Management Memo

Management’s inside guide to labor relations

ACA Update: DC Circuit Stays Halbig, Upholds Accommodation for Contraceptive Coverage

LinkedIn Tweet Like Email Comment

Our colleague Stuart Gerson of Epstein Becker Green posted “DC Circuit Stays Halbig Action Pending SCOTUS Review of King, Upholds Accommodation for Contraceptive Coverage” on the Health Law Advisor blog. Following is the full text:

Only last week, we informed you of the Supreme Court’s somewhat surprising grant of cert. in the Fourth Circuit case of King v. Burwell, in which the court of appeals had upheld the government’s view that the Affordable Care Act makes federal premium tax credits available to taxpayers in all states, even where the federal government, not the state, has set up an exchange.

The Administration has taken something of a PR buffeting in the week following, after its principal ACA technical advisor’s comments on this issue were made public.

In any event, we suggested that the scheduled DC Circuit en banc argument in Halbig v. Burwell, which raises the same issue as the King case, would never take place. We were correct. The DC Circuit yesterday stayed action in its case pending Supreme Court resolution of King. We’ll continue to follow related developments.

Speaking of the DC Circuit, a panel of its most liberal judges today upheld religious organization accommodation for contraceptive coverage under the ACA, holding under Hobby Lobby that opt-out procedure does not substantially burden employer’s religious beliefs. Priests for Life v. U.S. Dep’t of Health & Human Services. There will be similar cases brought in other federal circuits, and we’ll report on those as well.

Complimentary Webinar – Eye on Ebola: Issues Impacting Health Care Providers

LinkedIn Tweet Like Email Comment

WHEN: November 17, 2014

TIME:    2:00pm – 3:30pm EST

To register for this webinar, please click here.

Please join us for a complimentary webinar addressing the professional and business challenges encountered by health care providers dealing with Ebola and other infectious diseases. This webinar will offer a clinical overview as well as a review of the guidelines which offer protocols for addressing concerns over Ebola and similar diseases, the health regulatory and risk management issues providers might consider in developing a response strategy, and the resulting labor and employment considerations facing health care employers. A question and answer period will follow the program.

Topics will include:

  • Clinical Overview and Emergency Management Issues
  • Health Regulatory Considerations for Providers
  • Risk Management Concerns
  • Employment Issues Confronting the Health Care Industry including Labor Management Relations

Speakers:

  • Bruno Petinaux, M.D. – Associate Professor, Co-Chief of the Emergency Management Section, Department of Emergency Medicine, George Washington University Medical Faculty Associates
  • George B. Breen – Member, Epstein Becker Green, Chair, Health Care and Life Sciences Practice Steering Committee
  • Frank C. Morris, Jr. – Member, Epstein Becker Green, Employment, Labor and Workforce Management Practice
  • Amy F. Lerman – Associate, Epstein Becker Green, Health Care and Life Sciences Practice

To register for this webinar, please click here.

If you have questions regarding this event, please contact Whitney Krebs at (202) 861-0900, or wkrebs@ebglaw.com.

Labor and Employment Cases Predominate in the Supreme Court’s Current Term

LinkedIn Tweet Like Email Comment

By Stuart M. Gerson

While by most accounts the current term of the Supreme Court is generally uninteresting, lacking anything that the popular media deem to be a blockbuster (the media’s choice being same-sex marriage or Affordable Care Act cases), the docket is heavily weighted towards labor and employment cases that potentially affect employers in all industries including  retail, health care, financial services, hospitality, and manufacturing.  In chronological order of argument they are as follows.

The Court already has heard argument in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433, which concerns whether the Portal-to-Portal Act, which amends the Fair Labor Standards Act, requires employers to pay warehouse employees for the time they spend, which in this case runs up to 25 minutes, going through post-shift anti-theft screening. Integrity is a contractor to Amazon.com, and the 9th Circuit had ruled in against it, holding that the activity was part of the shift and not non-compensable postliminary activity. Interestingly, DOL is on the side of the employer, fearing a flood of FLSA cases generated from any activity in which employees are on the employers’ premises.  This case will affect many of our clients and should be monitored carefully.

On November 10th, the Court will hear argument in M&G Polymers USA,  LLC v. Tackett, No. 13-1010, which I see as an important case, though most commentators don’t seem to realize it. The question involves the so-called “Yard-Man Presumption” in the context of whether the courts should infer that silence as to the duration of retirement health insurance benefits established under a CBA are meant to apply for the lifetimes of covered retirees.

