The President earlier this week announced the nomination of Marvin Kaplan, who currently serves as counsel at the Occupational Safety and Health Commission, to serve as a Member of the National Labor Relations Board. Mr. Kaplan is a Republican and once confirmed, his taking a seat on the Board will be an important step in the move towards a more employer-friendly Republican majority that can be expected to reconsider many of the decisions of the Democratic majority Obama Board. Mr. Kaplan’s nomination is for the seat most recently held by Member Harry Johnson, and will be for a full five year term continuing into 2022.

The nomination is now before the Senate Committee on Health, Education, Labor & Pensions, where it is expected to be advanced. Committee Chairman Lamar Alexander of Tennessee expressed his support, stating “Marvin Kaplan has the qualifications to be an effective member of the National Labor Relations Board. Once Mr. Kaplan’s nomination paperwork is received, the Senate labor committee will move promptly to consider his nomination.” It is not yet known however when that will occur.

As we reported last month, the President is also expected to nominate management side labor lawyer William Emanuel for the other vacant seat on the Board.

If President Trump’s nominees are confirmed by the Senate, the NLRB will have its first Republican majority in nine years.

As discussed in our earlier advisory, the board is likely to consider a number of significant legal issues once the vacancies are filled, including the NLRB’s test for determining whether joint employer relationships exist, the standards for evaluating whether handbooks and work rules interfere with employees’ rights under the National Labor Relations Act (“NLRA”), appropriate units for collective bargaining, the question of whether graduate students and research assistants are employees under the NLRA with the right to collective bargaining and a host of other decisions from the past eight years that more expansively interpreted the NLRA.

On June 7, 2017, in RHCG Safety Corp. and Construction & General Building Laborers, Local 79, LIUNA, the National Labor Relations Board (“NLRB” or the “Board”) rejected an employer’s contention that “a text message cannot be found to constitute an unlawful interrogation” and found that a coercive text message, just like a coercive face-to-face meeting or a coercive phone call, could serve as evidence that the employer had unlawfully threatened or interrogated employees concerning their union support or activity in violation of the National Labor Relations Act (“NLRA” or the “Act”),  and thus could support a finding that the employer committed an unfair labor practice (“ULP”).  The Board noted that the employer had offered “no reason why the Board should provide a safe harbor for coercive employer messages via text messages.”

The Act’s Protection of Employee Activity

The Act provides all employees with the right to engage or refrain from engaging in protected, concerted activity, that is activity concerning their terms and conditions of employment, including but not limited to the right to join and be represented by unions and to engage in collective bargaining with their employers. It is well established that these rights, which are provided for in Section 7 of the Act, protect and apply to employees in both unionized and non-union settings.  The Act prohibits both employers and unions from engaging in conduct that interferes with employees in their exercise of their Section 7 rights.  Under Section 8(a)(1) of the Act, it is an ULP for an employer or its agents to restrain or coerce employees in the exercise of their Section 7 rights.  For example, it is unlawful for an employer to interrogate an employee about his or her support for a union or that of other employees.  It is a violation of Section 8(a)(3) of the Act for an employer to terminate, discipline or otherwise take action against an employee because of his or her exercise of Section 7 rights.

The case in question arose in the context of a union organizing campaign by Laborers Union Local 79 among employees of RHCG Safety Corp. (also known as Redhook Construction Group). The union had petitioned the NLRB for a representation election, in which employees were to vote on whether they wanted Local 79 to become their bargaining representative. During the campaign, an employee texted his supervisor, to inquire about returning to work after an approved leave of absence. The supervisor replied by text, “U working for Redhook or u working in the union?” According to the unanimous Board decision, in which Chairman Miscimarra joined with Members Pearce and McFerran, an employee would understand the supervisor’s message to strongly suggest that working for Redhook was incompatible with supporting or working in the union.  The Board therefore agreed with the Administrative Law Judge (“ALJ”) who had conducted the ULP hearing, that the text message constituted an unlawful interrogation and violated Section 8(a)(1) of the Act.

