Management Memo

Management’s inside guide to labor relations

Nationwide Preliminary Injunction Ordered Against Persuader Rule

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Stop Sign CrosswalkToday, the United States District Court for the Northern District of Texas issued a nationwide preliminary injunction halting the Department of Labor’s (“DOL”) controversial new Persuader Rule and its new Advice Exemption Interpretation, previously discussed here and here.  The Rule and Interpretation marked a dramatic change by requiring public financial disclosure reports concerning payments that employers make in connection with “indirect persuader activities” that were not reportable under the long standing rules, but that would, if the new rule were to take effect, for the first time, be considered reportable as persuader activity.

Injunction Issues Just In Time

The injunction was issued in advance of the July 1, 2016, enforcement date, which the DOL had stated employers, and labor relations consultants, including attorneys, would need to start reporting engagements covered by the new Rule and Interpretation.  Employers and attorneys have raised concerns about the impact on the attorney-client privilege, including the chilling effect and interference with their ability to obtain/provide advice traditionally exempt from disclosure.

In granting the injunction, the Court concluded:

[The DOL is] hereby enjoined on a national basis  from implementing any and all aspects of the United States Department of Labor’s Persuader Advice Exemption Rule (“Advice Exemption Interpretation”), as published in 81 Fed. Reg. 15,924, et seq., pending a final resolution of the merits of this case or until a further order of this Court, the United States Court of Appeals for the Firth Circuit or the United States Supreme Court.  The scope of this injunction is nationwide.

District Court Order Provides Employers Comprehensive Victory

The Northern District of Texas went one step further than the United States District Court for the District of Minnesota, which last week ruled that the DOL’s Persuader Rule exceeded the agencies authority under the LMRDA, but stopped short of issuing an injunction.  The Court’s Order here gives employers a comprehensive victory, finding not only a substantial threat of irreparable harm but also that the Texas plaintiffs will likely succeed in establishing:

  • The DOL exceeded its authority in promulgating its new Advice Exemption Interpretation in the new Persuader Rule;
  • The new Advice Exemption Interpretation is arbitrary, capricious and an abuse of discretion;
  • The new Advice Exemption Interpretation violates free speech and association rights under the First Amendment;
  • The new Advice Exemption Interpretation is unconstitutionally vague; and
  • The new Advice Exemption Interpretation violates the Regulatory Flexibility Act.

Preliminary Injunction May Only Be Temporary Reprieve for Employers

Obviously a preliminary Injunction is just that, preliminary and temporary in nature.  It is anticipated that the DOL will file an appeal and, depending on the results of the Presidential Election later this year, this could be a looming threat for employers for some time.

Accordingly, employers should first do all they can, including signing long-term agreements with law firms and/or labor relations consultants before July 1, to be prepared in the event the Rule ultimately becomes effective, so as to potentially shield themselves from the obligation to report and disclose so-called indirect persuader activity that has been exempt from reporting under the former rules.

Court Denies Injunction to Keep Amended Persuader Rule from Taking Effect – Finds DOL Exceeded Authority Under LMRDA

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Steven M. Swirsky

Steven M. Swirsky

U.S. District Court Judge Patrick J. Schiltz “has found that aspects” of the Department of Labor’s Amended Persuader Rule “are likely invalid because they require reporting of advice that is exempt from disclosure under Section 203(c)” of the Labor Management Reporting and Disclosure Act (LMRDA).

The Amended Persuader Rule Makes Distinctions Between Materially Indistinguishable Activities

In his 34 page opinion denying the plaintiffs’ application for a temporary restraining order and/or a preliminary injunction that would keep new reporting obligations for employers and labor relations consultants, including attorneys from taking effect on July 1, “The Court has also questioned the manner in which the DOL has construed the term “advice,” pointing out that the DOL makes distinctions  between activities that are materially indistinguishable and struggles to place certain common activities on one side or the other of the untenable divide that it has created between persuader activities and advice.”

