Employers in New York, the second-most unionized state in the country, have lost another key point of leverage in collective bargaining.  Effective February 6, 2020, Senate Bill 7310 reduces the amount of time striking workers in the private sector must wait before they are eligible to receive unemployment benefits.  While New York is one of only a handful of states to allow strikers to receive unemployment benefits,[1] the seven week waiting period that has applied until now, has served as a deterrent to strikes. The new, shorter waiting time has the potential to profoundly affect the calculus and reduce employers’ economic leverage in collective bargaining because earlier access to unemployment benefits will soften the blow that a strike has on an employee’s financial well-being and potentially increase the willingness of unions and employees to strike.

Access to Unemployment Benefits While Striking in New York

The Supreme Court has long held that the National Labor Relations Act does not preempt a state’s ability to determine whether unemployment benefits are available for employees engaged in a labor dispute.  As unemployment benefits are generally available only to those workers who are ready willing and able to work, employers might reasonably expect that workers who voluntarily withhold their labor in a strike would not be eligible for such benefits.  While most states appear to agree and do not permit employees who are on strike to collect unemployment insurance benefits, New York remains an outlier.

Historically, striking employees in New York had to wait seven weeks before they could file for unemployment benefits, unless there was a lockout or the employer hired replacement workers.  This waiting period meant that striking workers could not receive their first benefit check until the ninth week of the work stoppage.  The purpose of the delay in benefits was to prevent the state from inserting itself prematurely into a private-sector labor dispute and to “avoid the imputation that a strike may be financed through unemployment insurance benefits.”  Matter of Burger, 277 App. Div. 234 (1950).  This thoughtful counter-balance reduced the risk of frivolous strikes and work stoppages, while providing an eventual safety net for those rare instances where a labor dispute suffered a long impasse.

Reducing the Waiting Period

Under New York’s amended law, the amount of time that striking workers must wait before receiving unemployment benefits is reduced from seven weeks to two weeks.  This law modifies a previously adopted bill that would have required workers to wait just one week after the start of the strike to be eligible to receive unemployment benefits.   Had the legislature not amended the 2019 bill, for the purposes of unemployment benefits in New York, striking workers would have been treated similarly to those employees who became jobless involuntarily.

A New Calculus for New York Employers

A reduction in the waiting period for unemployment benefits potentially changes the dynamics in collective bargaining by reducing the incentive for unions and workers to avoid strikes and the economic hardship on those who strike and increasing the pressure on employers to concede to union demands to avoid strikes.  Over the last two years there has been a recent upsurge in major strike activity. With unemployment benefits now available sooner, unions may be more willing to initiate or prolong a strike to improve their bargaining position.  New York employers should be wary of how this shift in the costs of striking could affect future labor negotiations and update their existing strategies accordingly.

***********************************************************************************

[1] The list of states permitting striking workers to receive unemployment benefits is short.  In 2018, New Jersey passed a bill permitting striking workers to begin collecting unemployment benefits 30 days after the start of a strike.  Other states, such as GeorgiaNew Hampshire, Rhode Island, West Virginia, provide benefits if unemployment continues after the labor dispute ends, so long as the worker did not participate in the strike and are not a member of the union involved in the labor dispute.

The National Labor Relations Board has announced the issuance of its final rule governing joint-employer status. The new rule, which was first proposed in September 2018 and has been the subject of extensive public comment, will become effective April 27, 2020.

The critical elements for finding a joint-employer relationship under the new rule is the possession and the exercise of substantial direct and immediate control over the terms and conditions of employment of those employed by another employer.  The essence of the new rule is described in the Board’s February 25, 2020 press release:

To be a joint employer under the final rule, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees. The final rule defines key terms, including what are considered “essential terms and conditions of employment,” and what does, and what does not, constitute “direct and immediate control” as to each of these essential employment terms. The final rule also defines what constitutes “substantial” direct and immediate control and makes clear that control exercised on a sporadic, isolated, or de minimis basis is not “substantial.”

Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the final rule, but it cannot give rise to such status without substantial direct and immediate control. Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.

