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NLRB Weakens Employer’s Right to Hire Permanent Replacements

NLRB Weakens Employer’s Right to Hire Permanent Replacements

By:  Dan Cohen – 6/7/16

On May 31, 2016, in a 2-1 decision by Chairman Mark Pearce and Member Kent Hirozawa, the NLRB has once again disrupted an employer’s right to protect its business interests. The case is American Baptist Homes of the West, 364 NLRB No. 13, and the issue pertains to an employer’s right to permanently replace economic strikers.  Nearly 80 years ago, the Supreme Court established an employer’s right to permanently replace economic strikers as an “economic weapon” when faced with an economic strike. Mackay Radio & Telegraph Company, 304 U.S. 333 (1938).  While it is true that neither the Mackay Radio decision nor subsequent Board decisions suggested that the employer’s right was absolute, the Board adopted a rule back in 1964 disallowing scrutiny into the employer’s motive for hiring permanent replacements.  Indeed, the Board had held that the employer’s motive for such replacement to be immaterial absent evidence of “an independent unlawful purpose” extrinsic to the strike.  Thus, an employer had a recognized right to permanently replace economic strikers to continue is operation and counteract the union’s ultimate economic weapon.

After receiving notice from the SEIU that workers would go on strike on August 2 and unconditionally return on August 7, American Baptist retained a staffing firm to temporarily staff its continuing care facility in Oakland, California during the strike. American Baptist extended temporary employment offers to 60-70 staffing employees at a cost of $300,000.  Eighty of the 100 bargaining unit employees went out on strike on August 2.  Shortly thereafter, American Baptist started permanently replacing the striking employees by making 44 permanent job offers.  Within 24 hours of the anticipated return to work date set by the SEIU, striking employees were notified that they would be placed on a preferential hiring list.  When the striking employees returned on August 7 consistent with the prior offer of unconditional return, only some were permitted to work.  The majority were advised they had been permanently replaced and would be placed on a preferential hiring list.

The ALJ concluded that American Baptist’s’ motivation for permanently replacing the strikers—to teach the strikers “a lesson” and ensure that employees would not strike again—was related to the underlying strike and therefore did not constitute an “independent unlawful purpose.” The Board disagreed and found the permanent replacement of the strikers in violation of the NLRA. According to Chairman Pearce and Member Hirozawa, General Counsel does not have the burden of showing an unlawful purpose extrinsic to the strike, but, rather, only that the hiring of permanent replacements was motivated by a purpose prohibited by the Act.  The majority then determined that hiring permanent replacements to “teach the union a lesson” and to “curtail future strikes” were both independently unlawful.  As for the latter reason, the majority concluded that the evidence established an independent unlawful motive, specifically, a desire to interfere with employees’ future protected activity.

Replacing striking workers always has the effect of dissuading future strikes, but until this ruling, it was a long-recognized economic weapon of management. Apparently, this Board intends to divest management of their “equalizer” economic weapon.  This should not come as much of a surprising given the Board and General Counsel’s objectives of strengthening unions at every chance they get.  By changing the meaning of “independent unlawful purpose” to nothing more than antistrike animus, which the Supreme Court long ago recognized as a given when faced with a potentially devastating economic strike, the majority now suggests that economic strikes should be a “risk free” proposition for strikers. American Baptist is likely to appeal this decision, but for now, employers facing strikes and entertaining the idea of permanent replacements must be exceedingly careful.  One word to the wise—it is probably not a good idea to tell the Union that you permanently replaced the workers to “teach the union a lesson” and to “curtail future strikes.”  I would suggest making the decision to permanently replace economic strikers as a means of carrying on the business, nothing more and nothing less!