In its exceptions to the ALJ’s decision Redhook argued to the Board that a text message could not constitute an unlawful interrogation, but according to the Board’s decision, Redhook failed to offer any reason to support its position that a text message could not support a finding of an unlawful interrogation.  The Board rejected Redhook’s contention, finding “an unlawful interrogation need not be face-to-face.”   The Board also rejected the argument that the text message at issue was inadmissible at the ULP hearing because the screenshot of the text offered by Counsel for the General Counsel did not include the entire communication between the employee and his supervisor.  The Board reasoned that the Federal Rules of Evidence permit introduction of only a part of a writing, and there was nothing in the record to suggest the text message at issue was incomplete or that the “missing” text messages could have negated the coercive nature of the “are-you-for-the union” inquiry.

What Should Employers Do Now?

The Board’s decision highlights the need for employers to carefully consider how to communicate with employees in the ordinary course of business and during an organizing campaign. Given the issues workplace texting presents for employers, it is advisable for employers to review their communication policies to make clear what methods of communication are allowed in the workplace.  Employers should also review their record retention policies to make sure that all permissible mediums of communication are covered by the policy.  Texting is a casual form of communication. To the extent employers permit text messaging among employees, it may also be necessary for employers to remind employees that text messages are workplace conversations, and the dos and don’ts applicable to face-to-face meetings and telephone calls apply equally to text messages.  Employers should also pay even greater attention to all forms of communications, both formal and informal, and by the company as well as by supervisors and managers whose actions and statements can be attributed to the employer, in the presence of organizing or other union activity.

According to news reports, the Trump administration has submitted Marvin Kaplan and William Emanuel for FBI background checks, and it plans to nominate them by June to fill a pair of vacancies at the National Labor Relations Board (“NLRB”).

The administration hopes to have the new members confirmed by the Senate before the August recess.

Kaplan is currently counsel to the commissioner of the independent Occupational Safety and Health Review Commission. He previously served as the Republican workforce policy counsel for the House Education and the Workforce Committee.

Emanuel is a shareholder at the management firm Littler Mendelson PC in Los Angeles. He has represented business groups seeking to invalidate state laws that his clients say allow unions to trespass on their property.

The five-seat board currently only has three members: Chairman Philip A. Miscimarra (R) and Members Mark Gaston Pearce (D) and Lauren McFerran (D). The vacant seats are reserved for Republicans. The Board is generally composed of three Members of the President’s party and two from the other party.

If President Trump’s nominees are confirmed by the Senate, the NLRB will have its first Republican majority in nine years.

As discussed in our earlier advisory, the board is likely to consider a number of significant legal issues once the vacancies are filled, including the NLRB’s test for determining whether joint employer relationships exist, the standards for evaluating whether handbooks and work rules interfere with employees’ rights under the National Labor Relations Act “(NLRA”), appropriate units for collective bargaining, the question of whether graduate students and research assistants are employees under the NLRA with the right to collective bargaining and a host of other decisions from the past eight years that more expansively interpreted the NLRA.

While this will ultimately be a welcome change to employers, for those with cases pending the current union leaning majority may still have several months to issue Obama-era type decisions.

As we recently reported, Dish Network, LLC unwittingly fell into the trap of a stipulated record, which proved fatal to its defense of a confidentiality admonishment issued to a suspended employee. The stipulated record in Dish Network, LLC did not set forth any business justifications for the confidentiality admonishment – an indispensable element in proving the lawfulness of such orders. Dish Network endeavored to cure this deficiency in its post-hearing brief, but the Board rejected its belated effort, in part, because the stipulated record was silent on this issue. This case served as a reminder that employers should exercise extreme caution before submitting to a stipulated record and voluntarily curbing their ability to proffer contextual evidence at a hearing to justify its workplace rules.

The Majority in Mercedes-Benz U.S. International, Inc. Holds That an Employer Has the Right to Present Contextual Evidence at a Hearing Which Might Justify a Facially Overbroad Rule

In Mercedes-Benz U.S. International, Inc., the Board recently reaffirmed employers’ rights to present contextual evidence at a hearing when defending workplace policies and rules. In this case, the General Counsel challenged Mercedes-Benz’s rule banning cameras and video recording devices in its vehicle manufacturing plant without prior authorization. The General Counsel argued this rule was facially unlawful because it banned all recordings – with no exception for protected concerted activity – and filed a motion for summary judgment.

Mercedes-Benz defended the motion by arguing that it must be permitted to present contextual evidence at a hearing. Mercedes-Benz asserted that the rule not only furthers its legitimate business interests – including the protection of proprietary and confidential information, the maintenance of safety and production protocols and open communication – but, through “candid communication between employees and managers at daily meetings,” employees also understood that the rule was not intended to curtail protected concerted activity. Without a hearing, Mercedes-Benz would be deprived of the opportunity to establish these crucial contextual details.

