7.25.18

News & Analysis

The Good, the Bad and the Ugly

NEWS & ANALYSIS

NLRB’s joint employer standard is still up in the air. The “joint employer” standard of the National Labor Relations Board is still in play.

On May 9, in a rarely-seen development, the NLRB Office of Information and Regulatory Affairs published an announcement by Chairman John F. Ring that the Board may use the regulatory rulemaking process to decide the joint employer standard. Through rulemaking, the Republican-majority Board may be able to avoid Member conflict allegations such as those that engulfed Member William Emanuel in Hy-Brand. On May 29, supporters of organized labor, including Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), and Kirsten Gillibrand (D-N.Y.), sent a letter expressing their concern over the proposal.

On June 5, Chairman Ring responded that the rulemaking would take place and that the Senators’ politically motivated questioning and attacks on the process were not persuasive to him. His letter is worth the read:

... a majority of the Board believes that "notice-and-comment” rulemaking offers the best vehicle to fully consider all views on what the [joint-employer] standard ought to be. Although we could have invited briefing in connection with our traditional case-by-case adjudication, rulemaking on this topic opens an avenue of communication with the Board for — we hope — thousands of commenters. I look forward to hearing from all interested parties, including individuals and small businesses that may not be able to afford to hire a law firm to write a brief for them, yet have valuable insight to share from hard-won experience.

Rulemaking is appropriate for the joint-employer subject because it will permit the Board to consider and address the issues in a comprehensive manner and to provide the greatest guidance. Although legal standards of general applicability can be announced in a decision of a specific case, case decisions are often limited to their facts. With rulemaking, by contrast, the Board will be able to consider and apply whatever standard it ultimately adopts to selected factual scenarios in the final rule itself. In this way, rulemaking on the joint-employer standard will enable the Board to provide unions and employers greater "certainty beforehand as to when [they] may proceed to reach decisions without fear of later evaluations labeling [their] conduct an unfair labor practice," as the Supreme Court has instructed us to do.

In addition, whereas standards adopted through case adjudication may apply either retroactively or prospectively, final rules issued through notice-and-comment rulemaking are required by law to apply prospectively only. Thus, by establishing the standard for determining joint-employer status through rulemaking, the Board immediately frees its stakeholders from any concern that actions they take today may wind up being evaluated under a new legal standard announced months or years from now.

If the three Republicans on the Board do indeed support new rulemaking as indicated in Chairman Ring’s letter, the Board by the end of the summer is likely to issue proposed regulations. That will begin a period of public comment regarding the proposed regulations. The Board can hold public hearings but is not required to do so.

In 2015, while Democrats were in the Board majority, the NLRB relaxed and expanded the Board’s joint-employment standard in Browning-Ferris. After Republicans regained the majority, the Board issued Hy-Brand Industrial Contractors, Ltd., which returned to the traditional standard. But then, Republican Member William Emanuel came under attack for failing to recuse himself from the Hy-Brand case. In February 2018, the Board excluded Member Emanuel from the case and then vacated the Hy-Brand decision entirely. (Hy-Brand the employer filed a motion for reconsideration of the decision to vacate the Hy-Brand decision.)

In the meantime, the Browning-Ferris case, which had been at the U.S. Court of Appeals for the District of Columbia Circuit, had been sent back to the Board because of the change of the applicable standard under Hy-Brand.

In June, the Board denied Hy-Brand’s request for reconsideration, and the Board requested that the D.C. Circuit take Browning-Ferris  "out of abeyance and continue processing it in the regular course." Not to be outflanked, Browning-Ferris (the employer) asked the D.C. Circuit to remand the case to the Board, given the Board’s announcement to pursue rulemaking on the appropriate joint employer standard. According to Browning-Ferris (the employer), “Although the joint-employer rules developed would not apply directly to this case... the reasoning underlying those rules presumably would bear upon this case if it is remanded...Given that the NLRB has undertaken definite measures to reconsider the standard governing its treatment of this case, the better outcome is to not have this case be an outlier in relation to the Board's new policy.” That motion apparently is pending.

Keep an eye out for developments regarding the proposed rulemaking and the D.C. Circuit’s handling of the Browning-Ferris case, as well as new developments in the well-publicized McDonald’s joint employment case. The McDonald’s case also involves joint employment, but with franchisees and franchisors. The parties had reached a settlement, but an NLRB Administrative Law Judge recently rejected the settlement.

NLRB General Counsel lends a hand with helpful memorandum clarifying Board law on handbook rules and policies. As Constangy has previously reported, on June 6, NLRB General Counsel Peter Robb issued a Guidance Memorandum summarizing how the Regional Offices would interpret employer rules and policies when considering unfair labor practice charges of interference. In its recent Boeing decision, the Board majority laid out a new standard for determining whether an employer rule or policy interfered with employees’ Section 7 rights. The General Counsel’s memorandum provides examples of rules and polices that are lawful and directs Regional Offices that they should no longer interpret ambiguous policies and rules against the interest of the drafting employer and those with generalized coverage as banning all activity that could conceivably be included within the applicable rules. The guidance provides that Regional Offices are to evaluate whether a rule “would be” interpreted as prohibiting and thus interfering with Section 7 activity, instead of the former standard, which found that a rule or policy would be unlawful if it “could be” interpreted as interfering.

