By John Telford

On February 25, 2020, the National Labor Relations Board (the Board”) issued its final rule setting forth the standard for determining joint-employer status under the National Labor Relations Act (“NLRA”).  The new rule effectively overturned the overly-broad joint employer standard announced in the NLRB’s 2015 Browning-Ferris decision, where the Board ruled that joint-employer status could be found based solely on an entity’s indirect and/or reserved-but-unexercised control over the terms and conditions of employment of a nominally separate entity’s workforce.

The Board stated that it intended for the new rule to return, with clarifying guidance, to the carefully balanced law as it existed before the Board’s departure in Browning-Ferris.  The rule provides that an entity will be considered a joint-employer of another employer’s employees only if the entity exercises “substantial direct and immediate control” over the essential terms and conditions of employment of the other employer’s employees.  The rule enumerates an exhaustive list of those essential terms and conditions: wages, benefits, hours or work, hiring, discharge, discipline, supervision and direction; and provides that the putative joint-employer must possess and exercise such substantial direct and immediate control over at least one of those terms as to warrant a finding that the entity affects matters relating to the employment relationship.  The rule further defines that control is not “substantial” if only exercised on a sporadic, isolated or de minimis basis.

The rule clarifies that a joint-employer relationship will not be established solely by the indirect and/or reserved-but-unexercised control over essential terms or conditions of employment or the control over non-essential terms and conditions of employment that may be mandatory subjects of bargaining.  Evidence of this lesser form of control may be probative of joint-employer status, but only to the extent that its supplements and reinforces evidence of direct and immediate control.  Further, indirect control does not include control or influence over setting the objectives, basic ground rules or expectations of another entity’s performance under a contract.

In criticizing the prior Browning-Ferris analysis, the NLRB noted that the Obama Board failed to draw meaningful distinctions between direct and immediate control and indirect and/or reserved-but-unexercised control, giving both equal weight.  The final rule re-establishes a “commonsense hierarchy” that recognizes the superior force of evidence of actually exercised direct and immediate control as compared to indirect and reserved-but-unexercised control.

The Board modified its proposed rule based on public comments and the DC Circuit’s decision in Browning Ferris.

In response to the nearly 29,000 comments and the DC Circuit’s Browning-Ferris decision following the announcement of its proposed rule, the Board modified the final rule in several significant ways.   First, the Board expanded the list of essential terms and conditions of employment to add “wages, benefits, hours or work” to “hiring, discharge, discipline, supervision and direction” and expressly stated that this was an exhaustive list of all essential terms and conditions.  Second, while the proposed rule was silent on the value of any control beyond the direct and immediate control of essential terms or conditions of employment, the final rule provides that indirect or reserved-but-unexercised control over essential terms of employment or control over mandatory subjects of bargaining that are not essential terms of employment may be considered, but would not be sufficient without more to make an entity a joint employer.  Instead, such factors may  weigh in the analysis but only to the extent that they supplement and reinforce evidence of the entity’s direct and immediate control over a particular essential term or condition of employment.  Third, the Board decided to omit hypothetical scenarios from the final rule and, instead, provide more specific guidance as to what does or does not constitute direct and immediate control in the text of the rule itself.  Fourth, the final rule does not include “limited and routine” as a general qualifying term and uses that term solely in the context of control over supervision.

Through the rule-making process, the Board provided granular guidance on the distinction between direct/immediate control and indirect/reserved-but unexercised control.

In announcing the final rule, the Board explained that the use of rulemaking provided it with the ability to “give this complex, nuanced and vitally important issue the kind of comprehensive and detailed explication it deserves…resulting in greater clarity and certainty of the law under the NLRA.”   The following chart summarizes that guidance from the Board relating to each essential term and condition of employment.

Essential Term Direct and Immediate Control NOT Direct and Immediate Control
Wages Actually determining wage rates and/or salary of another employer’s individual employees Entering into a cost-plus contract (with or without a maximum reimbursable wage rate)
Benefits Actually determining the fringe benefits of another employer’s employees by selecting benefit plans and/or level of benefits Allowing another employer to participate in an employer’s benefit plans through an arm’s-length contract
Hours of Work Actually determining the work schedules or work hours, including overtime, of another employer’s employees Establishing an enterprise’s operating hours or when it needs services provided by another employer
Hiring Actually determining which particular employees will he hired and which will not Requesting changes in staffing levels or setting minimal hiring standards such as those required by government regulation
Discipline/Discharge Actually deciding to discipline or discharge another employer’s employee Bringing misconduct or poor performance to the attention of another employer; expressing a negative opinion or another employer’s employee; refusing to allow another employer’s employee to continue performing work under a contract; refusing to allow another employer’s employee to access its premise; setting minimal standards of performance or conduct
Supervision/Direction Actually instructing another employer’s employees how to perform their work; issuing performance appraisals for another employee; assigning particular employees to their individual work schedules, positions and tasks Providing instructions that are limited and routine and consist primarily of telling another employer’s employees what work to perform, or where and when to perform the work; setting schedules for completion of a project; describing the work to be accomplished
     

 

Consistent with the provisions of the final rule, an evaluation of the type of control in the right-hand column should not be conducted unless the proponent of joint-employer status proves that the entity exercised direct and immediate control over at least one essential term and condition of employment.

“Indirect control” does not include routine business to business contractual terms inherent in contractual relationships between entities, though the line between probative and irrelevant arrangements remains vague. 

The final rules provides that “indirect control” does not include “control or influence over setting the objectives, basic ground rules or expectations for another entity’s performance under contract.”  While not specifically addressed in the text of the final rule, in promulgating the final rule the Board explained that social responsibility provisions, such as contractual provisions requiring workplace safety practices, sexual harassment policies, morality clauses that protect the reputation of the contracting entity, wage floors or other measures to encourage compliance with the law or to promote desired practices generally will not make joint employer status more likely under the Act and will constitute the setting of basic ground rules or expectations for the third-party contractor.

In justifying the final rule, the Board made it clear that it was rejecting an economic realities test and stated that an entity’s ability to cancel a contract (even an at-will contract) or terminate a business relationship with another entity should not be deemed reserved control relevant to the joint-employer inquiry.  The Board also indicated that being the exclusive purchaser of a manufacturer’s product or a donor conditioning donations to a nonprofit on changes to terms and conditions of the nonprofit’s employees will not be the kind of control that is relevant to the joint-employer analysis.

