Litigation News & Updates

On May 29, 2018, the D.C. Circuit asked the NLRB to explain – and justify – why it used a “clear and unmistakable waiver” standard when dealing with a Burns successor setting initial terms and conditions of employment, possibly offsetting its duty to bargain with a union in certain situations. As such, the court partially vacated an April 2017 Board decision holding that a successor employer, Tramont Manufacturing, LLC, violated the Act by laying off 12 workers without first notifying the employees’ union or bargaining over the effects of this layoff decision.

In 2014, Tramont, after acquiring the assets of a bankrupt company, decided to hire many of the predecessor employees and recognize the union, thus becoming a Burns successor. Tramont exercised its legal right as a Burns successor to set initial terms and conditions of employment by issuing an employee handbook that included a section covering layoffs. Then, in 2015, Tramont issued layoff notices to 12 employees without first notifying the union. The union attempted to bargain over the layoffs’ effects, but Tramont refused, which led to the subsequent filings of unfair labor practice charges with the NLRB.

In its ruling, the Board held that Tramont, in not notifying the union of these layoffs and refusing to bargain over its effects, violated the Act. In analyzing the case, the Board rejected Tramont’s argument that the “contract coverage” standard governed the lawfulness of this action and instead applied its “clear and unmistakable waiver” standard. Tramont appealed the decision.

Now, the D.C. Circuit has asked the Board to clarify and explain its use of the “clear and unmistakable waiver” standard when analyzing the bargaining obligations of a Burns successor in relation to the initial terms and conditions it is legally entitled to set. But, notably, the D.C. Circuit did not actually seem convinced that Tramont’s “contract coverage” standard should apply in place of the Board’s “clear and unmistakable waiver” standard:

Where…an employer seeks release from its statutory obligations on the basis of initial employment terms it has itself drafted… it would be perfectly reasonable for the Board to decide as a policy matter to construe those terms under a standard other than the one that would apply to the terms of a bargained for agreement.

Similarly, besides asking for an explanation, the court also opined on the soundness of the Board’s use of a “clear and unmistakable waiver” standard in this context. The court stated that it did not “see how employment terms unilaterally imposed by an employer could ever effect a waiver of bargaining rights by the union” and that “framing that standard in terms of waiver is far from intuitive.” Simply put, the court wants the Board to show their work and further explain why it applied this standard.

Lastly, even if the NLRB abandons its waiver standard in this context on remand, the court noted the Board may still decide that unilaterally imposed employment terms should be narrowly construed, thus leaving Tramont liable for violations under the Act. In this instance, the court asked the Board to respond to Tramont’s position that this outcome would counter Board precedent from 2001 that held a Burns successor did not have a bargaining obligation over the rate of pay offered to its new employees as part of initial terms and conditions it imposed.

In sum, whatever standard the Board decides to apply to the question of how far a Burns successor’s initial employment terms displace the duty to bargain with a union, it must clearly explain its reasoning for applying such standard. More significant, however, this decision will help both management and labor bars as employers and unions will better understand what conduct is legal and not legal under the established, but still evolving, successorship doctrine.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

Previously, I wrote about the “preemption” problem with the Seattle Ordinance regulating ride-sharing services like Uber and Lyft.  After Seattle passed the Ordinance, the federal Ninth Circuit Court of Appeals quickly stayed the Ordinance pending an appeal.  The Ninth Circuit recently issued its opinion on the case.  Although the law remains stayed due to antitrust law issues (that topic is for another blog…), the court’s decision provided a potentially game-changing decision on the preemptive force of national labor law as it relates to independent contractors.

As explained in my previous post, the National Labor Relations Act, which governs the formation of unions for most employees in the private sector, only covers “employees” and explicitly excludes independent contractors.  Since the ride-sharing drivers are independent contractors, Seattle passed the Ordinance based on the reasoning that, if the NLRA does not cover these workers, then it should be permissible for local government to step in and provide its own collective bargaining regime.  The counterargument, brought by the Chamber of Commerce on behalf of the ride-sharing companies and other interested employers, was that the exclusion of independent contractors from the NLRA’s coverage was purposefully intended to exclude them from any type of collective bargaining regime.