In two other cases involving an issue of discretion and judicial review set for argument on December 1st, Perez v. Mortgage Bankers Ass’n, No. 13-1041; and Nichols v. Mortgage Bankers Ass’n, No. 13-1052, the Court will decide whether DOL violated the Administrative Procedure Act by not affording notice-and-comment rulemaking to a reversal of a wage and hour opinion letter issued in 2006.  The DC Circuit ruled against DOL in both cases (one in which DOL is the petitioner; another in which affected loan officers are petitioners), rejecting DOL’s contention that the policy change was an “interpretive rule” not subject to APA notice-and-comment strictures. The case at bar itself doesn’t involve much, but as a precedent concerning how free agencies like DOL (a particular worry to employers during this administration), are to regulate unilaterally, free of judicial oversight it will be important, especially in the DC Circuit where there are so many agency cases.

On December 3rd, the Court will hear argument in Young v. United Parcel Service, Inc., No. 12-1226, which poses whether the Pregnancy Discrimination Act requires an employer to accommodate a pregnant woman with work restrictions related to pregnancy in the same manner as it accommodates a non-pregnant employee with the same restrictions, but not related to pregnancy. The 4th Circuit had ruled in favor of the company, which offered a “light duty program” held to be pregnancy blind to persons who have a disability cognizable under the ADA, who are injured on the job or are temporarily ineligible for DOT certification. Ms. Young objects to being considered in the same category as workers who are injured off the job. This case, too, will create a precedent of interest to at least some of our clients. Of  note, last week United Parcel Service sent a memo to employees announcing a change in policy for pregnant workers advising that starting January 1, the company will offer temporary light duty positions not just to workers injured on the job, which is current policy, but to pregnant workers who need it as well. In its brief UPS states “While UPS’s denial of [Young’s] accommodation request was lawful at the time it was made (and thus cannot give rise to a claim for damages), pregnant UPS employees will prospectively be eligible for light-duty assignments.”  The change in policy, UPS states, is the result of new pregnancy accommodation guidelines issued by the Equal Employment Opportunity Commission, and a growing number of states passing laws mandating reasonable accommodation of pregnant workers.

In a case not yet fully briefed or set for argument, Mach Mining LLC v. EEOC, No.13-1019, the Court will  decide whether the EEOC’s pre-suit conciliation efforts are subject to judicial review or whether the agency has unreviewable discretion to decide the reasonableness of settlement offers. The Seventh Circuit has ruled in favor of the EEOC in the instant case, but every other Circuit that has considered the matter has imposed a good-faith-effort standard upon the EEOC.

On October 2nd, the Supreme Court granted cert. in a Title VII religious accommodation case, EEOC v. Abercrombie & Fitch Stores, Inc., No. 14-86. The case concerns whether an employer is entitled to specific notice, in this case  of a religious practice – the wearing of a head scarf —  from a prospective employee before having the obligation to accommodate her.  In this case, the employer did not hire a Muslim applicant. The Tenth Circuit ruled that the employer was entitled to rely upon its “look” policy and would not presume religious bias where the employee did not raise the underlying issue. Retail clients and others will be affected by the outcome.

Finally, also on October 2nd, the Supreme Court granted cert. in Tibble v. Edison Int’l, which raises the issue of whether retirement plan fiduciaries breach their duties under ERISA by offering higher-cost retail-class mutual funds when identical lower-cost institutional class funds are available and the plan fiduciaries initially chose the higher-cost funds as plan investments more than six years (the notional statute of limitations) before the claim was filed. This issue has been around for years and the Court finally will resolve it.   The dueling rationales have been discussed in depth on many financial pages, for example recently in the New York Times. The potential importance of the case relates to whether trustees have a separate duty to reconsider their past decisions under a continuing violation theory that would supersede ERISA’s statute of limitations. The Solicitor General, in an amicus brief, argued on behalf of the United States that trustees of ERISA plans owed a continuing duty of prudence, which they breach by failing to research fund options and offer available lower-cost institutional-class investments during the six-year period prior to the filing of the complaint. The Court apparently took the case on the SG’s recommendation that noted the unresolved split on the issue in the Circuits.  If the Solicitor General proves correct, and the Petitioner prevails, fiduciaries all across the employment spectrum will be exposed to greater risk of scrutiny for their past actions.

More will follow as developments warrant.

