By Cary Burke

On April 4, 2023, the National Labor Relations Board signaled that it might allow employees to recover damages stemming from employers refusing to follow bargaining orders pending appeal.  In Hudson Institute of Process Research, 372 NLRB No. 73 (April 4, 2023), the Board ruled that the employer unlawfully failed to bargain with the union.  Ominously, though, the Board noted that it was severing and reserving for consideration whether to order the employer to “make its employees whole for the lost opportunity to bargain.”  In other words, and as we previously discussed here, the Board will take up whether to overrule Ex-Cell-O Corp., 185 NLRB 107 (1970).

For context, in Ex-Cell-O, the Board held that Supreme Court precedent prevented the imposition of financial penalties on employers that refuse to bargain pending appeal of a bargaining order.  NLRB General Counsel Jennifer Abruzzo has made no secret that, in her view, this restriction incentivizes employers to refuse to bargain.  And General Counsel Abruzzo has further made known that she would seek to have Ex-Cell-O overturned in an appropriate case.

It appears that the appropriate case has arrived.  Whether the Board will take up this invitation – and, if so, to what extent – remains unclear.  Just as importantly, how such damages would be calculated is also not well understood.  It’s possible that wage rates and benefits packages of employees working for “comparable” employers that offer similar services or manufacture similar products might be the basis for such calculations.  These “lost opportunity damages” might also be tied to prevailing wages, cost-of-living increases, or some other metric entirely. 

Should the Board overrule Ex-Cell-O and allow for the imposition of such financial penalties, employers that refuse to bargain with a union pending an appeal could open themselves up to steep damages awards should the appeal prove unsuccessful.  In short, the risk calculus will change in significant ways.  For that reason, employers with questions are advised to speak with their labor counsel at Seyfarth Shaw. 

By: Ronald Kramer and Seong Kim

Seyfarth Synopsis:  Another court has found that actuaries who set discount rates for withdrawal liability purposes that are not based upon their “best estimate of anticipated experience” for investments under the plan—in this case, basing the rate assumption only on estimated returns for 40% of the Plan’s assets in low risk fixed income investments—cannot withstand judicial scrutiny.

Yet another multiemployer pension plan’s withdrawal liability interest rate assumption has been shot down by the courts, this time by the Federal District Court for the District of Columbia in Employees’ Retirement Plan of the National Education Association v. Clark County Education Association, Case No. 20-3443 (RDM), 2023 BL 62912 (D.D.C. Feb. 27, 2023), due to the actuary’s failure to adequately justify his decision to use a lower interest rate than that used for funding obligation purposes.  This case is worth noting, as it interprets the D.C. Circuit Court’s decision in United Mineworkers of America 1974 Pension Plan v. Energy West Mining Co., 39 F.4th 730 (D.C. Cir 2022), which struck down the use of PBGC plan termination rates for withdrawal liability purposes.

For background, the Clark County Education Association (“CCEA”) was a contributing employer to the Employees’ Retirement Plan of the National Education Association of the United States (the “Plan”), a multiemployer pension plan.  CCEA withdrew from the Plan in 2018, and the Plan subsequently assessed withdrawal liability of $3,246,349 against CCEA.

In calculating withdrawal liability, the Plan actuary did not use the PBGC plan termination rates, the Plan’s 7.3% funding rate-of-return, or any combination thereof, as the interest rate assumption.  Instead, the actuary utilized a discount rate assumption of 5%, and explained this  was his best estimate of the expected returns on low investment risk and fixed income investments of the types in which the Plan invested.  The actuary explained he adopted this methodology, because the rate reflected both a low-rate investment environment and the expected returns on lower-risk fixed income investments.  Moreover, such a lower rate recognized that a withdrawing employer no longer participates in any future risks regarding plan investments, and the actuary believed it did not make sense to value a liability based on higher rates of return that provided for additional investment risk that only the remaining participating employers had to bear. 

