By: Bryan R. Bienias, Esq.

Seyfarth Synopsis: On Friday, December 1, 2017, newly appointed NLRB General Counsel Peter Robb issued a memorandum containing a broad overview of his initial agenda as General Counsel. It previews many anticipated developments during the Trump Administration. Our blog is exploring a different aspect of the memo each day during the first three weeks of December.  Click here, here, here, here, here, here, here, here, here, here, here, here & here to find prior posts.

While the weather outside may be frightful (for some), the agenda recently set forth by NLRB General Counsel Robb in GC 18-02 is sure to make some employers delightful this holiday season. In this installment, we will focus on the GC’s targeting of the Obama Board’s controversial decisions imposing the duty to bargain over discipline of newly unionized employees, as well as the GC’s preservation of longstanding Board doctrines governing employer campaign communications and withdrawing recognition of unpopular unions.

Out with the Old: The End of Alan Ritchey?

As we discussed here, the Board in Total Security Management, 364 NLRB No. 106 (Aug. 26, 2016) not only reaffirmed the Board’s employer-maligned Alan Ritchey decision, which required employers to bargain over discretionary discipline issued to newly organized employees prior to execution of a first contract, but also mandated prospective make-whole relief including reinstatement and back pay for future violations.

Total Security Management went even further and held that such make-whole relief would be subject to an employer’s “for cause” affirmative defense, placing the ultimate burden of persuasion on the employer to show at the compliance phase that (1) the employee engaged in misconduct; (2) the misconduct was the reason for the suspension or discharge; and (3) that the employee would have received the same discipline regardless of any disparate treatment or reasons for leniency shown by the charging party.

With GC 18-02’s listing of Total Security Management as one Board decision that “might support issuance of complaint, but where we also might want to provide the Board with an alternative analysis,” GC Robb sends a gift-wrapped message to employers that, much like 2017, Alan Ritchey’s and Total Security Management’s days may be numbered.  However, employers should continue treading carefully when considering discipline for newly unionized employees. While the Board’s reversal of these precedents are on the agenda, they remain the law of the land.

In with the . . . Old?: Preserving the Levitz Furniture and Tri-Cast Doctrines

GC Robb’s memo also expressly rescinds former General Counsel Peter Griffin’s GC 16-03, which implored the Board to overturn the framework set forth in Levitz Furniture, 333 NLRB 717, 717 (2001), which allows employers to unilaterally withdraw recognition from a union based on objective evidence that the union has lost majority support (i.e., employee signatures).  Griffin advocated for a new rule requiring a Board-sanctioned election before an employer could lawfully withdraw recognition.  With Robb’s rescinding of GC 16-03, employers can sleep somewhat easier in the year(s) ahead knowing that the Levitz framework will remain intact and that the option for employees to quickly rid themselves of an unpopular union will not be impeded through a long and costly election process.

In addition, GC 18-02 announces Robb’s abandonment of GC Griffin’s initiative to overturn the Board’s Tri-cast doctrine regarding the legality of employer statements to employees during organizing campaigns.  In Tri-Cast, 274 NLRB 377 (1985), the Board held that an employer could lawfully inform employees during a union campaign that they will not be able to discuss matters directly with management if they vote for the union and that such statements could not reasonably be characterized as retaliatory threats.

While the Obama Board had indicated its willingness to eventually overturn Tri-Cast, GC 18-02 effectively ensures that the current Board will maintain the status quo in the new year.

Should you have any questions about GC 18-02 or any labor relations issue, please contact the author, your Seyfarth attorney, or any member of the Labor & Employee Relations Team.

 

 By: Bradford L. Livingston, Esq.