NLRB’s Murphy Oil Decision Reaffirms Board’s Position on Class or Collective Action Waivers Despite Rejection by Federal Courts

LinkedIn Tweet Like Email Comment

By Jill Barbarino

On October 28 a three-member majority of the National Labor Relations Board in Murphy Oil U.S.A., Inc.  revisited and reaffirmed its position that employers violate the National Labor Relations Act (the “Act”) by requiring employees covered by the Act (virtually all nonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

As previously reported in an Act Now Advisory, in 2012 the NLRB held in D.R. Horton that the home builder unlawfully interfered with employees’ Section 7 right to engage in concerted activity by requiring them to sign an arbitration agreement prohibiting class or collective claims in any judicial or arbitral forum.  As we have also previously reported, however, on December 3, 2013, the Fifth Circuit rejected the NLRB’s position and held that the Act does not prohibit employers from requiring employees to sign class or collective action waivers.  The Second Circuit and the Eighth Circuit have likewise rejected the Board’s position.

Notwithstanding having “no illusions” that the Board’s decision would be the “last word on the subject”, in a 59-page decision, it reiterated and endorsed its prior position and addressed its critics head on, including the two lengthy dissents from Members Harry Johnson and Philip Miscimarra.

The Decision

Murphy Oil is the owner and operator of over 1,000 retail fueling stations.  Prior to March 6, 2012, Murphy Oil required all job applicants and current employees to execute a “Binding Arbitration Agreement and Waiver of Jury Trial,” which provided in pertinent part that all disputes related to an individual’s employment shall be resolved by binding arbitration and that the parties to the agreement “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.”  The Charging Party, Sheila Hobson, signed this Agreement when she applied for employment in 2008.  Two years later, Hobson filed a collective action pursuant to the Fair Labor Standards Act alleging that Murphy Oil failed to pay her and others for work-related activities performed off the clock.  Murphy Oil moved to compel arbitration and to dismiss the FLSA claims based on the plaintiffs having signed the Agreement.  Hobson, thereafter, filed an unfair labor practice charge and the NLRB’s General Counsel issued a complaint, alleging that Murphy Oil had violated Section 8(a)(1) of the Act.

At the heart of the dispute between the Board and its critics is the interpretation of Section 7 and 8(a)(1) of the Act as well as the application of the Federal Arbitration Act (“FAA”) and Supreme Court jurisprudence interpreting same.

Section 8(a)(1) of the Act states that it “shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees” in the exercise of their Section 7 rights.  Section 7 of the Act states that employees shall have the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]”  

The Supreme Court, on the other hand, in CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 673 (2012), held that where there is no specific “contrary congressional command” as to whether a claim can be arbitrated, the FAA “requires the arbitration agreement to be enforced according to its terms.”   The CompuCredit decision, however, only addressed the enforcement of an arbitration clause that barred access to courts, not a waiver of class or collection actions.  Moreover, the CompuCredit decision was not an employment-related dispute and did not involve the NLRA.  Thus, the specific issue at play in D.R. Horton and Murphy Oil remains unaddressed by the Supreme Court.

The Board’s rationale for upholding D.R. Horton is as follows:

(1)   Section 7 of the Act grants employees the  substantive right to act “concertedly for mutual aid or protection” and mandatory arbitration agreements that bar an employee’s ability to bring join, class, or collective workplace claims restrict this substantive right.

(2)   The conclusion that mandatory class action waivers are unlawful under the Act does not conflict with the FAA or its underlying policies because:

(a)    such a finding treats arbitration agreements no less favorably than any other private contract that conflicts with federal law;

(b)   Section 7 rights are substantive, which means that they cannot be waived under the FAA like procedural rights found in other statutes;

(c)    the “savings clause” in the FAA affirmatively provides that an arbitration agreement’s conflict with federal law is grounds for invalidating an agreement;

(d)   if there is a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act – which prevents private agreements that are inconsistent with the statutory policy of protecting employees’ rights to engage in concerted activity – requires the FAA to yield to the NLRA as necessary to accommodate Section 7 rights.

The Board criticized the Fifth Circuit’s decision for, among other things, giving too little weight to the “crucial point” that “the Board, like the courts, must carefully accommodate both the NLRA and the FAA” and not treat the FAA and its policies as “sweeping far more broadly than the statute or the Supreme Court’s decisions warrant.”

As to Member Johnson’s argument in his dissent that “there was no such thing as a class or collective action in any modern sense when the Act was passed in 1935” the Board majority found this point to be irrelevant because the language of “Section 7 is general and broad.”  As an example, the Board stated that the pursuit of unionization is “obviously protected” through the use of “modern communication technologies such as social media . . . regardless of whether workers during the Depression had access to Facebook.”

