Featured on Employment Law This Week: General Counsel Peter Robb has issued a memo to National Labor Relations Board regional directors that offers guidance in applying the Board’s Boeing decision when considering the legality of rules.

Robb instructs the regional offices to refer cases when there is uncertainty to the Board’s Division of Advice for direction. The General Counsel memo that was issued at the beginning of June provides very specific guidance regarding the placement of work rules into each of the three categories. The memo summarizes each of the three categories of rules. It provides concrete examples of the rules falling into each category and offers a brief analysis of the balancing test applied to each example. What is also significant about the memo is it serves as a reminder as to what has not changed since the Boeing decision.

Watch the segment below.

In Epic Systems Corp. v. Lewis  (a companion case to NLRB v. Murphy Oil USA and Ernst & Young v. Morris), the U.S. Supreme Court finally and decisively put to rest the Obama-era NLRB’s aggressive contention that the National Labor Relations Act (NLRA) prevented class action waiver in employees arbitration agreements, finding such waivers are both protected by the Federal Arbitration Act (FAA) and not prohibited by the NLRA. In its 5-4 decision, the Court explained that the NLRB’s interpretation of the FAA was not entitled to deference because it is not the agency charged by Congress with the interpretation and enforcement of that statute.

The Supreme Court started with two questions:

Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or do employees have a right to always bring their claims in class or collective actions, no matter what they agreed with their employers?

The Court first answered these questions plainly, noting that though as a matter of policy there could be a debate as to what the answer should be, “as a matter of the law the answer is clear” that class action waivers are legal under the NLRA and enforceable under the FAA, going on to systematically dismantle the arguments made by former NLRB General Counsel Richard Griffin, Jr. and related labor union and plaintiffs’ attorneys in amici briefs filed with the Court.

The Court’s majority opinion authored by Justice Gorsuch started with some history, noting that for the first 77 years of the NLRA there had been no argument by the Board that class action waivers violated the NLRA and that the FAA and the NLRA coexisted perfectly without conflict. As recently as 2010 the NLRB’s General Counsel took the position that class action waivers did not violate the NLRA. It was not until the Obama-era NLRB’s decision in the D.R. Horton that the NLRB took the then novel position that the NLRA’s “other concerted activities” protections created a substantive right to class action procedures. The Court then recited decades of precedent rejecting the relatively newly found aggressive NLRB position.

With respect to the FAA the Court reinforced that the courts must rigorously enforce arbitration agreements by their terms. The Court soundly rejected the NLRB’s argument that the FAA’s savings clause supported the NLRB’s position, explaining that the savings clause only applies to defenses applicable to any contract disputes, such as fraud, duress and unconscionably. In what could be helpful to arguments that other attempts to limit arbitration which are found in or being proposed in various state and local laws such as prohibiting arbitration of harassment claims or wage and hour claims under California’s Private Attorney General Act (PAGA) should be found valid notwithstanding the clear language of the FAA, the Court pointed out that the purpose of the FAA was to combat historic opposition to arbitration and, citing AT&T Mobility v. Conception’s validation of class action waivers generally, warned that the courts must guard against attempts to pervert the purposes of the FAA:

Just as judicial antagonism toward arbitration before the Arbitration Act’s enactment “manifested itself in a great variety of devices and formulas declaring arbitration against public policy,” Concepcion teaches that we must be alert to new devices and formulas that would achieve much the same result today.

With respect to the NLRA the Court, in addition to noting the historic context of both enforcement of arbitration agreements and the statute’s coexistence with the FAA, the Court observed that the NLRA’s protection of “other concerted activities” applies to subjects related to the right to organize, be represented by a union and bargain collectively, as well as other similar efforts of employees to freely associate with their coworkers in the workplace. Though not directly addressed by the Court, the language of the Opinion implies a much narrower reading of Section 7 rights under the NLRA than has historically been exposed by the Board and courts.

Finally, the Court addressed the fundamental underlying reality of the issue that the Board and the plaintiff employees’ position is an attempt to squeeze an elephant through a mouse hole by trying to use a novel interpretation of the NLRA to enforce FLSA rights in a manner which circumvents decades of established precedence. Ultimately, the Court ruled that in an employee can agree to arbitrate their FLSA rights under the FLSA, certainly nothing in the NLRA operates to prohibit such agreements.

On Wednesday, the Senate narrowly confirmed John Ring, a management-side labor attorney from Morgan Lewis & Bockius LLP, to the National Labor Relations Board (“NLRB” or the “Board”).  With this vote, Ring fills the last remaining open seat on the Board, which was previously held by former Chairman Philip Miscimarra.  Ring’s term will expire on December 16, 2022.  The confirmation vote of 50-48 was largely down party lines, with only two Democrats voting in favor of Ring’s confirmation.  The strong opposition from the Democrats is likely due to the perceived efforts of the Trump administration to install pro-business members to the Board.  Several prominent Democratic senators, including Patty Murray (D-Wash.) and Elizabeth Warren (D-Mass.), made very critical statements about Ring ahead of the vote.