The NLRB in Boeing reexamined the standard for determining whether an employer rule or policy violates the National Labor Relations Act. The new standard balances the restrictive effect on employees’ Section 7 rights against the employer’s legitimate right to maintain workplace discipline and productivity. Under the new standard, employer rules and policies are grouped into three categories: (1) those that are generally lawful; (2) those that warrant individualized scrutiny; and (3) those that are plainly unlawful. The General Counsel’s memorandum, largely tracking the Boeing decision, puts some common employer rules and policies into the groups.

Category 1:  Rules or policies that are generally lawful because, when interpreted reasonably, they do not prohibit or interfere with the exercise of Section 7 rights, or because the business justifications for the rule outweigh the potential adverse effect on Section 7 rights. Examples of rules and policies in this category include the following:

  • Civility policies (for example, no disparaging of co-workers, no offensive language)
  • No-photography, no-recording rules
  • Rules proscribing disruptive behavior (for example, “creating a disturbance on company premises or creating discord with clients or fellow employees is prohibited”)
  • Policies for protection of confidential, proprietary, or customer information
  • Rules prohibiting defamation or misrepresentation
  • Rules prohibiting use of company logos or other intellectual property
  • Policies requiring prior authorization to speak on behalf of the employer
  • Policies requiring loyalty and prohibiting self-enrichment.

Category 2: Rules and policies that are not plainly lawful or unlawful will need to be evaluated to determine whether they would interfere with Section 7 rights, and if so, whether the adverse impact, if any, on those rights is outweighed by legitimate employer interests. Examples of such rules and policies include the following:

  • Broad conflict-of-interest policies not specifically targeting fraud and self-enrichment, and not expressly restricting membership in, or voting for, a union
  • Confidentiality policies broadly including employer business or employee information
  • Policies concerning disparagement or criticism directed at the employer
  • Policies on use of the employer’s name
  • Policies restricting media or third party contact
  • Policies restricting off-duty conduct potentially detrimental to the employer
  • Policies prohibiting false statements.

Category 3: Rules and policies that are generally unlawful because they would prohibit or limit protected concerted activity with adverse impact on Section 7 rights outweighing the employer interest for having the rule or policy, including the following:

  • Confidentiality rules or policies regarding information on wages, benefits, or working conditions
  • Rules or policies restricting membership in outside organizations.

The General Counsel Memorandum limits some of the uncertainty that employers face in adopting or enforcing workplace rules and policies, and should help employers to promote safe, civil, and productive workplaces that benefit the vast majority of employees.

Individual worker joining outside protests of labor group is engaged in protected concerted activity, NLRB Division of Advice says. An employee of a Papa John’s Pizza franchisee, RoHoHo, Inc., skipped scheduled work to participate in activities related to the “Fight for $15” protests that have occurred sporadically in cities across the nation. The employee had requested the time off, but the employer denied the request because the employee had not provided seven days’ notice. When the employee no-showed, the employer discharged the employee for skipping work, presumably viewing the employee’s action as “individual.” But the employee filed an unfair labor practice charge, claiming that his individual action to join a group protest was protected concerted activity under the National Labor Relations Act. The NLRB regional office sent the charge to Washington, D.C., for consideration by the NLRB General Counsel’s Office, Division of Advice. The Division of Advice, in an Advice Memorandum released on June 14 (you can download a pdf of the Advice Memorandum here), concluded that the employee’s “solo strike” was protected concerted activity because it was to support the Southern Workers Organizing Committee, the labor organization sponsoring the protest action, and not an individual concern. Though concerted activity generally requires activity by at least two employees, the Division of Advice noted that the Board has found “a single employee’s apparent solo strike to be protected, concerted activity where the employee strikes to assist a labor union in furtherance of the union’s organizing efforts, particularly when it is done with the union’s knowledge and agreement.” The RoHoHo case was settled before the release of the Advice Memorandum, but the memorandum is a useful reminder that employers need to deal carefully with individual employee protests that might be creatively viewed as “concerted.”

NLRB to undertake comprehensive review of internal ethics and recusal. On June 8, the NLRB announced that it would undertake a comprehensive review of its policies and procedures governing ethics and recusal requirements for Board Members. The review is an offshoot of the recusal controversy involving Member Emanuel and the Hy-Brand decision discussed above. The Board’s announcement states in part as follows:

This initiative will ensure that the NLRB’s stakeholders—and the American people generally—can have full confidence in the integrity of the Board and its recusal processes.

“Recent events have raised questions about when Board Members are to be recused from particular cases and the appropriate process for securing such recusals,” said NLRB Chairman John F. Ring.  “We are going to look at how recusal determinations are made to ensure not only that we uphold the Board’s strong ethical culture, but also to ensure each Board Member’s right to participate in cases is protected in the future. Those who rely on us to decide labor matters need to know their cases will be decided under proper procedures that ensure an appropriate Board majority.”

