By Alex Meier & Cary Reid Burke 

The National Labor Relations Board moved from theory to practice in this administration’s battle against restrictive covenants. Recently, the Regional Director of Region 9 of the National Labor Relations Board filed a consolidated complaint alleging that certain restrictive covenants contained in offer letters and policies in an employee handbook violated the National Labor Relations Act. This complaint is a logical outgrowth of GC Memo 23-08, in which NLRB General Counsel Jennifer Abruzzo set out her view that “the proffer, maintenance, and enforcement” of restrictive covenants violates Section 8(a)(1) of the NLRA. Undoubtedly, this matter will serve only as the first test case, but not the last. For that reason, and because the broader non-compete landscape has shifted, employers might consider revisiting their restrictive covenants practices to mitigate risk. The complaint also serves as a reminder that employers should review their employment policies and handbooks regarding employee communications—particularly if those policies restrict communications about compensation or other terms and conditions of employment.

This complaint involves charges brought by three individuals at an aesthetics clinic that offered non-surgical cosmetic procedures. According to the complaint, the clinic maintained a number of policies that run afoul of the NLRA, including:

  • A confidentiality provision that expressly listed “salaries, bonuses, and compensation package information” in its scope;
  • An insubordination policy that prohibited disparaging statements about management or other employees;
  • A company communication policy that prohibited employees from making communications that could harm the “goodwill, brand, or business reputation” of the clinic;
  • A non-compete provision that imposed a two-year limitation on the employee’s ability to provide similar services within a 20-mile radius of the clinic, as well as a two-year limitation on customer and employee solicitation; and
  • An “Exit Agreement” that included an acknowledgment that damages for any violation of the non-compete, client non-solicit, and employee non-solicit amounted to, respectively tens of thousands of dollars in costs spent training the breaching employee (prorated under certain circumstances), $25,000 per solicited client, and $150,000 per solicited employee.

According to the complaint, several employees became dissatisfied with their work and left the company. Upon their resignations, the employer demanded that the departing employees all repay certain training costs, and the employees filed a slew of unfair labor practice charges, alleging, among other things, the maintenance of unlawful work rules. The allegations in the complaint regarding the restrictive covenants are limited to identifying the covenants and alleging that the clinic terminated one employee for refusing to sign the Exit Agreement “and to discourage employees” from engaging in concerted activity.

The Region investigated the charges, and has now issued a consolidated complaint, alleging that these restrictive covenants violate Section 8(a)(1) of the NLRA under the theory that such covenants tend to chill employees in the exercise of their Section 7 rights. The complaint also included references to several internal messages where supervisors allegedly demanded that employees refrain from discussing their compensation or their communications with management.

The Region appears to be building their argument that post-employment restrictive covenants somehow implicate Section 7 rights. To do so, Region 9 has set out an interesting first test case: as alleged in the complaint, certain of the employer’s policies seem to restrict discussions among employees relating to pay or employment conditions, which is unlawful. It’s possible that the General Counsel might leverage these allegedly unlawful policies (or other favorable facts) to extract concessions related to the clinic’s restrictive covenant program, or to argue that these policies collectively represent an unlawful limitation on employees’ Section 7 rights.

But it is unclear at this point whether the Act can be stretched to cover restrictive covenants for statutory “employees” under the National Labor Relations Act.[1] Indeed, the General Counsel only recently began to target the enforceability of restrictive covenants by way of a memorandum to the Regions. That memorandum, in turn, provides little detail regarding what legal theories (if any) grant the Board the authority to interfere with covenants that become effective only when the employment relationship between an employer and employee end. Even if the NLRB does have such authority, it bears recalling that the states have developed 50 separate bodies of law regarding their enforceability of restrictive covenants. To the extent the Board follows the General Counsel’s lead and finds the covenants at issue unlawful, the NLRB would wipe a large portion of that case law off the map (at least with respect to statutory employees).

Moreover, it’s also unclear whether the NLRB has the bandwidth and resources to litigate restrictive covenant cases. Setting aside whether the creation of two distinct bodies of law – one for supervisors excluded from the Act and one for statutory employees – makes sense, the Board has limited resources. As GC Abruzzo explained in her report to Congress last year, the Regions are already stretched thin with their current case load. Adding a whole new tranche of cases to their dockets, particularly ones that move very fast and are heavily litigated, would seem to be a bridge too far.