The Court Denied an Injunction Because It Did Not Find Irreparable Harm

Although the Court found that “the plaintiffs have shown a likelihood of success on one of their claims—specifically their claim that the new rule requires the reporting of some activities that are exempt from disclosure under Section 203(c), a critical element of any application for an injunction, the Court denied their request for an injunction because it found that they had not established that they are likely to suffer irreparable harm if the new rules are to take effect.

In finding that the plaintiffs’ “minimal showing of threat of irreparable harm is not sufficient to warrant the extraordinary relief of a preliminary injunction,” the Court noted that the Amended Rule “has multiple valid applications” and that the DOL had “identified thirteen types of conduct to which the rule applies, only some of which seem to require the reporting of advice that is exempt under ¶ 203.”

The Court’s Other Findings

The plaintiffs in the Labnet case also challenged the Amended Rule on the grounds that it interfered with their First Amendment Rights, it is void for vagueness, arbitrary and capricious, overbroad and violated the Regulatory Flexibility Act.  The Court concluded that the plaintiffs were not likely to prevail on these claims.

What Happens Next?

As we have reported, there are two other challenges to the Amended Rule pending in the U.S. District Courts for the Northern District of Texas and the District of Arkansas.  Hearings have taken place in both those actions, in which plaintiffs are also seeking to enjoin the enforcement of the Amended Rule’s new advice reporting requirements.  Rulings are anticipated in both prior to the July 1 effective date.

Employer Options and Alternatives

As we reported, earlier this month the DOL described what may be a meaningful way for employers (and law firms) to avoid the potential obligation to file public disclosure reports concerning identifying payments that employers made in connection with “indirect persuader activities” that were not reportable under the long standing rules, but that will, for the first time, be considered reportable as persuader activity.

At a recent compliance assistance seminar, representatives of the DOL stated that no persuader payment reporting will be required as a result of payments made after July 1 so long as those payments are tied to an agreement made prior to that date.  This interpretation by OLMS is considerably different from how many envisioned enforcement of the rule when the amendment was issued and it remains to be seen whether the DOL will stand by these statements and how it will interpret and apply them going forward. Until now, most employers and law firms understood that post-July 1, any agreements or arrangements—as well as any payments related to indirect persuader activity—would trigger reporting, regardless of whether the agreements or arrangements were entered into before July 1.

Given this new information, some employers may wish to sign long-term agreements with law firms or consultants now. At this point, it appears that so long as those agreements are made prior to July 1, any payments made under those agreements—even payments made later in 2016 and beyond—will not trigger reporting, according to the DOL.  If the DOL stands by these statements, it appears that entering into agreements with labor counsel prior to July 1 should protect advice and assistance provided by counsel from reporting and disclosure to the DOL and would apparently give employers and labor consultants, including attorneys, a strong defense against any claims that they willfully failed to file reports under the Amended Rule.

NLRB Scraps Rule on Mixed-Guard Unit Recognition – Employment Law This Week

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Featured on Employment Law This Week: The NLRB reverses its mixed-guard unit recognition rule. If a union represents both security guards and other employee groups, then an employer’s decision to recognize the union is voluntary. Before this decision, employers could also withdraw their recognition if no collective bargaining agreement was reached.  Now, employers must continue to recognize the union unless and until the employees vote to decertify it in an NLRB election.

View the episode below or read more about this story in a previous blog post, written by Steven M. Swirsky, co-editor of this blog.

NLRB Shifts Power Toward Unions During Strikes – Employment Law This Week

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Featured on Employment Law This Week: The National Labor Relations Board (NLRB) finds the hiring of permanent replacements for strikers to be an unfair labor practice.

In a 2-1 decision that could benefit unions during contract negotiations, the NLRB found that a continuing care facility in California violated federal labor law when it hired permanent replacements after a series of intermittent strikes. While the NLRB and courts have long held that an employer’s motivation for hiring permanent replacements is irrelevant, in this case, the board held that if the hiring is motivated by an intent to discourage future strikes, it interferes with employees’ rights under the National Labor Relations Act (NLRA). The employer in this case will likely seek judicial review. However, in the meantime, the decision adds new risks for employers that may wish to hire permanent striker replacements.