On Thursday April 12th, the President announced that he was naming Ring to serve as Chairman of the Board. That action does not require Senate confirmation.  Marvin Kaplan who was previously named Acting Chairman will continue as a Board member. The addition of Ring to the NLRB once again gives Republican-appointees a 3-2 majority, which likely means several Obama-era pro-labor rulings will be overturned in the coming months and years.  When the Republican appointees briefly had a 3-2 majority at the end of 2017, several Obama-era decisions were overturned, including setting forth a new standard to evaluate handbook rules and overturning the Obama Board’s decision in Specialty Health Care eliminating micro-units.  Notably, with Ring’s appointment, it is likely that the Board will again revisit the standards for determining joint-employer status. In its  December 2017 decision in Hy-Brand  the Board overturned the Browning Ferris Industries decision, which had adopted a more lenient standard for determining joint employer status, and returned to a requirement of “direct and immediate control.”  While Hy-Brand was recently rescinded, it is expected that the newly constituted Board will  likely consider the issue again in the near future.

We will continue to monitor and provide developments on the Hy-Brand and other notable NLRB decisions.

Featured on Employment Law This Week: NLRB Vacates Hy-Brand Joint-Employer Decision

The NLRB’s Browning-Ferris test is once again the law of the land — A 3-member panel has reversed the Board’s December Hy-Brand decision, which had nixed the Browning-Ferris joint-employer test, and returned to a “direct control” standard. The reversal comes after an inspector general report that found that Member William Emanuel should have recused himself. The Browing-Ferris test considers a company a “joint-employer” if it has the right to exercise either direct or “indirect control” over employees. Once the Senate acts on the nomination of republican John Ring to fill the Board’s vacant fifth seat, the Board is expected to once again roll back Browning-Ferris with a test like the one in Hy-Brand.

Watch the segment below and read our recent post.

On February 26, 2018, in a unanimous decision by Chairman Marvin Kaplan and Members Mark Pearce and Lauren McFerren, the National Labor Relations Board (“NLRB” or the “Board”) reversed and vacated its December 2017 decision in Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”), which had overruled the joint-employer standard set forth in the 2015 Browning-Ferris Industries (“Browning-Ferris”) decision. The decision followed the release of a finding that a potential conflict-of-interest had tainted the Board’s 3-2 vote. What this means, at least for the moment, is that the lower standard for determining joint-employer status in Browning-Ferris is the law once again.

What Is The Browning-Ferris Standard?

As we previously reported, under the Browning-Ferris standard, “[t]he Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”  Under Browning-Ferris, the primary inquiry is whether the purported joint-employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority.  This standard is viewed as employee and union-friendly, and led to the issuance of complaints alleging joint-employer status in an increased number of circumstances.

What Did Hy-Brand Set As the Test for Joint-Employer Status?

Later, in Hy-Brand, as we noted, the Board rejected the Browning-Ferris standard and returned to a more employer-friendly standard, based on the common law test for determining whether an employer-employee relationship exists as a predicate to finding a joint-employer relationship and adding more than just the right to exercise control.  Under Hy-Brand, a finding of joint-employer status would require proof that putative joint employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”  This decision had stopped at least some cases relying on Browning-Ferris in their tracks.

What Happens Next?

While Hy-Brand has been reversed for the time being, we expect the Board, once the Senate acts on President Trump’s nomination of John Ring to fill the seat vacated this past December by then Chairman Philip Miscimarra, to reinstate the joint-employment standard articulated in Hy-Brand or a similar standard.

As noted above, the reversal of Hy-Brand follows the ethics memo published by NLRB Inspector General David Berry finding that Member William Emanuel should have abstained from the decision in Hy-Brand because of the fact that the law firm of which he was a member was involved in the case.  There are a number of other cases in which similar conflict issues have arisen, also arguing that Member Emanuel should recuse himself.

Congress May Act

Separate and part from a future Board decision, as we noted in November, the House of Representatives passed the Save Local Business Act (H.R. 3441) which, if enacted, would amend the National Labor Relations Act and the Fair Labor Standards Act to establish a Hy-Brand-like direct control standard for joint employer liability.  The reversal of Hy-Brand may now put increased pressure on the Senate to pass the bill.

What Should Employers Do Now?

Employers and other parties with matters before the Board involving joint-employer issues now, whether in the context of unfair labor practice cases or representation cases, now will need to focus on both the Browning-Ferris standard and the Hy-Brand test to ensure that they preserve all arguments and issues recognizing the likelihood that sooner rather than later the Board will adopt a test that requires more than is required under Browning-Ferris to establish the existence of a joint-employer relationship, with all of the attendant responsibilities.  We will continue to follow this issue and report on developments.

