As we have previously reported, Unions currently face a serious existential threat as the unionized workforce in America continuously declines and the looming threat of a National Right to Work law steadily grows.  Recognizing that when employees have a choice, they are losing the battle for the hearts and minds, Unions have not taken these deleterious developments lying down and have deployed numerous countermeasures designed to increase their dues paying membership, including unprecedented forays into previously untouched industries and membership pools.  These efforts extend beyond “employees” as unions now are also targeting independent contractors, with one of the most notable being the robust ridesharing industry made popular by apps like Uber and Lyft.

Uber and Lyft have become synonymous with affordable, on-demand transportation throughout the world.  Their innovative business model has reinvigorated the for-hire transportation market –historically dominated by powerful unions and restrictive legislation – with some much needed competition.  These apps have created an inexpensive and efficient alternative in on-demand transportation while giving entrepreneurial drivers an opportunity to earn extra income on their own schedule and their own terms.  This could all change, though, if unions successfully infiltrate the rideshare market:  drivers could lose the flexibility they enjoy, consumers could see a sharp rise in costs and the rideshare market could lose its competitive ability to dynamically adjust to consumer demands.

A Federal District Court Rejects The U.S. Chamber of Commerce’s Motion For Injunction Relief Pending Appeal Of the Court’s Finding That Seattle’s Ordinance Is Not Preempted By The National Labor Relations Act. 

Rideshare drivers utilizing apps like Uber and Lyft are independent contractors and, therefore, are expressly excluded from the collective bargaining rights granted by the National Labor Relations Act (“Act”).  In December 2015, Seattle passed Ordinance 124968, which conferred collective bargaining rights on rideshare drivers.  The U.S. Chamber of Commerce subsequently filed an action in the U.S. District Court of Washington, Western District, claiming, among other things, that the Ordinance was preempted by the Act.  On April 7, 2017, the District Court temporarily enjoyed enforcement of the Ordinance pending the outcome of the litigation.

However, on August 1, 2017, the District Court lifted the injunction after it granted Seattle’s motion to dismiss, finding that the Act’s independent contractor exclusion did not preempt state law. The Court likened the independent contractor exclusion to other exclusions in the Act, such as the agricultural laborer and domestic service worker exclusions, which have long been held not to preempt state law.

In doing so, the District Court rejected the Chamber’s attempt to analogize the independent contractor exclusion to the Act’s supervisor exclusion, which decidedly preempts state law.  Citing to the legislative history of the supervisor exclusion, the District Court reasoned that Congress deemed the unionization of supervisors “a threat to the very purposes of the Act as well as the interests of both labor and management,” and these destructive consequences “would arise regardless of whether supervisors unionized under NLRA or under state law.”  By contrast, the District Court concluded, Congress did not identify unionization of independent contractors “as a threat to the free flow of goods, nor is there any indication that allowing them to participate in the collective action would threaten the independence of labor organizations or the rights of management.”

As further support for its holding, the District Court cited Section 14(a) of the Act, which allows supervisors to organize, but precludes the Board from compelling employers to recognize such unions.  No similar provision exists for independent contractors, agricultural laborers, or domestic workers, so the Court concluded the Act treated these groups alike.

Interestingly, the District Court did not engage in a deep analysis of Congress’ purpose for excluding independent contractors or whether, like the supervisor exclusion, those reasons justified preemption of state law, let alone did it examine whether the Act’s purpose in regulating the free flow of commerce constituted preemption.  It merely concluded that the justifications behind the independent contractor exclusion were different than those driving the supervisor exclusion and, because there was no express exemption specifically applicable to independent contractors like there was for supervisors, independent contractors were intended to be treated “more like the other excluded groups who have long been the subject of state regulation.”

On August 24, 2017, the Chamber filed a motion for injunction relief pending appeal of the District Court’s Order.  The same federal judge that granted Seattle’s motion to dismiss denied the Chamber’s motion for preliminary injunction, thereby permitting the Union to commence its organizing drive of Uber and Lyft drivers.

Ninth Circuit Temporarily Grants The Chambers’ Emergency Motion For Injunction Relief While It Considers The Merits Of The Motion

On August 29, 2017, the Chamber filed an emergency motion for injunctive relief with the Ninth Circuit Court of Appeal.  The Ninth Circuit temporarily granted the motion while the Court considered the merits of the motion.  Seattle filed its opposition to the Motion on September 5, 2017, and the Chamber’s filed its reply September 7, 2017.  Importantly, this truly could only be a temporary reprieve for rideshare companies as the Ninth Circuit Provided no indication one way or the other as to its leaning on the merits.

