 2023, New Jersey Governor Phil Murphy, signed A4772/S3215, which addresses unemployment insurance (“UI”) benefits for workers during labor disputes, including strikes.

A4772/S3215 (the “Bill”) amends existing law, now allowing UI benefits to be distributed to workers during an employer lockout even if a strike did not immediately precede the lockout. The Bill also decreases the timeframe from 30 days to 14 days following a strike that UI benefits are disqualified, while allowing for benefits to be paid immediately regardless of the timeframe if replacement workers are hired on either a permanent or temporary basis. Finally, the Bill clarifies that there is no disqualification if an issue in the labor dispute is the failure of the employer to comply with an agreement between the parties.

Governor Murphy stated that unemployment benefits  “should be a universal right for individuals who have recently lost their jobs, are unable to find work, or are currently in the middle of a labor dispute[.]” Labor unions have praised the Bill’s signing. Charlie Wowkanech, president of the New Jersey State AFL-CIO stated that “[g]oing on strike is a very difficult decision, but it is sometimes necessary when workers are pushed to their limits. This law will help ease that financial hardship, and we applaud Gov. Murphy for standing with working people and enacting this legislation.”

The Bill took effect immediately and will apply to all UI benefit claims filed on or after January 1, 2022.

By Cary Burke

On April 4, 2023, the National Labor Relations Board signaled that it might allow employees to recover damages stemming from employers refusing to follow bargaining orders pending appeal.  In Hudson Institute of Process Research, 372 NLRB No. 73 (April 4, 2023), the Board ruled that the employer unlawfully failed to bargain with the union.  Ominously, though, the Board noted that it was severing and reserving for consideration whether to order the employer to “make its employees whole for the lost opportunity to bargain.”  In other words, and as we previously discussed here, the Board will take up whether to overrule Ex-Cell-O Corp., 185 NLRB 107 (1970).

For context, in Ex-Cell-O, the Board held that Supreme Court precedent prevented the imposition of financial penalties on employers that refuse to bargain pending appeal of a bargaining order.  NLRB General Counsel Jennifer Abruzzo has made no secret that, in her view, this restriction incentivizes employers to refuse to bargain.  And General Counsel Abruzzo has further made known that she would seek to have Ex-Cell-O overturned in an appropriate case.

It appears that the appropriate case has arrived.  Whether the Board will take up this invitation – and, if so, to what extent – remains unclear.  Just as importantly, how such damages would be calculated is also not well understood.  It’s possible that wage rates and benefits packages of employees working for “comparable” employers that offer similar services or manufacture similar products might be the basis for such calculations.  These “lost opportunity damages” might also be tied to prevailing wages, cost-of-living increases, or some other metric entirely. 

Should the Board overrule Ex-Cell-O and allow for the imposition of such financial penalties, employers that refuse to bargain with a union pending an appeal could open themselves up to steep damages awards should the appeal prove unsuccessful.  In short, the risk calculus will change in significant ways.  For that reason, employers with questions are advised to speak with their labor counsel at Seyfarth Shaw. 

By: Ronald Kramer and Seong Kim

Seyfarth Synopsis:  Another court has found that actuaries who set discount rates for withdrawal liability purposes that are not based upon their “best estimate of anticipated experience” for investments under the plan—in this case, basing the rate assumption only on estimated returns for 40% of the Plan’s assets in low risk fixed income investments—cannot withstand judicial scrutiny.

Yet another multiemployer pension plan’s withdrawal liability interest rate assumption has been shot down by the courts, this time by the Federal District Court for the District of Columbia in Employees’ Retirement Plan of the National Education Association v. Clark County Education Association, Case No. 20-3443 (RDM), 2023 BL 62912 (D.D.C. Feb. 27, 2023), due to the actuary’s failure to adequately justify his decision to use a lower interest rate than that used for funding obligation purposes.  This case is worth noting, as it interprets the D.C. Circuit Court’s decision in United Mineworkers of America 1974 Pension Plan v. Energy West Mining Co., 39 F.4th 730 (D.C. Cir 2022), which struck down the use of PBGC plan termination rates for withdrawal liability purposes.