The Board also stated that contrary to the suggestion in Member Miscimarra’s dissent, it has not taken the position that the Act creates a guarantee to class certification or the equivalent; it does, however, create a right to “pursue joint, class or collective claims if and as available, without the interference of an employer-imposed restraint.”

What Does This Mean for Employers

After Murphy Oil, it is clear that the Board’s position and the position of at least some federal courts on this issue remain at odds.  If employers require employees covered by the Act to sign class action waivers, they should be aware that it could take significant time and money to ultimately have such an agreement upheld in federal court.  Clearly the last word on this issue will come only when the Supreme Court, as it is likely to do, considers the issue.  Until then employers that require such waivers should recognize that challenges through unfair labor practice charges will remain a fact of life.

7-Eleven Franchise Operators’ Overtime & Minimum Wage Lawsuit Given Green Light by NJ District Court

LinkedIn Tweet Like Email Comment

By Maxine Neuhauser

For retail and hospitality industries especially,  it is turning out to be a long, hot summer as franchises continue to be in the employment law spotlight.

On July 29, 2014 the NLRB’s General Counsel announced a decision to treat McDonald’s, USA, LLC as a joint employer, along with its franchisees, of workers  43 McDonald’s franchised restaurants with regard to unfair labor practices charges filed by unions on behalf of the workers and authorized charges against of both the franchisees and McDonalds. (See our July 30 blog post  and Aug. 14 blog post)

Then, on August 5, 2014 New Jersey U.S. District Court Judge Rene Bumb,  ruled in Naik v. 7-Eleven that four franchise owner-operators of Indian descent may pursue overtime and minimum wage claims against franchisor 7-Eleven under both the federal Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Law (“NJWHL”). In deciding 7-Eleven’s motion to dismiss plaintiffs’ wage claims, the court held that the complaint asserted sufficient factual allegations to establish, if proved, that the plaintiffs are employees of 7-Eleven, and not independent franchisees.  The decision has potential wide-ranging implications regarding the coverage and application of host of employment law statutes, as well as potential joint employment and labor-management issues.

The plaintiffs each entered into a 7-Eleven Store Franchise Agreement (“FA”) which characterizes the parties’ relationship as that of franchisor/independent contractor. Plaintiffs allege, however, that, they are they are actually 7-Eleven employees and entitled to overtime and minimum wage.

The court ruled that the language of the FA characterizing plaintiffs as independent contractors  was not alone sufficient to carry the day for 7-Eleven and instead applied a weighing of the factors and economic realities analysis, used when classifying individuals working directly for a business.

The court found that the factors weighed in favor of plaintiffs being characterized as employees, including the factor asking whether the services rendered by plaintiffs are integral to the defendant’s business. As to that element, the court stated, “It is unclear how Defendant could run their business at all without its franchisees [,]” this, despite the fact that franchisees are integral to a franchise business by the very nature of the business model.

The court did not accept that 7-Eleven’s alleged regulation of vendors, equipment maintenance, product supply, uniforms, and implementing a standardized store environment constitute mere quality control measures to ensure uniformity. Rather, it found that the plaintiffs’ allegations, “depict an economic reality of dependence” on 7-Eleven, which supported their classification as employees.

The motion to dismiss comes at an early stage of the ligation and the court’s decision to let  the cases proceed is not a decision on the merits.  Nevertheless the court’s legal analysis in deciding the motion, has certainly raised questions regarding intersection of franchise law and employment law that bear watching – both in terms of application of employment law statutes  and with regard to joint employment.

As a side note, the court dismissed plaintiffs’ claims alleging national origin discrimination and harassment in violation of the New Jersey Law Against Discrimination, but on reasons unrelated to the plaintiffs’ status as employees or independent contractors.

NLRB Again Expands Its Definition of Protected Concerted Activity – One Hand Clapping May Be Concerted

LinkedIn Tweet Like Email Comment

By Ian Gabriel Nanos

We have written about it before but a recent NLRB decision is yet another example of the NLRB’s expanding and expansive view of what constitutes protected, concerted activities, and is therefore protected under the National Labor Relations Act.  In Fresh & Easy Neighborhood Mkt, the NLRB (Chairman Pearce and Members Hirozawa and Schiffer) found that an employee engaged in protected, concerted activity when the employee spoke to co-workers about a single act of sexual harassment that was “seemingly directed at [the employee] alone.”   The majority noted that it did not matter whether she thought or believed that she was engaged in protected activity.

