You know the old saying, ‘if it ain’t broke, don’t fix it,’ right? Well, the National Labor Relations Board (NLRB) has never really liked this idea, especially during the Obama administration. On June 9, 2017, the D.C. Circuit upheld the NLRB’s August 24, 2016 decision in King Soopers, Inc., where it revised its longstanding back pay formula concerning search-for-work and interim employment expenses of terminated employees. Under the traditional approach, a complainant could not recover search-for-work costs that exceeded his or her interim earnings and these costs were an offset to interim earnings deducted from gross back pay. Put more clearly, the higher the interim earnings, the lower the amount of back pay an employee could collect. Thus, by deducting search-related expenses from the interim earnings amount, this ultimately increased an employee’s back pay and effectively reimbursed them for their search-for-work and interim employment expenses. Yet the Board majority, and Court, did not see it this way.
In August 2016, the Board ordered the Company reinstate complainant with “make-whole relief” and, as such, reimburse her for all search-for-work related costs when it found the Company violated Sections 8(a)(1) and (3) of the National Labor Relations Act. The Board reasoned that it never “explain[ed] or justif[ied] its [previous] approach” and that, particularly in the case at hand, the former back pay formula failed to make individuals completely whole, likely discouraged them in job search efforts, and failed to adequately deter further violations of the Act.
In agreement, the Court found that “the Board offered clear, reasonable, and compelling justifications for the new remedial framework.” The Court further held that pursuant to the Board’s “broad, discretionary” authority to order remedies that will “effectuate the policies” of the Act under Section 10(c), the Board had the statutory authority to revise the back pay formula. The Court also noted that case law interpreting the Act supports this broad remedial authority and that “a remedy will not be disturbed unless it can be shown that the order is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act.”
Moreover, neither the Court nor the Board were convinced by any of the arguments put forth by the Company or dissenting Board Member Philip A. Miscimarra (not yet the Chairman of the Board). These arguments included, among others, bad policy making; the Board exceeding statutory authority; the threat of protracted litigation when search-related expenses are particularly high; possible financial windfalls for complainants; and complainants abusing the new standard by seeking employment they are not qualified for as a way to increase employment expenses.
Still, the Court, like the Board, held that “the General Counsel continues to bear the burden of establishing that an employee’s search-for-work and work-related expenses are reasonable.” In reality, however, this burden is ultimately borne by employers as the only way to challenge search-for-work computations is through a compliance proceeding that demands more time, money and effort. Therefore, if an employer disagrees with a “reasonable” search-related calculation by the Board, they should be prepared to argue the merits of its claim in a compliance hearing.
Nevertheless, the practical effect of this decision is not likely to be drastic as search-for-work expenses and interim earnings are rarely a matter of contention that hold up cases. It is unlikely that this changed treatment of search-for-work expenses would sway an employer towards choosing litigation over settlement as this cost, in the grand scheme of things, is minimal compared to other forms of back pay potentially owed (e.g., lost wages or medical expenses). Moreover, though Board member Miscimarra’s reasoning for rejecting the Majority’s decision is sound, he also recognized that, under reasonable circumstances, “Board proceedings have rarely involved protracted litigation over employment/search expenses.” In the end, Republicans will soon have a majority on the five-seat Board (after Trump nominee William Emanuel’s likely Senate confirmation) and, consequently, many employee/union friendly decisions made during the Obama administration are likely to be overturned. Accordingly, this new remedial framework articulated in King Soopers, and affirmed by the Court, may not survive for long. (But, let’s hope the new Board tackles other, more pressing issues first, e.g., micro-units and the critical treatment of employer rules.).