View the episode below or read more about this story in a previous blog post, written by frequent contributor Steven M. Swirsky.

Seventh Circuit Creates Split on Class Waivers – Employment Law This Week

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One of the top stories featured on Employment Law This Week: The U.S. Court of Appeals for the Seventh Circuit has joined the National Labor Relations Board in finding that arbitration agreements containing class action waivers violate the National Labor Relations Act (NLRA).

At issue is a collective and class action by employees of Epic Systems about overtime pay. The company was seeking to dismiss the case based on a mandatory arbitration agreement that waived an employee’s right to participate in a collective or class action. Unlike the Fifth Circuit, the Seventh Circuit found that a class-action waiver like this one violates the NLRA and, because the contract is unlawful, its enforcement is not required by the Federal Arbitration Act. The Seventh Circuit’s decision creates a split in the federal circuits that means that the U.S. Supreme Court will likely weigh in on the issue.

View the episode below or read more about this story in a previous blog post by Steve Swirsky.

NLRB Curtails Employers’ Right to Hire Permanent Replacements for Strikers – Bolsters Unions’ Ability to Use Intermittent Strikes

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NLRB Curtails Employers’ Right to Hire Permanent Replacements for Strikers – Bolsters Unions’ Ability to Use Intermittent Strikes

The National Labor Relations Board, in a 2-1 decision by Chairman Mark Pearce and Member Kent Hirozawa, in American Baptist Homes of the West, 364 NLRB No. 13, has adopted a new standard for considering the legality of an employer’s hiring of permanent replacements in response to economic strikes. The decision, in the words of Member Philip Miscimarra’s dissent, is not only a “deformation of Board precedent,” but “a substantial rearrangement of the competing interests balanced by Congress when it chose to protect various economic weapons, including the hiring of permanent replacements.”

The Board Has Curtailed the Right to Hire Permanent Striker Replacements

In short, the Board in American Baptist Home of the West, severely casts doubt on the right of an employer to hire permanent replacements for striking workers. Under longstanding precedents, the Board would not look into the motivation when an employer decided to hire permanent replacements for strikers.

In this case, the General Counsel asked the Board to adopt a new standard and to hold that an employer may not hire permanent replacements where the Board finds that the employer has “an intent to encroach upon protected rights,” namely the right to strike.  The Board has now held, for the first time, that it will find an employer’s hiring of permanent replacements to be an unfair labor practice where it concludes “the hiring of permanent replacements was motivated by a purpose prohibited by the Act,” and that it will no longer require proof that of “the existence of an unlawful purpose extrinsic to the strike.”

The Board Holds That Attempts to Discourage Future Strikes Unlawfully Interferes with Employees’ Section 7 Rights

In the case at issue, the Board majority found that a prohibited purpose existed based on statements by an employer who had been subjected to a series of intermittent strikes that had caused it to incur significant expense in arranging for temporary replacements and wanted to “avoid any future strikes” and “teach the strikers and the Union a lesson.”

In so doing, the Board has undercut the right of employers, well recognized for almost 80 years, to hire permanent replacements as an “economic weapon” when faced with an economic strike, labor’s ultimate economic weapon. Relying on an obscure phrase in the Board’s 1961 decision in Hot Shoppes, Inc.,  a decision in which as Member Miscimarra points out, “the Board adopted a rule disallowing any scrutiny into an employer’s motive for hiring permanent replacements” in response to an economic strike (emphasis in original).

The Supreme Court Has Recognized Employers’ Right Since 1938

Since the Supreme Court’s 1938 decision in National Labor Relations Board v. McKay Radio & Telegraph Co., 304 U.S. 333, it has been undisputed that an employer faced with an economic strike by its employees has had the right to hire permanent replacements to continue the operation of its business and to respond to the union’s use of labor’s ultimate economic weapon. Notably, the Board and the Courts have viewed labor’s right to strike and an employer’s right to hire replacements or lock out employees as countervailing forces, and that employers and unions in collective bargaining “proceed from contrary and to an extent antagonistic viewpoints and concepts of self-interest” and that the “presence of economic weapons in reserve, and their actual exercise on occasion by the parties, is part and parcel of the system that the Wagner and Taft-Hartley Acts have recognized.” NLRB v. Insurance Agents’ International Union, 361 U.S. 477, 478-479 (1960).