The majority, comprised of Chairman Philip A. Miscimarra and Member Lauren McFerran, agreed. In a rather terse footnote, the majority explained its reasoning:

In previous decisions implicating similar rules, the Board has permitted employers to adduce evidence regarding asserted business justifications and about whether the rules were communicated or applied in a manner that clearly conveyed an intent to permit protected activity. [Citations] Because the Respondent has raised similar arguments here, we give the Respondent the same opportunity to adduce evidence at a hearing.

The Dissent Argues That a Facially Overbroad Rule Obviates the Need for a Hearing

Member Mark Gaston Pearce dissented. Pearce argued that Mercedes-Benz’s “weak” contextual argument did not warrant a hearing because “[t]he Board has consistently held that the mere maintenance of an overbroad rule such as the rule here tends to impermissibly chill employee expression.” Pearce also dismissed Mercedes-Benz’s purported justifications. First, Pearce explained that Mercedes-Benz’s “asserted business interests are inadequate because the rule…is not tailored to address only those concerns and to exclude Section 7 activity.” Second, Pearce attacked Mercedes-Benz’s proffering of its “open communications” to employees which purportedly conveyed that the rule did not preclude protected activity.

[Mercedes-Benz] argues only that it discussed unspecific business management issues with employees at the daily meetings. It does not assert that it instructed any – let alone all – employees that they could engage in protected recording in spite of the rule, as would be required to effective clarify the rule’s scope.

Help to Employers Asserting Their Rights to Defend Their Workplace Rules

The General Counsel often leverages the threat of a summary judgment motion to pressure employers into stipulating to the facts of a case challenging its workplace rules. Employers should avoid submitting to this pressure and voluntarily relinquishing their right to present an evidence-based, full defense. This decision gives employers a useful tool when asserting its right to present a full and comprehensive defense in the face of such pressure from the General Counsel.

Philip Miscimarra. Credit: NLRB.gov.

On April 24, 2017 President Trump designated Philip Miscimarra as Chairman of the National Labor Relations Board (NLRB or Board). The move follows the President’s late January designation of Board Member Miscimarra as Acting Chairman.

A Republican Chair

Miscimarra, a management-side labor lawyer and a Republican, was nominated to serve on the Board by then President Obama in 2013 and was confirmed by the Senate for a four year term that continues through December 16, 2017.  President Trump can nominate Chairman Miscimarra for another term if he should wish to do so. While Board Members are subject to Senate confirmation, the President may, in his discretion, designate a Member of the NLRB to serve as Chair at his pleasure.

Two Vacancies Remain On the NLRB

The Board is composed of five Members and at this time two of the seats on the Board are vacant. The vacant seats are reserved for Republicans.  The Board is generally composed of three Members of the President’s party and two from the other party.  Board Members Mark Pearce and Lauren McFerran are both Democrats.

What Is Likely To Change With a New Majority

Notably, Chairman Miscimarra, through a series of dissenting opinions taking issue with decisions of the Obama Board’s Democratic majority has offered a significant overview of issues as to which, once there is a new Republican majority on the NLRB, employers, unions and other advocates can expect the Board to likely move, as cases presenting the issues come before it for decision. These include such issues as the NLRB’s test for determining whether joint employer relationships exist, the standards for evaluating whether handbooks and work rules interfere with employees’ rights under the National Labor Relations Act (NLRA), appropriate units for collective bargaining, the question of whether graduate students and research assistants are employees under the NLRA with the right to collective bargaining and a host of other decisions from the past eight years that more expansively interpreted the NLRA.

Election Rules and Procedures

Also notable is the fact that Chairman Miscimarra was a dissenter when the Board adopted its Amended Representation Election Rules that took effect in May 2015. Those rules, often referred to as the “ambush” or ”quickie” election rules that have not only cut the time between the filing of a representation petition and a vote from an average of 40-45 days to approximately 25 days. Since the Amended Rules took effect, Mr. Miscimarra has pointed out that they have placed an undue priority on speed, compromising the rights of employees to make informed decisions when they vote and the right of employers to meaningfully communicate with employees before an election.