The Ninth Circuit agreed with Seattle on the preemption issue and found that the NLRA does not prohibit local governments from creating their own collective bargaining law covering independent contractors.  The Court found that, in passing the statute, Congress did not intend to prohibit independent contractors from bargaining collectively.  The NLRA only excluded them from coverage of its own provisions.  Moreover, the Court noted that the Ordinance itself provided that any drivers who were found to be employees of a business would be excluded from coverage of the Ordinance and, instead, subject to coverage of the NLRA.

Thus, the Ninth Circuit’s decision gives the “green light” to local governments (or even states) to create collective bargaining laws for independent contractors.  However, as in the Seattle case, local governments and independent contractors must beware of the potential antitrust implications of such arrangements.  It is expected that, regardless of the NLRA preemption holding, interested municipalities will wait for the remainder of the case to run its course on the antitrust issues before creating their own collective bargaining laws.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

In Epic Systems Corp. v. Lewis, No. 16-285, 584 U.S. ____ (May 21, 2018), the United States Supreme Court upheld the enforceability of arbitration agreements between employers and employees that require claims to be arbitrated on an individual basis, rather than on a class, collective, or multi-employee basis. Specific to the facts of the cases involved in the Court’s decision, this ruling means that the plaintiffs must individually arbitrate their wage and other employment-based claims against their employers, rather than pursue them in court as a class or collective action on behalf of themselves and others.

As background, for the past few decades, the Court has consistently ruled in favor of strictly enforcing the terms of arbitration agreements under the Federal Arbitration Act (“FAA”). The challengers in the three consolidated cases in Epic Systems attempted to stem this tide by arguing that the National Labor Relations Act (“NLRA”) conflicted with, or at least could be harmonized with, the FAA in terms of the prohibition on class actions in arbitrations because the NLRA inherently protects “concerted activities” by employees. Indeed, the National Labor Relations Board (“NLRB”) had even ruled in 2012 that joining together in a class action was a form of concerted activity that was protected by the NLRA (and subsequently reaffirmed this proposition through its numerous decisions issued in the years following).  Therefore, the challengers sought to use the NLRA and the NLRB’s rulings to invalidate restrictions on class action imposed by the challenger’s arbitration agreements.

However, the Court disagreed. Writing for the majority, Justice Neil Gorsuch, found that the NLRA’s protections were not sufficient to overcome the FAA’s mandate to enforce arbitration agreements by their terms. The NLRA did not show a “clear and manifest” intention by Congress to overrule the clear language of the FAA. In addition, the Court concluded that the NLRB was not owed any judicial deference in its interpretation of the interplay between the NLRA and the FAA and that the FAA governed. On this basis, the Court ruled that the agreements to arbitrate employment related claims on an individual basis must be enforced.

In sum, the cloud of uncertainty surrounding class action waivers in arbitration has been lifted.  These agreements are now fully enforceable as long as their terms do not conflict with “generally applicable contract defenses, such as fraud, duress, or unconscionably” (and, of course, provided Congress does not pass legislation to overrule the Court’s decision).

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

On April 20, 2018, the National Labor Relations Board, by adopting an ALJ’s decision, held that employees who replied in agreement to another employee’s critical group email about the employer’s workplace were engaged in protected concerted activities under the Act. The email discussed wages, work schedules, tip policies, working conditions, and management’s treatment of employees – all of which are protected topics of conversation as they encompass workers’ terms and conditions of employment. Notably, the email specifically addressed the other employees and advised that it was illegal for “management to intimidate” them, among other remarks.

Still, in the course of investigating, the employer ended up terminating each employee who responded positively to the critical email. The employer argued that these employees were not terminated for their responses, but rather were terminated for refusing to be interviewed by the restaurant regarding their concerns about the email and for skipping/walking out on scheduled shifts. In essence, the employer contended that the ALJ expanded the reach of protected concerted activity by finding concerted insubordination to be protected.

Ultimately, the Board held that neither the critical email nor the employees’ responses – which included such statements as “Thank you for standing up for us” and “I agree a 100% as well” – were egregious enough to lose the protections of the Act. The Board further found that the employer’s purported reasons for discharge were pretextual in nature. As such, the Board ordered the restaurant reinstate these employees to their prior positions, provide them with backpay for lost wages, and hang a notice posting at the job location (though compliance in terms of reinstatement and notice posting may be difficult since the restaurant has since closed).