Further, the Board noted that policies prohibiting disruption of operations or unlawful conduct generally constitute the type of basic ground rules and expectations.  These basic ground rules and expectations would also likely include contractual specifications of timeframe and production standards for a parts supplier and a requirement that the supplier certify that it has a drug and alcohol testing program.

The Board noted that divining the line between indirect control and ground rules will largely depend on the enterprise, citing for example that a business that engages a food service contractor to staff its lunchroom merely sets “basic ground rules or expectations” by specifying when the lunchroom is open,  is not evidence of indirect control, and should not even be considered.  “Accordingly, what is indirect or reserved control over an essential term and condition of employment versus what is merely a setting of objectives, basic ground rules or expectations for a contractor’s performance is an issue of fact to be determined on a case-by-case basis.” As such, when evaluating current relationships with contractual partners or establishing new ones, employers should consult with counsel.

Why the rule is important to employers.

The NLRB’s final rule is consistent with the joint-employer rule recently promulgated by the Department of Labor implementing the Fair Labor Standards ActAnd the Equal Employment Opportunity Commission has expressed interest in a similar rule for nondiscrimination laws.  Each of these agencies understands the importance of clarifying the scope of the employer-employee relationship in the ever-changing economy.  Under the NLRA, re-establishing the limited scope of joint employer status is critical, as an overly-broad joint employer standard would result in a company being required to bargain with a union whose bargaining relationship derives from organizing another employer’s workforce, opening up the company to picketing and other activity that would otherwise be secondary and unlawful and subjecting the company to joint and several liability for the other employer’s unfair labor practices.

As the Board stated – “A less demanding standard would unjustly subject innocent parties to liability for others’ unfair labor practices and coercion in others’ labor disputes.  A fuzzier standard with no bright lines would make it difficult for the Board to distinguish between arm’s-length contracting parties and genuine joint employers.  Accordingly, preserving the element of direct and immediate control over essential terms draws a discernible and predictable line, providing ‘certainly beforehand’ for the regulated community.”

The NLRB’s rule will go into effect April 27, 2020.  Opponents of the rule have promised legal challenges, but the Board’s willingness to modify the terms of the proposed rule based on the submitted comments and to tailor the final rule to the DC Circuit Court’s decision in Browning-Ferris should increase the likelihood that the final rule will survive.

 By: Marc R. Jacobs, Esq.

Seyfarth Synopsis: As the BLS reported more strikes in 2019, employers going into bargaining in 2020 should really consider preparing for the possibility of a work stoppage.

The federal Bureau of Labor Statistics issued its annual report of “major work stoppages” in 2019 and the data shows there were 25 “large strikes” in 2019 involving approximately 425,000 workers. This total is up from 20 in 2018, although the number of workers involved in 2019 decreased from 485,000 in 2018 to 425,000 in 2019. For a large strike to be reported by BLS, it must involve over 1,000 workers who are off work for at least one entire shift, either in the public or private sector. The 2018/19 two year average is the highest in about 35 years.

Several items reported by other sources should cause more concern for unionized employers, especially those with contracts expiring in 2020. First, Bloomberg reports that almost 90 percent of work stoppages occur in workplaces with fewer than 1,000, and the number of work stoppages in 2019 was almost as high as 2018 (which had the highest level since 2012). Second, the Economic Policy Institute suggests that the large number of strikes – despite a general decrease in the number of unionized workers to the lowest level since BLS started tracking the statistic in 1983 to about 10.2 percent of the US workforce – is in part because employees are not as afraid for their jobs because of low unemployment rates.

A key takeaway for an employer going into bargaining in 2020 is that it is more important than ever to prepare for the possibility of a work stoppage as part of overall bargaining preparation. Do not rely on wishful thinking that ‘our workers will never strike’ but instead apply that old adage “hope for the best but prepare for the worst”. These efforts should involve a plan for operations in the event of a strike, facility, security and logistics assessments, public relations and communications plans, and early identification of your internal (and external) team.

By:  John Telford and Rachel Reed

Seyfarth Synopsis:  The National Labor Relations Board, pushed out a number of noteworthy decisions early this week.  The Board’s holiday rush coincided with the departure of its sole Democratic member, Lauren McFerran, who ended her term on December 16, 2019.

The National Labor Relations Board, pushed out a number of noteworthy decisions last week.  The Board’s holiday rush coincided with the departure of its sole Democratic member, Lauren McFerran, who ended her term on December 16, 2019.  The end of McFerran’s term was no different.  While a number of the decisions issued in the final days of her term were business as usual for the now-exclusively Republican Board, some represented major shifts from precedents set in Obama-era rulings.  The move is consistent with the Board’s historical reluctance to overturn precedent without having a member of the minority party involved in the decision or, as McFerran has often done, writing in dissent.

Here are some of the key outcomes employers need to know:

Rules Requiring Confidentiality During Workplace Investigations Are Permissible

On December 16, 2019, the Board issued its decision in Apogee Retail LLC, 368 NLRB No. 144 (2019).  Apogee establishes that work place rules requiring confidentiality during investigations are lawful under the National Labor Relations Act.  The decision conclusively resolves a long-standing tension between employers’ interests in conducting confidential investigations and employees’ Section 7 rights and reverses an Obama Board ruling that required employers to prove the need for confidentiality on a case-by-case basis.  See, Banner Estrella Medical Center, 362 NLRB 1108 (2015) (“Banner Health”).

In Banner Health, the Board held that employers were prohibited from implementing blanket policies requiring confidentiality during ongoing investigations.  Instead, employers had the burden of conducting an individualized assessment of each investigation to determine whether the integrity of the investigation would be compromised without confidentiality and whether its interest in preserving the integrity of its investigation outweighed employees’ Section 7 rights.

A 3-1 Republican Board majority overruled Banner Health, explaining that the decision improperly placed the burden of balancing employer and employee interests on the employer.  The Board also found that Banner Health’s prohibition on investigative confidentiality rules ran contrary to guidance from the EEOC, which endorses the adoption of blanket rules requiring confidentiality during employer investigations.