The dissenters (Members Johnson and Miscimarra), on the other hand, cautioned that the majority decision could have “limitless application” to myriad employee complaints falling outside the NLRB’s jurisdiction.  As Member Johnson noted in his dissent, with apologies to George Bernard Shaw, the Board at this point consists of “five Board Members divided by a common language,” when it comes to their views of how broadly protected concerted activity can be defined under the Act.

Here are the facts.  An employee walked into the break room and discovered that someone wrote a sexually degrading comment next to where her name appeared on a company whiteboard.  The employee, upset with the sexual statement that was directed at her, wanted to file a complaint of sexual harassment.  So far the NLRA is not yet implicated.  But here is where it gets interesting:  The employee then created a hand-copied reproduction of the offending material and asked three co-workers to sign the documentation.  The employee explained that she did this to document evidence in support of her claim of sex harassment.  She added that she thought the other female co-workers also found the material offensive.  She admitted that she did not intend, however, to create a joint-complaint with her co-workers.  In fact, the co-workers indicated that, by signing the documentation, they believed they were merely serving as witnesses to validate the accuracy of the documentation.  And some of the co-workers even went to far as to complain to the employer that they felt the employee “bull[ied]” them into signing the document.

After the employer received notification of the offending statement, the employer initiated an investigation, including review of video footage in the break room to identify the perpetrator.  The employer also spoke with the employee about her efforts to obtain signatures from her co-workers, inquired about the employee’s motivations for doing so and instructed the employee to refrain from obtaining any further witness statements so that the employer could conduct an investigation.  Significantly, the employer informed the employee that she could talk to other employees about the incident and/or request that they be witnesses.  The employee did not receive any discipline for her initial efforts to obtain the signatures.

Nevertheless, according to the NLRB, the employee engaged in “concerted activity” for the “mutual aid or protection.”  The NLRB reasoned that, even if the employee was pursuing her own claim with respect to conduct directed at her, “she wanted her co-workers to be witnesses to the incident, which she would then report to the [employer].”  The Board found that the personal element of the sexual harassment complaint and “selfish motivation” for speaking to her co-workers was not a bar to finding “concerted activity” because “concertedness is not dependent on a shared objective or on the agreement of one’s coworkers with what is proposed” – even if the co-workers disagreed with the complaint or did not want to sign the document.

The Board further concluded that this activity was for the “mutual aid or protection” because the employee’s efforts to obtain witnesses effectively invoked federal or state law protections that “implicated” the rights of other employees.  The Board surmised that, since it would be “unquestionably” protected to “join forces with another employee who likewise had been the victim of alleged sexual harassment,” the analysis should not change just because the offending conduct was “seemingly directed at [the employee] alone.”  The reason, is that in both cases the employee is still attempting to “’band together’ in solidarity to address their terms and conditions of employment with their employer.”

The Board then explicitly overruled the Board’s divided decision in Holling Press, Inc., 343 NLRB 301 (2004), because that decision “effectively nullifie[d] the solidarity principle when it comes to claims of sexual harassment involving conduct directed at only one employee.”  In other words, as far as the majority of the current Board is concerned, solidarity need not be inconsistent with solitary.

This expansive approach to the notion of “concerted activity” is certainly not without precedent.  For example, we recently wrote, about an ALJ decision finding that a waiter at a restaurant who, acting alone, instituted a class action lawsuit claiming violation of state or federal wage and hour laws, engaged in concerted activity on behalf of himself and co-workers, even if none of those co-workers are aware of the filing.

There is, however, something of a saving grace.  The Board in Fresh & Easy found that the employer’s action – on these particular facts – was lawful.   The Board explained that the employer had a legitimate business interest in conducting its own investigation.  The employer’s instructions that the employee should not attempt to obtain any witness statements, moreover, was narrowly tailored to meet the employer’s need to conduct an impartial and thorough investigation and were found to comply with the standards enunciated by the Board in Banner Health  in 2012, when it considered when and in what circumstances requiring confidentiality in connection with investigations could itself interfere with employees’ rights under the Act.  Indeed, the Board acknowledged that the employer’s instruction did not prevent the employee from “from discussing the pending investigation with her coworkers, asking them to be witnesses for her, bringing subsequent complaints, or obtaining statements from coworkers in future complaints.”  In addition, the Board found that the employee’s inquiry as to the employee’s motivations for obtaining the signatures was narrowly tailored – again, on these facts – to the employer’s legitimate interest in conducting a legitimate investigation, including into the assertions that some of the co-workers felt “bull[ied]” into signing the documentation.