For background, the Clark County Education Association (“CCEA”) was a contributing employer to the Employees’ Retirement Plan of the National Education Association of the United States (the “Plan”), a multiemployer pension plan.  CCEA withdrew from the Plan in 2018, and the Plan subsequently assessed withdrawal liability of $3,246,349 against CCEA.

In calculating withdrawal liability, the Plan actuary did not use the PBGC plan termination rates, the Plan’s 7.3% funding rate-of-return, or any combination thereof, as the interest rate assumption.  Instead, the actuary utilized a discount rate assumption of 5%, and explained this  was his best estimate of the expected returns on low investment risk and fixed income investments of the types in which the Plan invested.  The actuary explained he adopted this methodology, because the rate reflected both a low-rate investment environment and the expected returns on lower-risk fixed income investments.  Moreover, such a lower rate recognized that a withdrawing employer no longer participates in any future risks regarding plan investments, and the actuary believed it did not make sense to value a liability based on higher rates of return that provided for additional investment risk that only the remaining participating employers had to bear. 

After an arbitrator found the actuary’s assumptions to be unreasonable in the aggregate because the discount rate was unreasonable, the Plan appealed.  The Court found it was “evident from the record that the 5.0% withdrawal liability discount rate . . . was not [the actuary’s] ‘best estimate of anticipated experience under the plan’ as Energy West interpreted that language.’”  Granted, contrary to Energy West, where the actuary used PBGC plan termination rates totally divorced from Plan assets, the discount rate applied here was based investment types actually in the NEA plan.  Yet only 40% of plan assets were in low-risk investments, and that did “not cut it.”  “Energy West requires that an actuary ‘estimate how much interest the plan’s assets will earn based on their anticipated rate of return.’ 39 F.4th at 738.  A discount rate assumption based on the expected returns on a type of asset that makes up less than half of a Plan’s portfolio falls short of that standard.”

The Court made clear that Energy West “does not deprive actuaries of all flexibility” in determining interest rate assumptions for withdrawal liability purposes, nor does it preclude any consideration of risk shifting.  Instead, the Court recognized that there can be a range of permissible discount rate assumptions.  The Court also noted that Energy West does not hold that an actuary’s estimate must encompass the expected rate of return of all of the Plan’s assets.  It could preclude, however, estimates that disregard the expected returns of the majority of the Plan’s assets.  The Court noted that the fact that the actuary reviewed a portion of the Plan’s assets cannot make up for the fact that he failed to consider most of them.  An actuary may be able to weigh risk shifting in the course of selecting a discount rate assumption at the conservative end of a range of reasonable estimates of anticipated investment returns, but “an actuary cannot risk shift his way to a discount rate ‘divorced from’ a plan’s anticipated returns or, as in this case the majority of the assets that drive such returns.” (Citations omitted).

The Court also refused to credit the conclusion of the Plan’s expert witness that 5.0% could be a reasonable estimate of the expected returns of the Plan’s entire portfolio.  The Court was focused not on what an actuary might have done, but what the actuary actually did. Here, the Plan actuary did not look at the Plan’s entire portfolio to determine what a reasonable discount rate was.  The discount rate assumption was unreasonable because it did not give due regard to the Plan’s experience, and given the overall calculation contained no offsetting changes to blunt the impact of that assumption, was unreasonable in the aggregate as well.

Although the arbitrator ordered the NEA Plan to recalculate liability using the actuary’s 7.3% funding rate of return, the Court remanded the matter back to the arbitrator for reconsideration.  The Court noted that while in certain circumstances arbitrators have the authority to impose set remedies, in general arbitrators must defer to the reasonable assumptions made by plan actuaries, and must avoid substituting their own views for those of the actuaries. 