The Board went on to conclude that Boeing Company, 365 NLRB No. 154 (2017) laid out the proper framework for analyzing rules involving investigatory confidentiality.  Boeing places work rules into three categories based on the impact they may have on workers protected rights under the National Labor Relations Act.  Category 1 rules are deemed lawful because they either do not interfere with employee rights, or the employer’s justification for the rule outweighs any adverse impact.  Category 2 rules require an individualized assessment to determine the balance of employer and employee interests.  Category 3 rules are deemed unlawful, and include those rules where business justifications cannot outweigh the adverse impact employees’ protected rights.  Seyfarth wrote on Boeing and its three work rule categories here.

The Apogee decision determined that rules requiring confidentiality during the course of investigations belong in Category 1.  As such, these rules are lawful.  This means that employers can create and promulgate confidentiality rules that apply to any workplace investigation without running afoul of the NLRA.  Confidentiality rules that expand beyond open investigations, however, belong in Category 2.  Rules that require confidentiality after an investigation concludes or rules, like the one in Apogee, that are silent as to duration, will still require an individualized assessment to determine their lawfulness.

We also note that Apogee did not invalidate an employer’s obligation to disclose confidential witness statements collected during an investigation to union representatives processing a grievance.  Similar to the now defunct Banner Health balancing test, employers seeking to maintain the confidentiality of witness statement have to demonstrate that their interest in confidentiality outweighs the union’s need for information.  This disclosure obligation was established in American Baptist Homes of the West d/b/a Piedmont Gardens, 362 NLRB No. 139 (2015) (“Piedmont Gardens”).  Piedmont Gardens remains good law, but the Board majority in Apogee indicated it was ready to revisit the decision if raised in a future case.  This issue remains one to watch.

Policies Prohibiting Email Use for Non-work Purposes are Permissible for Most Employers

In Caesars Entertainment, 368 NLRB No. 143, issued on December 16, 2019, a Board majority ruled that employers have the right to restrict employees from using work email, and other company communication systems, for non-business related purposes.

In this long-anticipated decision, the Board determined that, with limited exception, employees have no right under the National Labor Relations Act to use employer email and information systems to engage in Section 7 protected communications (i.e. communications regarding wages, hours, working conditions, and union activities).  The Caesars decision makes clear that employers have the right to control the use of their equipment and can restrict employees’ use of their equipment for certain purposes, so long as the restrictions are not discriminatory.

Caesars expressly overrules Purple Communications, Inc., 361 NLRB 1050 (2014), a controversial decision, which held that employees had a presumptive right to use company email for Section 7 purposes, and that even facially neutral policies prohibiting non-work-related email use were presumptively unlawful.  Seyfarth previously blogged about the battle over Purple Communications and employee use of employer email systems here.

With its rejection of Purple Communications, the Board also reinstated its holding in Register Guard, 351 NLRB 1110 (2007), a pre-Obama Board decision governing employee use of company email.  Like Caesar’s, Register Guard recognized that employers have a strong property interest in controlling the use of their email systems.  In recognition of this right, employers under Register Guard were allowed, without exception, to implement bans on using work email for non-work purposes.  Caesars, however, recognizes an exception to this rule.  Under the new rule, employees’ use of company email for Section 7 communications will be protected “in those rare cases where an employer’s email system furnishes the only reasonable means for employees to communicate with one another.”

Although the Caesars decision anticipates that in a “typical workplace” employees will have adequate opportunities to communicate face to face and through other avenues, such as text and social media, the Board declined to discuss head on whether these private means of communication would adequately address the rights of dispersed and remote workers.  With employers’ use of remote workers on the rise, the Caesars exception is sure to be tested.

Employers Can Stop Collecting Union Dues Once a CBA Expires

In yet another 3-1 ruling, the Board restored employers’ rights to stop collecting and remitting union dues after a collective bargaining agreement with a dues check off arrangement expires.  Valley Hospital Medical Center, 368 NLRB No. 139 (2019), overruled the Obama Board’s decision in Lincoln Lutheran of Racine, 362 NLRB 1655 (2015), which held that employers had a statutory obligation to continue checking off union dues after the expiration of a collective bargaining agreement.

By overruling Lincoln Lutheran, the Board returned to its prior, longstanding rule established by Bethlehem Steel, 136 NLRB 1500 (1962).  Like in Bethlehem Steel, the Board in Valley Hospital held that dues check off provisions fall within the “limited category of mandatory bargaining subjects that are exclusively created by contract.”  As such, these provisions are only enforceable for the duration of the contract and an employer has no obligation under the Act to continue dues checkoff once a contract expires.

This shift back to established law will likely create an additional incentive for unions to agree to reasonable employer terms during negotiations prior to a contract’s expiration.

This recent slew of cases signals that Employers can likely expect even more management-friendly decisions in the year to come.  But, Employers should bear in mind that the Board’s rulings are almost always subject to change with the political tide.  While these rules are likely to remain in place for now, their longevity—like the longevity of the rules they replaced—may depend on the results of next year’s election.

By Bryan M. O’Keefe

Seyfarth Synopsis: In a long-awaited decision with significant impact for the private equity industry, in Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, the United States Court of Appeals for the First Circuit held that two Sun Capital private equity investment funds did not create an implied partnership-in-fact in their purchase and management of a portfolio company.   As a result, pension fund withdrawal liability incurred as part of the portfolio company’s bankruptcy was not imposed against the investment funds.

Any labor lawyer worth his or her salt knows of the National Labor Relation Board’s Browning- Ferris decision, which radically changed the definition of a “joint employer” under NLRB case law [Full Disclosure: Seyfarth Shaw represents Browning-Ferris in this proceeding].   Similarly, any private equity lawyer worth his or her salt is aware of several rulings emanating from the United States Court of Appeals for the First Circuit and District Court of Massachusetts involving private equity firm Sun Capital Partners which threatened to hold several Sun affiliated investment funds responsible for withdrawal liability imposed at a bankrupt portfolio company.

As one of the rare lawyers whose practice straddles both of these areas, I have been intently following each case for some time now. While Browning-Ferris is still up in the air while the NLRB determines through rulemaking and a DC Circuit remand what the Board considers the proper joint-employer standard is, the First Circuit delivered the likely final word on Sun Capital this past Friday, finding that the two Sun Capital controlled funds were not a partnership-in-fact under tax law and thus were not jointly responsible for the portfolio company’s withdrawal liability.