While we do not recommend that employers modify their restrictive covenant programs based on theoretical risk from the NLRB, this complaint is a good reminder that employers should examine whether they have legitimate business interests sufficient to support restrictive covenants under state law, especially for employees not working in a management or supervisor role. Risks are increasing for companies that universally impose broad restrictive covenants on employees, both under the NLRA and under state law.

And the decision also serves as a reminder that overbroad employee handbooks and policies regarding the confidentiality of compensation or employment conditions present significant risk where the NLRB is on much stronger statutory grounds. 

We will continue to monitor NLRB activity involving restrictive covenants, and employers with questions should reach out to their Seyfarth attorney.

[1] Most relevant to this post, the NLRA exempts supervisors from the definition of “employee.”

By: Molly Gabel and Rachael Reed

On August 31, 2023, the National Labor Relations Board’s Democratic majority issued a decision in American Federation for Children, Inc. The ruling expands the scope of activities protected by Section 7 of the National Labor Relations Act (NLRA) to include statutory employees’ efforts to advocate for nonemployees. To reach this outcome, the Board overruled Amnesty International, which held that employee advocacy on behalf of individuals who do not qualify as “employees” under the NLRA is excluded from Section 7 protections. 

The Board’s 2019 Amnesty International decision was one of several Trump-era rulings involving “protected concerted activity” targeted for review by the Board’s current General Counsel Jennifer Abruzzo in Memorandum 21-04 (“Mandatory Submissions to Advice”). The diverging results in American Federation for Children and Amnesty International each turned on answering when, if ever, a statutory employee seeking to support a nonemployee is acting for the purpose of “mutual aid and protection” within the meaning of the NLRA. 

“Mutual Aid and Protection” Under Amnesty International

Section 7 of the NLRA gives employees the right “to engage in . . . concerted activities for the purpose of . . . mutual aid and protection.” 29 U.S.C. § 157 (emphasis added). Employee conduct protected by this statutory provision requires the employee’s activity be both “concerted” and for “mutual aid and protection.”

In Amnesty International, the Board considered whether employees who joined a petition seeking pay for their employer’s unpaid interns engaged in protected Section 7 activity. The then Republican majority determined they had not. According to the Amnesty International Board: “Activity advocating only for nonemployees is not for ‘other mutual aid or protection’ within the meaning of Section 7.” Because Amnesty’s unpaid interns did not qualify as statutory employees under Section 2(3) of the NLRA, their coworkers’ efforts to help them gain paid wages were not undertaken for “mutual aid and protection,” and thus were not protected under Section 7.

American Federation for Children Takes a Much Broader View of “Mutual Aid and Protection” Based on Principles of Solidarity

The Board’s 3-1 American Federation for Children decision purports to overrule Amnesty International and broadens the interpretation of “mutual aid and protection” to encompass advocacy on behalf of nonemployees in circumstances that might also benefit statutory employees. American Federation for Children involved an employee whom the Board majority claimed solicited support from her coworkers to ensure the rehiring and work permit sponsorship of a former colleague. Applying Amnesty International, an administrative law judge determined the employee had not acted for the purpose of mutual aid and protection because her former colleague was not a statutory employee under the NLRA. On exceptions filed by the General Counsel, the Board reversed.

First, the Board, including the dissent, concluded that the employee’s colleague was most appropriately viewed as an applicant for employment and, therefore, met the definition of an “employee” under the NLRA. With this issue resolved, the Board majority concluded that the employee’s efforts to rally support for her former colleague’s rehiring were “clearly for the mutual aid and protection of employees” within the meaning of Section 7.

As the dissent pointed out, the Board majority should have ended its analysis there. Instead, it went a step further and alternatively held that the employee acted for mutual aid and protection even if her colleague was not a statutory employee. In doing so, the Board majority stated it was expressly overruling Amnesty International and returning to what it characterized as the “traditional” approach to nonemployee advocacy expressed by the Second Circuit in NLRB v. Peter Cailler Kohler Swiss Chocolates Co. and the Board in General Electric Co. According to the Board majority, these cases firmly establish a “solidarity principle” – wherein an employee who comes to the aid of another can reasonably expect help in return – is integral to the concept of mutual aid and protection under the NLRA.

Board Member Marvin Kaplan dissented from the decision and critiqued the Board majority for overruling Amnesty International when the facts of the case rendered that unnecessary. He explained in his dissent that the Board’s “alternative holding” is nonbinding, nonprecedential dicta, foreshadowing how this case may be challenged before courts.

