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  While Hy-Brand was recently rescinded, it is expected that the newly constituted Board will  likely consider the issue again in the near future.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.

The White House has announced that John Ring, co-chair of the Labor & Employment Law practice at a management side law firm, is the President’s choice for the vacancy on the National Labor Relations Board created last month when Board Chairman Phillip Miscimarra completed his term on December 16, 2017. Mr. Ring’s nomination to the Board is subject to Senate confirmation. No date has been set for hearings on the nomination.

The Board is Now Split 2-2

Since Mr. Miscimarra’s departure from the Board, where he was part of a 3-2 Republican majority following the confirmation of Marvin Kaplan, who has now been named Chairman, and William Emanuel, the Board has been composed of 2 Republicans and 2 Democrats, Members Mark Pearce and Lauren McFerran, both appointed by President Obama.

When Mr. Ring is Confirmed A New Republican Majority is Expected to Continue to Revisit Obama Era Decisions Overruling Long Standing Precedents  

During December 2017, the Board issued a number of significant decisions, overruling Obama-era decisions including overturning Browning-Ferris Industries and returning to a more traditional test for determining whether two businesses are joint-employers, adopting new standards for determining whether facially neutral employer policies and handbooks unlawfully interfere with employees’ Section 7 rights, overturning  which opened the doors to organizing in so-called micro-units, and other decisions seen as tilting the Board’s administration and interpretation of the National Labor Relations Act in favor of unions.  Since Member Miscimarra’s departure however, the Board has been split between 2 Democrats and 2 Republicans, resulting in an inability to form a majority to reverse Obama era holdings.  Provided Mr. Ring is confirmed, the Board will once again return to a 3-2 Republican majority.

There Are a Significant Number of Important Issues the Board’s General Counsel Plans to Ask the Board to Reexamine Once Member Ring Is Confirmed and a Republican Majority Is in Place

In December, General Counsel Peter B. Robb issued GC Memorandum 18-02, Mandatory Submissions to Advice, identifying those issues that he had identified as ones the Board’s Regional Offices should refer to the Division of Advice in the Office of the General Counsel.  These include “cases that involve significant legal issues,” including “cases over the last eight years that overruled precedent and involved one or more dissents, cases involving issues that the Board has not decided, and any other cases that the Region believes will be of importance to the General Counsel.”

The Mandatory Submissions Memo identifies a broad swath of recent Board precedents and topics that must be submitted to Advice, where there is a good chance the new General Counsel will ask the Board to return to pre-Obama Board interpretations of the Act and practices.  These include:

  • Joint –Employer – Browning-Ferris Industries’ holding that joint-employer relationships can be found based on “evidence of indirect or potential control over the working conditions of another employer’s employees.
  • Use of Employer’s Email Systems for Union Activity– The Mandatory Submission Memo calls for the submission to Advice of all cases involving claims based on Purple Communications’ holding that “employees have a presumptive right to use their employer’s email systems to engage in Section 7 activities. The Memo also explains that the new General Counsel is effectively overruling prior Advice Memoranda in which his predecessor noted his initiative “to extend Purple Communications to other [employer owned] electronic systems,” such as the internet, phones and instant messaging systems that employees regularly use in the course of their work.
  • Cases In Which Policies in Employee Handbooks Were Found to Interfere With Section 7 Rights – The Mandatory Submissions Memo indicates the General Counsel will likely be asking the Board to reexamine a broad range of holdings in which policies and conduct standards contained in handbooks and work rules were found to interfere with employees Section 7 rights, in many cases in non-union workplaces. These will include cases finding prohibiting “’disrespectful’ conduct,’ rules prohibiting the use of cameras and recording devices in the workplace, and policies concerning confidentiality in investigations.
  • Cases Involving the Standard For Determining Whether Employees Would Find a Work Rule or Policy to Unlawfully Interfere With Section 7 Rights – Which Board Member Miscimarra – One of the areas in which (then) NLRB Chairman Philip Miscimarra most frequently disagreed with his colleagues on the Obama Board was over the Board’s use of the Lutheran Heritage test, which he repeatedly described as a test that “defies common sense.” Look for the new General Counsel to ask the Board to adopt the standard which (then) Chairman Miscimarra proposed in his now legendary dissent in William Beaumont Hospital.
  • Cases in Which The Obama Board Expanded the Definition of Concerted Activity For Mutual Aid and Protection – In cases such as Fresh & Easy Neighborhood Market the Obama Board expanded the circumstances in which it would find an employee’s actions to be protected, holding that an employee’s actions involving a matter in which “only one employee had an immediate stake in the outcome to be protected.” Such cases must now be referred to Advice and it can be anticipated the General Counsel will ask the Board to reexamine.
  • Cases involving “Obscene, Vulgar or Other Highly Inappropriate Conduct”- The new General Counsel will be considering whether the Board went too far in holding in cases such as Pier Sixty, LLC that even where employees engaged in expletive-laden Facebook post – which hurled vulgar attacks at his manager, his manager’s mother and his family, the employee’s actions remained protected by the Act.