Chairman Ring has proposed for Board consideration a review, to be conducted expeditiously, that would examine every aspect of the Board’s current recusal practices in light of the statutory, regulatory, and presidential requirements governing those practices.  Among other things, the Board would review and evaluate all existing procedures for determining when recusals are required, as well as the roles and responsibilities of Agency personnel in connection with making such determinations. To more fully inform its review, the Board would seek outside guidance, including gathering information regarding the recusal practices of other independent agencies with adjudicatory functions. Under the Chairman’s proposal, the review would culminate with the issuance of a report that sets forth the Board’s findings and establishes clear procedures to ensure compliance with all ethical and recusal obligations.

Hopefully, the review will be the basis for some clear rules that help avoid fiascoes such as the Hy-Brand mess and that will not require Board Members with “in-the-trenches” labor law experience to have to recuse themselves because of prior representation of clients in labor matters.

THE GOOD, THE BAD AND THE UGLY
Supreme Court’s Janus decision has public sector unions on defense. Public sector employees forced to pay agency fees to unions are reacting swiftly in response to the Janus decision, issued in late June. Recent reports indicate that one lawsuit has been filed by teachers in California against the National Education Association and another in Illinois against the Service Employees International Union. Although the unions representing public sector employees may soon be seeing “red ink,” state governments and taxpayers in so-called “blue states” may be seeing “greener” futures. A recent article in The Wall Street Journal (paid subscription required for full access) pointed out that Janus may be cure for the vicious cycle of unaffordable and ever-growing wage and benefits increases for public workers. Unions in these states will potentially have less money to put in place government officials who increase wages and benefits to unsustainable levels, letting the next generation deal with the consequences.

The UAW-Fiat Chrysler corruption investigation never ends. In late May, a third former Fiat Chrysler employee, employee relations manager Michael Brown, pleaded guilty to lying to a federal grand jury. Mr. Brown allegedly lied about his knowledge of the unlawful diversion of more than $1.5 million in gifts given to UAW officials for the UAW-Chrysler National Training Center. Mr. Brown accepted a plea agreement in federal court in Michigan and pleaded guilty to one count of "misprision" of a felony, which means that he tried to conceal a felony.

According to prosecutors, the training funds scandal involved the illegal diversion of approximately $4.5 million in funds that were to be used to train workers. Instead, the funds were paid to union officials or used by company managers to pay for personal items, including expensive vacations, exotic sports cars, designer clothing, fancy pens, parties, mortgage payments, and a swimming pool at a union officer’s house. Mr. Brown admitted in court that he knew Fiat Chrysler managers used credit cards and bank accounts of the Training Center to conceal the payments and opulent gifts to certain UAW officers and employees. He also admitted that he authorized payments of hundreds of thousands of dollars from the Training Center for salaries and benefits to UAW members who did little or no work for the Training Center. He is now expected to cooperate with prosecutors, and his sentencing is scheduled for September.

In a related development, the wife of a UAW Vice President, Monica Morgan-Holiefield, was sentenced to 18 months in prison and one year of probation, and will be required to pay a $25,000 fine for her role. She pled guilty in early 2017 to felonies for failure to pay taxes. According to a federal prosecutor involved in the case, Ms. Morgan-Holiefield lived a high-flying lifestyle on a declared annual income of about $5,400.

The Training Center has now filed suit against two of the Fiat Chrysler managers involved in the alleged corruption, the spouse of one of the managers, and Ms. Morgan-Holiefield, seeking $4.4 million in diverted funds. Collecting may be tough.

On the waterfront 2.0: featherbedding continues on the Hudson. According to a recent article in the New York Post, Hudson Yards Construction, LLC, developer of the 33 Hudson Yards project, has filed lawsuits seeking $77 million from the Building and Trades Council of Greater New York, a union group. A private investigator for the developer has reported that the project has “coffee boys” who are paid $43.98 per hour to do nothing but serve food and drinks to employees on the worksite. The lawsuits claim that the “coffee boys” are part of a widespread scheme of “misconduct” and “thuggish tactics of yesteryear” carried out by the union group. Members of the union group are also accused of slashing the tires of trucks of non-union concrete suppliers and interfering with concrete deliveries. The union group reportedly has denied the allegations, claiming the lawsuits are retaliation for its opposition to the use of non-union labor. The article points out that, under the collective bargaining agreement, the site is to have one concrete worker to pass out water and take coffee and lunch orders, and then perform covered work for the rest of the shift. However, the private investigator reported that between March 12 and April 21, it appeared that one worker did not perform any functions other than “coffee boy.” The “coffee boy” job may to some bring back memories of Marlon Brando in On The Waterfront -- before he got on the wrong side of Johnny Friendly. To others, this controversy is a good reminder of the value of video evidence to avoid fact disputes.

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