Because the Amended Rules were adopted under the Board’s rulemaking authority, any further revisions in the election rules must also be made either through the same lengthy process or by Congress through legislation. For the Board to do so will require a new majority that agrees that change is needed. While various sources have suggested that the new administration is considering who it will nominate for the vacant seats on the Board, only time will tell when the President will submit his nominations and the Senate will consider them.

In recent years, the Obama Board has adopted some extreme views on Section 7 rights, which has pushed its jurisdiction into uncharted territories and left non-unionized employers vulnerable to attack. Two of the most notable examples are (1) Murphy Oil U.S.A., Inc. and D.R. Horton, Inc., in which the Board invalidated arbitration agreements with class action waivers and effectively ignored a mountain of legal precedent to the contrary, including the Supreme Court’s repeated affirmations of such agreements and the Board’s own longstanding jurisprudence and (2) Banner Health System, in which the Board deemed routine confidentiality admonishments given in workplace investigations unlawful, brushing aside employer concerns about protecting the integrity of such investigations. These decisions left both unionized and non-unionized employers reeling from the Board’s unprecedented expansion of Section 7 rights.

The Board’s recent decision in Dish Network, LLC is not such a case. Dish Network, LLC merely reinforces established rules that long predate the Obama Board, which is why Acting Chairman Philip Miscimarra, who has consistently objected to the Obama Board’s extraordinary augmentation of Section 7 rights, concurred with the majority. Nevertheless, although its holding is not particularly groundbreaking, Dish Network, LLC does contain some important lessons for employers – ones that would need to be adhered to even under a Trump Board.

The Board Finds That Dish Network Interfered with Employees’ Section 7 Rights

In Dish Network, LLC, the Board found that Dish Network unlawfully interfered with employees’ Section 7 rights by maintaining an overly broad arbitration agreement and instructing an employee to maintain confidentiality and not to discuss his suspension with his co-workers. These findings, however, were not based on the class action waiver theories of Murphy Oil or the investigation rules of Banner Health System. Rather, they dealt with established protections likely to be enforced through a Trump administration.

Arbitration Agreements Must Allow Employees to File NLRB Charges

The arbitration agreement – which broadly applied to “any claim, controversy and/or dispute between [an employee and Dish Network], arising out of and/or in any way related to Employee’s application for employment and/or termination of employment” – was deemed unlawful because “employees would reasonably construe it to prohibit filing Board charges or otherwise accessing the Board’s processes.” Policies that require the arbitration of all disputes (including NLRB charges) relating to an employee’s employment have been considered violations of the Act since 2006, when the Bush-era Board rendered its decision in U-Haul Co. of California, 347 NLRB 375 (2006).

Employees Cannot Be Told to Keep Disciplinary Actions or Complaints Confidential

The Board also found that Dish Network violated the Act when it instructed an employee not to discuss his suspension with his co-workers. The Act protects employees’ rights to discuss their terms and conditions of employment, including their disciplines and complaints, and, absent a legitimate and substantial business justification that outweighs the employee’s Section 7 rights, rules requiring confidentiality about such matters have long been held unlawful by the Board.   The Board used a similar reasoning to find that the arbitration agreement’s confidentiality provision independently violated the Act because it prohibited employees from discussing “all arbitration proceedings, including but not limited to hearings, discovery, settlements, and awards.”

Lessons Learned From Dish Network, LLC

Although the Board in Dish Network, LLC merely enforced rules established long before the Obama Board, it does serve as a cautionary tale for employers. First, this case acts as a stark reminder that even large, sophisticated employers can run afoul of established NLRB precedent if they do not diligently review and monitor their policies for compliance with rules established by the Board. This is particularly true for non-unionized employers, who may not be as cognizant of or familiar with the Board’s ever evolving rules. Second, employers should never agree to a stipulated record when they are defending claims before the Board, as Dish Network did in this case. Here, the stipulated record contained no justification for the confidentiality admonishment to the suspended employee, which is an indispensable part of proving the lawfulness of such an order. Dish Network tried to cure this deficiency by proffering a justification in its brief, but the Board did not accept it because “the stipulation of facts [was] silent about the existence of any such concern.”

On March 21, 2017, the National Labor Relations Board (“NLRB” or “Board”) found that a Teamsters local violated Section 8(b)(1)(A) of the National Labor Relations Act (“Act”) by failing to provide sufficient information about the financial expenditures of the local and its affiliates to two workers employed in a bargaining unit who exercised their rights to object to paying union dues and fees pursuant to Communications Workers v. Beck, 487 U.S. 735 (1988).