After an arbitrator found the actuary’s assumptions to be unreasonable in the aggregate because the discount rate was unreasonable, the Plan appealed.  The Court found it was “evident from the record that the 5.0% withdrawal liability discount rate . . . was not [the actuary’s] ‘best estimate of anticipated experience under the plan’ as Energy West interpreted that language.’”  Granted, contrary to Energy West, where the actuary used PBGC plan termination rates totally divorced from Plan assets, the discount rate applied here was based investment types actually in the NEA plan.  Yet only 40% of plan assets were in low-risk investments, and that did “not cut it.”  “Energy West requires that an actuary ‘estimate how much interest the plan’s assets will earn based on their anticipated rate of return.’ 39 F.4th at 738.  A discount rate assumption based on the expected returns on a type of asset that makes up less than half of a Plan’s portfolio falls short of that standard.”

The Court made clear that Energy West “does not deprive actuaries of all flexibility” in determining interest rate assumptions for withdrawal liability purposes, nor does it preclude any consideration of risk shifting.  Instead, the Court recognized that there can be a range of permissible discount rate assumptions.  The Court also noted that Energy West does not hold that an actuary’s estimate must encompass the expected rate of return of all of the Plan’s assets.  It could preclude, however, estimates that disregard the expected returns of the majority of the Plan’s assets.  The Court noted that the fact that the actuary reviewed a portion of the Plan’s assets cannot make up for the fact that he failed to consider most of them.  An actuary may be able to weigh risk shifting in the course of selecting a discount rate assumption at the conservative end of a range of reasonable estimates of anticipated investment returns, but “an actuary cannot risk shift his way to a discount rate ‘divorced from’ a plan’s anticipated returns or, as in this case the majority of the assets that drive such returns.” (Citations omitted).

The Court also refused to credit the conclusion of the Plan’s expert witness that 5.0% could be a reasonable estimate of the expected returns of the Plan’s entire portfolio.  The Court was focused not on what an actuary might have done, but what the actuary actually did. Here, the Plan actuary did not look at the Plan’s entire portfolio to determine what a reasonable discount rate was.  The discount rate assumption was unreasonable because it did not give due regard to the Plan’s experience, and given the overall calculation contained no offsetting changes to blunt the impact of that assumption, was unreasonable in the aggregate as well.

Although the arbitrator ordered the NEA Plan to recalculate liability using the actuary’s 7.3% funding rate of return, the Court remanded the matter back to the arbitrator for reconsideration.  The Court noted that while in certain circumstances arbitrators have the authority to impose set remedies, in general arbitrators must defer to the reasonable assumptions made by plan actuaries, and must avoid substituting their own views for those of the actuaries. 

Here, the arbitrator did not explain why setting a discount rate as opposed to a more open-ended remedy was appropriate.  On remand, and in light of the Court’s decision, if the arbitrator concludes it should give the actuary another opportunity to set a reasonable rate, it should do so.  If the arbitrator finds that the actuary really believed that a discount rate of 7.3% reflected the Plan’s anticipated experience, then the arbitrator should say so and could order that rate be used.

Yet again, the use of a discount rate assumption that is divorced from the actual expected investment returns of the majority of plan assets has been found to be unreasonable in the aggregate, and not the actuary’s best estimate.  While the pending PBGC regulations setting forth accepted discount rate methodologies—assuming they are adopted and withstand judicial scrutiny—may resolve this dispute for withdrawals going forward, litigation remains ongoing for those withdrawals that predate the ultimate adoption of the regulations.

By: Jamie Rich, Michael Berkheimer, and Andrew Cohen

On March 20, 2023, National Labor Relations Board (NLRB or Board) General Counsel Jennifer Abruzzo issued GC Memo 23-04. The memorandum is a follow-up to her August 12, 2021, GC Memo 21-04 (“Mandatory Submissions to Advice”), in which General Counsel Abruzzo announced that she would pursue charges and seek to change the interpretation of the National Labor Relations Act (the Act) in several key areas. The recent memorandum narrows the issues that Regional Offices must submit to the NLRB’s Division of Advice for further consideration and interpretation of the law.