In sum, this case serves as a helpful reminder to tread lightly whenever your employees are discussing terms of employment like wages, working conditions, and their general treatment at work, regardless of the forum (e.g., in-person, social media, or a group email). Here, the restaurant’s reaction to this critical email, and the employees’ responses, was less than ideal as it resulted in the employer terminating each employee within two days of responding to the email.  Notwithstanding legitimate reason(s) for discipline, the optics of this case placed the employer in an uphill battle from the beginning. And this, of course, would likely not have been the outcome had the employer contacted experienced labor attorneys prior to taking any action.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

On February 2, 2018, a split three-member Board panel held that a prior election won by a union must be vacated and, accordingly, ordered a second election as it found merit to the employer’s objection arguing that the tardiness of the Board Agent conducting the election potentially disenfranchised a dispositive number of eligible voters.

In February 2017, employees at Bronx Lobster Place LLC voted in favor of unionization by a narrow margin of 14-12. There were 4 eligible voters that did not vote for unknown reasons but, significantly, the Board Agent running the election opened the second voting session 7 minutes after it was scheduled to begin. Notwithstanding the fact that none of the missing voters actually showed up during the Board Agent’s absence, the employer argued that this alone should be enough to set aside the election results. Indeed, the Regional Director, in adopting the Hearing Officer’s recommendation, relied on this fact – no eligible voters were actually prevented from voting due to the late opening of the polls – in certifying the election results.

But, contrary to the Regional Director and the lone dissenting (Democratic) Board member, the Board majority found that case law “rejects such an actual-disenfranchisement standard, in favor of a potential-disenfranchisement test.” Interestingly, one of the two Democratic Board members left on the panel from the Obama-era ruled in favor of undoing the election results and conducting a second election.

In the end, this Board decision reaffirms precedent dating back almost two decades by clearly articulating the applicable standard, and it is yet another example of a favorable decision for an employer under this new administration. This application is also consistent with frequent management-side requests for bright line rules that make it simpler for parties to operate under. Expect more of the same in the (somewhat) near future once the Board has a fully constituted five-member panel with a Republican majority. Stay tuned.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

On January 29, 2018, the DC Circuit remanded a 2016 NLRB decision – Grill Concepts Servs., Inc., 364 NLRB No. 36 (2016) back to the Board for reconsideration of several employee handbook violations found unlawful under the now-replaced Lutheran Heritage standard in light of the Board’s new standard recognized in Boeing Co., 365 NLRB No. 154 (2017).

As explained in a previous Alert, the prior standard considered work rules unlawful if employees would “reasonably construe” them to interfere with union or other protected concerted activity under Section 7 of the Act.  Until this past December, the Obama Board unreasonably interpreted and applied this decision for several years. That, however, changed in Boeing when the Board adopted a balancing approach that considers “the nature and extent of the potential impact” on Section 7 rights and the employer’s “legitimate justifications” for the rule.

Fast forward to this case and the DC Circuit has agreed to remand several work rules the Board previously found unlawful under the now-overruled “reasonably construe” standard.  These rules, contained in the restaurant’s employee handbook, include a “Team Member Relations/Positive Culture” rule requiring employees to interact respectfully with management, an “Online Communications” rule, and a “Team Member Conduct While Representing the Restaurant” rule (just to name a few). And while it is not unusual for a federal court of appeals to remand a matter back to an agency, especially when encountered with a change in policy by said agency, this situation should help instruct employers previously found to have unlawful work rules and currently in the midst of an appeals process.

This decision to remand will also allow the Board to give more guidance to employees and employers alike by actually applying the new standard to different facts and circumstances than those examined in the Boeing case. Yet, the clear guidance we all desire – but at times hardly get – can only happen when John Ring is confirmed by the Senate and gives the Board a 3-2 Republican-majority once again. Until then, any case taken up by a four-member Board evenly divided among party lines will likely end up deadlocked 2-2 and possibly constrain the application of the new Boeing standard.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

Hy-Brand Industrial Contractors – the recent Board case overturning Browning Ferris Industries and restoring the previous joint employer standard – was perhaps the most important decision among the many decided prior to former Board Chairman Miscimarra stepping down in late 2017; but the decision may not be as significant for all.