Teamsters Local 75 – Schreiber Foods

In Teamsters Local 75, affiliated with the International Brotherhood of Teamsters, AFL-CIO (Schreiber Foods) the NLRB issued its Second Supplemental Decision and Order following up on prior Board decisions in the case’s long history and unanimously held that Teamsters Local 75 unlawfully sought to collect union dues and fees from two employees who invoked their Beck objector rights.  Specifically, the Board ruled that the Union failed to provide adequate and detailed financial disclosures because, in addition to the providing the details about the local’s own expenditures of employees’ dues, the Board ruled the local must also provide details about its affiliates’ financials resulting from the local’s “per capita tax” expenditure—that is the portion of dues money that the local shares with its affiliates.  With respect to the Teamsters, the “per capita tax” is the amount that a local of the Teamsters union pays, using a portion of each employee members’ dues money, to three affiliated entities—the International Brotherhood of Teamsters (International), the relevant Conference of Teamsters (Conference), and the relevant Teamsters Joint Council (Jt. Council).

The Board’s Reasoning

The Board relied in part on its rationale and holding in Teamsters Local 579 (Chambers & Owen), 350 NLRB 1166, 1170-1171 (2007), wherein the Board overturned its prior holding that a union that pays per capita taxes to its affiliates is not required to provide Beck objectors with information regarding “how its affiliates determined the chargeability to the objectors of the per capita taxes that the affiliates received and spent.” Id. at 1168.  Rather, in Chambers & Owen, the Board not only held that “this affiliate information must be furnished to a Beck objector so that he or she can determine whether to file a challenge” id. (emphasis in original), but it also found that the union’s failure to provide such information violated Section 8(b)(1)(A) and its duty of fair representation. Id. at 1169, 1171.

What the Board Will Now Require

Here, the Board reached the same conclusion—and went a step further—noting that Teamster Local 75 must provide the Becks objecting employees with the following detailed expenditure information:

[T]he major categories of its expenditures, the percentage of each category that it considers chargeable and nonchargeable, and a detailed explanation of how it calculates its allocation of expenditures; the names of its affiliates and other entities with which it shares income from dues and fees, the amounts of income shared, the major categories of expenditures of each affiliate or other entity and the percentages of each category those affiliates and other entities consider chargeable and nonchargeable, and a detailed explanation of how the affiliates and other entities calculated their expenditure allocation.

 What This Means Going Forward

This holding essentially means that unions will have to disclose much more detailed financial information when employees exercise their Beck rights—information that unions will likely be far more resistant and hesitant to provide.  With affiliates’ expenditures coming under greater scrutiny, it also makes it more likely that Beck dues objectors will seek to have less of their money going to the unions (and their affiliates) activities.  With more Americans than ever choosing to be union-free and/or choosing not to be union members, this decision places much more power with individual employees, and emboldens their protected right to refrain from union activity, a right already afforded under the Act but often glossed over by unions.

On March 21, 2017, the United States Supreme Court ruled that the National Labor Relations Board’s former Acting General Counsel Lafe Solomon served in violation of the Federal Vacancies Reform Act, 5 U.S.C. §§ 3345, et seq. (“FVRA”) when he continued in that position after President Barack Obama nominated him for a full term as General Counsel.

By a 6 to 2 vote, the Justices affirmed an August 2015 decision by the D.C. Circuit, which found that Solomon improperly served as Acting General Counsel during the almost three-year period between January 2011 and late 2013 while his nomination for confirmation as  the Board’s General Counsel languished in the Republican-controlled Senate.  Ultimately, Obama withdrew Solomon’s nomination and put forward Richard F. Griffin, Jr., who was eventually confirmed on October 29, 2013.

Background

As we explained in our prior post, the position of NLRB General Counsel is just one of approximately 1,200 senior level positions within the federal government (including Cabinet secretaries and deputies, heads of most independent agencies, and ambassadors) that may only be filled by an individual nominated by the President and confirmed by the Senate (so-called “PAS” positions).  The FVRA, enacted in 1998, gives the President authority to appoint acting officers to serve in these positions until the President’s nominee completes the sometimes lengthy Senate confirmation process.