In other words, our system of labor management relations and collective bargaining has historically granted labor and management tools that they have had a legal right to threatened to wield or to actually use to help prevail in bargaining.   This has been a fundamental element of the system of collective bargaining in the United States since the NLRA was enacted in 1935.

The Board Is Attempting to Change Bargaining by Cutting Employers’ Rights

The unfair labor practice charges that the Board considered in American Baptist Homes of the West arose out of contract negotiations between the operator of a continuing care facility in Oakland, CA, and Service Employees International Union, United Healthcare Workers-West (SEIU) in 2010 for a successor collective bargaining Agreement. In order to press its bargaining demands, the SEIU engaged in informational picketing of the employer’s facilities.  In order to ramp up the pressure, on July 9, 2010, the SEIU then gave the employer notice that it would strike on Monday August 2nd if there was not a new contract.  The SEIU also notified the employer that same day, in a second letter, that the strikers would return to work on Saturday August 7th.  In other words the union threatened to conduct an “intermittent strike,” something that has become a common tool, particularly in health care.  The website Labor Notes  stated as follows concerning this tactic: “A short-term strike sends a powerful message to management, dramatizing workers’ anger and determination.”

Faced with the need to maintain operations and care for its patients, the employer engaged a staffing agency and incurred expenses of at least $350,000 to ensure that the necessary personnel would be available.  When the union struck, the employer made offers of permanent employment to 44 of the replacements for the 80 employees who went on strike.

The Board, in finding that the employer in Baptist Home of the West did not have the right in these circumstances to hire permanent replacements pointed to evidence that “the decision to hire permanent replacements was admittedly motivated by her desire to avoid a future strike at the facility,” and the Board’s finding that it would have cost the employer a “lesser amount  . . . over the 3-year life of the contract to fully implement the Union’s” economic proposals than it cost to retain the replacements.

In essence, the Board concluded that what made the hiring of permanent understudies a ULP and unlawful in this case was that the employer was seeking to dissuade employees from striking in the future.  However, what the majority ignores is that every time an employer and a union bargain for a contract, at the end of the day each side tries to convince the other to compromise through the threat of wielding the rights the law gives them: the right to strike and the right to hire replacements and/or lock out employees.

What Does This Mean for Employers Going Forward?

There can be no question that the Board and the General Counsel are trying to affect the relative strength of employers and unions in bargaining.  For those who read this blog and follow the pronouncements of the Board’s General Counsel, this should come as no surprise.  As we reported in April, when the General Counsel issued his latest memo identifying issues on which the NLRB’s Regional Offices must consult with the Division of Advice, cases involving an allegation that an employer’s permanent replacement of economic strikers had an unlawful motive, were near the top of the list.

While the views of the Board and the General Counsel are reflected in American Baptist Homes of the West, as the dissent observes, the decision is clearly inconsistent with almost 80 years of judicial and Board interpretation of the Act.  Undoubtedly, the issue will make its way back into the courts as the Board seeks to enforce the decision and this and/or other employers and advocates seek judicial review.

While at the end of the day, the Courts are likely to restore the longstanding interpretation of the Act which has held that as the Board held in Mrs. Natt’s Bakery in 1942, “since an employer may” when faced with the prospect of an economic strike “replace striking workers with impunity, it is not unlawful for him to state such an intention.”

In the meantime, employers facing strike threats and considering when and whether to hire permanent replacements, will no doubt face unions and workers that will feel an unwarranted sense of protection against the possibility of their employers wielding this rarely deployed tool.

Federal Appeals Court Sides with NLRB – Holds Arbitration Agreement and Class Action Waiver Violates Employee Rights and Unenforceable

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Steven M. Swirsky

Steven M. Swirsky

The US Court of Appeals for the Seventh Circuit in Chicago has now sided with the National Labor Relations Board (NLRB or Board) in its decision in Lewis v. Epic Systems Corporation, and found that an employer’s arbitration agreement that it required all of its workers to sign, requiring them to bring any wage and hour claims that they have against the company in individual arbitrations “violates the National Labor Relations Act (NLRA) and is unenforceable under the Federal Arbitration Act FAA).”