In yet another significant decision overturning a controversial Obama-era ruling, the NLRB has reverted to its prior standards in determining what will be an appropriate bargaining unit for union organizing and bargaining. PCC Structurals, Inc., 365 NLRB No. 160 (December 15, 2017).  Just a day before his term on the Board ended leaving a vacancy and 2-2 split among its members, Chairman Miscimarra along with the two newest Board members appointed by President Trump — over the sharp dissent of the Board’s two Democratic members — reversed the so-called “micro bargaining unit” test set out in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934 (2011). It’s now a Big(ger) Ba(rgaini)ng Theory, or as Sheldon Cooper might say: Bazinga!

By way of background, bargaining units are the identifiable groups of employees that unions can organize, represent, and bargain for at an employer’s facility or facilities. While the National Labor Relations Act for the most part does not define the specific requirements for who can be included in or excluded from any individual unit, it instead looks at whether the group shares enough common working conditions or “an appropriate community of interests.”  Those interests can include an almost limitless number of factors, ranging from the employer’s organizational, management and supervisory structure to which parking lots, break rooms or time clocks certain groups of employees use.  Sometimes a union may represent all employees except managers and supervisors who work at a single location.  Other times, they may represent just a particular craft (e.g., electricians), type of worker (e.g., clerical), or alternatively employees who work at multiple of the employer’s locations.  Likewise, at any individual facility, an employer may be required to deal and negotiate separate labor agreements with (and face the possibility of a strike from) multiple different unions and bargaining units.

The composition of a bargaining unit is significant for both organizing and bargaining. Under the NLRA, it does not need to be the “most” appropriate unit, merely “an” appropriate unit.  When a union files an organizing petition with the NLRB, it has invariably self-selected the group of employees where the union feels it has the best chance of winning a representation election. Often, this may be a smaller group within any facility. Under Specialty Healthcare, the NLRB had ruled that so long as any group that a union selected was minimally appropriate, it would not entertain an employer’s objections unless it could establish that other employees shared “an overwhelming” community of interest with the group the union wanted to represent. As cases under Specialty Healthcare found, working conditions need to “overlap almost completely” so that there was “no legitimate basis” for excluding others from the group the union sought to represent.  In effect, a union could often select a small group of employees within a much larger group, succeed in organizing them, and then it or other unions could try later to organize either other individual groups or the rest of the employees.  Divide and conquer.  Employers were faced with a greater likelihood of negotiating and administering different labor agreements with multiple individual bargaining units at the same facility.

In PCC Structurals, the NLRB reverted to its historical way of assessing any group that a union may seek to represent, looking at both the commonalities and differences in the employment relationship that the group shares with other coworkers.  In that case, the union sought to represent roughly 100 of over 2500 employees working at three of the employer’s facilities in Oregon.  These 100 employees worked in different departments and had different supervisors, each of whom was responsible for supervising other employees that the union did not seek to represent. In rejecting the Specialty Healthcare test under which the smaller group was found appropriate, the Board emphasized that each case will need to be assessed individually and that a smaller unit will not necessarily be appropriate.  Bigger may be better. Bazinga!

By: Ashley Laken, Esq.

Seyfarth Synopsis: On Friday, December 1, 2017, newly appointed NLRB General Counsel Peter Robb issued a memo containing a broad overview of his initial agenda as General Counsel. It previews many anticipated developments during the Trump Administration. Our blog is exploring a different aspect of the memo each day during the first three weeks of December. Click here to find prior posts.

In GC Memo 18-02, the new General Counsel of the NLRB listed “Disparate treatment of represented employees during contract negotiations” as requiring submission to his Division of Advice for consideration before proceeding to issue a complaint in an unfair labor practice case, citing to the Obama Board’s decision in Arc Bridges, Inc., 362 NLRB No. 56 (2015). The new GC described Arc Bridges as “Finding unlawful the failure to give a company-wide wage increase to newly represented employees during initial bargaining, even where there was no regular, established annual increase and the employer was concerned that it would violate the Act if it unilaterally provided the increase to represented employees.” The GC Memo 18-02 suggests the GC may disagree with the Arc Bridges decision.

