By: David L. Streck and Bryan Bienias

In its recent 3-1 decision in Macy’s Inc., 361 NLRB No. 4 (2014), the National Labor Relations Board fueled employer concerns about fragmented micro-units in the retail industry.  There, the Board held that a bargaining unit of 41 Macy’s nonsupervisory cosmetics and fragrance (“C+F”) salespersons was an appropriate unit for purposes of collective bargaining, despite the exclusion of salespersons in other departments. The Board’s decision provides a sobering glimpse into the future difficulties retailers may face in showing that a narrowly defined petitioned-for unit is not appropriate.

As discussed in our previous post on the Macy’s case, the primary issue centered on the application of the Board’s 2011 Specialty Healthcare decision to the retail industry. Under the Specialty Healthcare test, any “readily identifiable” group of employees who also share a community of interest is found to be presumptively appropriate, with the burden falling on the employer to show that excluded employees share an “overwhelming community of interest” because the traditional community of interest factors “overlap almost completely.”

Applying this test, the Macy’s Board found that the C+F employees: 1) are readily identifiable as a group based on their similar job classifications and job functions and 2) share a sufficient community of interest because they work in the same department, have common supervision, and share the same purpose and functional integration of selling cosmetic and fragrance products.  While the Board recognized a number of differences among the C+F employees themselves, it found those differences insignificant, particularly because the petitioned-for unit “tracks a departmental line drawn by the employer.” The Board also considered prior retail precedent and made clear that storewide units are no longer presumptively appropriate in the retail industry.

The Board then held that Macy’s failed to show that other salespersons at the store shared an overwhelming community of interest with the C+F employees. In so finding, the Board emphasized the insufficient record evidence of assistance and interchange between all sales employees and the small amount of sales the employees recruited in other departments. The Board also minimized evidence of the similarities between all of the stores’ sales employees (same shifts, handbook, evaluation system, benefits, attendance at morning “rallies”), while focusing on their differences (separate departments, the existence of “counter managers” in the C+F department, separate mid-level supervision, etc.) to find that the employees did not “overlap almost completely.” Notably—and possibly the most troubling for retailers—was the Board’s reliance on certain differences between the C+F  employees and other salespersons to find they did not share an overwhelming community of interest while dismissing those same differences among C+F employees themselves. For example, while finding it significant that other sales employees worked in “separate physical spaces” from C+F employees, the Board minimized the fact that the C+F employees worked on two separate floors of the store by pointing to the presence of an escalator that connected the two work areas.

Finally, the Board outright dismissed Macy’s and the amici’s concerns that the decision would harm the retail industry through “destructive factionalization” of retailers’ operations and the proliferation of competitive and administratively burdensome “micro-unions” at retail stores. The Board found these arguments “pure speculation” and unsupported by the record in this particular case, noting that the C+F unit comprised over one-third of all selling employees and was “significantly larger” than the median unit size (23 to 26 employees) from 2001 to 2011.

The majority’s skepticism aside, it remains to be seen how far the NLRB will go in applying Specialty Healthcare in the retail industry. For now, retailers who would prefer a more broadly defined cross-departmental unit should take heed of the Macy’s decision in both structuring their departments and challenging future petitions for department-by-department bargaining units. As shown in the Macy’s decision, even the slightest differences in departmental structure and lack of contact and interchange between employees in separate departments could suffice to defeat a retailer’s argument for a larger bargaining unit.  There can be no doubt that Macy’s is a major victory for unions, which will try to take advantage of this decision to obtain a foothold in retail stores. Retailers can, therefore, expect to see more petitions for departmental units on the horizon.  Stay tuned.