The Fate Of Unionization of Rideshare Drivers

Ninth Circuit’s ruling effectively stayed the Union’s right to begin its efforts to unionize Uber and Lyft drivers, but this reprieve may only be temporary.  If the Ninth Circuit denies the emergency motion, it will clear the way for Teamsters, Local 117 to begin its organizing drive while the Chamber appeals the dismissal of its lawsuit to block the Ordinance.  However, even if the Court denies injunctive relief and Teamsters successfully organizes the drivers, the Ninth Circuit could still decide the Act preempts Seattle’s unprecedented ordinance and reverse the Union’s gain.  If Ninth Circuit sides with Seattle, though, and permits the Ordinance to stand, this scenario will likely be repeated in other cities across the nation as Unions, with the aid of the members of city councils and legislatures they funded and elected, desperately seek to reverse the long running trend of declining membership by targeting new industries.  And if this occurs, the rideshare industry will likely be dramatically transformed in fundamental ways – ways that may destroy the flexibility and affordability that made this industry so popular in the first place.

In what may be a harbinger of good things to come, the NLRB recently reversed an Administrative Law Judge’s (“ALJ”) finding that Macy’s, Inc.’s confidentiality policies unlawfully interfered with employees’ Section 7 rights.  Unlike many employer policy decisions issued by the Board in recent years, this case does not break new ground or saddle employers with new, unrealistic onuses.  It merely reinforces well-established rules regarding the use of sensitive customer information obtained from an employer’s records and actually reaffirms the right of employers to protect “information their employer lawfully may conceal.”

What is refreshing about this case, though, is what the Board, in a two-to-one decision by Chairman Miscimarra and Member McFerran, with Member Pearce dissenting, did not do.  Namely, it did not attach an excessively broad interpretation to rules that, while theoretically susceptible to such a construction, were clearly not intended to have such an overreaching effect.  In an era of Board decisions that have ostensibly transformed the Lutheran Heritage “reasonably construe” standard into a micromanagement weapon wielded against employers to invalidate commonplace personnel policies based on uber speculative constructions untethered to industrial realities, this case may mark the apex of this aggressive push and the beginning of a more rational Board jurisprudence.  The decision returned focus on the original intent of Lutheran Heritage.  That is, rules will only be held to per se violate employees’ rights under the Act if they explicitly restrict Section 7 rights and just because a rule could be interpreted that way does not mean it’s reasonable.

The Board reaffirmed that where a rule does not explicitly restrict Section 7 rights, it will only be found to violate the Act if it can be shown that “(1) employees would reasonably construe the language [of the rule] to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity, or (3) the rule has been applied to restrict the exercise of Section 7 rights.”

Board Finds That Employees Have No Right to Use Customer Data Acquired from Employer’s Records

At issue in this case were three rules confidentiality rules. One restricted the use of “Confidential Information,” which was defined to include “social security numbers or credit card numbers – in short, any information, which if known outside the Company could harm the Company or its business partners, customers or employees or allow someone to benefit from having this information before it is publicly known.”  The other two prohibited the disclosure of “personal data,” including customers’ “names, home and office contact information, social security numbers, drivers’ license number, account numbers and other similar data.”

The ALJ found that these rules unlawfully restricted employees’ Section 7 right to communicate with customers about their work-related concerns. The Board reversed the ALJ on the grounds that the rules only prohibited employees’ use or disclosure of sensitive data (i.e., customers’ social security and/or credit card numbers) or information obtained from the employer’s own confidential records. While the Board reaffirmed the proposition that “employees indisputably have a Section 7 right to concertedly appeal to their employer’s customers for their support in a labor dispute,” the Board held that this right did not usurp their employer’s right to protect and prevent the disclosure of “information their employer lawfully may conceal.” Neither of the Board’s justifications is particularly controversial – the Board has long recognized that employees have no right to use sensitive data or information drawn from the employer’s confidential records.

What is also notable, though, is that the majority rejected the much broader construction advocated by Member Pearce in his dissent, which would have expanded the scope of these rules beyond their apparent lawful parameters, because such a construction, while possible, was not reasonable.