The new rule marks a return to a standard similar to that which the Board followed from 1984 until 2015.  In 2015, in Browning-Ferris Industries, the Board adopted a much more liberal test under which a finding that the putative joint employer possessed indirect influence and the ability (including through a reserved contractual right) to influence terms and conditions, regardless of whether the putative joint employer actually exercised such influence or control, could result in it being held to be a joint-employer of a second employer’s employee.

As a practical matter, the standard under the Board’s new rule should make it much more difficult to establish that a company is a joint-employer of a supplier, contractor, franchisee, or other company’s employees. The new rule will mean that a party claiming joint-employer status to exist will need to demonstrate with evidence that the putative joint-employer doesn’t just have a theoretical right to influence the other employer’s employees’ terms and conditions of employment, but that it has actually exercised that right in a substantial, direct and immediate manner.

This new rule is likely to make it much more difficult for unions to successfully claim that franchisors are joint-employers with their franchisees, and that companies are joint-employers of personnel employed by their contractors and contract suppliers of labor, such as leasing and temporary agencies.

As private sector unionization rates have continued to fall over recent decades, organized labor has increasingly turned to the state and local politicians it supports for assistance in the form of state legislation and local ordinances imposing burdens on employers and aid to unions, while depriving employees of the process and balance intended by the National Labor Relations Act (“NLRA”).  These often come in the form of “Labor Peace” requirements which mandate employers enter into agreements with unions that do not represent their employees as a condition of doing business with government entities or as a condition of entry into government controlled or regulated sectors.  The emerging legalization of marijuana and cannabis in California is one of the latest examples of this trend.

Why AB 1291 Will Make It Easier for Unions to Organize Cannabis Employees and How Cannabis Employers Can Prepare and Protect Themselves

California’s AB 1291, which goes into effect on January 1, 2020, mandates that all cannabis license applicants employing more than 20 employees must enter into a “labor peace agreement,” as defined by Business and Professions Code Section 26001(x), that prohibits a union from engaging in strikes, work stoppages and other economic interferences.  Employers without a qualifying labor peace agreement will not qualify for a cannabis license.  While on its face this ordinance purports to protect the cannabis industry from the disruption of labor disputes, in reality, it effectuates a compelled waiver of fundamental rights guaranteed under the NLRA and makes it much easier for unions to organize cannabis employees.

How AB 1291 Impacts NLRA-Protected Rights and Makes It Easier to Organize Employees

Waiver of Employer’s Property Rights.  Under the NLRA, unions generally enjoy no greater access to an employer’s property than any other member of the public, which allows cannabis employers to exclude union organizers from their property.  AB 1291, however, compels cannabis employers to waive their property rights by mandating that any cannabis employer that is party to a labor peace agreement, which typically will be with a union that is seeking to represent that employer’s workers, provide the union “access at reasonable times to areas in which the applicant’s employees work for the purpose of meeting with employees to discuss their right to representation, employment rights under state law, and terms and conditions of employment.”  This means that union organizers must be permitted to enter the working areas of a cannabis employer’s private property and speak to employees about joining and being represented by the union.

“Neutrality.”  The NLRA, a federal law, protects employers’ free speech rights – their Section 8(c) rights – and allows employers to share their opinions, experiences and facts about unions with employees.  These are essential tools for employers facing union organizing drives as they allow employers to educate employees about the reality of union representation and respond to misinformation disseminated by the union.  More important, hearing both perspectives allows employees to make informed and free choices on whether they or not they want to be represented by a union.  Neutrality provisions in labor peace agreements contractually waive employers’ ability to deploy these dynamic tools and typically require employers to remain impartial on all union matters.  While AB 1291 does not explicitly waive cannabis employers’ free speech rights, neutrality is one of the most common union demands in labor peace agreement negotiations, and employers can expect that unions will insist on neutrality as consideration for entering into a labor peace agreement.  Because a labor peace agreement with a union is required to do business, AB 1291 provides unions the necessary leverage to impose these type of provisions.

