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.

By: Ronald Kramer and Seong Kim

Seyfarth Synopsis: The billions of taxpayer dollars now flowing out to financially troubled multiemployer plans is good news for those plans, their contributing employers, and plan participants. That said, it is not a “get out of jail free” card for employers considering withdrawing from such plans. Employer beware.

Christmas came early this past year for some financially troubled multiemployer pension plans, thanks to newly available Special Financial Assistance (SFA) under the American Rescue Plan Act.  President Biden recently announced, for example, that the Central States, Southeast and Southwest Areas Pension Fund would receive $35 billion in SFA.  Similarly, the New York State Teamsters Pension Fund in November learned it would receive $963.4 million in SFA.

As of December 30, 2022, PBGC has approved over $45.6 billion in SFA to plans that cover over 550,000 workers, retirees, and beneficiaries.  By the time the application process for SFA is over, the PBGC estimates that more than 200 plans covering more than 3 million participants and beneficiaries will receive some $94 billion in SFA.

This windfall may cause contributing employers participating in these plans to wonder how this effects them.  There is a lot for contributing employers to be grateful for:

  1. Multiemployer plans receiving SFA, if all goes as planned, should receive sufficient funds to cover all participant benefits due through 2051.  Even if the SFA amounts received are insufficient to cover benefits payable through the next 28 years, one would hope the financial relief received would cover benefits at least through the vast majority of that time;
  2. Multiemployer plans receiving SFA are limited both in how they invest SFA money and in increasing benefits, so as to reduce the chances these multiemployer plans run out of money too soon;
  3. Participating employees and retirees should actually receive their full pension benefits for the foreseeable future.  Employers need not fear that the benefits they are paying for are illusory;
  4. These multiemployer plans will not become insolvent like they would have without SFA, and that reduces the risks of mass withdrawal; and
  5. The SFA program was paid for entirely by taxpayer dollars.

What SFA does not do, however, is make it any less expensive to exit these funds — at least initially.  While the Central States Pension Fund, for example, may have just gone from being 17% funded to roughly 78% funded, that is not going to equate to a similar immediate reduction in employer withdrawal liability.  This is due to two new PBGC withdrawal liability rules for funds receiving SFA: 

  1. The discount rate to determine unfunded vested benefits for withdrawal liability must be the PBGC’s very conservative mass withdrawal interest assumptions that approximate the market price that insurance companies charge to assume a similar pension-benefit-like liability for withdrawals. For many multiemployer pension plans, this is a lower discount rate than they would otherwise use for funding purposes, and will result in a higher calculated amount of unfunded vested benefit liability.  This rule remains in effect until the later of ten years or when the plan projects it will exhaust any SFA assets (assuming plan benefits and expenses are paid exclusively from SFA assets until exhausted).
  2. Multiemployer plans, at least those receiving SFA under the PBGC final rule as opposed to the old interim rule, will not initially credit all of the SFA assets for withdrawal liability purposes.  Instead, the SFA will be phased in, with the phase-in period beginning the first plan year in which the plan receives SFA, and extending through the end of the plan year in which the plan expects SFA funds to be exhausted (assuming plan benefits and expenses are paid exclusively from SFA assets until exhausted).  Depending upon the multiemployer plan, it could be several years or even well over a decade before most or all of the SFA assets are counted for withdrawal liability purposes.  This will mean employers withdrawing shortly after plans receive SFA will see little benefit to the SFA reflected in their assessments.

Every multiemployer plan’s situation is different, but most contributing employers should not assume a withdrawal — especially if their share of unfunded vested benefit liability is so high their payment schedule is capped at 20 years —  will immediately be less expensive post SFA.  At a minimum, they should consult with counsel and actuaries to determine what the SFA means, and does not mean, for them.

While contributing employers may not benefit from multiemployer plans receiving SFA in the form of immediately reduced withdrawal liability, both contributing employers and employees will certainly still benefit from participating in plans that will now how have sufficient assets to pay full benefits for decades to come.  That is something everyone can be thankful for.