Overview of GC Memo 23-04

As General Counsel Abruzzo discussed at length during recent ABA midwinter meetings, there are still several areas of Board law she hopes to change and she is looking for the right case or cases to do so. She intends to pursue 15 issues remaining from the Mandatory Submissions to Advice list found in GC Memo 21-04, including cases involving:

  • protected concerted activity (i.e., the applicability of the inherently concerted doctrine to subjects other than wages, such as diversity, equity, and inclusion-related subjects),
  • strike-related precedent (i.e., intermittent strikes and employers’ ability to set terms and conditions of employment for strike replacements),
  • union membership (i.e., anticipatory withdrawal requirements, ability to withdraw recognition after the third year of a contract of greater duration than three years, and requirements applicable to non-member Beck objectors),
  • successorship (i.e., the ability to establish initial terms and conditions of employment by an employer who discriminates in the hiring of a predecessor’s workforce in order to avoid being treated as a Burns successor),
  • bargaining obligations (i.e., the application of the status quo doctrine to post-contractual benefit increases),
  • information requests (i.e., refusals to furnish information related to plant relocations and refusals to respond to information requests made prior to pre-disciplinary interviews),
  • remedies (i.e., restricting offers of heightened backpay in exchange for waiving reinstatement and authorizing possible make whole remedies for failures to bargain),
  • arbitration agreements (i.e., employers’ ability to promulgate mandatory arbitration agreements in response to protected activity), and
  • extension of the Act’s coverage (i.e., extending coverage to individuals with disabilities in specific situations; revisiting the test for determining whether the NLRB will defer to National Mediation Board advisory opinions regarding Railway Labor Act jurisdiction).

The new memorandum also requires that Regional Offices submit to the Division of Advice cases involving algorithmic management or electronic surveillance.

Status of GC Memo 21-04 – Issues Gone But Not Forgotten

Most of the legal issues referenced in GC 21-04 are not found in GC 23-04, because the Regions already have cases pending, although their outcomes remain to be seen. Those types of matters no longer need to be submitted to the Division of Advice for interpretation, because the Regions may rely on outstanding guidance. In fact, GC Memo 23-04 states that the Division of Advice has issued guidance for dozens of issues found in GC Memo 21-04.

In some cases, the Division of Advice’s guidance has already resulted in the current Democrat-led NLRB overturning precedent. For example, the Board recently overruled precedent holding that employer restrictions on employees’ display of union insignia in the workplace are presumptively unlawful absent special circumstances.

Other cases have not yet reached the current Board, or have not yet been decided. There are 46 issues found in GC Memo 21-04 for which the Division of Advice has issued guidance, including arguments that protected concerted activity should include worker complaints about not being tipped and arguments that employees should be able to encourage their co-workers to vote for union representation while on-duty.

One of the more controversial items that remains pending is General Counsel Abruzzo’s position on captive audience speeches. On April 7, 2022, her office released GC Memo 22-04 , describing the General Counsel’s position that captive audience speeches are unlawful unless the employer holding them provides certain assurances to employees. Counsel for the General Counsel is actively pursuing this legal theory in Cemex, Case No 28-CA-230115, and its related cases. Last week, on March 16, 2023, the Associated Builders and Contractors of Michigan sued General Counsel Abruzzo for declaratory and injunctive relief. See Associated Builders and Contractors of Michigan v. Jennifer Abruzzo, in her official capacity as General Counsel of the National Labor Relations Board, Case No. 1:23-cv-00277-RJJ-RSK (W.D. Mich. March 16, 2023). The lawsuit argues that General Counsel Abruzzo has “embarked on a personal campaign to transform federal labor law.” It further argues that GC Memo 22-04 wrongfully targets extant law on captive audience speeches and coerces employer speech by limiting the freedom of expression guaranteed by the First Amendment and Section 8(c) of the Act. The lawsuit takes issue with the memorandum-writing process itself and seeks declaratory relief enjoining GC Memo 22-04.

