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.

Kat PaternoFollowing on the heels first of the U.S. Supreme Court’s January 13, 2017 announcement that it granted certiorari in NLRB v. Murphy Oil USA, along with Epic Systems Corp. v. Lewis (7th Circuit) and Ernst & Young, et al. v. Morris (9th Cir.), and then of President Trump’s January 26, 2017 appointment of Philip A. Miscimarra as Acting Chair of the National Labor Relations Board (“NLRB” or “Board”), there is yet another new development in the ongoing fight over the NLRB’s challenge of class action waivers in arbitration agreements.

Acting swiftly, on January 26, 2017, the same day that Miscimarra was appointed, the NLRB’s Office of the General Counsel (“General Counsel”), Division of Operations-Management, distributed to all NLRB Regional Directors, nationwide, Memorandum OM 17-11 (“Memo OM 17-11” or “Memo”), which provides guidance to Regions handling pending cases involving employment arbitration agreements prohibited by Murphy Oil, essentially protecting all active cases under the former Obama administration’s NLRB.

While citing to commitment to “judicial economy and avoiding undue litigation” while awaiting the Supreme Court’s review as the reason for the guidance Memo, the Memo effectively ensures active cases remain subject to the Obama-appointed General Counsel’s militant opposition to such arbitration agreements under its holding in Murphy Oil—before President Trump’s appointees take control.

Memo OM 17-11 provides specific guidance to Regional Directors regarding the handling of the varying scenarios relating to such agreements under Murphy Oil.  For instance, in cases where the Regions find merit that an employer is either maintaining and/or enforcing an arbitration agreement prohibited by Murphy Oil, the General Counsel in Memo OM 17-11 directs Regions to propose the parties enter into settlement agreements conditioned on the NLRB prevailing before the Supreme Court.

Perhaps most interesting is the broad phrasing used in Memo OM 17-11; it carefully avoids narrowing the issue taken under review by the Supreme Court as being “whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violates Section 8(a)(1) of the Act.” Glaringly absent from the issue is the hot topic term mandatory, which instead appears solely in a sentence toward the Memo’s end, which states:  “In situations involving opt in/opt out clauses in mandatory arbitration agreements or where it is argued that some other feature of these agreements renders them distinguishable from Murphy Oil, Regions are directed to hold such cases in abeyance.”

On whole, Memo OM 17-11 provides hope for employers. The General Counsel’s Office has, for the moment, temporarily plugged the holes in the Obama Administration Board’s reasoning for its Murphy Oil holding.  But it reveals that the General Counsel is aware that there are, indeed, holes worth questioning.

Last week we reported that the NLRB continues its assault on arbitration agreements in spite of judicial rejection of its holdings.  Days after our post, another federal judge disregarded the NLRB’s holdings and actually dismissed employees’ wage and hour claims because the employees failed to follow the court’s order compelling the employees to arbitration.

Specifically, on July 8, 2015, a federal judge dismissed (PDF) the original wage and hour collective action that ultimately led to the NLRB’s decision in Murphy Oil where it held that arbitration agreements containing joint, class and collective action waivers in all forums, judicial and arbitral, are unlawful under the National Labor Relations Act.

The four Murphy Oil USA Inc. employees who had originally filed the collective action alleging overtime violations were ordered to arbitration by U.S. District Judge C. Lynwood Smith Jr. of the Northern District of Alabama in 2012.  However, rather than proceed to arbitration as the Court ordered, the plaintiffs waited while one of the four pursued the action before the NLRB.  The plaintiffs undoubtedly were hoping that they would be able to avoid arbitration and proceed with their overtime claim in federal court based on the NLRB’s holding in Murphy Oil.

In February 2015, the plaintiffs filed a motion requesting Judge Smith to reconsider his decision compelling arbitration in light of the NLRB’s October 2014 ruling in Murphy Oil.  Judge Smith not only denied the plaintiffs’ motion for reconsideration, but he also dismissed the action altogether, leaving the plaintiffs without even the option to arbitrate their claims.