By: Cary Burke and Olivia Jenkins

As labor watchers have come to expect over the past few years, the National Labor Relations Board saved some of its most consequential decisions for release in late December.  In a slew of rulings, the Board significantly broadened the categories of damages available to aggrieved employees, re-opened the door to the formation of “micro-units,” and gifted contractors increased access to private employer-owned property.  These changes to settled law follow the Board’s employee-friendly actions throughout the year.  Below, we briefly touch on some of the most impactful decisions from a very busy 2022.  And in a companion post, we’ll run down what we think employers might expect from the Board in 2023.

Increased Damages Available to Aggrieved Employees

The Board kicked off its now-expected December flurry by drastically expanding the pool of damages an aggrieved employee may recover upon an unfair labor practice finding.  In Thryv, Inc., 372 NLRB No. 22 (Dec. 13, 2022), the Board majority ruled that any “make-whole remedy” must include compensation for any “direct or foreseeable pecuniary harm.”  Such compensation, per the Board, may very well include things like credit card penalties or out-of-pocket medical expenses, to the extent a terminated employee was not able to pay their credit card debt because they lost their income stream (or lost their health insurance).  To be sure, the General Counsel must put on evidence of these costs and expenses.  This ruling, though, may significantly expand an employer’s liability beyond lost earnings and benefits. 

The Return of the Micro-Unit

In an expected, yet unwelcome, decision, the Board majority re-opened the door to the organization of “micro-units” of employees.  In American Steel Construction, 372 NLRB No. 23 (Dec. 14, 2022), the majority overruled PCC Structurals, 365 NLRB No. 160 (2017), and The Boeing Co., 368 NLRB No. 67 (2019) – two Trump Board decisions — and returned to its previous test to determine whether additional employees must be included in a petitioned-for unit in order to render it an appropriate bargaining unit.  Under this reinstated test, a petitioned-for-unit will be found to be an appropriate unit if it is “readily identifiable as a group” and the workers share a “community of interest.”  In simple terms, the return to this analysis (known as the Specialty Healthcare test) will make it easier for unions to organize a subgroup of an employer’s business, like a group of cashiers within a grocery store.

Contractor’s Section 7 Rights Trump Employer’s Private Property Rights

Rounding out its trio of late-December decisions, the Board narrowed the instances in which an employer may limit access to off-duty contractors.  In another return to an Obama-era test, this time from the Board’s decision in New York, New York Hotel & Casino, 356 NLRB 907 (2011), the Board ruled that an employer may only limit a contractor employees’ right to access the employer’s property where the employer demonstrates that 1) the employees’ protected concerted activity “significantly interferes” with the employer’s use of its property; or 2) the employer sets out a legitimate business reason to exclude the employees from its property, like a demonstrated and specific need to maintain production.  This reinstated standard will likely result in increased contractor organizing activity on employer property.

Employers Must Continue Dues Checkoff Provisions Post-CBA Expiration

In another about-face, the Board reversed its Valley Hospital Medical Center, 368 NLRB No. 139 (2019) (Valley Hospital I) decision and held that employers must continue to follow union dues checkoff provisions after the expiration of a collective bargaining agreement until either the parties reach a new agreement or come to impasse.  Valley Hospital Medical Center Inc., 371 NLRB No. 160 (September 30, 2022) (Valley Hospital II).  In a vigorous dissent, Members Kaplan and Ring argued that this change to Board law impermissibly interfered with the bargaining process by “eliminating one of employers’ legitimate economic weapons” to persuade unions to agree to a successor collective bargaining agreement.

Weingarten Rights Extended to Replacement Employees

In line with General Counsel Abruzzo’s stated goal to expand Weingarten rights, the Board held in Troy Grove, 371 NLRB No. 138 (August 14, 2022) that strike replacement workers are entitled to a witness during an investigatory interview that may lead to discipline.  We expect this decision is a mere beachhead for the General Counsel, who appears to be looking for an appropriate case to test whether Weingarten rights should apply to employees in a non-union workforce. 

NLRB Revises the Mail-Ballot Election Test

In an effort to keep up with the everchanging “new normal” of COVID 19 safety parameters, the Board altered its test for deciding when to conduct mail ballot elections.  Indeed, in September 2022, the Board held that Regional Directors must look to the Centers for Disease Control’s COVID 19 Community Level Tracker when deciding whether to proceed with an in-person election or order a mail-ballot election. To the extent the CDC’s tracker provides that community transmission is “high,” the Regional Director has the discretion, but not the obligation, to order a mail-ballot election.  It remains to be seen whether this decision will have a significant impact on the frequency of mail-ballot elections, particularly in light of the decline in COVID 19 transmission nationwide.