The Sun Capital case was a significant one in private equity for the same reasons that Browning-Ferris has reverberated so much in traditional labor law. In both cases, courts and governmental agencies have arguably eviscerated core principles of corporate law and tax law to find “deeper pockets” for alleged labor and employment related liabilities, potentially at the expense of deterring private investment in failing businesses.

In its decision, the First Circuit immediately recognized this tension, noting that imposing withdrawal liability on investment funds “would likely dis-incentivize much-needed private investment in underperforming companies with unfunded pension liabilities.” The Court went on to note that “this chilling effect could, in turn, worsen the financial position of multiemployer pension plans.” On the other hand, if no withdrawal liability was imposed on the investment funds and the pension fund becomes insolvent, then the workers themselves, some with as much as 30 years of service, would receive a greatly reduced pension payout (totaling a maximum of $12,870 annually) through the Pension Benefit Guarantee Corporation.   Suffice to say, cases such as these can present difficult public policy questions.

Whether the two Sun affiliated investment funds constituted a “partnership-in-fact” was critical because a parent-subsidiary control group is jointly and severally liable for pension fund liabilities only when at least eighty percent of the subsidiary is owned by the parent. Neither fund affiliated with Sun ultimately owned 80 percent of the portfolio company, but if the funds were in partnership together then the resulting “partnership-in-fact” would have owned 100% of the portfolio company and thus would have been jointly and severally liable for the portfolio company withdrawal liability— the deep pockets found.

Ultimately, the First Circuit did not draw a bright-line rule that PE investment funds can never be liable for withdrawal liability at a portfolio company.   Rather, the First Circuit borrowed a multi-factor test from a fifty-five year old tax law case (Luna v. Commissioner, 42 T.C. 1067 (1964)) (which, it should be noted, was decided before a single PE firm was ever founded!) and held that Sun Capital’s two investment funds did not create a partnership-in-fact such that there was common control of the portfolio company sufficient to require the imposition of withdrawal liability.

To be sure, the First Circuit found that some of the Luna factors supported finding a de facto partnership. For instance, the funds jointly developed restructuring and operating plans for target companies before acquiring them. In addition, the same two individuals essentially ran both the funds and the management company in charge of the portfolio company. The Court also noted that there was a pooling of resources and expertise that both the funds and the portfolio company utilized.

Yet, the Court held that other facts rebutted partnership-in-fact formation. First, the funds expressly disclaimed any partnership between themselves. Moreover, most of the limited partners in each fund were not the same. Additionally, the funds filed separate tax returns, had separate books, and maintained separate bank accounts. Also, the funds did not operate in parallel, showing some independence in operations and structure. Finally, because an LLC was formed to actually acquire the portfolio company, the Funds were prevented from conducting business in their “joint names” and were limited in how they could “exercise[] mutual control over and assume[] mutual responsibilities for” the portfolio company.

What’s most interesting is that even though many of the “day to day” activities of the funds—developing restructuring plans, two individuals running the funds, pooling resources and expertise, etc.—seemed to weigh in favor of a partnership-in-fact finding, the Court ultimately gave more weight to the Luna factors more closely associated with corporate formalities—an express disclaimer of partnership, separate books, setting up an LLC to acquire the portfolio companies, etc. The Court also seemed uneasy with striking down core tenets of corporate law without at least some input from Congress or the PBGC on the issue, even saying in its closing paragraphs that its decision was partially based on a “reluctance” to impose withdrawal liability without a “firm indication of congressional intent to do so and any further formal guidance from the PBGC.”   The Court further noted that the lack of congressional intent meant that “two of ERISA and the MPPAA’s principle aims—to ensure the viability of existing pension funds and to encourage the private sector to invest in, or assume control of, struggling companies with pension plans—are in considerable tension here.”

The case is a strong reminder that corporate formalities do matter and that PE funds, like Sun Capital, which respect corporate formalities and treat their businesses as separate entities in the way that corporate and tax law intends can find themselves shielded from unwanted liabilities at their investments; other investment funds which are not as careful in the way that they operate may not find themselves in as fortunate a position, even under the First Circuit’s otherwise PE-friendly decision.

Seyfarth Synopsis: The National Labor Relations Board has been making a lot of noise since the current administration took control. From reversing draconian restrictions on workplace civility rules to restoring employer control over nonemployee union activity on private property, the noise should be music to employers’ ears. As 2020 quickly approaches, below we revisit some of the greatest hits. 

By Nick Geannacopulos and Timothy M. Hoppe

It started like a small California wave, and now, after three years has turned into a Tsunami. Since taking control of the NLRB, the current administration has systematically altered, revised and overturned many of the key rulings of the Obama-era Board, and in some instances, has reversed even longer-standing precedent. These changes resonate with many unionized employers, but have unions singing the blues.

Here are some decisions that have (or are destined to) climbed the charts:

Common Sense Employee Conduct Rules. The Boeing Company, 365 NLRB No. 154 (Dec. 14, 2017). In an early harbinger of things to come, in 2017, the Board overruled a 2004 decision, Lutheran Heritage Village-Livonia, that the Obama-era Board used to invalidate a number of common sense workplace civility policies. For instance, the old Board used Lutheran Heritage to hold unlawful policies prohibiting “abusive or threatening language to anyone on the company premises” and policies restricting conduct that impedes harmonious interactions or relationships. According to the prior Board, employees could construe these types of civility rules as prohibiting protected concerted actions under the NLRA. In Boeing, the new Board sought to apply a more common sense analysis to rules clearly aimed at actually balancing an employer’s legitimate interests in maintaining a civil workplace and employees’ rights under the NLRA. Of course, not all work rules fly under Boeing, but the decision and its progeny are a welcome sign that common sense is back in vogue at the Board.

A Return to Tradition in Deciding the Composition of Potential Bargaining Units. PCC Structurals, Inc., 365 NLRB No. 160 (Dec. 15, 2017). PCC Structurals reversed the Obama-era decision, Specialty Healthcare, 357 NLRB No. 83 (2011), which allowed unions to organize so-called “micro units” for determining the appropriateness of a bargaining unit election. The Obama-era “overwhelming community of interest” standard allowed unions to organize very small sub-sections of an employer. For instance, in one decision, the Board approved a 41 person micro-unit limited to only non-supervisory employees in the fragrance department of a department store. In PCC, the Board restored the traditional “community of interest” standard. Now, the Board will apply a multi-factored test to determine if organizing employees’ interests are sufficiently distinct from those left out of the group. As the Board noted, this common sense approach makes it harder for organizers to gerrymander bargaining units to exclude unsupportive coworkers.