The Board’s Stated New Standard for Nonemployee Advocacy

With this background in mind, the Board majority announced its new standard for assessing whether advocacy for nonemployees is for mutual aid and protection. “The question is simply whether in helping those persons, employees potentially aid and protect themselves, whether by directly improving their own terms and conditions of employment or by creating the possibility of future reciprocal support from others in their efforts to better working conditions.”

The Board identified two key ways in which the employee at issue could potentially benefit from advocating for her colleague’s rehiring. First, by advocating for her colleague’s rehiring, the employee could reasonably expect to receive her support in return when, if ever, a future need arises. Second, in seeking to ensure the hiring of a desired coworker, the employee was working to improve her own and other coworkers’ working conditions.

The Board further ruled that the legal standard announced in American Federation for Children applies retroactively.

Takeaways for Employers

The impact of the Board’s American Federation for Children decision is potentially far-reaching. In comments addressing the ruling, Board Chair Lauren McFerran stated: “Standing in solidarity can be a protected act regardless of the employment status of those you stand with—the question is simply whether, in helping others, employees might help themselves and get help in return.”

Employers are left asking in response: “At what point does the prospect of future help become so remote or attenuated from the employment environment that employees can no longer be said to be acting for mutual aid and protection?” The American Federation for Children decision leaves that question unanswered. However, in an environment where social justice and other political and social movements have increasing reach and visibility, it is unlikely that the bounds of “mutual aid and protection” under the American Federation for Children standard will remain untested for long. Until then, employers faced with employees who seek to advocate for nonemployee groups and various causes should understand there is newfound legal risk and uncertainty in light of the Board’s decision.

If you have questions about the impacts of this decision or how to navigate the changing labor landscape, do not hesitate to contact our team of experienced labor attorneys to help guide you through these issues.

By: Jamie Rich, Lisa Nichols, and Joe Vento

On August 25, 2023, the National Labor Relations Board (NLRB or Board) issued its much-anticipated Cemex decision, which has broad implications for union organizing. It handed unions a win with a partial return to the Joy Silk standard. Now, if a union demands recognition from an employer because it claims that it has obtained union authorization cards demonstrating majority support within a bargaining unit, the employer must pursue one of two options: (1) it can recognize and bargain with the union or (2) it can file a petition (a so-called RM Petition) seeking an NLRB election. If the employer and union proceed to an NLRB election and the employer commits unfair labor practices prior to the election, that would normally require a rerun of the election. Under the new Cemex standard, if an employer engages in even one unfair labor practice after a petition for election is filed, the Board may instead refuse to hold an election and issue an order requiring the employer to recognize and bargain with the union. An employer may also be subject to a bargaining order if it neither recognizes the union nor files a petition for an election.

Unions have long advocated for card check recognition requirements via proposed legislation such as the Employee Free Choice Act and the PRO Act. These efforts have repeatedly failed. But recently, in GC Memo 21-04, NLRB General Counsel Jennifer Abruzzo indicated that she would seek to overturn decades of settled United States Supreme Court and NLRB precedent regarding the voluntary nature of card check recognition. In the GC Memo, she asked the Regional Offices reporting to her to submit cases to the Division of Advice, so that she could pursue certain cases that might allow the Board to overturn existing precedent and change the law. The General Counsel found that opportunity in Cemex.

The Background on Cemex

Cemex stemmed from an organizing drive among certain ready-mix drivers employed in Southern California and Las Vegas, Nevada. Around 2018, the International Brotherhood of Teamsters (Union) began organizing a unit of 350 ready-mix drivers and trainers at 24 Cemex facilities. The union filed a petition for election with the NLRB in December 2018, after gathering 207 authorization cards. The employer’s reaction to the union’s organizing drive was described as “quick” and “aggressive.” The ALJ found that the employer: (1) employed approximately five independent consultants to assist with the employer’s campaign; (2) met with small groups and individuals daily for approximately six months; (3) presented PowerPoint displays and answered questions at several small-group meetings; (4) presented employees with two video messages urging employees to reject the union; (5) distributed stickers, flyers, pamphlets, and letters encouraging employees to reject the union; and (6) monitored the Union’s social media and posted “antiunion” messages on its own social media.

