News & Analysis

The Good, the Bad and the Ugly

Class arbitration cases continue to stack up at Supreme Court. The National Labor Relations Board on September 9 petitioned the Court for certiorari in NLRB v. Murphy Oil USA, Inc. The lower court decision, from the U.S. Court of Appeals for the Fifth Circuit, found that an employment agreement with a provision for binding arbitration and a waiver of class or collective claims was enforceable and did not violate employees’ right to engage in protected concerted activity under the National Labor Relations Act. In addition to the Fifth Circuit, the Second and Eighth circuits have also rejected the Board’s position. The Seventh and Ninth circuits agree with the Board, and the employers in these cases have also sought review by the Supreme Court. The issue at stake is the degree of freedom that an employer and employee have to contract as they wish. The Federal Arbitration Act generally supports arbitration of all types of disputes unless “otherwise unlawful.” In the “pro-arbitration” cases, the courts have found that the FAA policy generally favoring arbitration should prevail. On the other hand, the Board and the “anti-arbitration” courts contend that waivers of class or collective claims in arbitration agreements violate the NLRA and therefore fit within the “otherwise unlawful” exception in the FAA. In other words, according to the “anti” side, the NLRA’s protection of concerted activity is not trumped by the FAA.

U.S. Department of Labor appeals “Persuader Rule” injunction to Fifth Circuit. On August 25, the U.S. Department of Labor appealed the nationwide temporary injunction against enforcement of its “Persuader Rule.” The injunction, issued by a federal court in Lubbock, Texas, has drawn national attention because of its nationwide scope. Two other lawsuits challenging the rule are pending in federal district courts in Arkansas and Minnesota.This summer, shortly before the Texas court issued a preliminary injunction, the Minnesota court declined to issue a preliminary injunction. The Arkansas court decided not to rule on a preliminary injunction after the Texas court enjoined the rule. In all three cases, the courts will ultimately have to make a final decision on the merits of the challenges and decide whether to permanently enjoin the rule. The injunction in the state of Texas remains in place while the appeal is pending.

D.C. Circuit awards attorneys’ fees and costs to employer after NLRB pursued “clear and unmistakable waiver” theory at odds with controlling precedent. The NLRB has for some years stubbornly held that a union does not waive its right to bargain over a mandatory subject of bargaining unless there is clear and unmistakable waiver language in the collective bargaining agreement or otherwise. The Board also says that a union doesn’t waive its right to bargain merely because the subject matter is covered in the agreement. Even where a waiver is arguably clear and unmistakable, the Board regularly engages in hairsplitting to find that the parties to the collective bargaining agreement had not covered the specific circumstances at issue in the case. Thus, the Board frequently rules against employers who assert that a management rights clause allowed the employers to take action without bargaining over the decision or the effects of the decision.

Because of the Board’s position, employers regularly back down and choose to bargain rather than rely on their contract rights, to avoid lengthy and costly litigation at (and against) the Board. However, not all U.S. courts of appeal agree with the Board, specifically including the U.S. Court of Appeals for the District of Columbia Circuit. The D.C. Circuit will find a waiver if the parties in their agreement “covered” the subject.

In the recent case of Heartland Plymouth Court MI v. NLRB, the nursing home employer had a collective bargaining agreement with a union that expressly allowed it to reduce hours or staff, and it conducted a layoff during the contract term without bargaining with the union. The union filed a charge, alleging that Heartland had violated its duty to bargain. The Regional Director issued a complaint, and the Board ultimately found that Heartland had violated the NLRA.

Heartland sought review at the D.C. Circuit, and the Court, following its precedent, refused to enforce the Board’s decision.

That’s good. But it gets better.

Heartland then asked the Court to require the Board to pay Heartland’s attorneys’ fees and costs because the Board continued to fight on appeal, even though the legal precedent in that circuit was clearly against it. The D.C. Circuit, in a scathing opinion, took the Board to task for what the Court called a “roguish form of nonacquiescence” to the Court’s precedential rulings. The Court criticized the Board’s approach in the case, which the Court saw as essentially one where the Board said, “We don’t care what the law says, if you want to beat us, you will have to fight us.” The Court also noted that the Board previously had ample opportunity to take the issue up to the Supreme Court but had chosen not to do so. Ultimately, because of the Board’s litigation “nonacquiescence” and “abusive tactics,” the Court awarded Heartland more than $17,000 in attorneys’ fees and costs related to the appeal.