Return to the Historical Independent Contract Analysis. Supershuttle Dfw, Inc., 367 NLRB No. 75 (Jan. 25, 2019). SuperShuttle expressly overruled the Obama-era Board’s ruling in FedEx Home Delivery, 361 NLRB 610 (2014), which significantly limited the importance of “entrepreneurial opportunity” in analyzing whether individuals were employees or independent contractors under the NLRA. Instead, the Board returned to the long-standing common law agency test the predated the FedEx decision.

When is a Successor “Perfectly Clear.” Ridgewood Health Care Ctr., Inc., 367 NLRB No. 110 (Apr. 2, 2019). The Board used Ridgewood Health Care to narrow the scope of when an employer acquiring a unionized company is required to bargain prior to setting the initial terms of employment. In doing so, the Board overruled precedent established in 1996 in Galloway School Lines, 321 NLRB 1422 (1996). Generally, employers acquiring unionized companies cannot set initial employment terms for a workforce if the companies indicate they will hire “substantially all” of the prior employer’s employees. Galloway effectively lessened this standard in situations where a successor employer engaged in discriminatory hiring practices. If an employer, for instance, violated the NLRA in its hiring practices, the Board prohibited the employer from setting the initial terms of employment if it failed to hire “some” employees, as opposed to “substantially all” employees. Ridgewood Health Care rejected this lower standard. Now, even if successors engage in unfair hiring practices, they only lose the right to set the initial terms of employment if, absent the successor’s unlawful conduct, it would not have hired all or substantially all of the predecessor employees.

Discipline Before Execution of a CBA. The Board seems to be on the cusp of overturning the decision in Total Security Management, 364 NLRB No. 106 (2016), which held that a newly organized employer without an executed collective bargaining agreement must provide the union with a reasonable opportunity to bargain over certain disciplinary issues (discharge, suspension and emotion) prior to reaching a first contract.  A more recent decision in Oberthur Techs. of Am. Corp., 368 NLRB No. 5 (June 17, 2019) complicated this analysis when it held (on facts relating to discipline that occurred prior to Total Security Management), that a newly organized employer without an executed collective bargaining agreement has a duty to bargain before it changes any disciplinary standards – as opposed to when it issues certain discipline.  Because the discipline at issue in Oberthur was prior to 2016, Oberthur did not overrule Total Security Management.  However, in Triumph Aerostructures, (Cases 16-CA-197912, 16-CA-198055, 16-CA-198410, 16-CA-198417; JD-74-19 2019) NLRB LEXIS 549; 2019 WL 4795431 (Sept. 30, 2019), an ALJ dismissed a failure to bargain over discipline allegation and held that the Oberthur standard was the appropriate one.  Counsel for the General Counsel is urging that the Triumph case be used to overturn Total Security Management.

Equity to Withdrawing Recognition of a Union.  Johnson Controls, Inc., 368 NLRB No. 20 (July 3, 2019). In this case, the current Board overruled Levitz Furniture, 333 NLRB 717 (2001), which made it more difficult to withdraw recognition of a union. Generally, unionized employees can ask employers to withdraw recognition of a union by submitting evidence that at least 50% of the bargaining unit members no longer wish the union to represent them. Under Levitz, if the union challenged the withdrawal of recognition, the employer ultimately had the burden of proving the union lacked majority status, and would be subject to unfair labor practice claims if it failed to carry its burden. Johnson Controls takes a more equitable approach. If a union contests the withdrawal petition, it will have 45 days to seek a Board-supervised secret ballot election to verify whether 50% of the bargaining unit supports withdrawal.

Restoring Reason to Employer’s Rights to Control Activities on Their Property. Kroger Ltd. P’ship I Mid-Atl. & United Food & Commercial Workers Union Local 400, 368 NLRB No. 64 (Sept. 6, 2019). In this case, the current Board overruled 20 years of precedent that restricted when employers can bar nonemployee union agents from employer property. Under the prior precedent, set in Sandusky Mall Co., 329 NLRB 618 (1999), allowing Girl Scouts and the Salvation Army to fundraise at a store would take away employers’ rights to bar nonemployee union agents from soliciting signatures or engaging in other union activities on the employer’s property. The Board’s decision in Kroger overturned Sandusky. Now the Board will look at whether the employer allowed activities on its property “similar in nature” to the nonemployee union agent activities. If so, then the employer must allow the union activity; if not, the employer is well within its right to remove the nonemployee union agent from its property. Kroger does not apply to employee activities on the property, nor does it change state-specific laws in places like those in California that place additional restrictions on employer property rights. Nevertheless, it represents another common sense change to Board law that was long overdue.

Alignment with Long-Standing Circuit Court Rulings Regarding Unilateral Changes to Working Conditions. MV Transportation, Inc., 368 NLRB No. 66 (Sept. 10, 2019). Generally, employers and unions can agree in a CBA to give employers the unilaterally power to change certain terms and conditions of employment. Since 1993, the D.C. Circuit has applied the “contract coverage” standard to evaluate the scope of such CBA provisions. A waiver is valid if it is “within the compass or scope” of the CBA. The Board rejected the Circuit Court’s approach for years. Instead, it applied a higher standard, requiring employers to prove unions “clearly and unmistakably waived [their] right[s] to bargain over” a unilateral change. In MV Transportation, the Board finally agreed to follow long-standing circuit court precedent. The practical effect of the old “clear and unmistakable waiver” standard was that the Board rarely found employer changes permissible, even when the subject of the change was discussed at the bargaining table with the union, and common sense suggested the parties contemplated the change or waived the issue. Now, the Board will apply a much more reasonable standard, and one that has been applied by circuit courts for years.

As detailed above, the times they are a changing for unionized employers. Stay tuned to this blog for all of those changes and how they might impact your workplaces going forward.

By Ashley K. Laken and Kyllan B. Kershaw

Seyfarth Synopsis: As the future of work continues to take shape, labor unions are taking notice and adjusting their strategies and their focus in response.  To the extent they haven’t already, companies both large and small should take heed and consider adjusting their employee and labor relations approaches accordingly.   