Here, the arbitrator did not explain why setting a discount rate as opposed to a more open-ended remedy was appropriate.  On remand, and in light of the Court’s decision, if the arbitrator concludes it should give the actuary another opportunity to set a reasonable rate, it should do so.  If the arbitrator finds that the actuary really believed that a discount rate of 7.3% reflected the Plan’s anticipated experience, then the arbitrator should say so and could order that rate be used.

Yet again, the use of a discount rate assumption that is divorced from the actual expected investment returns of the majority of plan assets has been found to be unreasonable in the aggregate, and not the actuary’s best estimate.  While the pending PBGC regulations setting forth accepted discount rate methodologies—assuming they are adopted and withstand judicial scrutiny—may resolve this dispute for withdrawals going forward, litigation remains ongoing for those withdrawals that predate the ultimate adoption of the regulations.

By: Jamie Rich, Michael Berkheimer, and Andrew Cohen

On March 20, 2023, National Labor Relations Board (NLRB or Board) General Counsel Jennifer Abruzzo issued GC Memo 23-04. The memorandum is a follow-up to her August 12, 2021, GC Memo 21-04 (“Mandatory Submissions to Advice”), in which General Counsel Abruzzo announced that she would pursue charges and seek to change the interpretation of the National Labor Relations Act (the Act) in several key areas. The recent memorandum narrows the issues that Regional Offices must submit to the NLRB’s Division of Advice for further consideration and interpretation of the law.

Overview of GC Memo 23-04

As General Counsel Abruzzo discussed at length during recent ABA midwinter meetings, there are still several areas of Board law she hopes to change and she is looking for the right case or cases to do so. She intends to pursue 15 issues remaining from the Mandatory Submissions to Advice list found in GC Memo 21-04, including cases involving:

  • protected concerted activity (i.e., the applicability of the inherently concerted doctrine to subjects other than wages, such as diversity, equity, and inclusion-related subjects),
  • strike-related precedent (i.e., intermittent strikes and employers’ ability to set terms and conditions of employment for strike replacements),
  • union membership (i.e., anticipatory withdrawal requirements, ability to withdraw recognition after the third year of a contract of greater duration than three years, and requirements applicable to non-member Beck objectors),
  • successorship (i.e., the ability to establish initial terms and conditions of employment by an employer who discriminates in the hiring of a predecessor’s workforce in order to avoid being treated as a Burns successor),
  • bargaining obligations (i.e., the application of the status quo doctrine to post-contractual benefit increases),
  • information requests (i.e., refusals to furnish information related to plant relocations and refusals to respond to information requests made prior to pre-disciplinary interviews),
  • remedies (i.e., restricting offers of heightened backpay in exchange for waiving reinstatement and authorizing possible make whole remedies for failures to bargain),
  • arbitration agreements (i.e., employers’ ability to promulgate mandatory arbitration agreements in response to protected activity), and
  • extension of the Act’s coverage (i.e., extending coverage to individuals with disabilities in specific situations; revisiting the test for determining whether the NLRB will defer to National Mediation Board advisory opinions regarding Railway Labor Act jurisdiction).

The new memorandum also requires that Regional Offices submit to the Division of Advice cases involving algorithmic management or electronic surveillance.

Status of GC Memo 21-04 – Issues Gone But Not Forgotten

Most of the legal issues referenced in GC 21-04 are not found in GC 23-04, because the Regions already have cases pending, although their outcomes remain to be seen. Those types of matters no longer need to be submitted to the Division of Advice for interpretation, because the Regions may rely on outstanding guidance. In fact, GC Memo 23-04 states that the Division of Advice has issued guidance for dozens of issues found in GC Memo 21-04.

In some cases, the Division of Advice’s guidance has already resulted in the current Democrat-led NLRB overturning precedent. For example, the Board recently overruled precedent holding that employer restrictions on employees’ display of union insignia in the workplace are presumptively unlawful absent special circumstances.