NLRB Upholds Standard Applied to Work Rules But Dissent Proposes New Framework

NLRB Upholds Standard Applied to Work Rules But Dissent Proposes New Framework

By: Rob Dare – 4/21/16

It seems that every week brings a new NLRB decision that declares workplace conduct rules unlawful (see the previous blog post). Last week was no different, when the majority of the Board held two rules in a Beaumont Hospital surgical services Code of Conduct to be unlawful. However, the decision is particularly noteworthy because a forceful dissent by a Member of the Board called for the abandonment of the decade-old standard used by both the Board and courts to evaluate workplace rules. The Luther Heritage standard (named for the case in which it was announced), provides that employment policies, work rules, and handbook provisions are unlawful if employees “would reasonably construe” the language to prohibit protected activities under Section 7 of the NLRA, which grants employees the right to engage in union organizing, collective bargaining, and other concerted activities for the purpose of mutual aid or protection.

The rules at issue prohibited:

  1. Employee conduct that, in the context of patient care and hospital operation, “impedes harmonious interactions and relationships.”
  2. “Negative or disparaging comments about the moral character or professional capabilities of an employee or physician made to employees, physicians, patients, or visitors.”

According to the majority, the first rule is unlawfully overbroad because it could “encompass any disagreement or conflict among employees, including those related to discussions and interactions protected by Section 7.” And the second rule is unlawful because it “would reasonably be construed to prohibit expressions of concerns over working conditions.”

Member Miscimarra, however, explained that in his view, the case (and result) illustrates the problematic nature of the Luther Heritage standard – that it places too much emphasis on the effect that facially neutral work rules have on Section 7 rights, while failing to consider any legitimate reasons employers have for implementing the rules in the first place. Listing the “multiple defects” of the standard, Miscimarra essentially argues that the “single-minded focus” of the “reasonably construe” standard “prevents the Board from giving meaningful consideration to the real world ‘complexities’ associated with many employment policies, work rules, and handbook provisions.” Here, he opines, the two rules helped serve the public interest by protecting patients and family members from needless conflict in hospital settings, but that is ignored under Lutheran Heritage.

The solution, according to Miscimarra, is to replace Luther Heritage with a balancing test where employees’ Section 7 interests are weighed against the employer’s particular business justification for the rule in question. Unpersuaded, the majority replied that a finding that “a particular rule threatens to have a chilling effect does not mean, however, that an employer may not address the subject matter of the rule and protect his legitimate business interests [with a] more narrowly tailored rule that does not infringe on Section 7 rights.”

Thus, Luther Heritage remains the standard that will be applied to employer rules. Accordingly, all employers, unionized or not, should continue to carefully craft and narrowly tailor the language within its handbook, code of conduct, etc. But, we will continue to monitor NLRB decisions and any relevant changes, as Member Miscimarra has provided a powerful road map for future work rule challenges.

NLRB Rules Against Quicken Loans

By Dan Cohen – 4/11/16

On April 7, 2016, Quicken Loans and several of Dan Gilbert’s other businesses were ordered to make 24 changes to their employee rules by Administrative Law Judge David Goldman because the rules were overly broad and violated Section 8(a)(1) of the National Labor Relations Act. Section 8(a)(1) prohibits employers from interfering with, restraining, or coercing employees in the exercise of the rights guaranteed in Section 7 of the Act.  According to Judge Goldman, the 24 work rules infringed upon employee rights to engage in concerted activities, including the right to discuss, debate, and communicate with each other regarding their workplace terms and conditions of employment.

Quicken argued that the employee manual (a/k/a “the Big Book”) had limited use, had only been distributed to some employees, was not used or relied upon by managers and that the manual played no active role in the employees’ work life. Quicken’s arguments were rejected because the evidence established that nothing amended or contradicted the offending rules and employees were not advised that they could engage in the conduct prohibited by the manual.  According to ALJ Goldman, “once offending rules are placed in an employer-developed employee rulebook and distributed to employees, it takes forceful and specific countervailing evidence of their disavowal to strip them of their tendency to coerce.”