Editor’s Note: Constangy attorneys Chuck Roberts and Cliff Nelson represented Heartland before the NLRB and on appeal.

Board decision requiring offer to bargain over “discretionary” discipline puts employers between a rock and a hard place. In Total Security Management, the Board on August 26 found that an employer contemplating discretionary discipline of an employee -- before it enters into a first collective bargaining agreement or has agreed upon a grievance procedure -- has a duty to give notice to the union and an opportunity to bargain. Meanwhile, the employer is generally required to maintain the status quo until agreement or impasse is reached. In other words, the employer cannot follow through with the discipline until the union agrees or the parties reach impasse. The rationale of the Board majority was that the exercise of disciplinary discretion by an employer involves a change of the status quo with respect to the affected employee. The Board’s holding includes some limitations: the newly-announced duty to bargain over discipline (1) applies only to disciplinary decisions that have an inevitable and immediate impact on employee tenure, status or earnings, such as suspension, demotion or discharge; and (2) does not apply to warnings, corrective actions, or counselings unless they are a step of progressive discipline under a policy that would lead to more severe discipline (which warnings, corrective actions, and counselings almost always are). Further, the Board limited the initial employer obligation to (1) notice to the union and (2) an opportunity for the union to be heard, along with (3) providing relevant information upon request to the union. (However, if the union wants to bargain, then the employer must bargain.) Finally, the Board explained that an employer, when “exigent circumstances” are presented, may deal with the situation promptly (for example, by suspending an employee pending investigation) and then bargain to agreement or impasse after the fact.

The Total Security Management decision tracks the rule of the Alan Ritchey case from December 2012 that became void when the Noel Canning decision was issued by the Supreme Court in June 2014. The decision lacks clarity and also represents a significant change to the way that the NLRA has been applied in the past. Given that much, if not almost all, employer discipline involves some exercise of discretion, the Board can be expected to find routinely that there was a duty to bargain over discipline. The rule will potentially have the greatest impact on employers who refuse to bargain while they seek judicial review of a Board certification of a union as a representative. Employers in this situation will face a dilemma: On the one hand, they face potential liability for back pay or other remedies if the certification is ultimately upheld. On the other hand, they cannot bargain with a union that is not legally the representative of the affected employees. In other words, employers in this situation will be between a rock and a hard place when it comes to handling disciplinary actions covered by the new Board rule.

NLRB General Counsel finds Northwestern scholarship football players are “employees,” but football handbook interfering with “employee” rights does not warrant unfair labor practice prosecution. A private attorney (perhaps a fan of the rival Fighting Illini?) filed an unfair labor practice charge, alleging that the Northwestern University Football Handbook contained rules that interfered with the scholarship players’ Section 7 rights. The charge piggybacked on proceedings before the Board that ended in August 2015, when the Board found that the Northwestern players were “employees” under the NLRA but declined to exercise jurisdiction to permit them to have a representation election. The charge alleged that four provisions of the handbook violated the NLRA. The regional office of the Board submitted the case to the General Counsel’s Division of Advice, and on September 22, 2016, the Division issued an Advice Memorandum.

In the Advice Memorandum, the Division of Advice analyzed the provisions as it would an “employee handbook” and found that the following four provisions violated the NLRA:

  1. A social media policy that allowed the University to monitor all social media postings and prohibited players from posting anything that would be embarrassing to the University.
  2. A rule that prohibited players from discussing any aspects of the team – including player condition or strategies – with anyone.
  3. A rule that prohibited players from speaking to the media without approval from the Athletics Communications Office.
  4. A dispute resolution policy requiring that complaints and grievances be handled internally first and limiting players’ ability to talk to third parties in the complaint or grievance process.

The Division of Advice recommended that no complaint issue because the University had modified the handbook to remove the offending provisions. That’s good news for Northwestern, but private universities with scholarship athletes should be aware that the Board is continuing to press its theory that scholarship players are “employees” subject to the NLRA. They should also be aware of the Columbia University decision that we reported on recently, in which the Board ruled that teaching assistants paid and controlled by Columbia were “employees” under the NLRA and could organize a union. Private academic institutions may want to plan for the future expecting the Board to become more, not less, aggressive in its expansion of power, and for the courts to increasingly uphold those efforts if the courts’ composition changes due to political developments.