In writing for a three judge panel in Lewis v. Epic Systems, Chief Judge Wood found that the views of the NLRB, expressed in its decision in Murphy Oil, D.R. Horton, and other decisions finding employers’ attempts to require their employees to arbitrate any and all wage and hour and similar claims individually and not in class action lawsuits, were entitled to deference, under the Chevron doctrine.  He held that the NLRB’s view that mandatory arbitration interferes with employees’ rights under Section 7 of the NLRA, was, at a minimum, “a sensible way to understand the statutory language” of Section 7 of the Act and, for that reason, “we must follow it.”

Judge Wood agreed with the Board that the right to pursue claims on a class or collective basis is a substantive right, “not merely a procedural one,” as Epic Systems contended.  It was, he concluded, “the core substantive right protected by the NLRA” and the “foundation on which the (NLRA) and Federal labor law rest.”

While the Seventh Circuit sided with the Board, other federal appeals courts that have considered the question of whether the Act prohibits employers from requiring their employees who are not represented by a union or covered by a collective bargaining agreement to arbitrate their claims individually have reached an opposite conclusion.  These include Courts for the Second, Fifth, Eighth, and Ninth Circuits.  These courts have concluded that the Federal Arbitration Act (“FAA”) with its mandate to support arbitration, dictated the finding that an employer could require individual arbitration of employment disputes, and that such restrictions impacted procedural, not substantive rights.  Further, in a case fully briefed and currently pending oral argument before the Second Circuit, the argument has been squarely presented whether issue is resolved by the second part of Section 7 of the NLRA, which grants to employees the right to refrain from engaging in any and all “concerted protected activities,” along with the right to engage in such activities.  This Section 7 language, employers argue, blesses an employee’s right to give up the right to litigate employment claims (including wage and hour claims) in class actions and to resolve all such issues in single, individual arbitration proceedings.

The decision of the Seventh Circuit, finding that the Board’s view was not inconsistent with the FAA, sets the ground for continued uncertainty as employers wrestle with the issue.  Clearly, the question is one that is likely to remain open until such time as the Supreme Court agrees to consider the divergent views, or the Board, assuming a new majority appointed by a different President, reevaluates its own position.

NLRB Looks to Make It Harder for Employees to Decertify Unions

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Steven M. Swirsky

Steven M. Swirsky

National Labor Relations Board (NLRB) General Counsel Richard F. Griffin, Jr., has announced in a newly issued Memorandum Regional Directors in the agency’s offices across the country that he is seeking a change in law that would make it much more difficult for employees who no longer wish to be represented by a union to do so.  Under long standing case law, an employer has had the right to unilaterally withdraw recognition from a union when there is objective evidence that a majority of the employees in a bargaining unit no longer want the union to represent them.

The General Counsel Wants the Board to Change the Law

If the General Counsel’s position is agreed to by a majority of the members of the Board, it would be an unfair labor practice for an employer to withdraw recognition from a union, no matter how strong the evidence is that employees do not want to be represented unless and until the employees or the employer petition for a decertification election, a majority of the employees vote against continued representation and the results of the vote are certified.  This would mean that the employer would be required to continue to recognize the union and bargain with it for a new contract even where it knows that a majority of the employees do not want the union to continue to represent them.

Levitz Furniture Allows Employers to Withdraw Recognition Based on Objective Evidence That a Majority Of Employees No Longer Want the Union to Represent Them

Fifteen years ago, in Levitz Furniture Co. of the Pacific, the Board’s then General Counsel made a similar argument to the Board, which it rejected.  While the Board in Levitz held that an employer needed more than an objective good faith belief that a union was no longer supported by the majority, and in essence set a rule that an employer would act at its peril when withdrawing recognition, it rejected the notion that employees who no longer wanted to be represented by a union could only make such a decision in an NLRB election.