Board Rejects Unreasonable Construction That Parses Out Certain Language from Entire Policy

First, the dissent argued that, as defined, “Confidential Information” would encompass customer contact information because such data could certainly benefit outside entities and/or its disclosure could harm the Company.  The Board majority rejected this contention on contextual grounds because the language attacked by the dissent was preceded by an exemplary list of sensitive personal and proprietary data.  These contextual elucidations, the majority reasoned, effectively precluded employees from reasonably interpreting the prohibition as embracing benign customer data such as names and addresses.  The majority emphasized that just because a rule may be susceptible to a particular construction does not make that construction reasonable.

Board Rejects Speculative Scenario Not Grounded In Evidence

Second, Member Pearce’s dissent argued that an employer cannot restrict the use of customer information maintained in files the employer designates as “confidential” because this information is likely available to all employees in the normal course of their employment duties.  The majority rejected this on two grounds.  First, they pointed out that the Act does not protect employees’ use of information drawn from an employer’s records merely because employees have access to it as part of their duties.  Second, “there is…no evidence in this case that the Respondent’s customer contact information was available to ‘all employees’ as the dissent contends, much less that it was used by them in the course of their normal employment duties…Our colleague’s unsupported speculation as to the Respondent’s ‘likely’ practices cannot substitute for evidence not in the record.”

In recent years, employers have reeled from the Board’s frequent unwillingness to acknowledge the reasonable and obvious intent of ordinary workplace rules and to instead concoct speculative scenarios out of whole cloth to justify finding such policies violative of the Act.  Chairman Miscimarra has long argued that this increasingly frequent approach contradicts the true intent of the Lutheran Heritage “reasonably construe” standard and has imposed impossible burdens on employers trying to craft lawful policies that protect their legitimate business interests.  Chairman Miscimarra has continuously advocated for the Board to repeal and replace the Lutheran Heritage standard because this standard is inherently susceptible to widely varying application and does little to promote the certainty and predictability employers need when promulgating workplace policies.  While the majority in Macy’s did not adopt Chairman Miscimarra’s proposed replacement, Member McFerran did agree to reject the ALJ’s interpretation of the rules and policies in question based on the constrained parsing and overreach that dominated the Obama Board’s application of the “reasonably construe”  standard.

With newly sworn in Member Marvin Kaplan and likely soon to be confirmed William Emanual, in September Chairman Miscimarra will have the first Republican majority of the Decade. However, with Chairman Miscimarra’s announced intention not to seek a second term, he will only have a couple of months in which to lead a newly construed Board in its move to the new standards and tests he has been advocating.

In Midwest Division-MMC, LLC, d/b/a/ Menorah Medical Center v. NLRB, the D.C. Circuit rejected the Board’s unprecedented application of Weingarten rights to voluntary meetings, by reversing the Board’s Decision that would have extended the right of employees to have union representation at meetings at which the employees’ attendance is not compelled.

Kansas state law requires hospitals to establish an internal mechanism to monitor the standard of care provided by nursing professionals.  Pursuant to this law, Menorah Medical Center (“Menorah” or “Hospital”) established a Nursing Peer Review Committee (“Committee”) to investigate alleged violations of the prevailing standard of care.  If substantiated, the Committee reports the violation to the state licensing agency, but the Committee itself does not impose discipline.  If a violation is reported, the state, not the employer, may suspend or revoke a nurse’s license.

In May 2012, two nurses received letters alleging that they had engaged in unprofessional conduct. The letters advised that the nurses could address the Committee at a hearing “if you choose,” but also gave the nurses the option to submit a written statement in lieu of a personal appearance.  Both nurses requested union representation at the Committee hearing, but the Hospital denied their requests.  Their union subsequently filed an unfair labor practice charge alleging that the Hospital violated the National Labor Relations Act (“Act”) by denying the nurses’ requests for union representation at the hearing.

The D.C. Circuit Court Finds There Is No Right to Union Representation at Voluntary Meetings

The Board found that the Hospital’s denial violated the Act because employees have a right to union representation under Weingarten in “interviews where there is a reasonable belief that the employee will be disciplined,” regardless of whether the employees’ attendance is compulsory or voluntary.  This was an overt expansion of employees’ Weingarten rights which only apply to a unionized employee’s right to representation at a mandatory meeting an employer requires them to answer potentially incriminating questions which may result in disciplinary action by the employer.