Featured on Employment Law This Week: Should the misclassification of an employee as an independent contractor be found to violate the NLRA?

The National Labor Relations Board is seeking amicus briefs on whether the misclassification of an employee as an independent contractor should be found to violate the National Labor Relations Act. Former NLRB general counsel Richard Griffin argued that misclassification violates the NLRA because it impacts the rights that employees have under the Act, including the right to engage in concerted activities with co-workers, join a union and engage in bargaining. To date, the Board has not ruled on the question. Amicus briefs must be filed by April 16th.

Watch the segment below and read our recent post.

Resolving a split between circuits, this week the United States Supreme Court, in CNH Industrial v. Reese rejected what has come to be known as the Yard-Man standard, and reaffirmed that collective bargaining agreements must be interpreted according ordinary contract principles.  Although the Supreme Court has long held ordinary cannons of contract construction apply to collective bargaining agreements, some federal courts developed a specialized set of inferences, known as the Yard-Man inferences, which allowed them to read beyond the actual contract terms, to reach what in some cases have been more employee-friendly results when ordinary interpretation principles would not.

The Supreme Court’s first attempt rein this concept was in 2015,  in M&G Polymers USA, LLC v. Tackett.  There, the Sixth Circuit had applied the Yard-Man inferences to read into collective bargaining agreement language an intention on the part of the employer and union that retiree medical benefits vest for life because the contract did not expressly hold that the retiree benefits were not ongoing beyond the contract term.   The Supreme Court disagreed with the Sixth Circuit, holding that the collective bargaining agreement’s silence on the question could not be construed as  evidencing  a presumptive intent.   Rather, it opined that ordinary construction rules supported a finding that the obligation to provide retiree medical benefits would not continue beyond the term of the agreement unless the contract expressly states otherwise.    

In Reese, the Sixth Circuit in essence repackaged and repurposed the Yard-Man inferences to again hold that the obligation continued beyond the term of the contract notwithstanding the absence of express language.  Here, the Sixth Circuit pointed to the collective bargaining agreement’s silence to find “ambiguity” rather than “intent.”   After concluding that there was such an ambiguity, the Sixth Circuit concluded that it was appropriate to consider extrinsic evidence to resolve the ambiguity.  The extrinsic evidence, according to the Sixth Circuit, supported lifetime vesting of retiree medical benefits.

In Reese, in a Per Curiam opinion, the Supreme Court resoundingly rejected this approach and remanded the case to the Sixth Circuit.  It admonished the Yard-Men inferences “are not a valid way to read a contract” and “cannot be used to create a reasonable interpretation any more than they can be used to create a presumptive one.”  Rather, pursuant to ordinary interpretation rules, the contract’s silence on vesting meant that retiree benefits, like other benefits, do not survive the contract.      

On a micro level, this decision ensures that, at least in the case of contracts that do not expressly establish a lifetime retiree medical benefit for covered employees, employers will not be saddled with  substantial financial burdens they neither bargained for nor anticipated, and preserves the flexibility needed to bargain over such benefits going forward. On a macro level, though, this decision has far more reaching implications – it ensures uniformity across the judicial landscape and stands a bulwark against interpretist judges attempting to rewrite non-ambiguous collective bargaining agreements, substituting their own judgment for those of the contracting parties, because they may think it is “fair” to employees to do so.

Featured on Employment Law This Week:  General Counsel Peter Robb could be signaling a shift at the NLRB.

Robb has reportedly suggested structural changes that could establish a new layer of management between the General Counsel and the field. These reports come as the NLRB seeks to adjust to cuts to its budget and a decline in case filings. If implemented, the changes could remove authority from the Regional Directors and shift more decision-making to the GC. Sources report that some changes are likely before the new budget year next October.

Watch the segment below and read our recent post.

 

In the months following Donald Trump’s inauguration, those interested in the National Labor Relations Board (“NLRB” or “Board”) waited anxiously for the new President to fill key positions that would allow the Board to reconsider many of the actions of the past eight years. Over the last six months, the Board has begun to revisit, and overrule, several union-friendly and pro-employee Obama-era Board decisions. The Board’s new General Counsel has also given clear guidance as to where else employers can expect to see his office pursue further changes in how the National Labor Relations Act (“NLRA” or “Act”) will be interpreted and enforced.