Dispute over maintenance worker bargaining unit at Volkswagen gets into court. As we have previously reported, a majority of employees in a maintenance employee bargaining unit that the Board found appropriate voted for representation by a local union affiliated with the United Auto Workers. Subsequently, Volkswagen engaged in a technical refusal to bargain so that it could carve a path to get into court. As expected, the NLRB on August 26 found that the maintenance employee bargaining unit was an appropriate unit for collective bargaining. On September 1, Volkswagen sought review by the D.C. Circuit. We expect the UAW to prevail: the Board is given broad latitude under the NLRA to decide what constitutes an appropriate bargaining unit, and it is settled law that the unit need not be the most appropriate unit. The fact that the UAW lost an earlier election at the plant in a wall-to-wall unit is unlikely to bear on the issues in court. Instead, to avoid the Board’s certification of the UAW local and court enforcement of the Board’s order to bargain, Volkswagen will probably have to show that the employees in the unit have an overwhelming community of interest with the other employees in the plant.

Two Uber drivers in New York are ruled “employees” eligible for unemployment benefits. A recent decision of the New York State Department of Labor found that two former Uber drivers were employees for purposes of the state unemployment insurance scheme.  The NYDOL viewed the Uber business model from a status quo perspective and ruled that two of its drivers were not independent contractors. The decision echoes rulings from the west coast and is another blow to the Uber business model. Uber asserts that it is a ride-sharing platform that allows independent contractor drivers to match themselves to customers needing rides. Statewide audits of Uber and its relationship with its drivers may upset the applecart, which may explain – at least in part – why Uber is making a push in the direction of driverless cars.

Federal and state government agencies hungry for tax revenue are looking for opportunities to challenge independent contractor classifications, and plaintiffs’ lawyers are seeking to bring overtime claims for misclassified employees. Finally, companies in the “gig” economy should be aware that the NLRB General Counsel is intent on pursuing unfair labor practice charges asserting that misclassification is “interference with Section 7 rights under the NLRA.” We expect to see no shortage of unions willing and able to file that type of charge as part of their organizing efforts.

Whiskey workers walk out. According to the Courier-Journal of Louisville, workers at two Jim Beam bourbon whiskey plants in Kentucky began a strike on September 15. The twist here is that the strike is because of too much work – the workers want the company to hire more full-time employees to reduce the overtime. The strike comes after negotiations for a new contract to replace one that expired in August. According to a local representative of the United Food and Commercial Workers union who was on the scene, the company’s slogan has always been “come in as friends, leave as family.” She said, “That’s the way we want to be treated: like family.” The company says it has contingency plans to keep operations running at the two facilities, and maybe most importantly to some, “No shortages of the company’s famous bourbon whisky are expected.” That’s a relief.

UPDATE: Let the whiskey flow! The strike ended on Friday, October 21.

Union muscle helps Hillary Clinton silence hecklers in Vegas. According to the Daily Mail, hecklers who were either pro-Donald or anti-Hillary showed up at a recent Clinton rally in Las Vegas, only to be swiftly removed by a self-appointed security squad from Carpenters Local Union 1977. One heckler reportedly had his shirt ripped off after he was thrown to the ground and then removed from the event. The union members wore blue union shirts, possibly for their “blue state” actions. Organized labor is a reliable supporter of Secretary Clinton. As we went to press, only two unions appear to have endorsed Mr. Trump: the union representing Border Patrol agents, and the Fraternal Order of Police.

Will labor relations “go Euro” after November 8? The Center for American Progress and its President, who is co-chair of the Hillary Clinton transition team, will be seeking “YUUUGE” changes to U.S. labor law if it gets its way. According to an October 2016 report in Bloomberg BNA, the CAP wants European-style industry-wide collective bargaining. That bargaining framework would limit individual employer flexibility by setting wages and benefits across industry groups (for example, “breweries,” or “automobile manufacturing”). Other issues would be pushed down to workplace councils at the various individual sites of employment. How’s that working out for Europe?

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