The D.C. Circuit Court, however, unanimously reversed the Board’s decision. The Circuit Court, quoting the Supreme Court’s Weingarten decision, held that an employee’s Weingarten rights are infringed only when an employer compels an employee’s attendance at an interview that might reasonably be expected to lead to discipline and denies his or her request for union representation.  Specifically, the Supreme Court in Weingarten delineated the limited representation right as:

…the employee’s individual right to engage in concerted activity by seeking the assistance of his statutory representative if the employer denies the employee’s request and compels the employee to appear unassisted at an interview which may put his job security in jeopardy.

Here, the Hospital’s letters to the nurses clearly conveyed their attendance at the hearing was voluntary and even allowed them to submit a written statement as an alternative to attending.  Accordingly, the right to union representation under Weingarten was not triggered.

The Court also rejected the Board’s finding that, after denying a request for union representation in these circumstances, the employer must discontinue the interview unless the employee voluntarily agrees to continue after the employer explains to the employee that he or she has a choice to continue the interview without a representative present or not have the interview at all.  The Court explained that the letters sent to the nurses made it clear that their attendance was voluntary, and Weingarten “contains no suggestion that the NLRA requires an employer to renew advice to an employee that her attendance at a hearing is optional.”  The Court distinguished the precedent relied upon by the Board on the ground that all the cases involved compulsory attendance at interviews.

The Concurrence Suggests Weingarten Rights Do Not Apply Outside Interviews Conducted by Employers

Notably, in a concurring opinion, Circuit Judge Kavanaugh emphasized that the majority’s opinion assumes arguendo that Weingarten rights could apply to peer review committees without deciding this threshold question.  Judge Kavanaugh explained that, were the Court to decide this threshold question, he would hold Weingarten rights do not apply in peer review committee interviews.  Rather, Weingarten rights exist “to redress the perceived imbalance of economic power between labor and management,” and therefore apply primarily in the context of disciplinary investigations conducted by the employer.  When the interview is conducted by a state-mandated peer review committee that is not part of the employer’s disciplinary process, Weingarten rights do not apply.

On Wednesday, the U.S. Senate confirmed Marvin Kaplan, a former Occupational Safety and Health Review Commission lawyer, to fill one of the two open seats on the National Labor Relations Board, moving the agency a step closer to a Republican majority. Kaplan was confirmed on a 50-48 party-line vote by the GOP-controlled Senate.

The Senate has yet to schedule a vote for President Trump’s second nominee for the Board, William Emanuel, a long time management-side labor and employment lawyer. The Senate is expected to vote for cloture on Emanuel’s nomination after the August recess. The cloture vote kicks off a 30-hour period of debate. A final confirmation vote will then be scheduled.

The delay in moving forward on Emanuel’s nomination is the result of several Democrats stalling by raising partisan concerns that Emanuel’s history as a management-side lawyer somehow creates a conflict of interest, notwithstanding their prior support of Board nominees who have had lifelong careers as attorneys for unions, and indeed in numerous other instances, attorneys who represented employers. For example, current Member Mark Gaston Peace was longtime union lawyer and the current NLRB General Counsel Richard Griffin, Jr. was the General Counsel of the International Union of the Operating Engineers and a member of the board of directors of the AFL-CIO Lawyers Coordinating Committee.

Emanuel is expected to be confirmed in September despite the delays.

As discussed in our earlier advisory, if the nomination of Emanuel is confirmed by the Senate, which seems likely as of now, the NLRB will not only have its first Republican majority in nine years, it will return to full strength at five members. As cases come before the Board for its consideration, the NLRB will likely reconsider many of the decisions of the Democratic majority Obama Board. However, as we have noted, NLRB General Counsel is expected to serve out his four year term and remain in that critical post, in which he decides in many respects, which issues are litigated and presented to the Board, through November 3, 2017.

As we noted in our earlier blog, the Board is likely to consider a number of significant legal issues once the final vacancy is filled, including the NLRB’s standards for determining whether joint employer relationships exist, the standards for evaluating whether handbooks and work rules unlawfully interfere with employees’ rights under the National Labor Relations Act (“NLRA”), the Board’s standards for determining what are appropriate units for collective bargaining including a review of the so-called “mircro-units” approved by the Obama Board, the status graduate students and research assistants as 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.