Without belaboring the point, the Board’s decisions this year skewed strongly in favor of employees and labor unions.  We expect this trend to continue in 2023, as the Democrats now hold a 3-1 Board majority.  In a coming blog post, we discuss what we expect from the Board in the coming months.  Stay tuned!

By: Jennifer L. Mora and Cary Burke

On October 31, 2022, National Labor Relations Board (“NLRB” or “Board”) General Counsel Jennifer A. Abruzzo issued Memorandum GC 23-02, wherein the General Counsel 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 (“NLRA” or “Act”). To do this, the General Counsel explains that she will both “vigorously enforce extant law,” and urge the Board to apply current law “in new ways.”

Current Board law already addresses certain types of surveillance and management technologies. For instance, in cases where an employer observes open protected concerted activity and public union activity, such as hand billing or picketing, the Board has recognized that “pictorial recordkeeping tends to create fear among employees of future reprisals.” It also is well established that an employer violates the Act if it rolls out new monitoring technologies in response to Section 7 activities or uses existing technologies to discover protected concerted activities.

The goal of the Memorandum is to look beyond these traditional methods of surveillance and monitoring and stay ahead of recent technological advances, including the use of artificial intelligence, algorithm-based decision-making, and surveillance during break times and in non-work areas. On the latter point, the General Counsel commented that “[i]f the surveillance extends to break times and nonwork areas, or if excessive workloads prevent workers from taking their breaks together or at all, they may be unable to engage in solicitation and distribution of union literature during nonworking time.”

To accomplish this goal, the General Counsel proposes 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.”

Forebodingly, even where the employer can meet its burden, the General Counsel will still request that the Board engage in an undefined “balancing test” pitting the employer’s right to manage its business as it sees fit against an employee’s ability to exercise their Section 7 rights. Should this proposed balancing test ultimately tip in favor of the employer, the General Counsel would still request that the employer be forced to disclose to employees 1) the technology in use; 2) the employer’s reasons for using the technology; and 3) “how it is using the information it obtains.” Without that information, the General Counsel posits, employees cannot “intelligently exercise their Section 7 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. To the extent they cannot do so to the General Counsel’s satisfaction, this sort of typical 21st century employer practice could very well be deemed unlawful.

It bears noting, too, that the General Counsel buried a Halloween scare in the footnotes. Therein, the General Counsel instructs Regions to require employers to report expenditures on electronic management technology to the U.S. Department of Labor’s Office of Labor-Management Standards under Form LM-10 as part of any settlement of such charges.

Given the breadth of the routine employer actions that this memorandum targets, employers would do well to seriously consider whether, when, and how they employ electronic management technology in their workplaces. Employers with questions should reach out to their labor counsel for assistance.

By: Cary R. Burke and Olivia Jenkins

On October 20, 2022, National Labor Relations Board (“NLRB” or “Board”) General Counsel Jennifer Abruzzo issued Memorandum GC 23-01, which instructs the Regions to “routinely attempt to obtain full interim relief” when seeking injunctive relief under Section 10(j) of the National Labor Relations Act (“NLRA”).  For context, Section 10(j) authorizes the Board to seek a temporary injunction against an employer in federal court when a matter is being litigated before an ALJ or the Board.  

In the memorandum, the General Counsel instructs the Regions to first attempt to settle the entire administrative 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.  According to the General Counsel, this framework will: 1) increase settlements, 2) reduce litigation, and 3) conserve resources for the Agency and all parties involved.  Regions are further directed to seek the described interim relief where “appropriate,” including in cases involving discharges during organizing campaigns, alleged violations of the Act during initial bargaining, and alleged unlawful withdrawals of recognition.

Whether these instructions will achieve their desired ends, though, is up for debate.  Ultimately, the General Counsel’s framework could be viewed as forcing employers 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.  To be sure, absent an agreement to settle the 10(j) portion of the charge, the employer would be forced to litigate whether injunctive relief is appropriate while also defending the Charge.  But this has always been the case, and the General Counsel’s new 10(j) settlement procedures as described in the memorandum add little incentive for employers to settle cases.  Should an employer come up against a request for interim relief, they should think carefully about whether this new form of interim relief makes sense.  Employers with questions on how to navigate the 10(j) process should consult with a labor attorney.