Pursuant to the FVRA, therefore, when former NLRB General Counsel Ronald Meisburg vacated that position on June 20, 2010, Obama appointed Solomon, then a 10-year agency veteran who was serving as Director of the NLRB’s Office of Representation Appeals, to become the agency’s Acting General Counsel.  Six months later, Obama sent Solomon’s name to the Senate, when he nominated Solomon to fill the General Counsel position.  The Senate, however, did not take action on Solomon’s nomination and returned it to the President at the expiration of the Congressional term.  Although Obama resubmitted Solomon’s nomination in May 2013, he later withdrew it and nominated Richard F. Griffin, Jr., whom the Senate confirmed as General Counsel in November 2013.

After one of the Board’s Regional Directors, acting as an agent of the General Counsel, issued as  a complaint alleging Southwest General had committed unfair labor practices, the company argued that Solomon lacked authority to issue and litigate that complaint because his service as Acting General Counsel during the pendency of his nomination to the General Counsel position violated the FVRA.  While the Administrative Law Judge who heard the case and the Board, when it reviewed the ALJ’s decision, rejected that argument, the D.C. Circuit agreed with the employer, and interpreted the FVRA to prohibit any individual (subject to certain limited statutory exceptions that did not apply to Solomon) from serving as an acting officer for a PAS position while he or she was also a nominee to fill that same position for a full term.

The Supreme Court’s Decision

Writing for the majority in NLRB v. SW General, Inc., Chief Justice Roberts wrote “[a]pplying the FVRA to this case is straightforward,” and concluded that once Obama submitted Solomon’s nomination to fill the General Counsel position for a full term, the FVRA prohibited Solomon from continuing in the Acting General Counsel role.  Chief Justice Roberts noted that Obama could have appointed any one of the approximately 250 senior NLRB employees or hundreds of other individuals in PAS positions throughout the federal government to serve as Acting General Counsel during the pendency of Solomon’s nomination.  Because the President did not do so, and Solomon continued to serve as Acting General Counsel, Chief Justice Roberts concluded, Solomon’s continued service as Acting General Counsel after his nomination was submitted to the Senate violated the FVRA.

Chief Justice Roberts also rejected the Board’s argument that, in the past, three different presidents have submitted the nominations of 112 persons for Senate confirmation while they simultaneously served as acting officers under FVRA.  As Chief Justice Roberts pointed out, the FVRA was enacted in 1998, and those 112 nominations made up a small percentage of the total number of nominations for PAS positions that the Senate considered during that time.

Impact of the Court’s Decision

The Court’s ruling will most certainly have an impact on the administration of President Donald Trump, who faces the daunting task of filling the multitude of PAS positions that are either already vacant or will become vacant shortly, as Obama’s appointees transition out.  The decision in SW General will likely have a more limited impact on employers.  When the D.C. Circuit issued SW General, it made clear that it considered the holding to be a narrow one:  Acting General Counsel Solomon served in violation of the FVRA as of the date the President nominated him to be General Counsel.  Moreover, the D.C. Circuit held that any FVRA defect in Acting General Counsel Solomon’s authority to take action could be readily cured if a subsequent, properly-serving General Counsel were to ratify his actions.  Finally, the Circuit made clear that it addressed the FVRA issue only because the employer in Southwest General had timely preserved and raised that objection early in the proceedings.  The Court did not expand the effects of the D.C. Circuit’s ruling with this decision.  The real benefit from the ruling to employers, unions, and others with business before the NLRB may become apparent after Griffin’s four-year term expires in November 2017, when President Trump or any other future President will not be able to designate his or her choice to fill a future vacancy in the position of General Counsel (or in any other PAS position) to serve in such role on an acting basis while their nomination works its way through the Senate confirmation process.

Steven M. SwirskyOver the past week the U.S. Court of Appeals for the District of Columbia Circuit weighed in on two separate related efforts by the Obama-Board to expand the protections of the National Labor Relations Act (the “Act”) to workers who are not in traditional employer-employee relationships.

One Court – Two Cases

In a March 3, 2017 decision, the Court rejected the National Labor Relations Board’s (“NLRB”) finding that FedEx Home Delivery drivers were employees and agreed with the company that the drivers were independent contractors and therefore did not have the right to union representation under the Act.   On March 9th, the Court heard the much anticipated argument on the challenge by Browning –Ferris Industries of California Inc., to the Board’s 2015 decision adopting a new and much looser standard for determining joint employer status. While it is not certain when the Court’s decision will be released, the questions asked by the judges who heard the appeal suggested that they are by no means convinced that the new test articulated in Browning-Ferris is the correct one and consistent with what Congress intended when it passed the Act.