In Arc Bridges, while an employer was negotiating an initial collective bargaining agreement, it gave a 3% wage increase to all employees outside of the bargaining unit but did not provide any increase to bargaining unit employees. The Board found that the employer’s actions were unlawfully motivated and violated
Section 8(a)(3) of the NLRA. The Board observed that an employer can treat represented and unrepresented employees differently during the course of negotiations, so long as the disparate treatment is not unlawfully motivated.  The Board then proceeded to find that the employer’s decision to withhold the wage increase from union-represented employees was motivated by antiunion animus, and ordered the employer to retroactively pay each of the affected employees for the increase they would have received, plus interest compounded daily, plus compensation for any adverse tax consequences.

Then-Member Miscimarra vigorously dissented, reasoning that in his view, the evidence manifestly failed to support an inference of unlawful motivation. He also reasoned that even if the evidence showed otherwise, the employer had shown it would have withheld the increase for legitimate, nondiscriminatory reasons, which included preserving bargaining leverage and avoiding a Section 8(a)(5) charge.

Miscimarra observed that “Under the Board’s prevailing but mistaken view,” the General Counsel can show that protected conduct by employees was a motivating factor in an employer’s decision simply by showing generalized antiunion animus. Instead, Miscimarra observed, the General Counsel must establish a motivational link between the protected activity and the adverse employment action.

Miscimarra made these additional observations to support his view that the Board was mistaken:

  • It is important to recognize that it is not unlawful “antiunion motivation” when an employer desires to be more successful in union negotiations, and the Board has long held that employers can offer different benefits to represented and unrepresented groups of employees as part of its bargaining strategy.
  • Annual wage increases at the employer were not the status quo, and refraining from giving unit employees a wage increase while bargaining was ongoing was what the employer was supposed to do; otherwise, the employer would have violated Section 8(a)(5).
  • Especially in this context, the Board must require strong and convincing evidence sufficient to prove unlawful motivation; otherwise, employers would run the risk of violating the Act whenever they comply with their legal obligation to refrain from automatically giving represented employees whatever increases are granted to other employees.
  • The practical effect of the majority’s decision was to put the employer in a no-win situation, and the Board cannot reasonably adopt standards that cause parties to be in violation of the Act regardless of the actions they take.

In our view, Miscimarra’s approach makes more sense from both a practical and a legal standpoint. And GC Memo 18-02 suggests that the new NLRB General Counsel may agree, possibly giving employers something to look forward to in 2018.

  By:  Timothy M. Hoppe, Esq.

Seyfarth Synopsis: With the NBA season opener just over a month away, at least one team could be getting an unexpected influx of free agents. In Minnesota Timberwolves Basketball, LP, 365 NLRB No. 124 (2017), the Board recently held that the production crew responsible for operating the Timberwolves’ center court video display were employees under the National Labor Relations Act and could form a bargaining unit to negotiate the terms and conditions of their employment.

Facts

The Minnesota Timberwolves, like most professional sports teams, has a large video display in the center of its arena to broadcast live game footage, player statistics, replays, advertisements, and fan favorites like the kiss cam during games. Behind all of these visual effects are sixteen crewmembers who operate video cameras in the arena and direct what video gets displayed during the games.

The Timberwolves maintain a roster of about 51 crewmembers with the skills to operate the video display. The team circulates a game schedule at the beginning of each season and the individual crewmembers decide which, if any, games they will work. Most perform production work for other entities when not working for the Timberwolves. For each game, the team sets the crewmembers’ start time and pays a set fee, which varies based on the game and position crewmembers hold. The team also provides the crewmembers with a basic game plan prior to each game outlining the timing of some of the promotions it wants to broadcast. But the crew maintains significant control over what makes it onto the video display during the game.

In February of 2016 the crewmembers sought to enlist an agent, the International Alliance of Theatrical Stage Employers, to form a union. The team appealed to its referee, the NLRB, claiming that the crewmembers where independent contractors under the Act and, therefore could not unionize. The Regional Director, whistled the crewmembers’ play dead, holding that they were not employees. The crewmembers sought a booth review from the Board.