Other cases have not yet reached the current Board, or have not yet been decided. There are 46 issues found in GC Memo 21-04 for which the Division of Advice has issued guidance, including arguments that protected concerted activity should include worker complaints about not being tipped and arguments that employees should be able to encourage their co-workers to vote for union representation while on-duty.

One of the more controversial items that remains pending is General Counsel Abruzzo’s position on captive audience speeches. On April 7, 2022, her office released GC Memo 22-04 , describing the General Counsel’s position that captive audience speeches are unlawful unless the employer holding them provides certain assurances to employees. Counsel for the General Counsel is actively pursuing this legal theory in Cemex, Case No 28-CA-230115, and its related cases. Last week, on March 16, 2023, the Associated Builders and Contractors of Michigan sued General Counsel Abruzzo for declaratory and injunctive relief. See Associated Builders and Contractors of Michigan v. Jennifer Abruzzo, in her official capacity as General Counsel of the National Labor Relations Board, Case No. 1:23-cv-00277-RJJ-RSK (W.D. Mich. March 16, 2023). The lawsuit argues that General Counsel Abruzzo has “embarked on a personal campaign to transform federal labor law.” It further argues that GC Memo 22-04 wrongfully targets extant law on captive audience speeches and coerces employer speech by limiting the freedom of expression guaranteed by the First Amendment and Section 8(c) of the Act. The lawsuit takes issue with the memorandum-writing process itself and seeks declaratory relief enjoining GC Memo 22-04.

What This Means for Employers

General Counsel Abruzzo released two new memoranda this week, including GC Memo 23-04, only a few days after the Associated Builders and Contractors of Michigan filed its lawsuit against her. This indicates that the General Counsel remains undeterred and will continue to pursue her aggressive labor agenda, particularly regarding the 15 legal issues found in GC Memo 23-04. Time will tell whether the General Counsel’s various initiatives will survive challenge. In the meantime, employers with cases that may involve legal issues found in 21-04 or 23-04 should be wary. We will continue to provide updates here as these matters (and more!) develop.

By: Cary Burke

As we previously posted here, on February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) ruled in McLaren Macomb, 372 NLRB No. 58, that the mere proffer of a draft severance agreement containing broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA” or “Act”). 

Since that time, employers have been scratching their heads regarding whether and how they might include any confidentiality or non-disparagement provisions in severance agreements to employees.  Earlier today, General Counsel Jennifer Abruzzo provided labor watchers with at least some answers when releasing GC Memo 23-05 (the “memo”), which purports to instruct Regions on responding to inquiries “about implications stemming from” the McLaren decision.  Of course, it’s important to keep in mind that this memo is not the law, and is not binding on anyone, save for the Regions, which may pursue unfair labor practice charges based on the guidance therein.

To start, severance agreements are not “banned.”  Employers, rather, may continue to proffer and enter into severance agreements so long as they “do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”  In addition, and as expected, the decision applies retroactively.  Unlawful provisions in the severance agreement, moreover, should generally be excised, and will not invalidate the entire agreement.

Surprisingly, though, the General Counsel appears to take the position that maintaining or enforcing a previously-executed severance agreement that contains purportedly unlawful provisions would be considered a “continuing violation,” and would not be subject to the Board’s six-month statute of limitations. In other words, former employees who entered into severance agreements with purportedly unlawful language could file an unfair labor practice charge past the six-month statute of limitations deadline set out in Section 10(b) of the Act.

The Memo further posits that McLaren’s prohibition on overly broad confidentiality and non-disparagement provisions could apply to statutory supervisors, to the extent the severance agreement prohibited a supervisor from participating in a Board investigation.

Of further concern to employers, the memo provides that other typical restrictions in severance agreements could be unlawful, including: 1) non-compete clauses; 2) non-solicitation clauses; 3) no-poaching clauses; 4) broad liability releases; 5) covenants not to sue; and 6) post-termination cooperation clauses. 