Judge Smith found the plaintiffs had willfully ignored and delayed in following the court’s order and that they had done so “for the purpose of gaining a strategic advantage” in the NLRB action.  The Judge found the plaintiffs’ argument that they would have been unable to pursue their case before the NLRB if they had proceeded to arbitration as ordered to be disingenuous.  Judge Smith noted that instead of appealing his order or requesting a stay of arbitration, the plaintiffs engaged “simply disregarded this court’s order because it required them to do something they did not want to do.”

Judge Smith stated that the plaintiffs had:

not cited any authority to support their outlandish suggestion that a federal court order is without effect if there is a related proceeding pending before the NLRB.

While not likely to dislodge the NLRB from its position and apparent collision with the Supreme Court, it is interesting that the NLRB’s position is seemingly now also putting employees, as well as employers, in situation where they face untenuous choices.   Employees now may be faced with the choice of resolving claims through their signed arbitration agreements that they have agreed to with their employers or pursuing the NLRB’s anti-arbitration position at the risk of a court throwing out their claims and losing any chance for relief on their claims.

As discussed in our previous post, the NLRB’s divergent position has already forced employers to carefully navigate between maintaining and enforcing their otherwise valid arbitration agreements and the NLRB’s aggressive condemnation of those agreements.  This District Court’s decision clearly gives employers even more to think about in deciding how to proceed given the conflicting guidance of the Courts and the NLRB.

Even further expanding the National Labor Relations Board’s (“NLRB”) holdings in D.R. Horton and Murphy Oil limiting employer requirements concerning class action waivers, on June 26, 2015, an NLRB administrative law judge (“ALJ”) ruled that even a non-mandatory arbitration agreement that is voluntarily entered into by employees is unlawful if it requires employees to waive joint, class or collective actions in all forums, judicial and arbitral.

In November 2011, AT&T Mobility Services (“AT&T”) sent via email a Management Arbitration Agreement (“Agreement”) to 24,000 of its employees who were not represented by unions that included a class and collective action waiver.  The email made clear employees had the right to opt-out of the Agreement and provided employees instructions on how to do so electronically.

The email’s subject line read: “Action Required: Notice Regarding Arbitration Agreement.”  Once the Agreement was electronically opened, the page linked to a button marked “Review Completed,” which when clicked, indicated that an employee had reviewed it.  Employees who did not click on the button were sent additional emails until they reviewed and acknowledged the Agreement.

The emails provided each employee with a deadline of February 6, 2012 by which to choose to opt-out of the Agreement and explained that opting out meant the employee was declining “to participate in the arbitration process.”  The messages also included assurances that no adverse action would be taken against employees who choose to opt out, provided employees with a hotline number to call should they have any questions and explicitly stated that all employees could still bring claims before administrative agencies.

In June 2013, three employees filed a wage and hour class action in federal district court.  AT&T convinced the plaintiffs’ attorney that two of three employees had failed to opt-out of the Agreement and thus were bound to arbitrate their claims on an individual basis.  AT&T argued that employees who had not opted out were bound by the Agreement and had waived their right to participate in the class action.

The class action continued in federal court, and the federal district court judge found that only those 175 employees who had opted-out of the Agreement were eligible to participate in the class (and only 20 actually opted to participate).

The two initial plaintiffs who had not opted out of the Agreement proceeded to arbitration with their claims and eventually sought new counsel.  Their new attorney filed an unfair labor practice (“ULP”) charge with the NLRB on their behalf, arguing that the Agreement violated their rights under the National Labor Relations Act (“NLRA”) by interfering with their right to participate in a class action, a form of concerted activity.  The Board’s Regional Director agreed, issued a Complaint, and the matter proceeded to a hearing before an ALJ.