Just over two years ago, the AFL-CIO formed its own Commission on the Future of Work and Unions.  In announcing the Commission’s formation, the AFL-CIO stated that “[t]he rich and the powerful are driving large-scale changes in the nature of work, including digitization, automation, deindustrialization, deprofessionalization, autonomous operations, globalization, offshoring and the impact of trade agreements—all of which threaten to leave working families with even less clout and economic security,” and that this makes “the mission and values of the labor movement more important than ever.”  The Commission has various subcommittees corresponding to particular sectors of the economy, including health care, energy, service and retail, transportation, and professionals.

Recently, the Commission published its first written report, which is available on the AFL-CIO’s website.  The report makes a number of sweeping assertions, including the following:

  • “[A]nti-worker interests are trying to wipe unions out of existence…The labor movement is the last line of defense standing in the way of total corporate control.”
  • “Emerging business models have encouraged management to wash its hands of any responsibility for workers.”
  • “America’s workers, particularly young people, are tired of being silenced, working harder and harder and still falling behind. We are hungry for connection to each other, so we can influence the decisions that will shape the future of our workplaces, our communities, our nation and our world.”
  • “[T]hriving unions are good for America, and at this moment of massive inequality, technological revolution and historic collective action, our role has never been more important.”
  • “Whether our future is one of shared prosperity or rising inequality, and social and economic dysfunction, depends on the strength of working people’s bargaining power.”

The report states that key aims for the labor movement should be to strengthen worker bargaining power and to make sure the benefits of technological change are shared broadly.  On this latter point, the report says that predictions that artificial intelligence and other new technologies will make workers more productive have generated interest in the prospect of a “leisure dividend” that allows for the reduction of overall work hour without any reduction in pay.  The Commission’s service and retail subcommittee therefore recommends mobilizing around issues such as bargaining or legislating four-day workweeks, paid time off, and the “right to disconnect” from digital services and work.

The report also notes that a key action plan for the labor movement is to dramatically expand union membership, and that new and diverse forms of cooperation and multi-union focus on coordinated, sectoral strategies are needed to organize more workers.  Sectoral bargaining, which is aimed at collective bargaining covering entire industries rather than individual companies, is aggressively being pushed by the SEIU, which is behind the Fight for $15 movement.  As it happens, the President of the SEIU was recently named by California’s Governor as co-chair of the California Future of Work Commission, which was established just a few months ago with the goal of developing “a new social compact for California workers, based on an expansive vision for economic equity that takes work and jobs as the starting point.”

The AFL-CIO Commission report also recommends that unions collectively form an advisory task force aimed at deploying the most sophisticated data collection, analysis, and experimental techniques “to understand what working people want and to suggest how we retool to meet those needs and desires.”  The report also notes that new forms of social media and digital communications have made identifying, communicating with, and assisting potential union supporters easier, and that unions have made major investments in digital staff and resources to keep up with new technologies and new ways to engage working people.  The report also recommends that unions develop a coordinated public narrative about union members and union representation, including in new and expanding sectors.

In light of the increased focus by unions on the future of work and their stated goal of dramatically expanding union membership, including in new and expanding sectors, companies of all sizes and in all industries should take heed and consider adjusting their employee relations strategies accordingly.  To the extent that workers at non-unionized companies don’t have much of a voice in issues that affect their day-to-day working lives, companies should consider establishing initiatives aimed at giving them more of a voice.  This will potentially avoid the prospect of workers seeking assistance on such matters from unions, or of falling prey to promises by union organizers to fix such issues.  Many workers also don’t understand all of the negative aspects that can come along with bringing in a union.  Non-union companies should therefore consider implementing strategies to educate their workers on these subjects.  Managers and supervisors should also be trained to recognize the signs of union organizing activity, and on what to do if they see such signs.  And finally, companies should consider providing positive employee relations training for their managers and supervisors, which can head off union organizing activity before it starts.

Seyfarth Synopsis: A new decision reinforces that the National Labor Relations Board will invalidate arbitration agreements that explicitly, or when reasonably interpreted, prohibit filing administrative charges.

By Samuel Rubinstein[1] and Howard M. Wexler

In June 2018, the Supreme Court held in Epic Systems that employers may require employees, as a condition of employment, to enter into arbitration agreements that contain waivers of the ability to participate in a class or collective action under various employment statutes.

In June 2019, the National Labor Relations Board held in Prime Healthcare Paradise Valley, LLC that even after Epic Systems, it is unlawful to enforce arbitration agreements that interfere with the employees’ right to file charges with the Board.  The Board in Prime Healthcare analyzed whether the arbitration agreement explicitly, or if reasonably interpreted, prohibits charge filing with the Board.  If so, the agreement violates the National Labor Relations Act.

The Board recently had another opportunity to revisit the issue of mandatory arbitration agreements in Beena Beauty, 31-CA-144492.

In Beena, the relevant language of the mandatory arbitration agreement stated: “THE COMPANY AND [EMPLOYEES] AGREE…TO SUBMIT ANY CLAIMS THAT EITHER HAS AGAINST THE OTHER TO FINAL AND BINDING ARBITRATION.”  The Agreement only excluded “[c]laims for workers compensation or unemployment compensation benefits.”

The Decision

The Board began its analysis by noting that the agreement does not explicitly prohibit filing administrative charges.  However, the Board still scrutinized the agreement as a whole.  In doing so, the Board noted that the agreement contained no exceptions for charge filing with the Board or other administrative agencies.  Furthermore, the Agreement specifically excluded workers compensation and unemployment compensation benefit claims.

Applying those principles, the Board found that the only reasonable interpretation of the agreement is that except for workers compensation and unemployment benefits, arbitration was “the exclusive forum for the resolution of all claims.”  Therefore, the agreement prohibits the filing of charges and it therefore violated the National Labor Relations Act.

The Remedy

After finding that the current agreement was unlawful, the Board ordered the employer to rescind the agreement or “revise it in all its forms to make clear to employees that the Agreement does not bar or restrict employees’ right to file charges with the National Labor Relations Board.”  In addition, the employer was ordered to notify current and former employees that the agreement has been rescinded and provide revised copies if applicable.

What Does Beena Beauty Mean for Employers?

The decision is an important reminder that the Board will still scrutinize arbitration agreements.  In this light, it reminds employers to review their current agreements to make sure that they contain exceptions for charge filing with administrative agencies generally.

[1] Mr. Rubinstein is a Senior Fellow.

By: Molly Clayton Mooney, Esq.