Ultimately, the General Counsel’s guidance – far from offering assurances to employers – seems to expand McLaren’s reach to now possibly apply to agreements to former supervisors, agreements proffered to employees beyond the Board’s six-month statute of limitations, and to typical post-employment restrictions, like non-competition agreements.  This approach – which signals a further expansion of Section 7 rights into typical employer/employee interactions – follows the General Counsel’s recent comments that the Board should return to the “inherently concerted doctrine,” which holds that employee discussions about race, gender, or “insurance coverage” are protected by the Act.

Employers with questions on this memo should reach out to their Seyfarth attorney or other able labor counsel.

By: Cary Burke

It’s no secret that one of National Labor Relations Board General Counsel Jennifer Abruzzo’s primary priorities is to broaden the damages available to an aggrieved party.  Indeed, as we’ve previously discussed here, last December, the Board ruled in Thryv, Inc., 372 NLRB No. 22 (Dec. 13, 2022), that aggrieved employees are entitled to recover damages that are a “direct and foreseeable” result of an unfair labor practice.  This sea change, though, appears to be a beach-head, rather than an end in and of itself.  Damages stemming from employers refusing to follow bargaining orders pending appeal appear to be next on the list.

By way of brief background, the Board ruled in Ex-Cell-O Corp., 185 NLRB 107 (1970), that Supreme Court precedent prevented the imposition of financial penalties on employers that refuse to bargain pending appeal of a bargaining order.  According to General Counsel Abruzzo, however, the lack of the availability of a monetary remedy incentivizes employers to refuse to bargain. 

Given the General Counsel’s focus on expansion of remedies – and her success in this arena already – we expect the Board to revisit Ex-Cell-O.  More to the point, the Board’s decision in Thryv allowing for the recovery of direct and foreseeable damages strongly suggests that the Democratic Board majority would overrule Ex-Cell-O if presented with the opportunity to do so.  This expected ruling, in turn, would very likely allow for the recovery of financial penalties upon the finding that an employer refused to comply with a bargaining order pending appeal.  Such financial penalties could conceivably encompass “lost opportunity damages,” which could include wages and benefits an employee might have earned had the employer chosen to bargain.   

How such lost opportunity damages might be calculated, of course, is anyone’s guess. Perhaps, wage rates and benefits packages of employees working for “comparable” employers that offer similar services or manufacture similar products might be the basis for such calculations.  Or such purported lost opportunity damages might be tied to cost-of-living increases or even federal prevailing wages.

Not to belabor the point, but we expect that remedies available to aggrieved parties will continue to broaden (and become more speculative).  For this reason, employers should carefully consider the merits of any appeal of a bargaining order.  An unsuccessful appeal could saddle an employer with significant liability, should the Board rule that financial penalties are recoverable upon a refusal to bargain finding. 

Employers with questions are advised to speak with their labor counsel at Seyfarth. 

By: Arthur Telegen, Cary Burke, and Alex Reganata

On February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) once again issued new precedent when holding that the mere proffer of a draft severance agreement containing broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA” or “Act”). The severance agreement provisions before the Board contained extremely broad restrictions and arose in the context of underlying unfair labor practices (“ULPs”) that included circumventing a certified bargaining representative.  It remains to be seen, therefore, whether the Board will seek to invalidate more narrowly-tailored confidentiality and non-disparagement provisions.

At issue in McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), were the legality of certain provisions contained in form severance agreements proffered to 11 furloughed bargaining unit members (in addition to various ULP allegations). These provisions, which were broad, boilerplate style provisions, were found by the Board to have forbidden virtually all communications about the agreement or any legal proceedings based on the terminations, as well as any statements that would “disparage” or “harm the image” of the employer. The Board also noted that any violation of these provisions would result in “substantial monetary or injunctive relief,” even though the severance amounts were quite small. To further complicate matters, the employer failed to inform the employees’ union of the proposed agreements or negotiate over the effects of their layoff, which all Board members agreed was required in this case.