In March 2019, the employees voted against the union by a margin of 179 to 166. The union objected to the election, arguing that the employer engaged in extensive unlawful and coercive conduct which required setting aside the election. On review of the union’s objections, the ALJ found the employer had engaged in numerous unfair labor practices, such as threatening employees that they could be fired or written up for having union stickers on their hard hats; telling employees that they could be discharged or have their hours reduced if they choose to unionize; stating that the company would “close their doors and take all their trucks to another site” if the union won the election; and discharging an employee because of her union activity, among others.

The ALJ ordered a rerun of the election, along with additional remedial actions “designed to dissipate as much as possible the lingering atmosphere of fear created by its unlawful conduct and to insure that if the question of union representation is placed before employees in the future they will be able to voice a free choice.”

The Board’s Announcement of a New Standard for Card Check Recognition

On appeal, the General Counsel argued that a bargaining order (an order imposing union recognition and directing the employer to begin collective bargaining negotiations) was the appropriate remedy for the employer’s violations, not a rerun of the election. Specifically, the General Counsel asked the Board to overturn Linden Lumber, which held that an employer does not violate the National Labor Relations Act solely by insisting on an NLRB election and refusing to accept other evidence of majority status. The General Counsel also asked the Board to return to the Joy Silk standard, which held an employer violates the Act by refusing to bargain with a union with majority support upon request, absent a showing of good faith doubt about the union’s majority status. In response, Cemex argued that even if the Board were to return to the decades-old Joy Silk standard, that standard could not be applied to its situation because the union had never presented evidence of a card majority.

The Board announced the following standard in Cemex:

An employer violates [the Act] by refusing to recognize, upon request, a union that has been designated as [a] representative by the majority of employees in an appropriate unit unless the employer promptly files a petition … to test the union’s majority status or the appropriateness of the unit, assuming that the union has not already filed a petition. […] However, if the employer commits an unfair labor practice that requires setting aside the election, the petition (whether filed by the employer or the union) will be dismissed, and the employer will be subject to a remedial bargaining order.

The decision is clear that neither the employer nor the General Counsel will need to apply or prove the “good faith doubt” standard found in Joy Silk. Instead, the employer is free to seek an NLRB election to test the union’s majority status. The decision also points out that an employer who simply refuses to bargain without filing a petition for an election may still demonstrate that it does not have a bargaining obligation in a later-filed unfair labor practice case. However, the employer acts “at its peril” when it takes this approach.

The decision also clarifies that a bargaining order is not “the first and only option” when an employer commits an unfair labor practice during the critical period prior to an election. Instead, the applicable standard requires consideration of all relevant factors, including the number of violations, their severity, the extent of dissemination, the size of the unit, the closeness of the election (if one is held), the proximity of the misconduct to the election date, and the number of unit employees affected. But notably, the Board acknowledged dissenting Member Kaplan’s point as accurate that an employer’s “generally applicable handbook confidentiality policy” could serve as the requisite unfair labor practice to warrant a bargaining order under certain circumstances.   

If the employer commits unfair labor practices that invalidate the election, the Board will, instead, rely on the prior designation of a representative by the majority of employees by nonelection means and issue an order requiring the employer to recognize and bargain with the union from the date the union demanded recognition from the employer. The Board emphasized that the employer’s right to the NLRB election machinery “will only be honored if, and as long as, the employer does not frustrate the election process by its unlawful conduct.

After announcing and clarifying its new standard, the Board issued an order requiring Cemex to recognize and bargain with the union. It held that Cemex refused the union’s request to bargain at a time when the union had in fact been designated representative by a majority of employees in a concededly appropriate unit, and then committed unfair labor practices requiring the election to be set aside. In response to the employer’s argument that the union had not demanded recognition, the Board explained that the union met this requirement when it filed a petition for an election.

The Board Declined to Revisit Mandatory Meetings and Tricast Precedent

Cemex also presented an opportunity to review two other legal issues found in GC Memo 21-04: (1) whether so-called “captive audience” meetings which require workers to listen to arguments against unionization are coercive, and (2) whether there should be new restrictions on certain employer speech. The Board was unwilling to use Cemex to overturn precedent on those issues.

The Board first declined the General Counsel’s request that it overrule Babcock & Wilcox, which addressed the lawfulness of employer-mandated campaign meetings. It found that the record did not establish that all or most employees were required to attend the employer’s small-group meetings on threat of discipline.