As explained in an earlier Alert, the Republican-controlled Board returned to the pre-BFI standard in place for decades and once again found that joint employer status depends on whether entities have “direct and immediate” control over employees’ terms and conditions. And, even though Browning Ferris Industries exposed corporations that franchise to greater legal liability by making it easier to find joint employer status, overturning this incredibly broad standard is less substantial for those employers who do not just sit on the sidelines and observe (reserved control) but who actually have direct and immediate control over the employment terms of another entity.

Primarily, Hy-Brand is a huge victory for business advocacy groups and employers of all sizes as it returns the joint employer standard to its logical place and abandons the nonsensical propositions put forth in Browning Ferris Industries. Additionally, since Hy-Brand applies retroactively to all pending cases regardless of stage in the proceedings, respondents involved in such matters can expect any evidence of indirect and reserved control that the NLRB may have against them to likely be moot and not bear any impact on the outcome.

Hy-Brand will also present the NLRB’s new General Counsel, Peter Robb, with a decision in terms of resources the Agency will allocate when cases purport to show a joint employer finding by relying more on reserved, non-exercised control evidence rather than direct and immediate control. Still, notwithstanding how the General Counsel decides to allocate Agency resources, one thing is certain: businesses – large, small, and in between – can rest a little more easily knowing several Obama-era policies are on their way out.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

A recent Memorandum from Peter B. Robb, the NLRB’s newly installed General Counsel, reminded me of a stanza from Lewis Carroll’s The Walrus and The Carpenter. To paraphrase: “The time has come” the GC said, “To talk of many things: Of handbook rules and Weingarten, of email use and salt-ings.” Though perhaps not as prosaic, the GC’s December 1 Memorandum presages his intent to take Board law back through the looking glass and review all issues overruled by the Obama Board.

The Memo – which new GCs typically issue at the start of their terms – mandates that all Regional Offices seek guidance from Advice before issuing complaints on “significant legal issues,” shorthand for subjects about which the Board overruled precedent during the last eight years. This appears to be the GC’s way of putting the brakes on the application of Obama Board precedents that have been widely viewed as overreaching.

Just in time for the holidays, the GC’s Memo recites is an employer’s wish list of Board rulings to be overturned or revisited:

  • A presumptive right of employees to use employer email systems for Section 7 activities;
  • Employer handbook rules found be unlawful that barred “disrespectful” conduct, use of employer intellectual property, and workplace recording;
  • Finding protected activity was concerted where only one employee had a stake in the outcome, or where the activity involved obscene or vulgar conduct;
  • Broad expansion of the Weingarten right;
  • Joint employer and successorship issues;
  • An employer duty to provide witness statement to unions;
  • And so much more!

Besides identifying issues of focus for potential complaints, the Memo also immediately withdraws a number of prior GC memoranda. Most notably, the GC has withdrawn GC Memo 15-04, “Report of the General Counsel Concerning Employer Rules,” which vexed many employers who scrambled to review and revise their seemingly innocuous handbooks in an often vain attempt to ensure that employees could not reasonably construe them in a way that would chill their NLRA-protected activity.

Finally, the Memo also halted initiatives of the prior administration, such as application of the Weingarten doctrine to non-union workplaces, and an effort to shift the burden of proof in cases involving back pay for salts.

A full analysis of the Memo and its potential implications – both immediate and in the future – is beyond the scope of this post. However, the Memo confirms the expectations of employers, unions and advocates on both sides: the pendulum is on the backswing and the Board is eager to correct the imbalance created over the past eight years.

Justin Schwam is an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

The Obama Board did not pull any punches when it came to analyzing the lawfulness of workplace rules. Still, as previously blogged about here, a more balanced approach to workplace rules may – hopefully – be on the horizon. On October 19, 2017, the ALJ in Green Apple Supermarket of Jamaica, Inc., issued a decision wherein he found, among other various Section 8(a)(1), (3), and (5) violations, that the employer did not violate Section 8(a)(1) by maintaining and promulgating overly broad texting and confidentiality rules. The ALJ found the following two rules lawful:

  • “All documents are considered confidential and the sole property of Green Apple Supermarket and are not to be distributed or taken off the premises. There is to be no copying, faxing or photographing of documents. Failure to comply may result in dismissal and legal action.”
  • “Texting and playing electronic games is strictly prohibited and will result in a warning: 3 warnings will result in a dismissal.”