Turning to the language of the manual, Judge Goldman found 24 rules and statements to violate the NLRA and ordered Quicken and the other companies to cease and desist from maintaining the following overly broad rules that:

  • Prohibit disclosure of unspecified “confidential information” in the employee handbook;
  • Prohibit employees from knowingly making false or misleading EEO complaints or EEO complaints in bad faith;
  • Require employees making complaints or participating in investigations to agree to maintain confidentiality;
  • Require employees to dress and conduct themselves in a professional manner;
  • Require employees to keep non-public financial or operational information confidential;
  • Require employees to resolve work-related concerns by speaking to team leaders and not taking it on-line;
  • Prohibit employees from displaying information that could be deemed harmful or offensive to the reasonable person;
  • Prohibit unauthorized postings and solicitations on company property;
  • Discourage emails that reflect unfavorably on the company and its reputation;
  • Prohibit non-business activities on company property;
  • Prohibit email use for activities other than company business;
  • Require employees to direct all press inquiries about the business and its directors to corporate communications persons;
  • Define confidential information as non-public information about the business, personnel, customers, operations and affairs;
  • Prohibit use of company resources which presents a threat of harm to the company or its reputation;
  • Prohibit conduct that is not in the best interests or the company, its clients or team members;
  • Prohibits signature lines with religious, political, sexual or other inappropriate content;
  • Prohibit employees from using personal web pages or sites that reference the company or which disclose information about the company without the permission of the marketing team;
  • Prohibit employees from sending non-business related attachments to emails or communicating with the media without express authorization from the corporate communications team;

Quicken has indicated it will appeal the ALJ’s decision to the full NLRB, and if necessary, to federal circuit court. Given the track record of the NLRB, I would not expect a reversal.  But, in order to move the case away from the Agency and into court, Quicken must exhaust its administrative remedies.  Thus, taking an appeal to the anti-employer NLRB must occur before Quicken is likely to get a fair shake.

While we applaud Mr. Gilbert and his efforts to fight what is clearly government overreach, we have been advising businesses now for several years on how to re-write many of the above rules in a way that protects important business rights and values without becoming fodder for the NLRB. Employers can still protect confidential information without prohibiting discussions about wages and benefits.  And, employers can still prohibit misconduct without labeling it as unprofessional, not in the company’s best interest or that which reflects unfavorably on the business.  Of course, some of the opinions are more troubling than others and hopefully Mr. Gilbert will have success once he can make his arguments in federal court. However, re-writing many of the work rules will save you defense costs, and disarm unions from using the unfair labor practice findings against your business in a union organizing drive or otherwise.  And, it will spare you the requirement of posting notices at your facilities for 60 days, which advise employees you violated federal law and reminds employees of their right to unionize.


Where Have We Been Lately?

Where Have We Been Lately?

By:  Dan Cohen – 10/8/15

It’s been about six weeks since we last posted to the Emplawyers Blawg, not because there has been nothing to write about, but because we have been so darn busy. By no means is this “sour grapes” as we welcome business with open arms, enjoy each and every challenge at work and wouldn’t have it any other way. To complicate matters in my life, I decided to spend the last few weekends of the summer painting my house. By most accounts, everyone thinks I am crazy for taking on such a project. And, while I told everyone who asked, that I enjoy painting and that it was not so bad, the truth of the matter is, I don’t know what I was thinking when I made that decision. It was bad, took longer than I thought it would, and is something I won’t quickly volunteer for again.

So, what has been going on for the last several weeks in the world of labor and employment law? The biggest and probably worst news came from the NLRB in its Browning-Ferris Industries of California, Inc., where the NLRB re-wrote its “joint employer” rule. Anybody following this case as well as the McDonald’s case, which involved the question whether McDonald’s was a “joint employer” with its franchisees, would probably have bet the farm the decision would be anti-business. Sure enough: It was. According to the Browning-Ferris decision, the NLRB may find two or more statutory employers to be joint employers of the same employees if they share control over the terms and conditions of employment. It does not matter if the two employers actually exercise that control According to the NLRB, indirect and even potential control is enough.

There is little doubt that the newly adopted NLRB standard for finding joint employment relationships is a “game changer” and deals a significant blow to the business community, particularly companies outsourcing functions, but retaining control over workers or operating within the franchisor/franchisee model as well as the staffing industry. Franchisors may become financially responsible for unfair labor practices committed by their franchisees and unions will be more motivated than ever before to organize franchisees in hopes of bringing the franchisor (and its much deeper pockets) to the bargaining table. The decision is also likely to result in an expansion of union membership in the private sector as organizing contingent and temporary workers will become far easier.