The Court Found FedEx Ground Drivers Are Independent Contractors, Not Employees

A key question in the gig economy is the relationship between a worker and the company for whom they provide services. Those workers who are employees under the Act have the right to join and be represented by unions; independent contractors do not.  The NLRB has gone so far in its efforts as to hold that misclassification of a worker the Board considers to be an independent contractor commits an unfair labor practice when it does so.  The Board has also argued before the Courts that its views on whether a worker is an employee or an independent contractor should be afforded deference by the Courts.

The D.C. Circuit’s decision in the FedEx case is of particular interest with regard to each of these propositions. First, the Court noted that under the Supreme Court’s 1968 decision in NLRB v. United Insurance Company of America, the “determination of whether a worker is a statutorily protected ‘employee’ or a statutorily exempt ‘independent contractor’ is governed by common law” and “there is no shorthand formula or magic phrase that can be applied to find the answer.” Thus, while the Board argued that the Court should afford great weight to its application and analysis of the common law test for determining whether the drivers were employees or independent contractors, because the question is “a question of pure common law agency principles ‘involv[ing] no special administrative expertise that a court does not possess,” the Court found that deference to the Board’s views was neither appropriate nor required.

The Court in its analysis and application of the common law test found that the NLRB was wrong to place greater weight on certain factors than others. Because the facts in the FedEx case were virtually identical to an earlier case the Court had considered with the same parties in 2009, the Court held the Board was not entitled to the deference that would be due “between two fairly conflicting view,” because the Court had previously considered and decided the issue.

The Board’s Browning-Ferris Joint Employer Test

The Board’s 2015 Browning-Ferris decision held that an employer could be deemed a joint-employer of another employer’s employees if it was found to exercise or even just has the right to exercise “indirect control” over the other employer’s employees. The D.C. Circuit heard argument on March 9th on the company’s challenge to this standard.  While it is too early to say whether the Court will defer to the Board in this case, the Court’s questions suggested that it at least has doubt as to the Board’s new standard.  For example, Judge Patricia Millet questioned the practicality and future application of the indirect control standard, asking the Board’s attorney “What assurance do we have that this test and particularly indirect control is going to continue to police the line properly between genuine joint employers and [contractors]?

As in the FedEx decision, the application of the common law standards was before the Court, this time in connection with the common law test for determining the existence of an employer-employee relationship, which is one of the requirements of the Browning-Ferris standard. Counsel for Browning-Ferris argued that “the notion of exertion control dovetails with Congress’ understanding of the essence of a common-law employment relationship as direct supervision.” If the Court agrees with this proposition, then it would seem questionable that the Court will accept the Board’s view that possession, without exercise, of indirect control is sufficient to find a joint-employment relationship.

What Do These Cases Tell Us?

Since last November’s election, there has been a great deal written and said about what a Trump Labor Board will likely mean for the legacy of the Obama Board. However, in examining that legacy it is important not to lose sight of the fact that the Board’s decisions are not self-enforcing and are subject to review and enforcement by the Courts of Appeal.  While the Board continues to follow its Doctrine of Non-Acquiescence, meaning it will not accept the holdings of any court other than the United States Supreme Court as binding upon it if it disagrees with the Court’s interpretation of or views concerning the application of the Act, the D.C. Circuit and other Courts have continued to take serious issue with the Board’s position.

It will be interesting to see, once a new Board with a majority of members is appointed by the new President, not only how it addresses the myriad of representation and unfair labor practice precedents that are the product of the Obama Board, but also whether it continues to stand by the Doctrine of Non-Acquiescence and how this shapes its relationship with the judiciary.

Featured on Employment Law This Week – Philip Miscimarra, Acting Chairman of the National Labor Relations Board (NLRB), has given a strong indication of the changes likely to come once President Trump fills vacant seats on the NLRB.

In a sharply worded dissent, Miscimarra doubled down on his disagreement with the NLRB’s controversial 2014 rule on union representation elections. Miscimarra argues that the rule’s heavy emphasis on election speed interferes with an employee’s right to make informed decisions on union representation and is inconsistent with the requirements of the statute. In another dissent, he argues that the NLRB’s current standard for reviewing employee handbook provisions “defies common sense” and should be replaced with a test balancing competing interests.

Watch the segment below and see our recent post.