Board’s Ruling

The Board has long applied common law agency principals to decide if an employee-employer relationship exists. It considers eleven “non-exclusive” factors, none of which is “decisive:” (1) the extent of control by the employer; (2) whether the individual is engaged in a distinct business; (3) the level of supervision from the employer; (4) skills required in the occupation; (5) who provides the tools, equipment, and work place; (6) the length of employees’ employment; (7) method of payment; (8) whether the work is part of the employer’s regular business; (9) whether the parties believe an independent contractor relationship exists; (10) whether the principal is in business; and (11) whether the employee renders services as part of an entrepreneurial business with opportunity for gain or loss.

Two of the Board’s pro-union members used these sprawling factors to overturn the Regional Director’s decision. They acknowledged that crewmembers exhibited some characteristics of independent contractors. The crew retained control over which games they worked, did not receive Timberwolves’ credentials, handbooks or written guidelines, and completed W-9 and 1099 forms for tax purposes. But the majority held that the amount of control the team exerted over the crewmembers, along with the “essential component” crewmembers provided to the team’s business, rendered the crew employees under the Act. The majority emphasized that the team provided guidance to the crew prior to and sometimes during games, and characterized running the video board as “plainly among the [Team’s] central business concerns.” It also noted other things, like the team-dictated start time of each member’s shift, the team-set pay for each game, and the team-provided tools necessary to perform the crewmembers’ jobs.

Chairman Miscimarra cried foul. Also emphasizing the control factor, he noted that the relevant issue was not whether the Timberwolves helped shape the final product that was displayed on the video board by providing a broad outline to the crew; such high level control is a hallmark of any independent contractor relationship. Instead, what should matter is the control over the details of the work. And in this case, he would have held the possession arrow pointed decidedly toward independent contractor status. During each game, crewmembers determine things like which video feeds to broadcast, what shots to capture, and other aspects of the live coverage. Chairman Miscimarra also rejected the majority’s view that the crewmembers’ function was central to the team’s business; without the crew, the team would still play basketball in the arena and the television broadcast would proceed uninterrupted. In Chairman Miscimarra’s opinion, these facts, when combined with things like the crew’s ability to choose their schedules, their per-game payment structure, and lack of any meaningful supervision from the team, “substantially outweighed” any factor supporting employee status.

Employer Takeaways

The decision does not dramatically change the Board’s employee/independent contractor jurisprudence. Instead, it highlights the perils of asking any referee, whether basketball or judicial, to apply an eleven factor test to anything. It is inherently unpredictable and open to the whims of hometown (for Basketball) or political party (for the Board) biases. Nevertheless, it is unlikely that even a more reasonable Board will completely abandon a multi-factor employee test. Therefore, the Timberwolves decision should act as a reminder to employers to carefully analyze their independent contractor relationships and ensure that the contractors retain as much control over the terms and conditions of their employment as business necessity permits.

 

 

NLRB (Logo)By: Glenn Smith, Esq.  & Kaitlyn F. Whiteside, Esq.

Seyfarth Synopsis: In a unanimous decision, a three-member panel of the NLRB found that a cab company violated the NLRA by changing the length of the waiting period for employee health insurance from one year to sixty days.

On May 16, 2017, Chairman Miscimarra, Member Pearce, and Member McFerran upheld an Administrative Law Judge’s determination that Western Cab Company violated Section 8(a)(5) of the NLRA by failing to give notice and an opportunity to bargain to the United Steelworkers during its 2014 implementation of the Patient Protection and Affordable Care Act (“ACA”).

According to the Board, because the ACA only prohibits waiting periods for employee health insurance of longer than ninety days, the employer had discretion over whether to reduce its one-year waiting period to “a 60-day waiting period….a 30- or 90-day waiting period, or even no waiting period at all.” Therefore, the employer owed the Union notice and an opportunity to bargain over the waiting period and any other aspects of the law that gave the employer discretion in compliance, such as the notice and enrollment and even the overall type of health insurance.