With these facts before it, the Democratic majority overruled two Trump-Board decisions and held that the provisions at issue under this fact pattern violated the Act. With respect to the non-disparagement provision, the Board reasoned that “[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act.” Further, according to the Board, “any statement asserting that the [employer] had violated the Act” included “employee conduct regarding any labor issue, dispute, or term and condition of employment” and interfered with “efforts to assist fellow employees, which would include future cooperation with the Board’s investigation.” The Board found the confidentiality provision to be unlawful because it prevented employees from “disclosing even the existence of an unlawful provision contained in the agreement,” which would interfere with their ability to file Board charges or participate in an investigation. Moreover, the Board determined that the confidentiality provision would have interfered with the ability of employees to speak with their co-workers and their union (if any) about the contents of their severance agreement.

The Board also held that the employer’s mere proffer of the draft agreements violated the Act in this instance. On this point, the Board reasoned that the employer’s proffer of the agreements containing offending provisions, even absent acceptance of the offending terms, “coerced” the employees from exercising their Section 7 rights to communicate with others regarding their terms and conditions of employment.   

What is not so clear is how much will change for most employers. As a starting point, the decision – and the Act — applies only to “employees” under the Act, and not to supervisors or managerial employees (with Section 2(11) containing a definition of “supervisor”).  Thus, this decision has no discernable impact on settlement agreements with supervisors and management.  Additionally, it remains to be seen whether the same restrictions would apply to settlement agreements negotiated with plaintiff’s counsel or with a union.  Beyond this, most well-advised employers already use severance templates that provide exceptions to confidentiality provisions that impinge on such matters as speaking to investigators, participating in agency hearings, or filing charges with federal agencies. 

What may be more important is that the decision serves as a reminder that employers should take care to draft such agreements to serve only necessary business interests. In particular, it might be worth considering whether a confidentiality or non-disparagement clause in a severance agreement with a non-supervisory employee is truly necessary to protect the employer’s interests. Sometimes, they might be. In other instances, though, such as where the agreements are issued as part of a large scale reduction in force (RIF) or when an employee did not have access to confidential information or trade secrets, those provisions may have little value and may be limited or eliminated. Employers also should be mindful of federal and state laws that might further restrict the scope of their confidentiality or non-disparagement policies, including the federal Speak Out Act.

In the end, the Board has not yet slammed the door on well-tailored severance arrangements that protect employer confidentiality interests while limiting their impact on Section 7 rights.  We suggest for the moment that employers take a hard look at their severance forms, and hold their ground on carefully tailored, business-required restrictions.  

Employers with questions can reach out to their Seyfarth lawyer or other able counsel for assistance.

By: Cary Burke and Olivia Jenkins

At the end of last year, Congressional appropriators gifted a $25 million budget increase to the National Labor Relations Board.  While this boost in funding fell short of President Biden and General Counsel Jennifer Abruzzo’s requests, this cash infusion should give the Board and its Regions the ability to further the General Counsel’s agenda.  With the Regions having additional resources to investigate and prosecute cases, and with the Board primed to engage in significant rulemaking, we expect to see a host of changes to labor law in 2023, some of which we outline below

The End of All-Hands Meetings?

At the top of the General Counsel’s wish list is an end to “captive audience” meetings, which she has argued are “inherently coercive.”  Indeed, in several interviews and post-hearing briefs, Ms. Abruzzo has expressed her view that employers should not have the right to conduct mandatory all-hands meetings where management officials relay factual information, as well as their opinions, to attempt to lawfully persuade employees to vote against unionization. 

An Expected Change to the Joint Employer Standard… Again

In early September, 2022, the Board issued a notice of proposed rulemaking, wherein it proposed to once again upend its joint-employer jurisprudence.  Under the proposed rule, which we expect the Board to approve in the next few months, a business that contracts with another business for services may be considered a joint employer where it maintains indirect or reserved control over the contracted “employees’ essential terms and conditions of employment,” such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules.  This expected expansion of the joint employer standard could inject uncertainty into typical contracting relationships – like a warehousing employer hiring a sanitation service – at the same point in time that employers are facing a potential recession. 