The General Counsel Directs Regions to Ignore Existing Law Under Levitz Furniture

In GC Memo 16-03, the General Counsel has directed the Regional Offices to issue an unfair labor practice (ULP) complaint any time a union files a charge in response to an employer’s decision to act in accordance with existing law and withdraw recognition of a union that is no longer supported by the majority of the employees in a unit.  As the Memo states, the Regional Directors are instructed to unilaterally withdraw recognition “under extant law.”  In other words, complaints will be issued in those cases where employers are taking action that the existing law allows, in the hope that the Board will change the law and find the employer guilty of a ULP for taking action that the law allows it to, and respecting the wishes of its employees.

What Happens Next?

An employer faced with evidence that a majority of its employees no longer want to be represented at the end of a contract, has until now had several options.  It could file an RM petition, asking the Board to hold a secret ballot vote to allow the employees to vote on continued representation or it could, if it concluded the evidence that the union had lost majority support was clear, it could inform the union of that fact and therefore that it was withdrawing recognition and would not bargain for a new contract.  Often, such employer action was met with ULP charges by the union and a union effort to convince the employees to stick with it.  If the employer, or for that matter an employee, filed a petition for a decertification election, a common union response has been to fight on and do whatever it could to delay the election and if possible deny the employees of their right to make the decision.  Unions can easily accomplish this desired delay by filing any garden variety unfair labor practice charge which, under NLRB procedures, act to “block” the election until they are fully investigate, litigated and resolved.  Union’s often file multiple and successive blocking charges” to continually delay employees’ ability to exercise their right to become union free.

If the General Counsel is able to convince the Board to overturn Levitz Furniture the result will likely be a serious impairment of the right of employees to decide whether or not they want to continue to be represented.  The General Counsel’s decision to seek to overturn Levitz Furniture should not come as a surprise to those who have read his last GC Memo, 16-01, in which he notified the agency’s Regional Offices of the issues that they must submit to the Division of Advice in the General Counsel’s Office for guidance.  In that memo, issued last month, the General Counsel laid out the road map of his “initiatives and/or priority areas of the law and/or labor policy” and where in his view “there is no governing precedent or the law is in flux.”

Reading the model language included in GC Memo 16-03, it is clear that the General Counsel sees the question of what must happen before an employer may lawfully withdraw recognition to be such an area in “flux” as he references statements in the Levitz Furniture decision in 2001 that if “experience proved” to a future Board that employers were unilaterally withdrawing recognition in the absence of “evidence” clearly indicating that a union had lost majority support, the Board would revisit this question.  While the General Counsel implies that this is why he now wants the Board to revisit the question, GC Memo 16-03 and the model brief language does not point to such evidence.

What Does This Mean for Employers and Employees?

An employer faced with evidence that a majority of its employees no longer wish to be represented by their union has always faced a difficult choice – whether to petition for an election or to respect its employees’ request and take the risk of charges and litigation by immediately withdrawing recognition. Clear understanding of the law and facts, as well as the potential consequences of each course of action has always been critical.  By issuing this Memo and announcing his goal, the stakes have clearly been raised, and the right of employees to decide—perhaps the ultimate purpose of the National Labor Relations Act—has been placed at serious risk.

Invalid Appointment Did Not Invalidate Union Election, Says Third Circuit

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Two years ago, as we discussed here and here, in NLRB v. Noel Canning, 134 S. Ct. 2550 (2014), the U.S. Supreme Court held unconstitutional President Obama’s January 2012 recess appointments of Members Block, Flynn and Griffin to the National Labor Relations Board (“Board” or “NLRB”). The decision cast into doubt the validity of hundreds of NLRB orders and official actions.