The reality for employers, which was not discussed by the Board, is that quite often employers are forced to attempt to make significant changes very quickly in order to comply with a newly effective law. According to the Board, these changes must be made while also navigating the legal obligation to provide notice and an opportunity to bargain to the Union over the implementation.  This obligation requires that employers have a robust and sophisticated understanding of the requirements of the law, and those aspects that may be discretionary, with enough advance time to allow for notice and bargaining with the Union.

Here, Western Cab received notice from its insurance provider in December 2013 that as of January, the ACA would require a significant shortening of Western Cab’s current waiting period, which at the time was one year. According to testimony before the ALJ, it was the insurance provider that mistakenly indicated that the waiting period under the ACA had to be sixty days.  As a result, Western Cab may not have even been aware when it implemented the sixty-day rule that it had made a discretionary decision.

Although he joined the majority, Chairman Miscimarra took the opportunity in a footnote to re-emphasize that “employers’ compliance with the NLRA should not frustrate their compliance with the complex array of non-NLRA legal obligations that confront them.” Further, in his view, the question is not simply whether the employer had any discretion in implementing the law.  Rather, the Chairman would focus on “whether the actions are similar in kind and degree to what the employer did in the past.”

In addition to finding a violation for failure to bargain over the ACA implementation, the panel also found the employer violated the Act by failing to give pre-imposition notice and an opportunity to bargain over discipline issued during negotiations for a first contract with the Union as required in the Board’s recent Total Security Management decision.  For more information on this disciplinary bargaining obligation, see our September 29, 2016 blog post here.  In a footnote, Chairman Miscimarra reiterated his disagreement with Total Security Management, a telling reminder that reversal may be in the cards should an appropriate case come before the Board when and if President Trump’s nominees to the NLRB are confirmed.

The key takeaway here is that for employers with unionized workforces, any change in terms and conditions of employment, whether positive or negative, requires notification and bargaining with the union.

NLRB (Logo)By: Joshua M. Henderson, Esq.

Seyfarth SynopsisA recent federal appeals court decision makes it even more difficult for an employer to withdraw recognition from a union that has lost majority support.  Employers need to be aware of the possibility of union “gamesmanship” when deciding how to proceed.

An employer that withdraws recognition from a union as the exclusive bargaining agent of its employees does so, as the Board and Courts say, “at its peril.” It’s a risky move, one that requires objective evidence that a union has actually lost the majority support among the employees it represents.  And the employer must be correct about the actual loss of majority support or it will face an unfair labor practice charge for refusing to bargain with a union.  Consider it a form of strict liability in the labor-relations context.  But what if the employer has objective evidence that a union has lost majority support, and then the union regains the majority support before the employer withdraws recognition?  Also, if an employer is found to have violated the law under those circumstances, what is the remedy when the union deliberately did not disclose to the employer it had regained majority status?

In Scomas of Sausalito v. NLRB (March 7, 2017), the D.C. Circuit considered these two questions.  The Court upheld the unfair labor practice charge against the employer that withdrew recognition without knowing that the union had regained majority status.  The Court observed that the employees had suffered from “an extended period of Union neglect.”  Thus, the union had not sought to bargain with the employer for over a year, and held no meetings and provided no information to its members for more than a year, but continued to collect dues from them all the while.  Perhaps not surprisingly, a majority of employees notified the employer in writing that they no longer wanted the union to represent them.  Two days after being confronted with this news, a union representative notified the employer that the union wanted to negotiate a new collective bargaining agreement, and worked behind the scenes to persuade six employees to revoke their signatures on the decertification notice that had been given to the employer.  Yet the union never told the employer that these signatures had been revoked, or that (in light of the size of the bargaining unit) this meant the union had in fact not lost majority support.  The Court decried the union’s “gamesmanship” in not informing the employer, but held that under the Board’s Levitz Furniture test (which the Court had approved of in an earlier case), the employer assumed the risk that it was wrong in evaluating majority support.  Because the employer was wrong, it could not lawfully withdraw recognition.