While I was up on a ladder, the Michigan Employment Relations Commission upheld an earlier ruling by an administrative law judge that the Michigan Education Association’s (“MEA”) “August Window” was illegal. Under its longstanding August Window rule, union members could only resign the membership from the union in August. The obvious intent and effect of the rule was to make it more difficult for teachers and support staff to resign their membership. This has become a hot button item now that Michigan is a right to work state and membership in the union can no longer be a condition of continued employment. I have witnessed first-hand how the MEA has treated some local groups of teachers and support staff who have attempted to resign their memberships and even decertify the MEA as their exclusive bargaining representative. In each case, the story has been the same: the employees have wondered what it is they are actually receiving from the MEA for the amount of union dues they have paid. Having some say in how their hard earned dollars are spent is an extremely important right that these teachers have not experienced with the MEA.

Finally, right about the time I was treating for my aching back, in an unpublished opinion of the Michigan Court of Appeals, the appellate court determined that a reduced limitations period set forth in an employee handbook was to be enforced. See e.g. Hier v. Douglas J. Management L.L.C, Case Number 321792 (September 15, 2015). In that case, the policy handbook required that an employee must commence “any claim, complaint, action or suit relating to their employment with the Company” within 182 days of the event “giving rise to the claim, complaint, action or suit.” Because the employee missed the 182 day deadline, the case was dismissed and upheld on appeal. We have won cases where similar 182 day limitations periods have been contained in the employment application, but this appears to be the first case where the language was set forth in the employee handbook. While we welcome this decision, the decision refers to the handbook provision as contractual, which is inconsistent with our advice that the handbook is not to be construed as a contract. Certainly, the better place for the reduced limitations period is the employment application or a stand-alone agreement. The handbook would be my third choice, but in a pinch might save the day.

By the way, my house looks great now.

NLRB Refuses to Allow Northwestern Football Players Opportunity to Form a Union

NLRB Refuses to Allow Northwestern Football Players Opportunity to Form a Union

By:  Dan Cohen – 8/22/15

Earlier this week, the NLRB unanimously ruled that Northwestern football players could not form a union. The ruling overturns the 2014 decision of the NLRB Regional Director in Chicago that college football players at Northwestern were employees of the University, who could be represented by a union (See e.g. 3/27/14 Post, “A New Concept of Offensive Linemen…Ready to Line Up Against University Administration”). The NLRB did not base its ruling on the central legal question, “whether student athletes were employees of the university.”

Instead, the Board’s decision recognized that since it did not have jurisdiction over state-run colleges and universities, which make up 108 of the roughly 125 teams, and because Northwestern was the only school in the Big 10 that was not state-run, “asserting jurisdiction over a single team would not promote stability in labor relations.” Had the NLRB exercised jurisdiction over the Northwestern football players, that decision would have affected all private schools with football programs in the NCAA’s top tier, including Baylor, Boston College, BYU, Duke, Miami, Northwestern, Notre Dame, Rice, SMU, Stanford, Syracuse, TCU, Tulane, Tulsa, USC, Vanderbilt and Wake Forest.

What we won’t know now as a result of this decision is how the football players voted since their ballots were sealed when Northwestern appealed the Regional Director’s decision allowing the vote to go forward. Frankly, with Northwestern Coach Pat Fitzgerald lobbying against unionization and players publicly announcing they would vote no, a vote in favor of unionization was far from certain.

The NLRB has essentially punted on the issue (no pun intended). However, some of the concerns raised by those pushing to unionize the student-athletes at Northwestern have been taken up elsewhere, and some reform has already begun. For example, in January, the schools that make up the NCAA’s five biggest conferences voted to allow college athletes to be paid stipends that cover more than tuition, room and board, and meals. The NCAA will reportedly distribute almost $19 million to the nearly 350 Division I schools for that purpose. The Big Ten and Pacific-12 conferences now guarantee four-year scholarships, and the Pac-12 guarantees medical coverage for athletes injured during competition for up to four years after graduation.

The wake-up call to the NCAA might just be the legacy of the failed attempt to unionize the Northwestern football team. While there is still more to do, I think reform is the a better answer then turning the game upside down by having some players unionized while the vast majority of others remain union free.