Increased Scrutiny of An Employer’s Neutral Work Rules

In early January, 2022, the Board invited briefing from parties and amici regarding whether it should revisit its framework for determining whether an employer work rule violates the National Labor Relations Act.  Ultimately, we expect this “new” framework to look a lot like the Board’s previous Lutheran-Heritage standard, whereby the maintenance of a facially-neutral work rule will violate the Act if employees would reasonably construe the rule to prohibit union and other protected concerted activity.  This restrictive analysis was difficult for employers to apply and led to inconsistent results.  For example, a workplace civility requirement might be found lawful, where as a workplace prohibition on disparaging communications might not.  Employers would do well to closely follow these developments, and may want to consider reviewing their current policies and rules to ensure they pass muster under this more restrictive analysis.

Weingarten Rights in a Non-Union Workplace

As we previewed in our companion blog post summarizing the Board’s big 2022 decisions, we anticipate that the General Counsel will argue that Weingarten rights – the right of a union-represented employee to a witness during an investigatory interview that may lead to discipline – should also apply in non-unionized workplaces.  To the extent the Board agrees with the General Counsel, employers could be forced to grant an employee’s request for a witness during an interview conducted in the course of a confidential investigation.  Not only would such a witness compromise the confidentiality of the proceedings, but breaking confidentiality could also cause the employer to run afoul of other nondiscrimination statutes.         

Prepare for More 10(j) Injunction Actions

In late October, 2022, the General Counsel instructed Regions to pursue “full interim relief” when seeking injunctive relief under Section 10(j) of the Act.  Pursuant to Memorandum GC 23-01, Regions should first attempt to settle the entire case.  Failing that, Regions should offer the employer the “opportunity to voluntarily agree to an interim settlement that includes remedies, such as reinstating alleged discriminatees or agreeing to bargain” while the underlying charge is litigated before the Board or an ALJ. 

This framework may not be palatable to most employers, as it would appear to require them to concede that an action was unlawful before the conduct is actually ruled upon.  As an example, should an employer lawfully discharge employees during an organizing campaign, the employer would have to bring those employees back to work to avoid defending an injunction action while simultaneously defending the terminations before the Board or the ALJ.  Stated another way, to avoid injunction proceedings, the employer would be forced to bring employees who it lawfully discharged back to work, only to potentially secure a decision from the Board that the terminations were lawful. 

Increased Scrutiny of Typical Employee Monitoring Technology

Also in late October 2022, the General Counsel issued Memorandum GC 23-02, wherein she announced her intention to “protect employees” from what she describes as “intrusive or abusive” and “omnipresent” electronic monitoring and algorithmic-driven management practices that might interfere with employees’ Section 7 rights under the National Labor Relations Act.  To accomplish this goal, the GC proposed an amorphous burden-shifting “framework” where an employer will be found to have presumptively violated the Act where its “surveillance and management practices, viewed as a whole, would tend to interfere with or prevent a reasonable employee in engaging in activity protected by the Act.” In defense, the employer would be forced to establish that the practice at issue is narrowly tailored to address a legitimate business need or, in the words of the General Counsel, “that its need cannot be met through means less damaging to employee rights.” 

Ultimately, this proposed framework appears to place the onus on employers to justify their use of routine workforce management technology, such as monitoring employee work rates, using surveillance cameras as a loss prevention tool, or using GPS tracking devices and cameras to monitor drivers. 

So What Now?

Given the Board’s Democratic majority and the General Counsel’s stated priorities, employers should consider preparing for these and other employee-friendly changes to labor law by, among other things: 1) reviewing and revising policies and rules; 2) considering the extent of their use of third-party vendors; and 3) watching for important Board decisions.  The pendulum has well and truly swung back from the more employer-friendly Trump Board days.  Keep an eye on the blog for more information.