In this Take 5, we offer an overview of key aspects of what the new Board has done to date, and what can be expected going forward:

  1. What to Look Out for This Year at the NLRB
  2. Hy-Brand Industrial Overrules Browning-Ferris and Sets New NLRB Standard for Determining Joint-Employer Status
  3. NLRB Ruling in The Boeing Co. Establishes New Standards Governing Employee Handbook Rules and Policies
  4. The Trump Board Signals a Return to Traditional Standards in Representation Cases
  5. As the NLRB Steps Back, Cities Step Forward

Read the full Take 5 online or download the PDF.

Over the past several weeks there have been conflicting reports concerning what The New York Times described as “a proposal” by Peter Robb, who was sworn in as the National Labor Relations Board’s  (“NLRB” or the “Board”) General Counsel on November 17, 2017, to “demote” the Board’s Regional Directors and career “senior civil servants who resolve most labor cases,” and transfer their decision making authority to “a small cadre of officials installed above them in the National Labor Relations Board’s hierarchy,” apparently answerable to the General Counsel.

Under the Board’s long standing organizational structure, the Regional Directors, who oversee the NLRB’s 26 Regional Offices, oversee the investigation of unfair labor practice charges, including making the determination, after investigation by attorneys and field examiners assigned to the Regional Offices, whether charges are supported by probable cause and should be prosecuted before an Administrative Law Judge or be dismissed.  They also oversee the processing of representation petitions and the conduct of elections in which employees vote on union representation.

The Regional Directors’ Letter

According to a letter on behalf of the 24 current Regional Directors, in a conference call on January 11, 2018, Mr. Robb outlined a series of steps he was considering to restructure the Board’s field offices and the Regional Directors’ role.  Highlights of the proposal described in the letter included:

  • Eliminating the Board’s Regional Offices and replacing them with “large Districts;”
  • Downgrading or demoting the current Regional Directors from SES positions to lower graded GS-15 status; and
  • Transferring the Regional Directors’ substantive decision making responsibilities to a new layer of managers under the General Counsel’s direction.

Currently Regional Directors generally have broad authority to review unfair labor practices cases and determine whether those cases move forward. The General Counsel’s reported proposal would have the effect of removing much of the NLRB’s prosecutorial powers and discretion from these career employees and instead placing these responsibilities with persons appointed by the General Counsel.

In the letter the Regional Directors expressed their concerns to Robb, saying that his proposal would have a “severe and negative impact on our agency and our stakeholders” and “will cause senior Directors and managers, whose institutional knowledge is a valuable asset to the Agency, to retire sooner than they otherwise intended.”

The Regional Directors’ letter states that while the Regional Directors had initially understood that any consideration of restructuring the Regional Offices and the existing structure would be “in response to budgetary concerns,” Mr. Robb told them during the call that “the restructuring would take place regardless of budgetary considerations.”

The General Counsel Has Denied The Reports

At this point, the General Counsel has not made public a plan to reorganize or restructure the Board’s offices and structure. Speaking before a January 19, 2018 meeting of the American Bar Association’s Committee on Practice and Procedure Before the National Labor Relations Board, Mr. Robb denied having told the Regional Directors that he had formulated such a plan, and reportedly stated that such a plan would require the approval of the Board itself, the five Presidential appointees who are subject to Senate confirmation.  Board Chairman Marvin Kaplan has also reportedly stated that under the structure whereby the Board delegates certain authority to the General Counsel, such a restructuring would require Board approval.

The reported proposal follows a series of aggressive changes in posture at the NLRB since last fall, when Republicans gained a majority on the five-member Board. Mr. Robb’s proposal likely needs the Board’s approval to go into effect.  Since Member Phillip Miscimarra’s departure on December 16, 2017, however, the Board has been split between 2 Democrats and 2 Republicans.  Republicans will regain control of the Board if the Senate confirms John Ring for the currently open seat.

However, there can be no question that given recent budgets and those likely in the future, the NLRB will be required to get by with fewer resources, which probably means fewer employees since the vast majority of its budget is devoted to salary and benefits costs. Notably, the NLRB has also been faced with declining budgets and appropriations over the past several years. Last year, the Board’s budget was slashed by $16 Million, from $274 Million to $258 Million, the lowest level since 2009.

In fact, data published on the Board’s website reflects a steady decline in the number of charges filed over the past decade, from 22,497 charges in fiscal 2008 to 19,280 in fiscal 2017. Similarly, the number of election petitions filed by unions over that period declined from 2,418 to 1,854.

The Board and General Counsel’s Office Are Looking at Changes

Notably, on January 31, 2018, an email concerning “Case Processing Suggestions,”  along with a 4 page memo described as a “draft summary of suggestions” for improving Board processes and procedures, and presumably helping to address the pressures resulting from the Board’s reduced budget, was made public. The email, dated January 29, 2018, describes various suggestions developed from “all levels of the organization” in both the field and headquarters.  Feedback is sought from within the Board’s Regional Offices by February 9, 2018. We will continue to follow and report on developments.