Recently, in Advanced Disposal Services East Inc. v. NLRB, decided April 21, 2016, the employer, Advanced Disposal Services, unsuccessfully attempted to invalidate actions taken by Regional Director Dennis Walsh by arguing the invalid recess appointments meant the Board lacked a quorum when it appointed Walsh as a Regional Director for Philadelphia based Region 4. Advanced claimed Walsh’s appointment was therefore invalid, and he lacked authority to oversee the election involving Advanced’s employees in which those employees elected to be represented by the Teamsters Local No. 384 by a vote of 60-58. Because Walsh’s actions facilitating that election were beyond his power, the election was invalid. Following the Board’s certification of the bargaining unit, Advanced refused to bargain with the union, drawing an unfair labor practice charge.

Absent the Noel Canning-based argument concerning the validity of the Regional Director’s appointment, the case would present nothing more than a garden-variety refusal to bargain case, and the only legal issue would be whether substantial evidence supported the Board’s decision. However, the question as to the appointment of the Regional Director created a closely watched legal issue carrying potential implications for many other employers in similar situations.

The case worked its way to the Third Circuit Court of Appeals, which first had to determine whether Advanced had waived its challenge to Walsh’s appointment by failing to raise the issue prior to the election, as required by the Board. Before the Third Circuit, the Board asserted that had Advanced raised this issue prior to the election, it could have corrected it.

Following the D.C. Circuit while distinguishing contrary precedent from the Eighth Circuit, the Third Circuit held the argument was “not a mere procedural technicality,” but instead implicated the very power of the Board to act. Accordingly, it constituted an “extraordinary circumstance” under the National Labor Relations Act, allowing Advanced to raise the issue for the first time on appeal.

However, that was not the end of the matter. In July of 2014, about one month after Noel Canning was decided, all five members of a properly constituted Board ratified its prior personnel decisions, including Walsh’s appointment. Shortly thereafter, Walsh ratified his prior acts in office, including the election involving Advanced. The Board argued these ratifications meant that the employer’s procedural challenge to the election results must fail.

The Third Circuit held that both the Board and the Regional Director had properly ratified their earlier actions. Thus, the Court agreed with the Board that its actions were ultimately procedurally valid. The only remaining question was whether substantial evidence supported the Board’s decision to overrule Advanced’s objection and its refusal to grant a new election. Finding that the Board’s decision was backed by substantial evidence, the Court denied Advanced’s petition for review and granted the Board’s cross-application for enforcement.

This disposition may represent the likely end of the line for similar challenges to invalid, but subsequently ratified appointments. Unless an employer can show that the ratification was somehow tainted, courts may be inclined to accept that the subsequent ratification makes the challenged determination valid. Epstein Becker Green will continue to monitor this issue.

NLRB Argues “Misclassification” as an Independent Contractor Is Unfair Labor Practice

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Steven M. Swirsky

Steven M. Swirsky

In a further incursion into the area of the gig and new age economy, the Regional Director for the National Labor Relations Board’s Los Angeles office has issued an unfair labor practice complaint alleging that it is a violation of the National Labor Relations Act (the “Act”) for an employer to misclassify an employee as an independent contractor.

The Complaint, which is based on a charge filed by the International Brotherhood of Teamsters, through its’ Justice For Port Truck Drivers  campaign, asserts that Intermodal Bridge Transport (“IBT”) “has misclassified its employee drivers as independent contractors, thereby inhibiting them from engaging in Section 7 activity and depriving them of the protections of the Act. The theory behind the ULP charge and complaint is that the Act gives employees the right to unionize and engage in other protected, concerted activity, and that if an employer misclassifies a worker as an independent contractor, it unlawfully deprives the worker of those rights.

The issuance of the complaint in this case comes less than a month after the Board’s General Counsel issued General Counsel Memorandum 16-01, Mandatory Submissions to Advice, identifying the types of cases that reflected “matters that involve General Counsel initiatives and/or priority areas of the law and labor policy.”  Among the top priorities are “Cases involving the employment status of workers in the on-demand economy,” and “Cases involving the question of whether the misclassification of employees as independent contractors,” which as reflected in the IBT complaint the General Counsel contends violates Section 8(a)(1) of the Act.

Clearly organized labor is using the General Counsel Memorandum as an invitation to present cases raising the issues the General Counsel is seeking to litigate.  We will continue to report as additional cases emerge from the General Counsel’s wish list of priorities and initiatives.