In answer to the second question, however, the Court reversed the Board’s decision that a “bargaining order” was the appropriate remedy. Bargaining orders are reserved for flagrant, deliberate unfair labor practices.  In the Court’s view, the employer was not acting in bad faith when it withdrew recognition from the union.  The evidence showed that the employer did not act in haste.  Rather, it took steps to ensure that the signatures on the petition delivered to it matched those on the employees’ payroll records.  Moreover, the signatures that remained on the petition after the revocation comprised 42 percent of the bargaining unit.  That exceeds the 30 percent threshold for directing an election, whether filed by a union, an employer, or an employee.  The disaffected employees also had filed a decertification election petition with the Board, but withdrew it after their employer withdrew recognition from the union.  Under the circumstances, the Court rejected the Board’s argument that an election was not an appropriate alternative remedy.

Takeaway for Employers:  Under the Board’s current test (which may or may not be reconsidered by a new Republican-majority Board), an employer may withdraw recognition from the union only when there is an actual loss of majority support for the union; as a practical matter, the employer must be absolutely certain that more than half of the employees in the bargaining unit no longer want the union to represent them.  Even then, the union may be able to undermine the employer’s basis for withdrawal and place the employer’s decision in jeopardy.  When faced with an apparent loss of majority support for a union, an employer should seriously consider choosing the safer option of filing an RM petition (a management election petition) with the NLRB to allow the employees an opportunity to vote on whether to oust the union in a formal election overseen by the Board.  [Good-faith uncertainty of majority status could, in some circumstances and under the Board’s current standard, support an internal poll of employees as to their support for the union, but polling requires fastidious attention to procedural safeguards and is fraught with legal risk as well.]

 

By: Alison C. Loomis, Esq.

Seyfarth Synopsis: Administrative Law Judge found that the NLRA preempts part of Wisconsin’s right-to-work law that restricts employers from deducting union dues directly from employees’ paychecks.

If you are an avid reader of our blog, you will undoubtedly recall that approximately two years ago, Wisconsin became the then-25th right-to-work state when it enacted legislation that made union security agreements requiring workers to pay union dues as a condition of employment illegal. In addition, the law also made it an unfair labor practice for an employer to collect dues from workers’ wages unless an employee directed it to do so by written notice, which was revocable with 30 days notice.

Almost two years to the day that the legislation was enacted, Administrative Law Judge Charles J. Muhl, a former NLRB attorney, found that the Wisconsin law was partially preempted by the National Labor Relations Act. Metalcraft of Mayville Inc. and District Lodge 10, International Association of Machinists, Case No. 18-CA-178322.

The parties’ collective bargaining agreement contained a dues check-off provision and was set to renew in June 2016, at which point, the contract would become subject to the Wisconsin right-to-work law. The employer initiated communications with the union in April to discuss the Wisconsin law’s impact on the contract.  The employer informed the union of its belief that the dues-checkoff provision would be unlawful once the law applied.  Two days prior to the renewal date of the contract, the employer informed the union that it would not enforce this provision.  The employer then sent several letters to employees intended to answer questions about the contract renewal, the right-to-work law, and the nature of paying union dues going forward.

A few days after the employer stopped remitting dues, the union filed a grievance, claiming that the employer violated section 8(a)(5) the NLRA by unilaterally changing working conditions by rescinding the dues-checkoff clause of their contract without bargaining. In response, the employer argued the Wisconsin right-to-work law required that it rescind its dues check-off.

In the decision, the ALJ concluded that the NLRA allowed Wisconsin the authority to “enact prohibitions on union security” but “preempts the state’s attempt to regulate dues checkoff.”  Specifically, the ALJ found that because the NLRA requires dues authorization forms be terminated with a year’s notice and the Wisconsin law minimizes the window to a 30-day period, “[t]he two provisions are directly at odds with one another” and, accordingly, “the provisions of Wisconsin’s law addressing that topic are preempted.”