In doing so, the ALJ reasoned that these two rules did not fall victim to the Board’s overly broad interpretation of what constitutes an illegal workplace rule under its Lutheran Heritage standard.  Specifically, the ALJ held these rules did not violate the first, and most expansive, prong of Lutheran Heritage, i.e., “employees would reasonably construe the language to prohibit Section 7 activity.” The ALJ found that the record was devoid of evidence “as to how and in what manner these rules affected the employees from exercising their Section 7 rights.” The ALJ relied on the fact that the rules were in place before the employer was unionized and that the General Counsel failed to show how they were applied to coerce, interfere, or restrain employees’ rights under the Act.

EE HandbookMoving forward, although this ALJ decision is nice to see among the majority of administrative and Board decisions that find workplace rules unlawful, employers must still be mindful of implementing broadly worded and vague rules. Employers need to be cautious when using certain words (e.g., “all”) and are advised to provide context and examples when constructing their rules to demonstrate that they are not intended, nor are they trying, to prohibit employees from exercising their rights under the Act. Presently, Lutheran Heritage is still the law of the land and whether employees “would reasonably construe” rules to restrict their rights under Section 7 is still the incredibly broad employee-friendly standard workplace rules are generally analyzed under.

Ideally, this Republican-controlled Board will issue a decision that appropriately balances the interests of both sides sooner rather than later. Perhaps something along the lines of Board Chairman Philip A. Miscimarra’s 2016 William Beaumont dissent where he proposes adopting a balancing approach that considers an employer’s justifications in promulgating a workplace rule. At this point, however, our only option is to wait and see. So stay tuned.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.

The Ninth Circuit, a historically employee-friendly court, recently issued a decision that backs the NLRB’s revised post-arbitral deferral standard laid out in its December 15, 2014 Babcock & Wilcox decision. This Board decision was previously blogged about here. On Tuesday, October 17, 2017, the Court affirmed the Board’s decision to apply its new deferral standard only prospectively and upheld the denial of the petitioner’s unfair labor practice complaint as it was analyzed under the previous more deferential standard. In doing so, the Court considered a five-part balancing test and ultimately found that a prospective application was appropriate.

Significantly, the Court held that the new post-arbitral deferral standard was an abrupt departure from a well-established practice that the employer relied on and a retroactive application would severely burden the employer and not appropriately balance statutory interests as it would undermine the previous arbitration and ALJ proceedings in the case at hand. Critically, retroactively applying the new standard “would impair the ‘stability of labor relations [that] was the primary objective of Congress in enacting the National Labor Relations Act’” and thus the Court found “the primary purpose of the NLRA favors prospective application.”

In Babcock & Wilcox, the Board majority found its previous post-arbitral deferral standard failed “to ensure that employees’ statutory rights are adequately protected,” despite the fact that it had been in place for decades without substantial change (and the several challenges made by the Board’s Republican members at the time). Specifically, the Board majority held that the previous standard relied on a “conclusive presumption that the arbitrator ‘adequately considered’ the statutory issue” since the underlying ULP issue and contractual issue only needed to be “factually parallel” and the arbitrator only needed to be “presented generally” with the relevant facts.

Accordingly, the Board now defers to an arbitrator’s decision if it is shown that (1) the arbitrator was explicitly permitted to decide the underlying ULP issue; (2) the arbitrator was presented with and considered the statutory issue, or was blocked from doing so by the party opposing deferral; (3) and Board law reasonably permits the arbitral award. Notably, the previous post-arbitral deferral standard placed the burden of proof on the party opposing deferral to demonstrate that the deferral criteria were not met, but the new standard places the burden on the party urging deferral to prove that the deferral standard is satisfied (i.e., usually the employer). The NLRB’s General Counsel issued a memorandum back on February 10, 2015 offering guidance on the Babcock & Wilcox decision and noted that this decision also changed the standards for pre-arbitral deferral and grievance settlements.

In short, the Court correctly noted that this revised post-arbitral deferral standard “makes deferral to an arbitral decision less likely.” As such, employers should continue to be mindful of the discretion Regional Offices across the country have in refusing to defer to an arbitrator’s decision and, critically, the possible arguments that a union who loses at arbitration may make to Regions investigating ULP charges that encompass issues already litigated in a previous arbitration.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.