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.

In NLRB v. Pier Sixty, LLC, the Second Circuit held that an employee’s expletive-laden Facebook post – which hurled vulgar attacks at his manager, his manager’s mother and his family – did not result in the employee losing the protection of the National Labor Relations Act (“Act”).  But even though the Second Circuit conferred protected status on this unquestionably obscene post, it did not create a protected right to level profane verbal assaults on management when discussing union business.  Such conduct has been, and will continue to be, unprotected in most circumstances.  Nevertheless, this case acts as an important reminder for employers:  if they choose to allow vulgar conduct in the workplace when it does not pertain to union activity, they must also allow it when it does.

A Pier Sixty Employee Posted an Obscene, Pro-Union Facebook Message in Response to Management’s Alleged Disrespect

Pier Sixty operates a catering company in New York, New York. In 2011, its employees embarked on a tense organizing campaign during which management allegedly threatened employees with discipline for union activity, disparately enforced a no-talk rule and told employees “bargaining would start from scratch” if they voted to unionize.  Two days before the election, Hernan Perez, a server employed by Pier Sixty, posted a vulgar Facebook message after his supervisor gave him instructions in a tone that Perez perceived to be disrespectful.  That post read:

Bob is such a NASTY [expletive] don’t know how to talk to people!!!  [Expletive] his mother and his entire [expletive] family!!!!  What a LOSER!!!  Vote YES for the UNION.

The Facebook post was accessible by Perez’s Facebook friends, which included 10 coworkers, and by the public, although Perez insisted he did not know that at the time. Perez deleted the post three days later, but Pier Sixty management had already learned about it and, after conducting an investigation, terminated Perez.

Perez’s Facebook Post Constituted Protected Activity Because Pier Sixty Routinely Tolerated Similarly Profane Outbursts from Employees

The Second Circuit ultimately concluded that Perez’s Facebook post constituted protected activity because Pier Sixty routinely permitted vulgarities in the workplace. Notwithstanding the profane language, Perez’s post “explicitly protested” management’s mistreatment and “exhorted employees to ‘Vote YES,’” while Pier Sixty’s anti-union animus was uncontested.  Given these circumstances, “the Board could reasonably determine that Perez’s outburst was not an idiosyncratic reaction to a manager’s request but part of a tense debate over managerial mistreatment in the period before the representation election.”  Moreover, Pier Sixty consistently tolerated “widespread profanity in the workplace,” and both management and employees used “daily obscenities” without consequence.  In the six years preceding Perez’s termination, there had only been five written warnings issued for such language and no terminations – until Perez. The Second Circuit noted that “it is striking that Perez – who had been a server at Pier Sixty for thirteen years – was fired for profanities two days before the Union election when no employee had ever before been sanctioned (much less fired) for profanity.”

The Second Circuit also found the manner in which Perez communicated his ire to be significant. Social media is a “key medium of communication among coworkers and a tool for organization in modern era,” and, despite publicly posting the message, Perez’s outburst did not occur “in the immediate presence of customers nor did it disrupt the catering event.” Thus, the Court found the post to be distinguishable from other “opprobrious conduct” cases it had considered.

Notably, although the Second Circuit deemed Perez’s post to be protected under the Act, it also cautioned, “this case seems to us to sit at the outer-bounds of protected, union-related comments, and any test for evaluating ‘opprobrious conduct’ must be sufficiently sensitive to employers’ legitimate disciplinary interests.”

Court Questioned the Validity of the Board’s “Totality of the Circumstances” Test

In 2012, the Second Circuit, in NLRB v. Starbucks, 679 F.3d 70 (2012), concluded that the test traditionally employed by the Board to assess whether obscenities uttered in the workplace constitute protected activity – the Atlantic Steel test – did not sufficiently accommodate employers’ legitimate interest in preventing employees’ public outbursts in the presence of customers and remanded the case to the Board to develop “more balanced standards for evaluating ‘opprobrious’ conduct in that context.”  The Office of the General Counsel subsequently issued Memorandum OM 12-59, which set forth a nine-factor “totality of the circumstances” test to assess the protected nature of employees’ social media communications, which the Second Circuit characterized as “more employee-friendly.”  The Board employed this test in Pier Sixty, LLC, but the Second Circuit questioned the test’s legitimacy, stating that “we are not convinced the amorphous ‘totality of the circumstances’ test adequately balances an employer’s interests…”  Ultimately, though, because Pier Sixty did not object to it the Second Circuit applied the test – without sanctioning its validity.