Unfortunately, this remains a cautionary tale: on a new set of facts, the Board may not find the employer’s instructions to be sufficiently narrowly tailored and the employer may not come out as relatively unscathed.

 

Where’s the Beef? McDonald’s, Joint Employers and the NLRB II: What “Labor” Says it Means

LinkedIn Tweet Like Email Comment

Following the NLRB’s announcement on July 29th of its position that McDonald’s and its franchisees are joint employers, commentators across the spectrum have been opining about this actually means for employers, unions and workers.

This week the AFL-CIO weighed in with its opinions in a post on its blog AFL-CIO NOW.  After recounting the background of the developments, in section called “What’s the Big Picture?” the author points out how organized labor intends to take advantage of the Board’s anticipated broadening of the standards for finding joint employer status:

“Even though this story has a long way to go, this is “pretty significant,” says AFL-CIO Legal Counsel Sarah Fox. What makes this case so interesting is that the joint employer doctrine can be applied not only to fast food franchises and franchise arrangements in other industries, but also to other practices companies use to avoid directly employing their workers, such as subcontracting, outsourcing and using temporary employment agencies. “Companies are increasingly using these kinds of arrangement to distance themselves from their workers and shield themselves from liability as employers,” says Fox. “These are the devices they use so that they can get the benefit of the work the employees do, but say ‘I’m not responsible’ for unfair labor practices, health and safety violations, paying proper employment taxes or complying with other legal responsibilities of an employer.”

The notion of the joint employer doctrine is an important concept for holding employers responsible, even if there’s a third party involved, when they are effectively exerting control over wages and working conditions.

As we have predicted, big labor and the NLRB both see these developments, under the rubric of the “economic realities” theory argued by the Board’s General Counsel in its brief to the Board in Browning-Ferris as calling for a new test for determining joint employer status – one which the AFL-CIO sees as allowing unions and workers to go after the companies that contract with other employers, through subcontracting, outsourcing and using temporary employment agencies,” in an effort to hold the customer responsible for its suppliers’ employment practices.

Expect to see these theories raised with ever increasing frequency in a broadening circle of relationships.

Increased NLRB Use of Section 10(j) Injunctions Interferes With Employer Rights In Collective Bargaining

LinkedIn Tweet Like Email Comment

By Peter M. PankenSteven M. Swirsky, and Adam C. Abrahms

In May, we cautioned employers that the NLRB would be increasing its aggressive pursuit of injunctions under Section 10(j) of the Act to pressure employers in a range of unfair labor practice cases.  The Board’s aggression and apparent overreach is clearly revealed in one recent case in which the Board petitioned for and was granted an injunction to end a lockout, only to have the underlying unfair labor practice allegation dismissed eight days later when the Administrative Law Judge who heard the case found that the parties had indeed reached impasse as the employer claimed, and thus, that the lockout was lawful.

In NLRB v. Kellogg Company, No.14-2272, (W.D. Tenn. July 30, 2014), the General Counsel sought a Section 10(j) injunction in response to the union’s 8(a)(5)  charges alleging that there was not an impasse and the employer’s lockout of its employees was an unfair labor practice.  On July 30, 2014, U.S. District Judge Samuel H. Mays, Jr. in Memphis issued an injunction ordering Kellogg Company to reinstate over 200 employees at a plant who it had locked out on October 22, 2013, after their union rejected the employer’s “last, best and final offer,” in negotiations over a local supplement to the parties’ Master Agreement.

After investigating ULP charges filed by the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, and Local Union 252-G, the NLRB’s Regional Director for Region 15 in Memphis, TN issued a Complaint alleging that the company had violated Section 8(a)(5) by declaring impasse unlawfully and then locking out the employees at the plant and by failing to provide the union with information that it had requested and needed to carry out its role as the bargaining representative.  The NLRB alleged that the employer was not bargaining in good faith but was instead seeking an interim change in wages in violation of a Master Agreement which had not expired.