By:  Ronald Kramer and Seong Kim

Seyfarth Synopsis:  Contributing employers to multiemployer pension plans have seen some big developments in July.  The PBGC released its new Final Rule on Special Financial Assistance on July 8, 2022, which will help financially troubled plans avoid insolvency, but will now also subject contributing employers to higher withdrawal liability assessments compared to the Interim Final Rule.  On the same day that the Final Rule was issued, the D.C. Circuit rejected a plan’s use of a risk-free discount rate for calculating withdrawal liability, placing into dispute withdrawal liability discount rates used by many plan actuaries that differ considerably from their funding rate assumptions.  Finally, the pending PBGC regulations on prescribed discount rate assumptions are coming soon.  Employer beware.

For employers who participate in multiemployer pension plans, July has been a busy month.  The PBGC published its Final Rule (FR) on the Special Financial Assistance (SFA) Program for financially troubled plans that was established as part of the American Rescue Plan Act of 2021 (ARPA), and the D.C. Circuit Court of Appeals issued its long awaited decision in United Mine Workers of America, 1974 Pension Plan v. Energy West Mining Company, Case No. 20-7054 (D.C. Cir., decided July 8, 2022).  Employers, when monitoring their multiemployer plan participation, should review these developments and the pending PBGC withdrawal liability assumption regulations.

PBGC Final Rule

Earlier this month we published a summary of the key changes under the Final Rule from the Interim Final Rule (IFR) (click here).  While we encourage you to read it, three changes in the Final Rule should be of considerable important to participating employers.

First, the PBGC revised the interest rate assumptions plans must use for purposes of calculating the total SFA amounts to be received.  Under the IFR, plans were required to use the same interest rate assumption for both SFA and non-SFA assets, even though SFA assets were also required to be segregated and invested much more conservatively than non-SFA assets.  By using the same investment assumptions for both, this meant that the amount of SFA provided likely would not be sufficient to pay all benefits due through the plan year ending 2051, given plans would have to invest the SFA in investments with lower returns.  To address this, under the FR there is a separate interest rate assumption for non-SFA plan assets, and a more conservative interest rate assumption for SFA assets.  This should increase the total amount of SFA plans receive, making it more likely that plans will have sufficient assets to avoid insolvency through 2051.

Second, the FR gives plans greater flexibility to invest SFA assets more aggressively.  Under the IFR, 100% of SFA assets were required to be invested in investment grade fixed income securities.  The Final Rule, however, allows plans to invest up to 33% of SFA assets in return seeking investments (e.g., publicly traded common stock, equity funds that invest primarily in public shares, bonds, etc.), with the remaining 67% restricted to investment grade fixed income securities. This development provides plans with an important element of flexibility in the investment of SFA assets, and it could significantly increase the likelihood that plans will be able to avoid insolvency through 2051.

Third, the FR switched course on how SFA funds must be recognized for purposes of determining total unfunded vested benefits and, hence, withdrawal liability.  The IFR previously required all SFA funds to be counted immediately when calculating unfunded vested benefits.  As a result, the infusion of SFA assets into a financially troubled plan would generally reduce its overall underfunding percentage and, hence, reduce withdrawal liability assessed on withdrawing employers.  To balance that, however, and to discourage participating employers from subsidizing their withdrawals with SFA funds, any plans receiving SFA funds are required to calculate and assess withdrawal liability using PBGC plan termination rates as the applicable discount rate — in other words, plans must use basically a risk-free discount rate.  Mandatory use of this artificially low discount rate was designed to inflate the underfunded status of a plan, in order to increase the amounts of withdrawal liability assessed, and thus prevent withdrawing employers from directly benefiting from the SFA.  Whether a withdrawing employer would benefit or be harmed from that “asset increase/discount rate reduction” tradeoff would depend upon the specific plan, its financial status, and the discount rates it traditionally uses for withdrawal liability.