The ALJ found that the employer violated the NLRA when it stopped collecting union dues and found several other labor violations. The decision ordered the employer to resume checking off and transferring dues to the union and to make the union whole for any payments that the employer missed.

Takeaway:

Although the Presidential election has led many to expect the labor law pendulum to swing quickly back toward a more pro-employer perspective, this decision reflects the reality that no such transition has yet occurred at the Board.

Striking  By: Brian Stolzenbach, Esq.

Seyfarth Synopsis: Employers should not presume that they are permitted to stop paying for employees’ medical benefits once they go out on strike. In a 2-1 decision, the NLRB recently held that — at least in some circumstances — medical benefits may be “accrued” simply by virtue of being employed.  If so, then an employer may not stop those benefits during strike.

Nearly 70 years ago, the NLRB confirmed that an employer has no obligation to finance a strike against itself by paying wages to employees during a strike. See General Elec., 80 NLRB 510 (1948).  No one ever said that strikes are supposed to be painless for strikers or that they entitled to be paid not to work.  Decades after the General Electric decision, it has become very common for employers to provide their employees with medical insurance, in addition to wages, as a form of compensation.  Many (perhaps most) employers assume that the old axiom extends to this form of compensation, as well:  they believe they can never be required to continue paying for their employees’ medical insurance during a strike.  Alas, in Hawaiian Telcom, Inc., 365 NLRB No. 36 (Feb. 23, 2017), the NLRB held otherwise.  Over an impassioned dissent by Acting NLRB Chairman Phil Miscimarra, the two Democrat Members of the Board concluded that this is actually a question of contract interpretation.  Reviewing the collective bargaining agreement that had expired prior to the strike, the NLRB observed that the contract provided medical insurance for all employees covered by the agreement — with no exceptions, save for termination of employment.  Strikers, of course, have not terminated their employment, so the NLRB decided that medical benefits could not be stopped during the strike, even though the collective bargaining agreement had expired.

What does this mean for employers? At the very least, it means that they should be very familiar with the precise terms of the collective bargaining agreement and other documents (benefit plan documents, SPDs, etc.) that govern their medical benefits for organized employees.  They should consider how these documents may be interpreted and whether they may be in need of revision.  Of course, this is a complex area of overlapping labor relations and employee benefits law, and an employer may not lawfully be able to make the changes it desires, for various reasons.  Nevertheless, it is better to understand the potential obstacles and to make a considered decision about dealing with them well before a work stoppage looms on the horizon, rather than scrambling to deal with the issue during a strike or (worse) finding out five years after cutting off benefits during a strike that the decision to do so was unlawful, as the employer did in Hawaiian Telcom.

By: Kyllan B. Kershaw, Esq.

Seyfarth Synopsis: This weekend Kentucky became the 27th state to pass right-to-work legislation, eliminating the right of unions to collect compelled-dues payments and providing a significant boost to employers hoping to operate union-free.

On Saturday, January 7th, Kentucky’s Governor signed Kentucky House Bill 1 into law, making Kentucky the 27th state in the country to adopt right-to-work legislation and the last state in the South to pass such a law. The new legislation is effective immediately but carves out an exemption for existing collective bargaining agreements.

The law bars making union membership a condition of employment and allows workers in union shops to opt out of paying union dues without fear of losing their jobs. The law also prohibits public employees from going out on strike.

Kentucky House Bill 1 was introduced on January 3 and fast-tracked by Kentucky House Republican leaders, passing by a vote of 58-39 on January 5th and pushed through the full State Senate in a special Saturday session on January 7th. A major factor motivating Kentucky Republicans who introduced the law is that Kentucky’s unemployment figures lag behind those of neighboring right-to-work states such as Indiana and Wisconsin. Likewise, while Kentucky’s overall union membership rates remain on par with the U.S. average, private-sector union membership rates in Kentucky are slightly above the national average. For example, in 2016, 11 percent of employees in Kentucky belonged to a union (right around the national average of 11.1%), while Kentucky’s private-sector employee membership rates hovered slightly above 8 percent, higher than the national average of 6.7 percent.