The Mandatory Submissions Memo also identifies each of the following as issues that must be submitted to Advice:

  • Work stoppages on employer premises;
  • The circumstances in which employers may restrict access to employer property at times when employees are off duty;
  • The recent expansion of Weingarten rights in the context of employer-mandated drug testing;
  • Employer obligations and rights with respect to wage increases during bargaining, where the increases are provided to unrepresented employees but not the employees whose wages and increases are being bargained;
  • Claims by unions that employers are successors by virtue of their hiring a predecessor’s employees as required by local laws;
  • The circumstances in which a new employer will be found to be a “perfectly clear successor” obligated to follow its predecessor’s terms and conditions rather than being free to set new terms and conditions for those it hires from a predecessor’s workforce;
  • Whether an employer must disclose and produce witness statements prior to arbitrations; and
  • Whether employers will be required to continue to honor contractual dues check off provisions after a collective bargaining agreement expires.

The New Majority Can Be Expected to Examine these and Other Questions

It is expected that once Mr. Ring is confirmed and the new majority is in place, the Board will be reconsidering existing precedents concerning these and other issues and looking at the 2014 Amended Election Rules adopted by the Obama Board

In footnotes to two recent unpublished NLRB decisions,  NLRB Chairman Marvin Kaplan, who was named to that role by the President following the December 16, 2017 conclusion of Philip Miscimarra’s term, and Member William Emanuel offered interested observers an indication of two additional areas of Board law that they believe warrant reconsideration once Mr. Miscimarra’s replacement is nominated and confirmed, and the Board returns to a 3-2 Republican majority.

While unpublished Board decisions “are not intended or appropriate for publication and are not binding precedent, except with respect to the parties in the specific case,” as in the two cases discussed below, can offer important insights into what Board members are thinking about significant matters, and therefore can give readers an idea what to expect when particular issues come before the Board in future cases. In this regard, they, like the General Counsel’s recent Memorandum on Mandatory Submissions to Advice, give meaningful guidance to employers and advocates.

The Board is Likely to Revisit and Move Away from Obama Era Holdings re Confidentiality in Settlement Agreements

During the past eight years, one of the signatures of the Obama Board was its effort to expand the application of the National Labor Relations Act’s relevance to non-union workplaces. One aspect of this was a series of Board decisions finding that when employers sought to include broad confidentiality provisions in private settlement and separation agreements with employees that restricted the employees’ ability to disclose the terms of such settlements to others, including employees, they were impermissibly restricting employees’ ability to act together with other employees concerning terms and conditions of employment.

In a footnote to a December 27, 2017 unpublished decision denying a motion for summary judgment in an unfair labor practice complaint issued against Baylor University School of Medicine, Chairman Kaplan and Member Emanuel wrote as follows:

Members Emanuel and Kaplan agree that there are genuine issues of material fact warranting a hearing and that the Respondent is not entitled to judgment as a matter of law.

However, they believe that, to the extent not already permitted under Board precedent, the legality of confidential severance agreements for former employees should be reconsidered

While the Baylor University decision does not answer the question of when and in what circumstances the Board will recognize an employer’s right to lawfully require confidentiality in settlement agreements and other agreements that where they would have been found to interfere with employees’ Section 7 rights, the tea leaves more than suggest a change in Board law as soon as the Board returns to five members and an appropriate case is before the new majority.

The Board is Likely to Change How It Interprets and Applies the Blocking Charge Rule

Another important area that Chairman Kaplan and Member Emanuel indicated they want to see the Board re-examine is a Board doctrine commonly referred to as the Blocking Charge Rule.

Under the Board’s 2014 Amended Election Rules, the NLRB holds that when an unfair labor practice charge is filed during the pendency of an representation petition, the Board will not conduct the election if the party that has filed the charge, typically the petitioning union, or in the case of a decertification petition, the incumbent union facing a vote to decertify it as the representative, if the charge alleges actions by the employer that the union claims prevent or interfere with a fair election. Many observers believe that such blocking charges are used tactically by unions that are concerned they face defeat at the polls.

Under the 2014 Amended Election Rules, it is quite easy for a union to use such a charge to block an election:

Section 103.20 of the final rule requires that a party wishing to block processing of the petition must file a request to block and simultaneously file a written offer of proof in support of its unfair labor practice charge. If the Region believes the charge precludes a question concerning representation and no request is filed, the Region may ask the Charging Party if they wish to request to block.  If so, the Charging Party should be informed that they must file a request to block and an offer of proof, including the names of witnesses who will testify in support of the charge and a summary of each witness’s anticipated testimony. In addition, the Charging Party must promptly make the witnesses available to the Region.

In a December 20, 2017 unpublished decision in a case involving a decertification petition filed by an employee of ADT, in which the incumbent union filed ULP charges, to prevent an election:

Member Kaplan agrees with the decision to deny review here. He notes, however, that, consistent with the Petitioner’s suggestion, he would consider revisiting the Board’s blocking charge policy in a future appropriate case. Member Emanuel agrees that the determination to hold the petition in abeyance in this case was permissible under the Board’s current blocking charge policy, but he believes that the policy should be changed. Specifically, he believes that an employee’s petition for an election should generally not be dismissed based on contested and unproven allegations of unfair labor practices.

One of the more interesting aspects of this decision and footnote is that both Chairman Kaplan and Member Emanuel, although not disagreeing with the Regional Director’s application of the rule in the case before them, each expressed their view that the Blocking Charge Rule, which is not a rule at all but rather a Board-created doctrine or policy “should be changed.”