Card Check Not Required Notably, AB 1291 stops short of many other state and local “labor peace” mandates by expressly not permitting “card check” provisions which deprive employees of NLRB supervised secret-ballot elections.  Such card checks are typically imposed as a result of other “labor peace” statutes, but are expressly not permitted under the definition of labor peace agreement under Section 26001.  This is likely an attempt to avoid a finding that the statute is preempted by the NLRA as card checks have long been argued to be unlawful – a position the NLRB General Counsel seemingly recently adopted.

Why AB 1291 Is Likely Preempted by Federal Law

AB 1291’s impact on fundamental NLRA-guaranteed rights is precisely why a strong case for preemption exists.  Preemption renders a state or local law unconstitutional when it either (1) regulates activity protected or prohibited by the NLRA (known as Garmon preemption) or (2) regulates conduct that effectively disrupts the balance of power between employers and unions (known as Machinists preemption).  AB 1291 is likely unconstitutional under both preemption doctrines, even without requiring card check.

First, AB 1291 explicitly regulates economic weapons and property rights protected by the NLRA.  Second, AB 1291 implicitly regulates free speech rights guaranteed by Congress to employers in the NLRA, since unions invariably insist on a waiver of employer free speech rights as consideration for entering into a labor peace agreement.    Because the state conditions a cannabis license on a labor peace agreement, a cannabis employer is forced into a position of choosing between either losing their business or giving up its and its employees’ federal rights.  In this regard, the state indirectly regulates employer speech by essentially forcing employers to submit to neutrality in order to receive a cannabis license, and it indirectly regulates employees’ rights to choose by encouraging employers not to share opposing views with employees.

An exception to preemption is recognized where the state is acting as a market participant and its actions further a proprietary interest.  This exception does not apply here, though, because the state is not acting as a market participate seeking to procure goods and services for itself in enacting AB 1291.  Rather, AB 1291 targets private businesses seeking to deliver cannabis products to private citizens through a licensing scheme that regulates conduct exclusively regulated to the purview of the NLRA.  Similar licensing schemes have been declared preempted by the United States Supreme Court and federal district courts.  Building and Const. Trades Council of Metropolitan Dist. v. Associated Builders and Contractors of Massachusetts, 507 U.S. 218, 227 (1993); Aeroground, Inc. v. City and county of San Francisco, 170 F. Supp.2d. 950, 958 (2001).

What Cannabis Employers Can Do In Response to AB 1291

Not surprisingly, although there is a strong case against AB 1291, challenging the new law will likely be economically infeasible for most cannabis employers.  However, there are important steps employers can take both before and after the law takes effect to protect its interests.

Strategic Labor Relations Plan.  The best offense is a good defense, and for cannabis employers, a tactical labor relations strategy is the best defense to AB 1291.  Unions win elections because they promise to change the way employees are treated, not because they promise more money.  Often, a few small changes in an employer’s internal processes can make a dramatic difference in employee morale and contentment, and a strategic labor relations plan ensures employers have optimized their internal processes so that a union cannot promise employees a dramatic improvement in working conditions.

Educate Employees Now.  AB 1291 does not directly impose neutrality upon employers starting January 1, 2020; rather, neutrality will be the likely result of any mandated labor peace agreement ultimately agreed upon.  Accordingly, until cannabis employers finalize a labor peace agreement with a union, they should consider taking advantage of their 8(c) rights and appropriately educate their employees about unions and their impact on employees and the workplace.

Review of Workplace Policies.  Workplace policies are the key to retaining control over the workplace and minimizing disruption once a union organizing drive begins.   Cannabis employers should have their workplace policies reviewed by a labor relations specialist to ensure (1) they are lawfully compliant and (2) they afford the employer maximum control over the workplace and workforce.  It will become more difficult to change workplace policies once a labor peace agreement is in place and a union organizing drive beings, so prudent cannabis employers should aim to have their policy review completed before finalizing a labor peace agreement with a union.