Overall, right-to-work states are considered more favorable to employers. Specifically, employers in non-right-to-work states experience a higher density of unionization and increased organizing efforts. Likewise, employers in non-right-to-work states often experience greater employment costs associated with doing business. For example, employers in non-right-to-work states: (a) generally pay higher wage rates and benefits to employees, regardless of the employer’s union status; and (b) are subject to increased government regulation of employment, including pro-employee laws and onerous regulations, as unions in these states often possess greater political capital and have additional lobbying capabilities as a result of compelled-dues payments.

Kentucky House Bill 1 follows the 6th Circuit’s recent affirmation of the rights of Kentucky counties to pass right-to-work legislation based on Kentucky’s home-rule powers. See UAW v. Hardin Cty., Docket No. 16-5246 (6th Cir. Nov. 18, 2016). Not surprisingly, Kentucky House Bill 1 restricts the right of local governments to enforce an ordinance contrary to the provisions of the new state law.

Kentucky’s right-to-work legislation comes as Republicans control the state government in Kentucky for the first time in nearly a century. States such as Missouri and Iowa may follow Kentucky’s lead, where Democrats suffered losses in November and state lawmakers have expressed interest in pursuing such laws and creating more employer-friendly climates.

Gavel

By: Ronald J. Kramer, Esq.

Seyfarth Synopsis: Seventh Circuit  finds employer still obligated to contribute to benefit funds for the life of the CBA even though the employees decertified the union.

Employers often assume that when their employees decertify a union, that any obligations an employer had under the operative collective bargaining agreement would disappear. No union, no contract.  Right?

Wrong! In Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Case Nos. 15-2628, -3221, -3861, 16-1870 (7th Cir. Dec. 20, 2016), employees in three separate IUOE bargaining units of the Company voted to decertify in 2013.  At the time, the Union and the Company were party to five year collective bargaining agreements expiring in 2015.  The Company assumed the decertification of the Union, which allowed it to set its own terms and conditions of employment, and ended any contractual obligation to contribute to the multiemployer welfare and pension funds (“Funds”).

The Funds sued, and after they were successful in district court the Company appealed. The Seventh Circuit recognized that the collective bargaining agreements were unenforceable as to the Union, but found nevertheless that the Funds had the right under ERISA to bring a suit for delinquent contributions under 29 U.S.C. § 1145.  The Court based its decision on the idea that when the Funds promised to provide a level of benefits to the employees (presumably by allowing the employer to participate in the Funds under the terms of the CBAs), that created a binding contractual promise.  The Court also recognized that the Funds were third-party beneficiaries to the CBAs and thus entitled to enforce them even if the Union could no longer do so.  “[S]o far as benefit law is concerned the employees were still working ‘under the terms of’ the collective bargaining agreement.”

The Seventh Circuit is not alone in finding that an employer’s contractual obligations to participate in multiemployer funds can survive decertification, withdrawals of recognition, and disclaimers of interest. But there is a competing view.  The Ninth Circuit has recognized that when a bargaining unit ceases to exist, be it by decertification or contract repudiation given the existence of a one person bargaining unit, any existing contract becomes void, not voidable, ending the employer’s obligation to contribute to employee benefit plans. Laborers Health & Welfare Trust Fund v. Westlake Development, 53 F.3d 979 (9th Cir. 1995) (contract repudiation); Sheet Metal Workers’ Int’l Ass’n v. West Coast Sheet Metal Co., 954 F.2d 1506 (9th Cir. 1992) (decertification case were the court held “that the renewal contract became void prospectively as of the decertification of the Union”).  Notably, the Seventh Circuit did not address the Circuit split.

Employers lucky enough to have employees decertify prior to contract expiration cannot assume their obligations to the funds necessarily end. Consult counsel before making any rash moves you may live to regret.