The Board then declined to overrule Tri-Cast and its related precedent, and reversed the judge’s finding that the employer violated the Act when it told drivers that unionization would change their relationship with management, that once they were under a collective-bargaining agreement they would have to go through the union instead of going directly to management, that they would lose their ability to deal directly with their supervisors, and that they were putting their relationship with management at risk. However, the Board noted that Chair McFerran and Members Wilcox and Prouty are willing to reexamine Tri-Cast and related precedent in the future with an appropriate case.

What This Means For Unions

Many unions have updated their organizing playbooks, and are already sending employers a letter demanding card check recognition prior to filing a petition for election with the NLRB. This is sure to become standard practice following Cemex. In a statement issued by the NLRB, Chair McFerran said, “The Cemex decision reaffirms that elections are not the only appropriate path for seeking union representation, while also ensuring that, when elections take place, they occur in a fair election environment.” She went on to explain that, “Under Cemex, an employer is free to use the board’s election procedure, but is never free to abuse it — it’s as simple as that.”

What This Means For Employers

Union demands for recognition based on authorization cards will now present a minefield for employers. Under the Cemex standard, if an employer refuses card check recognition, files a petition, and proceeds to an election, and is later found responsible for unfair labor practices occurring before the election, it may be subject to a bargaining order instead of a rerun of the election. And an employer will be subject to a bargaining order if it neither recognizes the union nor files a petition for an election. As such, when employers receive a recognition demand from a union, they should proceed with extreme caution.

Unfortunately, Cemex is retroactive, which means the new standard will be applied to any pending case where an employer refused to bargain upon a request for voluntary recognition, engaged in unfair labor practices during the critical period, and won the election, if the union can prove it had majority support at the time it requested recognition. The outcome in those cases may shed light on the types of unfair labor practices that do (or do not) result in a bargaining order.

Unions will be more likely to aggressively file unfair labor practice charges during organizing drives because of the new Cemex framework. Employers should take particular note of the Cemex Board majority’s acknowledgment that unlawful employee handbook policies can serve as the basis for a bargaining order in the right circumstances. This is particularly concerning in light of the Board’s recent decision in Stericycle, Inc., 372 NLRB No. 113 (August 2, 2023) (our blog post on that decision can be viewed here), where the Board held that a facially-neutral work rule is presumptively unlawful if a “reasonable” employee predisposed to engaging in protected concerted activity could interpret the rule to have a “coercive meaning.”

Notably, it remains to be seen whether the new Cemex standard will survive appeal. In a partial dissent, Member Kaplan argued that the United States Supreme Court’s decision in Linden Lumber precludes judicial enforcement of bargaining orders issued under the new standard. Member Kaplan expressed concern that the new standard will “result in lengthy litigation over an alleged violation that will never survive judicial review.”

If you have questions about the impacts of this decision, or if your company is facing an organizing drive, do not hesitate to contact our team of experienced labor attorneys to help guide you through these issues.

By: Sul Ah Kim and Cary R. Burke

Earlier this week, the National Labor Relations Board (“NLRB” or “Board”) overturned established precedent and held that a facially neutral work rule is presumptively unlawful if a “reasonable” employee predisposed to engaging in protected concerted activity could interpret the rule to have a “coercive meaning.” Stericycle, Inc., 372 NLRB No. 113 (August 2, 2023).  Assuming the General Counsel makes this modest showing, which the dissent correctly notes is an extremely low bar to clear, the employer may rebut this presumption by proving that the rule “advances legitimate and substantial business interests that cannot be achieved by a more narrowly tailored rule.”  Whether any employer can meet this burden – which for all practical purposes amounts to a “strict scrutiny” analysis – remains to be seen.

For context, more than eight years ago, in February 2015, the employer in Stericycle, Inc. distributed a revised employee handbook to its employees, which included a rule restricting the use of personal electronic devices to break times only.  The union filed unfair labor practice charges, and the General Counsel issued a complaint under the theory that the rule unlawfully infringed on employees’ Section 7 rights.  The Administrative Law Judge disagreed, and held that any impact on Section 7 activity was outweighed by the employer’s desire to ensure employees did not use their cell phones in hazardous work areas.  The General Counsel appealed the ALJ’s decision to the Board, and argued, among other things, that the Board’s then-current framework – which deemed a given rule lawful where its potential impact on Section 7 rights was outweighed by the employer’s business justifications – should be thrown out and replaced with a more employee-friendly standard.