What This Means for Employers

General Counsel Abruzzo released two new memoranda this week, including GC Memo 23-04, only a few days after the Associated Builders and Contractors of Michigan filed its lawsuit against her. This indicates that the General Counsel remains undeterred and will continue to pursue her aggressive labor agenda, particularly regarding the 15 legal issues found in GC Memo 23-04. Time will tell whether the General Counsel’s various initiatives will survive challenge. In the meantime, employers with cases that may involve legal issues found in 21-04 or 23-04 should be wary. We will continue to provide updates here as these matters (and more!) develop.

By: Cary Burke

As we previously posted here, on February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) ruled in McLaren Macomb, 372 NLRB No. 58, that the mere proffer of a draft severance agreement containing broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA” or “Act”). 

Since that time, employers have been scratching their heads regarding whether and how they might include any confidentiality or non-disparagement provisions in severance agreements to employees.  Earlier today, General Counsel Jennifer Abruzzo provided labor watchers with at least some answers when releasing GC Memo 23-05 (the “memo”), which purports to instruct Regions on responding to inquiries “about implications stemming from” the McLaren decision.  Of course, it’s important to keep in mind that this memo is not the law, and is not binding on anyone, save for the Regions, which may pursue unfair labor practice charges based on the guidance therein.

To start, severance agreements are not “banned.”  Employers, rather, may continue to proffer and enter into severance agreements so long as they “do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”  In addition, and as expected, the decision applies retroactively.  Unlawful provisions in the severance agreement, moreover, should generally be excised, and will not invalidate the entire agreement.

Surprisingly, though, the General Counsel appears to take the position that maintaining or enforcing a previously-executed severance agreement that contains purportedly unlawful provisions would be considered a “continuing violation,” and would not be subject to the Board’s six-month statute of limitations. In other words, former employees who entered into severance agreements with purportedly unlawful language could file an unfair labor practice charge past the six-month statute of limitations deadline set out in Section 10(b) of the Act.

The Memo further posits that McLaren’s prohibition on overly broad confidentiality and non-disparagement provisions could apply to statutory supervisors, to the extent the severance agreement prohibited a supervisor from participating in a Board investigation.

Of further concern to employers, the memo provides that other typical restrictions in severance agreements could be unlawful, including: 1) non-compete clauses; 2) non-solicitation clauses; 3) no-poaching clauses; 4) broad liability releases; 5) covenants not to sue; and 6) post-termination cooperation clauses. 

Ultimately, the General Counsel’s guidance – far from offering assurances to employers – seems to expand McLaren’s reach to now possibly apply to agreements to former supervisors, agreements proffered to employees beyond the Board’s six-month statute of limitations, and to typical post-employment restrictions, like non-competition agreements.  This approach – which signals a further expansion of Section 7 rights into typical employer/employee interactions – follows the General Counsel’s recent comments that the Board should return to the “inherently concerted doctrine,” which holds that employee discussions about race, gender, or “insurance coverage” are protected by the Act.

Employers with questions on this memo should reach out to their Seyfarth attorney or other able labor counsel.

By: Cary Burke

It’s no secret that one of National Labor Relations Board General Counsel Jennifer Abruzzo’s primary priorities is to broaden the damages available to an aggrieved party.  Indeed, as we’ve previously discussed here, last December, the Board ruled in Thryv, Inc., 372 NLRB No. 22 (Dec. 13, 2022), that aggrieved employees are entitled to recover damages that are a “direct and foreseeable” result of an unfair labor practice.  This sea change, though, appears to be a beach-head, rather than an end in and of itself.  Damages stemming from employers refusing to follow bargaining orders pending appeal appear to be next on the list.

By way of brief background, the Board ruled in Ex-Cell-O Corp., 185 NLRB 107 (1970), that Supreme Court precedent prevented the imposition of financial penalties on employers that refuse to bargain pending appeal of a bargaining order.  According to General Counsel Abruzzo, however, the lack of the availability of a monetary remedy incentivizes employers to refuse to bargain. 