The NLRB’s Attempt to Re-Write Book on Joint Employment Heats Up

By:  Dan Cohen – 4/3/15

For some time now, the National Labor Relations Board’s Office of the General Counsel has been on the offensive against McDonald’s USA, LLC and its franchise system. The Office of the General Counsel (“OGC”) in essence claims retaliatory action by the McDonald’s franchisee’s stemming from the nationwide protests by fast food workers about their wages. While the underlying facts provide for an interesting backdrop, the NLRB’s theory against McDonald’s USA is what I find to be the bigger story. The OGC has suggested that McDonald’s USA, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisee’s operations, beyond protection of the brand, to make it a joint employer with its franchisees, sharing liability for any violations of the NLRA.

Since 2012, the OGC has found more than 100 of the 310 charges against McDonald’s USA and its franchisees to be meritorious. Those that have not been settled have been consolidated into 19 separate complaints across the country, including one in Detroit’s Region 7 office. The OGC consolidated some of the complaints, and hearings began on March 30th in New York. The hearings will eventually move to Chicago and then on to Los Angeles.

The issuance of complaints against McDonald’s came after the OGC filed its amicus brief on June 26, 2014, in Browning-Ferris Industries of California v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters. The Browning-Ferris case arose in the context of a union election campaign. The Teamsters sought to organize recycling sorters directly employed by a subcontractor, Leadpoint Business Services, but also asserted that Browning-Ferris was a joint employer with Leadpoint. The case was initially dismissed under the NLRB’s long-standing joint employment test because Browning-Ferris did not exercise enough control over its contracted recycling sorters. The Teamsters filed an appeal, seeing the case as an opportunity “to address how best to evaluate joint-employer status in this increasingly common setting: workplaces where employers use labor contractors or staffing agencies to supply workers.”

In its amicus brief, the OGC argues that the time has come for the NLRB to alter the standard it has used for over 30 years when determining whether two separate and independent employers will be considered joint employers. The current standard was articulated in TLI, Inc., 271 NLRB 798 (1984), and Laerco Transportation, 269 NLRB 324 (1984). There, the NLRB held that legally separate entities are joint employers only when they actually share the ability to control or co-determine the essential terms and conditions of employment and can meaningfully affect matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction of employees. The Board has also indicated that the control must be “direct and immediate.” According to the OGC, however, the NLRB should broaden its joint-employer standard to include an entity that: (1) exercises “direct or indirect control” over working conditions; (2) has “unexercised potential to control” working conditions; or (3) where the “industrial realities” make the inclusion of the purported joint employer essential to meaningful bargaining.

Shortly, after the OGC filed its amicus brief, the Board decided CNN News Network and Team Video Services LLC, and found CNN and its labor contractor were joint employers of the contractor’s unionized employees even though CNN had not been named as an employer in the union’s election petition and had never engaged in collective bargaining. When CNN replaced Team Video with a non-union contractor, the union alleged that CNN terminated Team Video out of anti-union animus and unlawfully refused to bargain with the union about its decision to terminate the contract. The NLRB found CNN to be a joint employer because of the operational control provisions of its contract with Team Video, which granted CNN the authority to exercise control over hiring and work hours, including staffing levels and overtime. The Board rejected the CNN’s argument that the control had to be direct and immediate and ruled that the potential for control to be dispositive. CNN has since appealed the decision.

There is little doubt that the standard being championed by the OGC will have a dramatic impact on the franchise business model as well as the staffing industry. An expanded definition of joint employment will suddenly make franchisors financially responsible for unfair labor practices committed by their franchisees and motivate workers to organize franchisees in hopes of bringing the franchisor (and its much deeper pockets) to the bargaining table. It will also result in a significant expansion of union membership in the private sector as organizing contingent and temporary workers will become far easier. Quite frankly, the stakes could not be much greater, and it is hard for me to imagine how the NLRB’s attempt to change its decades’ old joint employment test will not reach the Supreme Court. But, that will take time as the cases must first make their way through the federal courts of appeal.