Seyfarth Synopsis: On September 10, in a 3-1 decision, the NLRB in MV Transportation, Inc., 368 NLRB No. 66 (Sept. 10, 2019), adopted the “contract coverage” standard in replacement for its previous “clear and unmistakable waiver” standard for determining when a collective bargaining agreement allows an employer to take unilateral action. This decision makes it easier for employers to show that their collective bargaining agreements allows them to make unilateral changes and is consistent with the position the D.C. Circuit has taken for years.

In MV Transportation, Inc., the Board considered whether MV Transportation violated the NLRA by making unilateral changes to various employment policies impacting workers at its Las Vegas, Nevada facility.

Previously, in determining whether an employer’s unilateral changes violated the NLRA, the Board applied a “clear and unmistakable waiver” standard. Under this standard, a unilateral change to working conditions was a violation of the NLRA unless the contract specifically allowed the employer to take the action in question. Broad management rights clauses, for example, were not sufficient to allow employers to take unilateral action, as these were found to not specifically address the unilateral action.

Yesterday, in MV Transportation, Inc., the Board rejected the “clear and unmistakable waiver” standard and adopted the “contract coverage” standard established by the D.C. Circuit in NLRB v. Postal Service, 8 F.3d 832, 838 (D.C. Cir. 1993). Under this standard, the Board will examine the plain language of the contract to determine if the employer’s actions fall within the employer’s authority under the contract. If the actions are “within the compass or scope” of the contract, the change will be found to not violate the NLRA. If the employer’s actions, however, are not covered by the contract, the employer will have violated the NLRA, unless it can prove that the union “clearly and unmistakably waived its right to bargain over the change” or that its unilateral action was privileged for some other reason. Notably, the Board gave the example of a contract that broadly grants an employer the right to “implement new rules and policies and to revise existing ones.” Under the newly adopted “contract coverage” standard, an employer with this broad language will not violate the NLRA by making changes to its various rules including attendance rules, safety rules, or disciplinary rules—even though these rules are not specifically listed in the contract.

Ultimately, the Board’s decision in MV Transportation, Inc. is an overdue acquiescence to the standard that has long been applied by the D.C. Circuit and to a standard that will lead to results that are more aligned with what the parties agreed to be bound to at the bargaining table. Previously, unions were able to take advantage of the Board’s “clear and unmistakable waiver” standard by filing unfair labor practice charges based on an employer’s unilateral action because even though the contract might have broadly granted the employer the rights to take the unilateral action, under the old standard, unions knew that this broad language would likely be insufficient for the employer to prevail through the Board’s processes. To have a shot at prevailing with broad contractual language, the employer under the old standard needed to litigate the case through the Board’s processes, before appealing the case to the D.C. Circuit Court or other Circuit Court. Now, Regional offices will likely review the contract based on its plain language and determine whether the unilateral action falls within the rights granted to the employer. The result is that employers will be able to more easily take the unilateral actions that they bargained for at the bargaining table, without as much fear that the NLRB will find their actions to violate the Act.

Authors: Howard M. Wexler and Samuel Sverdlov

Seyfarth Synopsis: The NLRB recently published a Notice of Proposed Rule Making regarding three proposed amendments to its current rules and regulations for union elections.  These amendments consist of: (1) a change from the current election blocking charge policy to a vote-and-impound procedure; (2) a reversion to the rule of Dana Corp. with respect to voluntary recognition agreements; and (3) a modification of the evidentiary requirements for § 9(a) recognition in the construction industry.  Comments on the proposed amendments are due on October 11, 2019.

On August 12, 2019 the National Labor Relations Board (“NLRB” or “Board”) published the first of potentially several Notices of Proposed Rule Making (“NPRM”) regarding amendments to the Board’s union representation procedures.  Specifically, in the NPRM, the Board proposes the codification of rules impacting the Board’s current block charge policy, procedure for challenging representation via a voluntary recognition agreement, and procedure for gaining Section 9(a) recognition in the construction industry.  As per the NLRB’s press release dated August 9, 2019, the proposed amendments, which received majority support from Board Chairman John F. Ring, and Board members Marvin E. Kaplan and William J. Emanuel, are meant to “better protect employees’ statutory right of free choice on questions concerning representation.”  We describe each proposed amendment in greater detail below.

Blocking Charge

Under the Board’s current practice, a party (which the Board states “is almost invariably a union”) is permitted to block a representation election simply by filing unfair labor practice (“ULP”) charges with allegations of impropriety in the election process.  The Board seeks to eliminate this practice of blocking elections for pending ULP charges because it unnecessary delays petitioned-for elections.  Indeed, the Board expressed myriad concerns regarding the current policy, including that “incumbent unions seeking to avoid a challenge to their representative status” engage in “abuse and manipulation” to delay elections, and that the policy is currently inconsistently applied by the NLRB’s regional directors.

Instead, the Board proposes that it adopt a vote-and-impound policy, whereby regional directors would continue processing representation elections (despite pending ULPs), however, if the ULPS have not been resolved prior to the election, then the ballots would remain impounded until the ULP can be resolved.  The Board contends that this process would preserve employee free choice because balloting can proceed before a probable cause finding has been issued, and if a ULP is without merit, the ballot counting can occur immediately, rather than after further delay as the election is unblocked, renegotiated, and redirected.

Voluntary Recognition Procedures

The Board also proposes to modify the process by which employees can file a petition for an election following an employer’s voluntary recognition of a union.  By way of background, in 2007, the Board issued the Dana Corp. decision, which held that once employees receive notice that they are represented by a union pursuant to a lawful voluntary recognition agreement, they have 45 days to challenge the representation through a secret ballot election.  The Obama-era Board abandoned this rule in 2011 when it issued the Lamons Gasket Co. decision holding that employees must wait a “reasonable period” of time to pass before an election can be challenged.  Now, the Board seeks to revert back to the practice set forth in Dana Corp.  In support of the Board’s position that this proposed amendment would increase employee free choice, the Board avers that elections are a superior method for employees to express their will than voluntary recognition agreements, which are supported by authorization cards.