Lessons Learned From Pier Sixty

This case serves as a reminder that employers must take the long view when deciding whether to discipline employees for workplace conduct that is inappropriate but not particularly offensive to the employer. Here, Perez’s posting would have likely fallen outside the bounds of protected activity had Pier Sixty disciplined employees for similar vulgarities in the workplace.  However, because Pier Sixty routinely tolerated such conduct from management and employees alike, the Second Circuit could not find that Perez’s conduct was “so egregious as to exceed the NLRA’s protection.”

This case also signals that the Second Circuit, and perhaps other courts, may be willing to abandon the Board’s “totality of the circumstances” test in favor of a standard that better protects employer’s legitimate interests in regulating employees’ workplace conduct. Employers defending cases in which the Board employs this test should vigorously argue that this standard improperly intrudes upon their legitimate business interests.

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.

In 2016 private sector union membership dropped to its lowest level in history – a dismal 6.4%. Given the laws and systems in place related to union membership, this means that at least 94.6% of all American private sector workers currently choose not to be union members. The drop, recently reported in a routine annual report issued by the U.S. Department of Labor’s Bureau of Labor Statistics, also was the largest year over year percentage drop in recent years, dropping 0.3%, from 6.7% in 2015.

While the percentage of union members as a portion of the total workforce saw a steep drop, possibly more disturbing to union bosses is the fact that the actual raw numbers of union members also dropped over 100,000 members from 7.554 million to 7.435 million dues paying members. This loss of dues revenue could hurt unions’ efforts to organize members as well as lobby and elect politicians.

Report reveals employees choosing to reject unions.

What is remarkable about these numbers is what is behind them. All of the above numbers are based on union membership, individuals who are dues paying members either by choice or as a result of a compulsory union security clause in a non-right-to-work state. What the above numbers do not show is the numbers and percentages of the employees represented by unions.

The percentage represented remained relatively stable, only dropping 0.1% from 7.4% to 7.3% of all private sector employees. More striking, the raw number of employees represented actually slightly increased from 8.411 million to 8.437 million. The fact that there are actually more total employees represented by the unions but less total employees who are union member may be the biggest news of the recent report. It indicates that more employees are choosing to reject joining a union, even though the union represents them.

This fact has import not only in analyzing how union membership fell to a record low, but also what could be on the horizon for unions. Specifically, this drop seems caused by the growing support for the “Right-to-Work” movement.

The Right-to-Work resurgence.

 Right-to-Work refers to statutes which are adopted for the express purpose of allowing employees the right to choose to join and pay dues to a union or choose not to be a union member. At their heart is employee choice – employees having the choice to decide whether they want to be a member of the union or decide they want to keep their job but not be a union member.

While the movement is far from new, it has enjoyed a resurgence in the recent years. This resurgence did not start in the typical Right-to-Work strongholds of the South, but bubbled up from historically union strongholds in the Rust Belt; possibly getting its genesis with the very public brouhaha over the 2011 Wisconsin public sector reforms instituted following the election of Governor Scott Walker.   Shortly thereafter the Right-to-Work movement’s renaissance began as in 2012 Michigan and Indiana became Right-to-Work states; shocking the labor community and freeing private employees in those states from compulsory union membership. Wisconsin followed, extending Right-to-Work to its private sector employees in 2015. West Virginia passed Right-to-Work in 2016 and already this year both Missouri and Kentucky have joined the ranks for a total of 28 states now guaranteeing private sector employees the right to choose whether or not to become dues paying union members. New Hampshire seems poised to join the others as the 29th state soon. Add to this the counties and municipalities which have recently passed local Right-to-Work laws; a practice under dispute but sanctioned in late 2016 by the 6th Circuit Court of Appeals in UAW v. Hardin. Together, the Right-to-Work movement is experiencing its greatest success since the 1950s.