To say the Board accepted the General Counsel’s invitation would be an understatement.  The highlights of this decision include:

  • A facially neutral work rule is presumed to be unlawful where the General Counsel makes a showing that it has a reasonable tendency to chill employees’ exercise of their Section 7 rights.
  • Whether the rule has a “tendency” to do so will be viewed from the perspective of an employee who is predisposed to engaging in protected concerted activity, not any other regular employee. 
  • The employer’s intention in maintaining a rule is immaterial.
  • To the extent the rule is ambiguous, the rule will be interpreted against the drafter (i.e., employer).
  • To rebut the General Counsel’s presumption, the employer must prove that legitimate and substantial business interests support the rule, and those interests cannot be achieved through less restrictive means.

While the Board majority takes pains to argue that this new framework is in line with prior Board decisions, that is simply not true: never before has the Board held that a given rule must be interpreted from the viewpoint of an employee who intends to engage in Section 7 activity.  Instead, for 85 years the Board has considered the impact of a rule from the perspective of a “reasonable employee.”  This appears to be a significant change: it is hard to envision a work rule that could not be interpreted to infringe on employees’ Section 7 rights in some form or fashion when viewed from the perspective of an employee who contemplates engaging in Section 7 activity.

It is important to note that this decision applies retroactively.  Because of that, there is a possibility that a host of work rules or policies that were once lawful are not anymore.  These include policies addressing social media, audio and video recordings at work, email use, distribution and solicitation, and bulletin boards, among many others.  It is recommended that employers take this opportunity to review their rules and policies to determine whether they are both narrowly tailored and backed by legitimate business justifications. 

Employers with questions about this ruling should consult with their Seyfarth attorney.

By: Elliot Fink and Cary Burke

Seyfarth Synopsis: In The Atlanta Opera, 372 NLRB 95 (2023), the National Labor Relations Board overturned Trump-era precedent by modifying its independent contractor test and returning to the test announced by the Obama Board. The NLRB now will review a multitude of enumerated and non-enumerated factors when determining independent contractor status, with no factor being given undue weight. In practical terms, this decision will likely not have much impact.  Even so, employers might consider reviewing their independent contractor practices and policies to ensure they have properly classified groups of workers.

Earlier this week, the National Labor Relations Board’s Democratic members upended prior precedent yet again when it ruled in The Atlanta Opera, 372 NLRB 95 (2023), that makeup artists, wig artists, and hairstylists were improperly classified as independent contractors, rather than employees.  In doing so, the Board overruled SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019) in favor of the analysis set out by the Obama Board.  Rather than focusing on the locus of entrepreneurial opportunity – as the Trump Board directed – the Atlanta Opera decision reinstates a muddled analysis that requires the Board to analyze a host of enumerated (and non-enumerated) factors when determining whether a given worker is an independent contractor.  While this decision ultimately throws some additional confusion into the independent contractor analysis, entrepreneurial opportunity still remains a factor in the test.  On that basis, it is more likely than not that this case will have little practical impact.

By way of brief background, in April 2021, a group of independent contractors who worked for the Atlanta Opera filed a representation petition with the NLRB.  After a hearing, the Regional Director held that the independent contractors – wig artists, makeup artists, and hairstylists who contracted with the Atlanta Opera during the fall and spring seasons – were, in fact, employees, and issued a decision and direction of election.  The Opera appealed that decision, and the Board invited briefing from amici on whether it should overturn SuperShuttle and return to the previous 2014 Obama-era standard.

Nearly two years later, the Board issued Atlanta Opera, which overruled SuperShuttle and returned to the prior standard, as it telegraphed when it invited briefing.  To level set here, and as yet another illustration of the lengths this Board will go to implement its pro-labor agenda, the Board did not even have to overturn precedent.  As Member Kaplan explained in dissent, even under SuperShuttle, these workers were improperly classified as independent contractors.  In other words, both Democrat and Republican members agreed that the workers were misclassified under SuperShuttle.  So much for judicial restraint.

In any event, the Board did what it did: whether a given worker retains “entrepreneurial opportunity” – the ability to get their own work from other clients and businesses – no longer carries outsized weight.  It is but one of a host of factors to be considered when analyzing independent contractor status, along with:

  • The extent of control exercised by the employer over the worker;
  • Whether or not the worker is engaged in a distinct occupation or business;
  • The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
  • The skill required in the particular occupation;
  • Whether the employer or the worker supplies the instrumentalities, tools, and place of work for the person performing the work;
  • The length of time for which the worker is employed;
  • The method of payment, including whether payment is by time worked, job performed, or some other method;
  • Whether or not the work is a part of the ”regular business” of the employer;
  • What type of relationship the parties believe they are creating; and
  • Whether the worker is or is not “in business.”