Construction-Industry Agreements

Section 8(f) of the National Labor Relations Act (“NLRA”) provides a procedure unique to the construction industry, by which employers could establish a collective bargaining relationship with a union without majority support from the employees.  While this provision allows collective bargaining within the atypical parameters of the construction industry, a collective bargaining relationship under Section 8(f) does not enjoy all of the benefits of a traditional collective bargaining relationship under Section 9(a) of the NLRA, including a contract bar period during which no representation elections can be held for up to three years before the collective bargaining agreement expires.  In the Board’s 2001 ruling in Stanton Fuel, the Board held that a construction industry union can convert an 8(f) relationship to a 9(a) relationship simply by relying on contract language alone without a contemporaneous showing of “positive evidence” of majority support amongst employee.  In the NPRM, the Board seeks to overturn Stanton Fuel, and require a contemporaneous showing of positive evidence of majority support to convert an 8(f) relationship to a 9(a) relationship.

Public Comments

Public comments on the NPRM are due on October 11, 2019, and they must be submitted either electronically or by mail to Roxanne Rothschild, Executive Secretary, National Labor Relations Board, 1015 Half Street S.E., Washington, D.C. 20570-0001.  Once the public comment period closes, the NLRB will review the comments and decide whether to issue a new or modified proposal, withdraw the proposal, or proceed to a final rule.

Additional Rule-Making On The Horizon

The NPRM is consistent with the regulatory agenda announced by the NLRB on May 22, 2019.  The other topics considered by the NLRB are the classification or students performing work at private colleges and universities, and standards for access to an employer’s private property.

If you have any questions regarding the NPRM and how it might impact your business or industry, please contact your local Seyfarth Shaw attorney.

By Jason Silver and Glenn Smith

Seyfarth Synopsis: In a 3-1 decision, the National Labor Relations Board (“Board”) in Johnson Controls, Inc., 368 NLRB No. 20 (July 3, 2019), established a new standard for determining whether a union has reacquired majority status after an employer announces its anticipatory withdrawal of recognition based on evidence indicating that the union has lost majority support. The Board’s new framework requires a secret ballot election be conducted when both the employer and the union have evidence supporting their positions of majority status.

Johnson Controls addresses what happens under the following scenario – employees (free from improper influence or assistance from management) provide their employer with evidence that at least 50 percent of the bargaining unit no longer wishes to be represented by their union, the employer tells the union that it will withdraw recognition when the parties’ collective bargaining agreement (‘CBA”) expires based on this evidence, and the union subsequently claims that it has reacquired majority status before the employer actually withdraws recognition.

Prior to Johnson Controls, under this factual scenario, the Board would determine the union’s representative status and the legality of the employer’s action by applying a “last in time” rule, under which the union’s evidence would ultimately control the outcome because it postdates the employer’s evidence.   Johnson Controls changes this.

In Johnson Controls, the employer and the union were parties to a CBA from May 7, 2012 through May 7, 2015. On April 21, the employer received a “Union Decertification Petition” signed by 83 of the 160 bargaining unit employees.  That same day, the employer notified the union of the petition and informed the union that it would no longer recognize it as the employees’ bargaining representative when the CBA expired on May 7, 2015. The union objected to the employer’s position, demanded the employer bargain a successor CBA, and collected new signed authorization cards from the employees.  Between April 27 and May 7, the union collected 69 signed authorization cards, 6 of which were signed by employees who had also signed the disaffection petition. On May 8, the employer withdrew recognition from the union and shortly thereafter instituted unilateral changes related to employees terms and condition of employment.  The union filed an unfair labor practice charge.

Under Board precedent, an employer that receives evidence, within a reasonable period of time before its existing CBA expires, that the union representing its employees no longer enjoys majority support may give notice that it will withdraw recognition from the union when the CBA expires, and the employer may also suspend bargaining or refuse to bargain for a successor CBA. This is called an “anticipatory” withdrawal of recognition.  Under Levitz Furniture Co., of the Pacific, 333 NLRB 717 (2001), however, once the CBA expires, an employer that has made a lawful anticipatory withdrawal of recognition still does so at its peril. If the union challenges the withdrawal of recognition in an unfair labor practice case, the employer will have violated Section 8(a)(5) if it fails to establish that the union lacked majority status at the time recognition was actually withdrawn.

Prior to Johnson Controls, the Board, in making this determination, used to rely on evidence that the union reacquired majority status in the interim between anticipatory and actual withdrawal, regardless of whether the employer knew that the union had reacquired majority status.

In an attempt to address this concern, the Board in Johnson Controls, discarded the “last in time” rule and instead formed a new legal framework in the anticipatory withdrawal context if an employer is presented with evidence that a majority of employees no longer which to be represented by the union upon CBA expiration and the union thereafter provides evidence of its reacquired majority status.

Under this factual scenario, the Board will now order a Board conducted secret ballot election. The Board concluded that this new framework is “fairer, promotes greater labor relations stability, and better protects Section 7 rights by creating a new opportunity to determine employees’ wishes concerning representation through the preferred means of a secret ballot election.”

In modifying the anticipatory of withdraw of recognition legal doctrine, the Board provided a two-step standard. First, the Board concluded that the “reasonable time” before CBA expiration within which anticipatory withdrawal may be effected is defined as no more than 90 days before the CBA expires. Second, the Board provided that if an incumbent union wishes to attempt to re-establish its majority status following an anticipatory withdrawal of recognition, it must file an election petition within 45 days from the date the employer announces its anticipatory withdrawal. The union has 45 days to file this petition regardless of whether the employer gives notice of anticipatory withdrawal more than or fewer than 45 days before the CBA expires. Any rival union may intervene in the incumbent’s representation case on a sufficient showing of interest.

Thereafter, the Board held that “If no post–anticipatory withdrawal election petition is timely filed, the employer, at contract expiration, may rely on the disaffection evidence upon which it relied to effect anticipatory withdrawal; that evidence—assuming it does, in fact, establish loss of majority status at the time of anticipatory withdrawal—will be dispositive of the union’s loss of majority status at the time of actual withdrawal at contract expiration; and the withdrawal of recognition will be lawful if no other grounds exist to render it unlawful.”

The new standard will apply retroactively. The new framework in Johnson Controls provides clarity and guidance for employers regarding how to respond to an employee decertification petition near the expiration of a CBA. Although the holding in Johnson Controls is narrow and limited to only anticipatory withdrawal of recognition cases, the holding advances employee free choice by mandating a Board conducted secret-ballot election. The ruling fits with the Board’s ongoing efforts to make it easier for dissatisfied employees to get rid out their union.