In a departure from the IFR, the FR institutes a “phase-in” feature for crediting SFA funds for purposes of determining unfunded vested benefits, and in turn, withdrawal liability. The phase-in period begins the first plan year in which the plan receives SFA and extends through the end of the plan year in which the plan expects SFA to be exhausted. How long the phase-in period can last will depend upon when the plan anticipates to have spent all of the SFA it receives.  To determine the amount of SFA assets excluded each year, the plan multiplies the total amount of SFA by a fraction, the numerator of which is the number of years remaining in the phase-in period, and the denominator is the total number or years in the phase-in period. The phased recognition of SFA assets does not apply to plans that received SFA funds under the terms of the IFR unless a supplemental application is filed.

While individual employer experiences may vary depending upon the plan, phase-in period, and when they withdraw, among other things, what this means is an employer withdrawing from a plan that receives SFA will automatically be assessed withdrawal liability using PBGC plan termination rates (which as of the date of this publication are currently running at 2.81% for the first 20 years and 2.94% thereafter), when many plans use 6.5% to 7.5% funding rate of return assumptions for that purpose.  Yet, that same employer may only see very little of the SFA assets credited toward the plan assets for calculating withdrawal liability under the FR.

Instead of preventing withdrawing employers from receiving a windfall, the FR phase-in will end up subjecting many employers that withdraw during the phase-in period to higher withdrawal liability assessments (than had plans received no SFA).  As seen from Energy West below, the difference in discount rates (absent any offsetting SFA) can lead to significant increases in withdrawal liability.  Depending upon the plan, this phase-in “penalty” could last for a few or many years.  Participating employers need to understand this risk, the phase-in period, and the potential costs of remaining in a plan that intends to seek SFA.

Energy West Mining Company

On July 8, 2022, the same day the PBGC issued its FR, the D.C. Circuit Court issued its long-awaited decision in Energy West.  At issue in Energy West was whether a plan could use the PBGC plan termination rate as the discount rate for purposes of determining an employer’s withdrawal liability. When Energy West withdrew in 2015, the United Mine Workers Plan actuary applied the risk-free PBGC plan termination rate — 2.71% for the first 20 years and then 2.78% thereafter — as the discount rate to calculate withdrawal liability.  That resulted in an assessment of over $115 million.  Had the actuary used the 7.5% discount rate assumption he had set for plan funding purposes based on the plan’s historic investment performance, the assessment would only have been about $40 million.  The actuary chose the PBGC rates as his best estimate for withdrawal liability purposes because an employer withdrawing from a plan no longer bears any risk if the plan investments do not perform as anticipated.

While an arbitrator and district court ruled for the plan, the Circuit Court reversed.  The Court found that the Multiemployer Pension Plan Amendments Act provision that the actuary use assumptions “which, in combination, offer the actuary’s best estimate of anticipated experience under the plan,” required that the actuary not only choose the discount rate, but that that rate be based on the plan’s actual investments.  As the actuary’s assumption in this instance was not chosen on the plan’s past or projected investment returns, by definition it was not the actuary’s best estimate.

The Court reversed the decision, but did not mandate that the plan use the actuary’s 7.5% funding rate of return assumption.  The Court recognized that the funding rate of return and the withdrawal liability discount rate assumptions need not be identical.  There is some acceptable range of reasonableness based on a plan’s characteristics:  “The assumed discount rates must be similar, even if not always the same.”  The Court directed the district court to vacate the arbitration award and have the actuary recalculate withdrawal liability using a discount rate assumption based on the plan’s actual characteristics.

Energy West is now the second appellate court in the past year (the Sixth Circuit issued a similar ruling last year) to reject withdrawal liability discount rates that are not based solely on plan characteristics (i.e., on the actuary’s best estimate of anticipated experience under the plan).  While not every employer will see a possible $75M reduction in withdrawal liability, many employers in plans that have differing funding and withdrawal liability rates, in theory, will see their estimated and actual withdrawal liability drop to the extent plan actuaries adopt withdrawal liability discount rates similar to plan funding interest rate assumptions.

How will actuaries respond to Energy West?  It is highly possible that other appellate courts will disagree with Energy West, leading to a circuit split that may have to be decided by the Supreme Court.  Hundreds of millions of dollars, if not billions, are at stake.  Moreover, it remains to be seen how “similar” discount rates need to be to the funding rates of return.

But Wait, There’s More

Last and certainly not least, the PBGC is still drafting regulations that will prescribe actuarial assumptions which may be used by a plan actuary in determining withdrawal liability.  It is anticipated the PBGC will bless some methods — perhaps even the use of the risk-free PBGC plan termination rates — that will permit the application of considerably lower discount rates than what would otherwise be assumed based solely on plan experience.  Such regulations, which are imminent, may moot this issue — at least for employers that have not withdrawn before the regulations become final.