From these enumerated factors, the focus seems to have shifted slightly to whether the worker has a realistic ability to work for other companies, has proprietary or ownership interest in their work, and has control over important business decisions.

Of course, and somewhat confusingly, other “relevant” (and unlisted) factors can come into play, too.  What those are, though, has yet to be answered.

Whether this decision makes much difference is also an open question.  Given the majority and the dissent ultimately agreed that these workers were employees, it doesn’t seem it will.  Beyond that, it is unclear whether this decision will survive appellate review.  As the majority acknowledges, it is directly at odds with the D.C. Circuit Court of Appeals.  And, as with most recent decisions from this Board, we expect this one to be appealed in short order.

Ultimately, while this decision seems to have been announced with a crescendo, its impact will likely be relatively muted.  That said, employers should consider taking another look at their independent contractor agreements and arrangements in light of this ruling, and the Board’s focus on misclassification more broadly.  When doing so, employers might seek to ensure that any individuals with whom the employer contracts actually possess the opportunity for entrepreneurial gain or loss.  Along with that, employers might also review their independent contractor agreements to eliminate (or at least reduce) any reserved right of control the employer maintains over the worker’s terms and conditions of work.

By: Saman Haque and Cary Burke

Seyfarth Synopsis: Recently, an Administrative Law Judge (ALJ), issued a decision in two cases that create the opportunity for the National Labor Relations Act to have a more expansive view of what constitutes protected activity. The ALJ’s decision could also provide employees an expanded definition of protected activity by accepting that “inherently concerted” activity ought to be protected so long as the activity is being engaged in by employees for the purpose of improving the conditions of their workplace, including what seems to be workplace culture and ideologies. The decision, if adopted by the National Labor Relations Board, could expand what “workplace conditions” means in the context of the Act, especially for issues that employees cannot “check…at the door when they start their shifts.”  Employers should think about what ideals are permeating their workplaces that might be “inherently concerted” activity and how those measure up to their current policies as well as their response to these activities.

NLRB General Counsel Jennifer Abruzzo has made no secret of her desire to overhaul extant law to “protect employee rights” under Section 7 of the Act.  Among GC Abruzzo’s more controversial initiatives outlined in  GC Memo 23-04 — and as she recently reaffirmed at the National Employment Lawyers Council Conference — is a proposal to expand the Act’s protection to employee statements about race, age, gender, sex, and even insurance.  Stated another way, in the GC’s view, such individualized comments should automatically be considered concerted, even absent any showing that two or more employees were actually acting together for mutual aid or protection. See Seyfarth’s Blog on GC Memo-23-04.

While the Board has yet to pass on the General Counsel’s invitation to expand the inherently concerted doctrine, it will likely have the chance to do so in short order.  Indeed, on May 3, 2023, an ALJ held that grocery store employees who wore “Black Lives Matter” buttons on their uniforms were engaged in protected concerted activity.  According to the ALJ, by “displaying the ‘Black Lives Matter’ message on their work uniforms, the employees acted to advance their interest as employees to work in an anti-racist, pro-civil rights, and pro justice workplace.” The employer, then, violated the Act when it barred the employees from wearing the buttons in the workplace and by sending several employees home who refused to take them off. 

Interestingly, the ALJ also took the employer to task for purportedly engaging in “virtue signaling,” which the ALJ characterized as a public display of support for a cause without corresponding “good works.”  Here, according to the ALJ, the employer professed its support for the Black Lives Matter movement, but disciplined its own employees for doing the same. 

Whether the employer’s purported virtue signaling had any impact on the ALJ’s ruling is anyone’s guess. What is more clear is that, except in limited situations, the Act grants broad leeway for employees to publicly address race-related topics together. And if the Board accepts the GC’s invitation to expand the inherently concerted doctrine, even individual comments regarding race will likely come under the Act’s protections. 

With all this in mind, employers might consider taking stock of whether, and to what extent, they choose to make public statements of support regarding the news of the day or the movement of the moment.  In some situations, discretion may truly be the better part of valor.  To the extent employers choose to go on a limb, though, they might run the risk of employees seeking to do the same thing during regular working hours and on work time.  Employers with questions about these matters should consult with experienced labor relations counsel.

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 employer’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 pleaded 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.