Given the General Counsel’s focus on expansion of remedies – and her success in this arena already – we expect the Board to revisit Ex-Cell-O.  More to the point, the Board’s decision in Thryv allowing for the recovery of direct and foreseeable damages strongly suggests that the Democratic Board majority would overrule Ex-Cell-O if presented with the opportunity to do so.  This expected ruling, in turn, would very likely allow for the recovery of financial penalties upon the finding that an employer refused to comply with a bargaining order pending appeal.  Such financial penalties could conceivably encompass “lost opportunity damages,” which could include wages and benefits an employee might have earned had the employer chosen to bargain.   

How such lost opportunity damages might be calculated, of course, is anyone’s guess. Perhaps, wage rates and benefits packages of employees working for “comparable” employers that offer similar services or manufacture similar products might be the basis for such calculations.  Or such purported lost opportunity damages might be tied to cost-of-living increases or even federal prevailing wages.

Not to belabor the point, but we expect that remedies available to aggrieved parties will continue to broaden (and become more speculative).  For this reason, employers should carefully consider the merits of any appeal of a bargaining order.  An unsuccessful appeal could saddle an employer with significant liability, should the Board rule that financial penalties are recoverable upon a refusal to bargain finding. 

Employers with questions are advised to speak with their labor counsel at Seyfarth. 

By: Arthur Telegen, Cary Burke, and Alex Reganata

On February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) once again issued new precedent when holding that the mere proffer of a draft severance agreement containing broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA” or “Act”). The severance agreement provisions before the Board contained extremely broad restrictions and arose in the context of underlying unfair labor practices (“ULPs”) that included circumventing a certified bargaining representative.  It remains to be seen, therefore, whether the Board will seek to invalidate more narrowly-tailored confidentiality and non-disparagement provisions.

At issue in McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), were the legality of certain provisions contained in form severance agreements proffered to 11 furloughed bargaining unit members (in addition to various ULP allegations). These provisions, which were broad, boilerplate style provisions, were found by the Board to have forbidden virtually all communications about the agreement or any legal proceedings based on the terminations, as well as any statements that would “disparage” or “harm the image” of the employer. The Board also noted that any violation of these provisions would result in “substantial monetary or injunctive relief,” even though the severance amounts were quite small. To further complicate matters, the employer failed to inform the employees’ union of the proposed agreements or negotiate over the effects of their layoff, which all Board members agreed was required in this case.

With these facts before it, the Democratic majority overruled two Trump-Board decisions and held that the provisions at issue under this fact pattern violated the Act. With respect to the non-disparagement provision, the Board reasoned that “[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act.” Further, according to the Board, “any statement asserting that the [employer] had violated the Act” included “employee conduct regarding any labor issue, dispute, or term and condition of employment” and interfered with “efforts to assist fellow employees, which would include future cooperation with the Board’s investigation.” The Board found the confidentiality provision to be unlawful because it prevented employees from “disclosing even the existence of an unlawful provision contained in the agreement,” which would interfere with their ability to file Board charges or participate in an investigation. Moreover, the Board determined that the confidentiality provision would have interfered with the ability of employees to speak with their co-workers and their union (if any) about the contents of their severance agreement.

The Board also held that the employer’s mere proffer of the draft agreements violated the Act in this instance. On this point, the Board reasoned that the employer’s proffer of the agreements containing offending provisions, even absent acceptance of the offending terms, “coerced” the employees from exercising their Section 7 rights to communicate with others regarding their terms and conditions of employment.   

What is not so clear is how much will change for most employers. As a starting point, the decision – and the Act — applies only to “employees” under the Act, and not to supervisors or managerial employees (with Section 2(11) containing a definition of “supervisor”).  Thus, this decision has no discernable impact on settlement agreements with supervisors and management.  Additionally, it remains to be seen whether the same restrictions would apply to settlement agreements negotiated with plaintiff’s counsel or with a union.  Beyond this, most well-advised employers already use severance templates that provide exceptions to confidentiality provisions that impinge on such matters as speaking to investigators, participating in agency hearings, or filing charges with federal agencies. 