Given the FR, Energy West and similar cases, and of course the pending PBGC regulations on actuarial assumptions, participating employers need to keep their eyes open on the latest developments to avoid possible surprises.

By: Jamie R. Rich and Abigail D. Skinner

Seyfarth Synopsis: On February 24, 2022, the National Labor Relations Board, Equal Employment Opportunity Commission, and Department of Labor hosted a webinar identifying their intent to ramp up prosecution of employers. The federal agencies are working together to specifically target employer retaliation against employees in an effort to address racial and economic injustice. Referring to labor issues as a “civil rights issue,” and a “human rights issue,” the agency leaders described the tools they are utilizing — such as early injunctive relief, cross-agency training, and resource sharing — to incentivize workers to speak out about employer misconduct. Employers should be prepared to face fast and forceful scrutiny of any alleged misconduct.

The National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), and the Department of Labor (DOL) have joined forces in an effort to target workplace retaliation. This multi-agency initiative was launched in November 2021 to build on memoranda of understanding (MOUs) that allow these federal agencies to coordinate investigations and litigation, reduce resource expenditures, and jointly pursue remedial relief. Before the initiative, MOUs existed between the DOL and EEOC and between the NLRB and EEOC. On January 6, 2022, the DOL’s Wage and Hour Division and the NLRB also announced an MOU. The three agencies held a virtual discussion on February 24, 2022, to inform the public of joint efforts to ramp up enforcement.

During the discussion, several of the agency leaders argued that, in their view, when one worker protection statute has been violated, it is likely that other worker protection statutes have been violated as well. For example, while a wage theft case is often categorized as strictly a wage and hour issue, it may also implicate Title VII if workers were denied wages because of their national origin. DOL Solicitor Seema Nanda emphasized the agencies’ efforts to act as “one government,” utilizing cross training, joint settlements, and information sharing between agencies. EEOC Regional Attorney Mary O’Neill added that the EEOC is “very interested” in cases that present multi-agency issues.

Retaliation is a Key Enforcement Priority

The priority of the multi-agency initiative is to address the impact that workplace retaliation has on workers in low income and diverse populations.  Charlotte Burrows, EEOC Chair, shared her view that retaliation has a greater impact on workers of color, and discussed the “deep inequality” that was exposed by the death of George Floyd and the COVID-19 pandemic. The agencies decided to focus their efforts in this area because of their concern that workplace retaliation often deters vulnerable workers from coming forward. O’Neil pointed out that employees who experience workplace retaliation and lose their jobs may suffer other consequences, such as trouble feeding their families. Throughout the webinar, the agency leaders were emphatic that these are civil rights issues, not just labor issues.

While the agencies are aiming to broadly address racial and economic injustice, they focused a substantial portion of their discussion on protection of immigrant workers specifically. The agencies have a close eye on industries that often employ high percentages of immigrant workers, such as agriculture, garment, hospitality, casino, and care facility workers. The agency leaders gave examples of cases in which employers retaliated against workers by threatening their immigration status. Nanda argued that the agencies can only be effective when workers feel safe speaking out.

Worker Protection Strategies and Enforcement Tools

The agency leaders discussed the various ways that they are addressing workplace retaliation using individualized and coordinated efforts.

The DOL’s Wage and Hour Division indicated that it is vigorously responding to both subtle and overt retaliation. Fisher discussed the success she has had in the last year using temporary restraining orders and preliminary injunctions as primary tools to stop employer retaliation “early and often.”

The NLRB representatives described the work the agency has been doing to protect workers of color. NLRB General Counsel Jennifer Abruzzo stated “I believe that racial and economic justice advocacy, where there is a direct link to the workplace, is protected….” She said that if workers are retaliated against for coming together to raise bias issues in the workplace, “we are going to prosecute.” She stated that the NLRB has already issued a number of complaints in this area since she was named General Counsel and intends to continue doing so.