Minimize Concessions in Negotiations for a Labor Peace Agreement.  Cannabis employers should use the labor peace agreement negotiations to minimize concessions to the union and obtain gains of their own.  For example, while AB 1291 requires that unions be granted reasonable access at reasonable times, a cannabis employer can negotiate provisions that specifically delineate when and where union organizers can access its property, which can significantly curtail the disruption such access can cause.  Additionally, employers can negotiate affirmative provisions into their agreement which are designed to actually enhance, advantage or protect their business in exchange for the neutrality or related provisions a union may demand.

The National Labor Relations Board, in its December 17th decision in Apogee Retail LLC d/b/a Unique Thrift Store, has reversed its prior rule and held that employer requirements that employees treat workplace investigations as confidential are “presumptively lawful.”  The Apogee decision overturns the Board’s 2015 Banner Estrella decision, which had required that an employer seeking to impose confidentiality in connection with a workplace investigation was required to prove, on a case by case basis, that the integrity of an investigation would be compromised without confidentiality.

The Board concluded that the framework set forth in Banner Estrella improperly placed the burden of proving that confidentiality was necessary on the employer and was inconsistent with the Board’s test developed in The Boeing Company for determining whether a facially neutral rule unlawfully interfered with employees’ rights under Section 7 of the National Labor Relations Act.  In its press release, the Board explained:

The Board concluded that the framework set forth in Banner Estrella improperly placed the burden on the employer to determine whether its interests in preserving the integrity of an investigation outweighed employee Section 7 rights, contrary to both Supreme Court and Board precedent. The Board also noted that the new standard better aligned with other federal guidance, including EEOC enforcement guidance.

In today’s decision, the Board applied the test for facially neutral workplace rules established in The Boeing Company, 365 NLRB No. 154 (2017), and determined that investigative confidentiality rules limited to the duration of the investigation are generally lawful. Because the rules at issue in this case did not limit confidentiality to the duration of the investigation, the majority remanded this case for further consideration.

What Employers Should Do Now

The Apogee decision makes clear that the Board will find a rule requiring employees to respect the confidentiality of ongoing investigations of harassment, discrimination and other workplace issues while such investigations are underway.

However the Board noted that another question that arose under Apogee that requires further consideration is what level of confidentiality is presumptively appropriate once the investigation in question is concluded.

Many employers and other organizations have, since Banner Estrella was decided more than four years ago, to reconcile their obligations under Title VII and other laws against harassment and other forms of discrimination, to treat investigations with an appropriate degree of confidentiality to help protect the rights of employees and witnesses who report misconduct and participate in investigations while not unlawfully interfering with employees’ rights under the National Labor Relations Act.

With the Apogee decision employers should consider reviewing and as appropriate revising their investigation procedures, including those with respect to confidentiality, to reflect the Board’s new guidance.

On December 17, 2019, the National Labor Relations Board (“Board”) ruled that an employer’s rule prohibiting use of its email system for nonbusiness purposes did not violate employees’ rights under the National Labor Relations Act. The 3-1 decision in Caesars Entertainment Corp d/b/a Rio All-Suites Hotel and Casino, NLRB Case No. 28-CA-060841, overturns the Board’s 2014 decision in Purple Communications, which held that work rules prohibiting employees from using employer-provided email systems for union activity were presumptively invalid.

According to the Caesars Entertainment majority, employees “do not have a statutory right to use employers’ email and other information-technology (IT) resources to engage in non-work-related communications.”  “Rather, employers have the right to control the use of their equipment, including their email and other IT systems, and they may lawfully exercise that right to restrict the uses to which those systems are put, provided that in doing so, they do not discriminate” against activities protected by Section 7 of the National Labor Relations Act, such as discussing wages, hours, and terms and conditions of employment.

In overturning Purple Communications, the Board effectively reinstated a prior 2007 decision known as  Register Guard, with one exception.  Under Caesars Entertainment, employees may lawfully use an employer’s email and IT resources for Section 7 activities when they are “the only reasonable means for employees to communicate with one another.”