What may be more important is that the decision serves as a reminder that employers should take care to draft such agreements to serve only necessary business interests. In particular, it might be worth considering whether a confidentiality or non-disparagement clause in a severance agreement with a non-supervisory employee is truly necessary to protect the employer’s interests. Sometimes, they might be. In other instances, though, such as where the agreements are issued as part of a large scale reduction in force (RIF) or when an employee did not have access to confidential information or trade secrets, those provisions may have little value and may be limited or eliminated. Employers also should be mindful of federal and state laws that might further restrict the scope of their confidentiality or non-disparagement policies, including the federal Speak Out Act.

In the end, the Board has not yet slammed the door on well-tailored severance arrangements that protect employer confidentiality interests while limiting their impact on Section 7 rights.  We suggest for the moment that employers take a hard look at their severance forms, and hold their ground on carefully tailored, business-required restrictions.  

Employers with questions can reach out to their Seyfarth lawyer or other able counsel for assistance.

By: Cary Burke and Olivia Jenkins

At the end of last year, Congressional appropriators gifted a $25 million budget increase to the National Labor Relations Board.  While this boost in funding fell short of President Biden and General Counsel Jennifer Abruzzo’s requests, this cash infusion should give the Board and its Regions the ability to further the General Counsel’s agenda.  With the Regions having additional resources to investigate and prosecute cases, and with the Board primed to engage in significant rulemaking, we expect to see a host of changes to labor law in 2023, some of which we outline below

The End of All-Hands Meetings?

At the top of the General Counsel’s wish list is an end to “captive audience” meetings, which she has argued are “inherently coercive.”  Indeed, in several interviews and post-hearing briefs, Ms. Abruzzo has expressed her view that employers should not have the right to conduct mandatory all-hands meetings where management officials relay factual information, as well as their opinions, to attempt to lawfully persuade employees to vote against unionization. 

An Expected Change to the Joint Employer Standard… Again

In early September, 2022, the Board issued a notice of proposed rulemaking, wherein it proposed to once again upend its joint-employer jurisprudence.  Under the proposed rule, which we expect the Board to approve in the next few months, a business that contracts with another business for services may be considered a joint employer where it maintains indirect or reserved control over the contracted “employees’ essential terms and conditions of employment,” such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules.  This expected expansion of the joint employer standard could inject uncertainty into typical contracting relationships – like a warehousing employer hiring a sanitation service – at the same point in time that employers are facing a potential recession. 

Increased Scrutiny of An Employer’s Neutral Work Rules

In early January, 2022, the Board invited briefing from parties and amici regarding whether it should revisit its framework for determining whether an employer work rule violates the National Labor Relations Act.  Ultimately, we expect this “new” framework to look a lot like the Board’s previous Lutheran-Heritage standard, whereby the maintenance of a facially-neutral work rule will violate the Act if employees would reasonably construe the rule to prohibit union and other protected concerted activity.  This restrictive analysis was difficult for employers to apply and led to inconsistent results.  For example, a workplace civility requirement might be found lawful, where as a workplace prohibition on disparaging communications might not.  Employers would do well to closely follow these developments, and may want to consider reviewing their current policies and rules to ensure they pass muster under this more restrictive analysis.

Weingarten Rights in a Non-Union Workplace

As we previewed in our companion blog post summarizing the Board’s big 2022 decisions, we anticipate that the General Counsel will argue that Weingarten rights – the right of a union-represented employee to a witness during an investigatory interview that may lead to discipline – should also apply in non-unionized workplaces.  To the extent the Board agrees with the General Counsel, employers could be forced to grant an employee’s request for a witness during an interview conducted in the course of a confidential investigation.  Not only would such a witness compromise the confidentiality of the proceedings, but breaking confidentiality could also cause the employer to run afoul of other nondiscrimination statutes.         

Prepare for More 10(j) Injunction Actions

In late October, 2022, the General Counsel instructed Regions to pursue “full interim relief” when seeking injunctive relief under Section 10(j) of the Act.  Pursuant to Memorandum GC 23-01, Regions should first attempt to settle the entire case.  Failing that, Regions should offer the employer the “opportunity to voluntarily agree to an interim settlement that includes remedies, such as reinstating alleged discriminatees or agreeing to bargain” while the underlying charge is litigated before the Board or an ALJ. 