On April 15, 2014, after the Complaint was issued but before a hearing was conducted on the merits, at which evidence would be presented and the Union, the employer and the Board’s General Counsel would be able to argue their positions to the Administrative Law Judge who would decide whether the General Counsel had proven that Kellogg had committed ULPs as alleged in the Complaint, the Regional Director for the NLRB’s Memphis Office filed an action in the District Court for an injunction under Section 10(j) of the Act.  In the petition for an injunction, the Regional Director asked the Court for an order directing Kellogg to end the lockout and to reinstate the employees, pending the outcome of the underlying ULP case.  Rather than holding an evidentiary hearing on the petition, Judge Mays waited for the ULP hearing, so that he could make his decision based upon his review of the record.

A five day hearing on the ULP Complaint was conducted from May 5-9, 2014 before ALJ Ira Sandron, and Kellogg, the Union and Counsel for the Board’s General Counsel submitted briefs to the ALJ in June 2014.  After the hearing closed, the record was submitted to the District Court, and on July 30, 2014, Judge Mays issued his Order, granting the Board its injunction and ordering Kellogg to end the lockout and reinstate the employees who had been out since October.

The Section 10(j) injunction was not based on findings that the employer had committed ULPs, that there was not an impasse or that the lockout was unlawful.   Rather, as the Order explained it was based on his finding that the NLRB as petitioner had met an extremely low standard necessary for it to secure the injunction.  Judge Mays found that the Regional Director, as the petitioner, had “reasonable cause” to believe that the company had violated the Act in the manner alleged in the charges filed by the union, and that an injunction was “just and proper” based on the facts as the Regional Director alleged.

To meet this burden, the Court noted that all the NLRB was required to do was to produce “some” evidence in support of the petition.  The Court noted that in seeking an injunction, the NLRB “need not even convince the Court of the validity of the Board’s theory.”  Instead, all it had to do was show that its theory was “substantial and not frivolous”.

To satisfy the requirement that issuance of an injunction was “just and proper,” the Court stated that all the Board had to show was that such relief was “necessary to return the parties to status quo pending the Board’s proceedings in order to protect the Board’s remedial powers under the Act.”

Indeed, the Judge even opined that in applying the reasonable cause/just and proper standard, “fact finding is inappropriate.” District Courts “should not resolve conflicting evidence or make credibility findings.”

Just 7 days later, the Administrative Law Judge issued his Decision and proposed order, in which he found that the allegations that Kellogg had illegally declared an impasse and locked out the employees should be dismissed.  He rejected the Board’s central premise and concluded that Kellogg had bargained to impasse over a mandatory term and condition of employment and therefore had the right to lock out its Memphis employees in support of its bargaining position.  (Kellogg Company and Bakery, Confectionary, Tobacco Workers & Grain Millers International Union and its Local 252. 15 CA 115259)

The Administrative Law Judge’s decision came after a full evidentiary hearing where factual evidence was presented and the NLRB’s evidence in support of the allegations could be heard and considered, and perhaps most importantly, the employer had the right to present its evidence and argue its case.

What is so unique and troubling about the Board’s pursuit of an injunction in this case is the fact that a full trial on the underlying ULP complaint was about to take place when the Board filed its petition, that trial had been completed by the time that the District Court considered the petition and granted the injunction and that the results were so diametrically opposed because of the undue deference commonly granted to the NLRB when it petitions for an injunction under Section 10(j).  When the Administrative Law Judge heard the case, evaluated the evidence and considered the employer’s legal theories and not just those of the NLRB, he quickly found that there was no violation and the employer had the right to lock its employees out in support of its bargaining position.  When the District Court considered the petition, it was essentially directed to simply take the Board’s word for it that ULPs had been committed and that an injunction was appropriate.

These contrasting results confirm the seriousness of the potential for an aggressive NLRB to over use and misuse discretionary injunctive relief under Section 10 (j) – a tool that has been used sparingly for most of the Board’s history.  The fact that many District Judges consider applications under Section 10(j) without a full or even partial evidentiary record and afford immense deference to the NLRB’s legal theories, however novel or misdirected they may be demonstrates the risks that employers face.

For these reasons employers facing the prospect of such injunction proceedings should not hesitate to urge the courts to require evidence to back up the NLRB’s claims and should point out when the legal theories underlying such cases are not based on well recognized principles and should therefore be weighed with appropriate skepticism.

The NLRB Goes to “Pot” – “The Board, Like Congress, Has the Authority to Regulate the Marijuana Industry”

LinkedIn Tweet Like Email Comment

The NLRB’s General Counsel’s Office, in an Advice Memo dated October 25, 2013  (pdf) and released to the public on August 7, 2014, has taken the position that “an enterprise that grows, processes, and retails medical marijuana” is an employer subject to the National Labor Relations Act provided it meets the Board’s monetary jurisdictional standards and is an employer engaged in commerce and that “the Board should assert jurisdiction over this type of business enterprise.”   