NLRB Regional Director Lisa Henderson highlighted an NLRB General Counsel Memo published in November 2021, which lays out the NLRB’s policies and procedures for protecting immigrant workers who file charges or act as witnesses in NLRB proceedings. The NLRB is committed to pursuing U and T visa petitions for workers who come forward. The DOL also protects worker witnesses and gives them incentives to speak with investigators. DOL Regional Solicitor Maia Fisher added that it is “standard practice” for the DOL to seek injunctive relief when employers threaten their employees’ work authorization status, saying “we do not tolerate that.”

O’Neil described the EEOC’s efforts to educate workers about their rights, for example, by building relationships with nonprofits and community groups. The agency leaders also suggested that they “meet people where they are,” by speaking in the workers’ native languages and using social media and other websites that workers typically use when sharing information.

In her closing remarks, Abruzzo encouraged workers to exercise their right to “band together,” further stating, “We are here to help you, educate you, and remedy violations of your rights…I hope this webinar empowers you to raise your voices.”

Takeaways

Employers should be aware that federal worker protection agencies are taking an active stance against workplace retaliation and incentivizing workers to speak out against their employers. Increased litigation can be expected as these agencies continue to prioritize and coordinate enforcement efforts in this area. Employers should also be prepared to face requests for injunctive relief and expanded remedies for alleged violations of worker protection laws.

As these federal agencies move forward with this racial and economic justice initiative, companies should reach out to their Seyfarth contact for recommendations on preventing or addressing retaliation and other workplace misconduct. Please contact your Seyfarth attorney or one of the authors if you have questions regarding the initiative.

By:  John Phillips and Vanessa Rogers

Seyfarth Synopsis:  The City of Houston is raising the minimum wage for employers with covered contracts, subcontracts, and concession agreements at George Bush Intercontinental Airport, William P. Hobby Airport, and Ellington Airport.  Under Mayor Sylvester Turner’s new executive order, the minimum wage will increase to $13.00/hour on April 1, 2022, $14.00/hour on October 1, 2022, and $15.00/hour on October 1, 2023.

On February 17, 2022, Houston Mayor Sylvester Turner signed an executive order to raise the wages for Houston airport workers to $15.00 per hour by October 1, 2023.  Mayor Turner previously signed a similar executive order in 2019 to raise the minimum wage to $12.00 per hour, and this new executive order replaces the prior one.

The new executive order applies to contractors, subcontractors, and concession agreements involving any city aviation facility, which includes George Bush Intercontinental Airport (IAH), William P. Hobby Airport (HOU), and Ellington Airport (EFD).  Unlike many minimum wage ordinances, the new executive order applies to employees of carriers and employees of concessionaires.  And although not specifically mentioned by name in the order, the executive order’s broad reach means that it also covers janitorial contractor employees and employees covered by collective bargaining agreements.  The executive order will not interfere with the right of an air carrier or a concessionaire, or one of their subcontractors to enter into or adhere to an agreement with a collective bargaining organization, but it will require covered contractors and subcontractors to incorporate the new minimum wage requirements into their city contracts.

As the executive order’s requirements are incorporated into city contracts, covered contractors and subcontractors will be required to pay their employees increased minimum wages, as follows:

  • Currently: $12.00 per hour
  • April 1, 2022: $13.00 per hour
  • October 1, 2022: $14.00 per hour
  • October 1, 2023: $15.00 per hour
  • 2024: As determined by applicable wage rate increase

For tipped employees, these new minimum wages must also be accounted for when applying the tip credit.

Accordingly, employers with city contracts or subcontracts at Houston area airports should review the new executive order and their pay practices, to ensure that they are planning for the new wage increases in the near future.

 

By: Ashley Cano

On February 4, 2022, President Biden signed an Executive Order that mandates the use of project labor agreements (“PLAs”) on federal construction projects valued at or above $35 million.  PLAs are pre-hire collective bargaining agreements between contractors and labor unions that set the terms and conditions of employment for a specific construction project, such as wages, hours, working conditions, worker qualifications, and dispute resolution processes.  Thus, under a PLA, the government or a general contractor negotiates with one or more unions to set the terms of the project before the project starts.

And while the Order does not require construction companies to unionize, it does require federal construction contractors to adhere to the terms of PLAs.  Under the Order, PLAs must include guarantees against strikes and lockouts, prompt and mutually binding procedures for resolving labor disputes, and mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.