The new BLS report shows this resurgence has had real impact on the labor movement. Not just in the loss in the national percentage or even in the loss in raw number of members; rather by delving into the report, the true scope and possibly future can be ascertained. For example, Wisconsin, in its first year following giving employees the Right-to-Work, saw its total (public and private, BLS does not separate on a statewide basis) union membership dropped from 8.3% down to 8.1%.   Michigan dropped from 15.2% down to 14.4%. Moreover, when you look all the way back to 2011, the year before Michigan passed Right-to-Work, Michigan’s union membership rate was 17.5%. In just 5 years, Michigan unions have lost 3.1% and dropped from 671,000 down to 605,000 dues paying members. This is a remarkable 10% plus loss in their ranks. Indiana likewise as dropped from 11.3% in 2011 down to 10.4% in 2016 despite tremendous job growth in traditionally unionized industries. Obviously, it is too soon to understand the true impact of Wisconsin, let alone West Virginia, Missouri and Kentucky, but if their precursor states are an indication, 6.4% may not be the historic low for long.

What this analysis also suggests is that 6.4% is not lily fully reflective of the percentage of American private sector workers who want to be dues paying members. With 22 states still allowing compulsory union membership through union security clauses and with those states actually having the majority of remaining union members, the true number of individuals who actually want to be union members is possibly far less.

National Right-to-Work, a real possibility?

This currently trapped group of American forced union members and their potential liberation is what could be even more concerning for unions and their coffers than the recent report of the historic low. Until very recently the Right-to-Work movement had realistically only been a state by state movement. For the first time, however, there is a real possibility that national Right-to-Work legislation could pass. In January Representatives Steve King of Iowa and Joe Wilson of South Carolina introduced the National Right-to-Work Act which would prohibit compulsory union membership for private sector employees covered by the National Labor Relations Act and the Railway Labor Act. While similar legislation has been proposed consistently in years passed, President Trump has stated he is a supporter of Right-to-Work (while President Obama would have swiftly vetoed it). With majorities in both the House and Senate, potentially the only thing stopping the Act would be a Democrat filibuster in the Senate. If Republicans held firm and could convince 8 Democrat Senators to join with them to break a filibuster and allow a vote, the US could have a national Right-to-Work law. Given the current division in Washington this may seem unlikely but 25 Democrat face election next year and 9 of those are from Right-to-Work states, including Michigan, Indiana, Wisconsin, Missouri and West Virginia plus another one from the teetering state of New Hampshire. Certainly it is possible.

As if these legislative threats were not enough, the battle over employee choice is being fought in the courts as well. Unions sighed collectively in relief last year when the Supreme Court deadlocked on the issue of whether compulsory dues collection from public sector employees was constitutional in Friedrichs v. California Teachers Association allowing the pro-union decision of the 9th Circuit to stand. However, in February the same lawyers who brought the Friedrichs case filed a new, virtually identical, suit in Yoon v. California Teachers Association. Likewise the case of Illinois public sector workers rights to choose to be union free is currently pending before the 7th Circuit in Rauner v. American Federation of State, County and Municipal Employees, Council 31. While these cases deal with public sector employees, many labor unions fear that an adverse ruling could be the first step towards a judicial determination that the NLRA’s sanctioning of union security clauses unconstitutionally violates individual employees’ free speech and freedom of association rights. Such a ruling would effectively make a national Right-to-Work law by judicial declaration.

Unions will not go quietly into the night.

Union’s will not take this existential threat without a counter offensive. Not only will they fight in Congress, the state houses and the courts, spending millions on lawyers and politicians, but they will fight in the workplace as well. With their backs to the wall employers should expect unions to be aggressively organizing, trying to use the Obama era gains they got through the Ambush Election rules and scores of pro-union NLRB decisions as the foundation for organizing drives. Unions will continue to try to grow their ranks in already heavily Democratic and more unionized states like New York (23.6%), California (15.9%), New Jersey (16.1%) and elsewhere where they can use their ranks, dues base and political clout to target employers. They will also continue to target industries where they have had more success like hospitals and other healthcare providers as well as industries where they are actually currently gaining like hospitality/accommodations (where membership is up from 7.4% to 7.6%) and telecommunications(where membership is up from 13.3% to 14.6%). They also will continue to push the traditional boundaries of the employment relationship, targeting franchisors in the fast food and other industries as well as the gig economy and companies such as Uber and Lyft utilizing independent contractors.

While the impact of the Right-to-Work resurgence and recent union membership reporting certainly indicates that giving employees a choice is a threat to labor unions; equally certain is that this threat is likely to cause more activity and challenges for employers who may be a target of unions seeking to replace lost revenue.