While the NLRB ALJ conceded that the Agreement “initially was not mandatory” due to the opt-out option, she took issue with what she concluded was an absence of evidence that employees were actually appraised “in layman’s terms, of the ‘real-life’ consequences of the choice they were being asked to make.”  On that basis, the ALJ reasoned that once an employee failed to opt-out, there was “no opportunity for an employee to reconsider his or her decision.”

The ALJ held that an employer may not require employees to enter into arbitration and class action waiver agreements—even where the employee voluntarily elects not to opt out—if the agreement includes an irrevocable waiver of the employee’s future rights protected by the NLRA, such as the right to participate in joint, class or collective actions.

As a remedy, the ALJ ordered AT&T to rescind the Agreement, or to revise it to make clear that employees are not required to waive their right to pursue joint, class or collective actions in all forums, arbitral or judicial.

While the ALJ had no problem stating that she was bound by NLRB precedent and the holdings of D.R. Horton and Murphy Oil, she failed to mention that Section 7 of the NLRA also affords employees the right to refrain from—and thus opt out of—collective action.  Specifically, while the current Board, and the ALJ here, have conjured a prohibition on class action waivers out the clause of Section 7 which states that employees “shall have the right to…engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…,” each has ignored Section 7’s equally important counterpart which provides that employees “shall also have the right to refrain from any or all such activities….”

Despite the fact that every U.S. Court of Appeals that has been asked to review D.R. Horton and Murphy Oil has outright rejected the NLRB’s extreme holdings concerning class and collective action waivers in arbitration agreements, the Board pushes forward undeterred and continues to adhere to, and ALJ’s continue to follow, the Board’s rationale and holdings articulated in those cases.

The unanimity and absence of any split among the Courts of Appeal makes it all the more likely that the U.S. Supreme Court will eventually address the NLRB’s very aggressive anti-arbitration agreement position.  Considering that the NLRB’s view directly conflicts with the Supreme Court’s prior rulings regarding class action waivers in arbitration agreements, it will be interesting to see how the NLRB’s position holds up if and when it ultimately comes under Supreme Court scrutiny.

In the meantime, the area has become increasingly difficult for employers to navigate.  Any employer that wishes to adopt an arbitration agreement with its individual employees that provides for some kind of joint, collective, or class action waiver should contact experienced labor counsel to determine the best course of action for the particular employer.

New Union Rules and Rulings: Proactive Strategies for Employers Facing Today’s Aggressive National Labor Relations Board and New Expedited Representation Elections

April 14, 2015 – Hilton Westchester, Rye Brook, New York

May 7, 2015 – The L.A. Hotel Downtown, Los Angeles, California

The National Labor Relations Board (NLRB) has adopted dramatic new rules and processes for union representation elections scheduled to take effect on April 14, 2015. The NLRB has also changed many of its standards concerning workplace rules, handbooks and policies affecting ALL EMPLOYERS, not only unionized workplaces.

This interactive workshop will address critical headline issues developing from today’s aggressive, union-friendly NLRB and provide innovative techniques and proactive and preventive strategies to prepare and respond to these developments. Specifically, our speakers will explain and offer tactics on:

  • New election rules that will bring fast elections in small units, with limited opportunity for employers to present both sides to employees and resolve key questions before a vote
  • NLRB’s evolving and expansive definition of joint employers including franchisors and franchisees
  • Developing and enforcing handbooks, policies, practices and work rules, including use of email, social media, and protection of confidential information that will withstand the NLRB’s increasing scrutiny
  • NLRB’s expanding view of protected concerted activity, including social media, workplace confrontations, class action waivers and other recent NLRB decisions

To review locations and a briefing agenda, please click here.  To register, please click here.

The fee to attend this briefing is $50 for the first person and $25 for each additional person from the same organization. The fee includes breakfast, workshop materials, and lunch. Overnight accommodations can be arranged directly with the hotel.

For additional information, please contact Elizabeth Lynch Gannon at egannon@ebglaw.com or 202/861-1850.