Notably, the General Counsel’s office advocates the position that even though all of Maine Wellness’s growth and production takes place within the State of Maine and all of its products are shipped to dispensaries within the State, Maine Wellness is engaged in interstate commerce because of the company’s purchases of equipment and supplies from enterprises in other states. At page 8 of the Advice Memorandum the Division of Advice makes the remarkable statement that “the Board, like Congress, has the authority to regulate the marijuana industry, even where production and consumption is intended to be wholly intrastate.”

Having reached that conclusion, the Division of Advice next examined the question of whether the Maine Wellness Connection’s  “productions assistants,” who are primarily responsible for performing the tasks associated with growing marijuana during growing cycle and  its “processing assistants who  are primarily responsible for tasks performed during the processing stage,” Associate General Counsel Barry J. Kearney of the Division of Advice concludes that Maine Wellness’s workers “who are primarily involved in what are referred to as marijuana processing activities that are not agricultural are employees under the Act.”  The Board notes what it considers to be the similarity of their work to those who work in sugar refineries and tobacco processing who have been held not to be engaged in agricultural employment.

The Advice Memorandum’s in depth description of the processes and procedures employed to process and ready the plants’ buds for placement in inventory and shipment to dispensaries across the State of Maine, and the processing of what are referred to as the “byproducts” of that process into a baker’s mix of finely ground leaves and flowers used to create “edibles, which are sweet or savory foods and beverage products” that include the baker’s mix as their active ingredient, reads like a 2014 update of the 1974 classic A Child’s Garden of Grass (The Official Handbook for Marijuana Users)

The Board’s intention to assert its jurisdiction over this industry comes at a time when the legalization and decriminalization of marijuana is rapidly expanding across the country and the growth, processing and distribution of cannabis products is becoming a big business (“some estimate that marijuana is now the highest value cash crop industry in Maine, surpassing the size of Maine’s wild blueberry industry at a value of approximately $78 million.”)

The Advice Memorandum reveals the fact that this fast growing industry is one in which organized labor is active and will likely continue to be given the General Counsel’s analysis and conclusions.  First although it is not mentioned in the Advice Memorandum, the unfair labor practice charges that are at the base of these issues were filed by United Food & Commercial Workers International Union, AFL-CIO, CLC. As the General Counsel notes, the UFCW and other unions, including the Teamsters are already engaged in organizing and representing workers in the marijuana industry.  In fact the UFCW has gone so far as to establish a distinct Medical Cannabis and Hemp Division within the union.  In what is no doubt a case of background being destiny, the Director of the Division is named Dan Rush.   You cannot make this stuff up.

NLRB Acts in Response to Supreme Court’s Noel Canning Decision

LinkedIn Tweet Like Email Comment

The National Labor Relations Board has been busy since the Supreme Court’s June 26th Noel Canning decision trying to address the issues and uncertainty resulting from the Court’s holding that recess appointments of Board members on January 4, 2012, were invalid because the Senate was not actually in recess.  As we pointed out in our earlier post, this meant that numerous Board decisions from January 4, 2012 until August 5, 2013, because the Board lacked a quorum at the time that the cases were decided and many administrative actions, including appointments of Regional Directors, were also invalid.

The decisions in question included not only decisions in representation and unfair labor practice cases but many of the personnel and administrative actions that are the responsibility of the Board.

The Board announced yesterday that by unanimous decision it has took  “administrative action” on July 18, 2014, to “confirm, adopt and ratify nunc pro tunc all administrative, personnel and procurement matter approved by the Board or taken by or on behalf of the Board from January 4, 2012 to August 5, 2013, inclusive.”  The Board explains in the Minute of Board Action (pdf) that its purpose in so doing was “to remove any question that may arise concerning the validity of the administrative, personnel and procurement matters undertaken during that period.”

While the Board action does not relate to substantive decisions in cases, it includes the appointment of Regional Directors for the NLRB’s Regional Offices in Philadelphia, Tampa and Los Angeles, the appointments of 5 Administrative Law Judges and numerous internal agency restructuring decisions.

Still to come are the Board’s actions with respect to the numerous cases decided between January 5, 2012 and the Board’s achievement of a valid quorum in August 2013.  It will be interesting to see whether the Board shows the same level of unanimity when it is faced with the substantive labor law questions cast into doubt by Noel Canning.