In announcing the Order, the White House said the PLA requirement will benefit taxpayers, contractors, and workers because it will: (1) alleviate coordination challenges on large, complex projects; (2) raise quality standards for contractors bidding on federal projects; (3) reduce uncertainty in the contracting process by standardizing the work rules, compensation costs, and dispute settlement processes on construction projects; and (4) increase training for the federal contracting workforce.  Proponents of the Order say it will boost wages on federal construction projects, guarantee work for unions, and prevent labor disputes and worker shortages.  Critics say it will reduce competition among contractors and raise construction costs.

Over the last several years, union membership in the construction industry has steadily declined.  Indeed, according to the Bureau of Labor Statistics, only 12.6% of workers in the construction industry were union members in 2021, compared to 14% in 2011.  This has forced organized labor to look for different ways to improve their market share of total construction projects, and pushing the Administration to mandate the adoption of PLAs is one way to do so.  The White House claims it is keeping a promise made to deliver a shot in the arm to unions.

Biden’s Order only applies to direct federal procurement, meaning that it does not apply to projects funded by federal grants to non-federal entities, such as state and local governments.  As a result, the bulk of the projects funded under the $1.2 trillion Infrastructure Investment and Jobs Act will not be covered.  Nonetheless, based on FY2021 figures, the Order could affect $262 billion in federal government construction contracting and nearly 200,000 workers on federal construction contracts.  The Order directs the Federal Acquisition Regulatory Council to propose regulations implementing the provisions of the Order within 120 days, to consider and evaluate public comments on the proposed regulations, and to promptly issue a final rule.

President Biden has stated he will be the most pro-union president ever, and it remains to be seen what the Administration will attempt next to advance labor union membership.  In the meantime, employers should stay tuned for further developments on this front.  For more information on the Executive Order or any other related topic, please do not hesitate to reach out to your favorite Seyfarth attorney or any member of Seyfarth’s Labor & Employment Team.

By: Molly Gabel and Kyllan Kershaw

Democrats face ethics déjà vu at NLRB- POLITICONLRB General Counsel Jennifer Abruzzo broadened the type of cases in which the NLRB will seek federal injunction proceedings through her General Counsel Memorandum 22-02 (Feb. 1, 2022), which issued earlier today.  Section 10(j) of the NLRA, 29 U.S.C. § 160(j), enables the General Counsel to seek injunctive relief in federal district court when the General Counsel can show normal NLRB processes will take too long to effectively remedy the unfair labor practice.  To receive such an injunction, the General Counsel must show that it is likely an unfair labor practice has occurred and that any NLRB remedial order will be null.  The NLRB has historically sought 10(j) relief in organizing cases only in those matters involving “serious, if not massive, unfair labor practices,” typically including improper grants of benefits and/or unlawful discharges.  See NLRB Section 10(j) Manual at 2.1.1.

In her memo, Abruzzo instructed Regional Offices to begin seeking injunctive relief in broader circumstances.  “Regions should promptly investigate alleged Section 8(a)(1) threats or coercion made during an organizing drive and immediately submit those cases for consideration of injunctive relief even in the absence of discharges or other Section 8(a)(3) violations or during the pendency of discharge or other Section 8(a)(3) investigations.”  Abruzzo reasons that such action is necessary to avoid “threats often escalat[ing] into action,” assuming that allegations of such threats “often” translate to unlawful discharges, job elimination, etc.

The memo further directs Regions and the NLRB’s Injunction Litigation Branch to “consider all contextual circumstances to determine whether it may be appropriate to recommend pursuit of an injunction in cases involving threats or other coercion, such as inherent impact on employees and union support; nature, frequency, severity and dissemination; hierarchal rank of the actor(s); local labor market; and recidivism, to name a few.”

Abruzzo’s directive will sweep in Section 8(a)(1) charges involving much lower level allegations.  Many such charges involve statutory supervisors’ alleged statements that require credibility determinations from a fact finder—an NLRB Administrative Law Judge.  Yet, it appears that Abruzzo is poised to seek injunctive relief in such cases well before any fact-finder renders a decision.  If injunctive relief is granted, employers may be barred from making necessary, legitimate, and otherwise lawful business decisions.  Moreover, employers will have to contend with negative press coverage and legal expenses associated with injunction litigation.  Employers with organizing activity should prepare accordingly, including by training supervisors on the nuances of an organizing campaign.