This framework may not be palatable to most employers, as it would appear to require them to concede that an action was unlawful before the conduct is actually ruled upon.  As an example, should an employer lawfully discharge employees during an organizing campaign, the employer would have to bring those employees back to work to avoid defending an injunction action while simultaneously defending the terminations before the Board or the ALJ.  Stated another way, to avoid injunction proceedings, the employer would be forced to bring employees who it lawfully discharged back to work, only to potentially secure a decision from the Board that the terminations were lawful. 

Increased Scrutiny of Typical Employee Monitoring Technology

Also in late October 2022, the General Counsel issued Memorandum GC 23-02, wherein she announced her intention to “protect employees” from what she describes as “intrusive or abusive” and “omnipresent” electronic monitoring and algorithmic-driven management practices that might interfere with employees’ Section 7 rights under the National Labor Relations Act.  To accomplish this goal, the GC proposed an amorphous burden-shifting “framework” where an employer will be found to have presumptively violated the Act where its “surveillance and management practices, viewed as a whole, would tend to interfere with or prevent a reasonable employee in engaging in activity protected by the Act.” In defense, the employer would be forced to establish that the practice at issue is narrowly tailored to address a legitimate business need or, in the words of the General Counsel, “that its need cannot be met through means less damaging to employee rights.” 

Ultimately, this proposed framework appears to place the onus on employers to justify their use of routine workforce management technology, such as monitoring employee work rates, using surveillance cameras as a loss prevention tool, or using GPS tracking devices and cameras to monitor drivers. 

So What Now?

Given the Board’s Democratic majority and the General Counsel’s stated priorities, employers should consider preparing for these and other employee-friendly changes to labor law by, among other things: 1) reviewing and revising policies and rules; 2) considering the extent of their use of third-party vendors; and 3) watching for important Board decisions.  The pendulum has well and truly swung back from the more employer-friendly Trump Board days.  Keep an eye on the blog for more information.

By: Ronald Kramer and Seong Kim

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

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

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

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

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

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

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

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

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

By: Cary Burke and Olivia Jenkins

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

Increased Damages Available to Aggrieved Employees

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

The Return of the Micro-Unit

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

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

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

Employers Must Continue Dues Checkoff Provisions Post-CBA Expiration

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

Weingarten Rights Extended to Replacement Employees

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

NLRB Revises the Mail-Ballot Election Test

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

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

By: Jennifer L. Mora and Cary Burke

On October 31, 2022, National Labor Relations Board (“NLRB” or “Board”) General Counsel Jennifer A. Abruzzo issued Memorandum GC 23-02, wherein the General Counsel announced her intention to “protect employees” from what she describes as “intrusive or abusive” and “omnipresent” electronic monitoring and algorithmic-driven management practices that might interfere with employees’ Section 7 rights under the National Labor Relations Act (“NLRA” or “Act”). To do this, the General Counsel explains that she will both “vigorously enforce extant law,” and urge the Board to apply current law “in new ways.”

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

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

To accomplish this goal, the General Counsel proposes an amorphous burden-shifting “framework” where an employer will be found to have presumptively violated the Act where its “surveillance and management practices, viewed as a whole, would tend to interfere with or prevent a reasonable employee in engaging in activity protected by the Act.” In defense, the employer would be forced to establish that the practice at issue is narrowly tailored to address a legitimate business need or, in the words of the General Counsel, “that its need cannot be met through means less damaging to employee rights.”

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

Ultimately, this proposed framework appears to place the onus on employers to justify their use of routine workforce management technology, such as monitoring employee work rates, using surveillance cameras as a loss prevention tool, or using GPS tracking devices and cameras to monitor drivers. To the extent they cannot do so to the General Counsel’s satisfaction, this sort of typical 21st century employer practice could very well be deemed unlawful.

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

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