What This Means

Many employers rewrote their employee handbooks and work rules as a result of Purple Communications.  In light of Caesars Entertainment and some other recent decisions by the NLRB, employers should considering revisiting their employee handbooks and policies and determine whether changes to comply with the new developments make sense for their business.  Employers that decide to implement a work rule banning employees from using company-provided email or IT resources for Section 7 activities, however, must ensure that they implement any such rule in a neutral and non-discriminatory manner.  In other words, “business use only,” must truly mean “business use only.”

Approximately four years ago, during the Obama Administration, the National Labor Relations Board upended decades of well-settled precedent by making it unlawful for employers to unilaterally cease dues checkoff pursuant to a contractual dues check-off provision upon the expiration of a collective bargaining agreement.  This week, the Republican-majority Board in Valley Hospital Medical Center, Inc. reversed that departure from established precedent and restored balance and stability in collective bargaining negotiations by holding that an employer has the right to stop withholding employees’ union dues from their pay when the parties’ contract expires.

For More Than 50 Years, Employers Could Unilaterally Cease Dues Checkoff Post-Expiration

Because employers have a duty to maintain the status quo upon expiration of a union contract, most contractually established terms and conditions generally continue in effect after the contract expires until a new agreement is reached or the parties reach impasses.  However, the Board has long recognized a limited category of provisions that do not survive contract expiration.  Prior to 2015, this limited category of exemptions from the status quo rule included no-strike/no-lockout and dues checkoff provisions, meaning unions could strike and employers could lock employees out and/or stop withholding and emitting union dues despite expired contract provisions prohibiting such actions.  This rule fostered balance and stability in negotiations by ensuring both unions and employers could deploy important economic weapons as leverage during contract negotiations.

Employers relied on this rule for more than 50 years.  In 2015, however, the Board in Lincoln Lutheran held employers could no longer unilaterally cease dues deductions when a contract expired, thereby removing a key economic weapon from employers’ arsenal.  The effect was to create a bargaining disparity in which unions had no restrictions on their economic weapons during post-expiration negotiations but employers did.

Obligations Whose Existence Depends Solely on the Contract Do Not Survive the Contract

The Board in Valley Hospital Medical Center has now rectified the inequity perpetuated by Lincoln Lutheran and reinstated employers’ ability to unilaterally discontinue dues checkoff after the expiration of a union contract. Adopting the rationale of a 2010 Board decision, the Board reasoned that dues checkoff provisions, like no-strike provisions, “cannot exist in a bargaining relationship until the parties affirmatively contract to be so bound.” Accordingly, “these obligations are coterminous with the contracts that gave rise to them.”  The Board distinguished these “contractually created” obligations from other terms and conditions of employment which can exist prior to and independent of a contract and, therefore, must be continued as part of the status quo after contract expiration.

The Board also noted that its decision better effectuates the policies of the National Labor Relations Act and the proper role of the Board.  Characterizing the Lincoln Lutheran decision as an “impermissible interference with the statutory bargaining process,” the Board noted the decision “undermin[ed] established bargaining practices and relationships that ordinarily promote labor relations stability” and had the potential to transform dues checkoff into “a considerably more divisive bargaining subject with the potential to frustrate efforts” to reach an initial or successor contract.

The Board also reiterated the Supreme Court’s edict that the Board should not function “as an arbiter of the sort of economic weapons the parties can use in seeking to gain acceptance of their bargaining positions.”  However, that is precisely what the Board did when, in 2015, it declared the post-expiration discontinuation of dues checkoff an invalid economic weapon.  Fortunately, now that the Board has corrected this short-lived restriction on employers’ economic weapons, employers can once again permissibly discontinue dues checkoff after contract expiration in support of their bargaining positions.

The National Labor Relations Board (“Board” or “NLRB”) has announced that it is publishing proposed changes to its Rules and Regulations that will begin to reverse the Board’s 2014 changes, which took effect in 2015, to its representation election rules and procedures commonly referred to as the “ambush election rules.”  The proposed final rule is expected to be published in the Federal Register on December 18, 2019 and to become effective 120 days after publication.

Board Chairman John F.  Ring described the rule changes as “common sense changes to ensure expeditious elections that are fair and efficient. The new procedures will allow workers to be informed of their rights and will simplify the representation process to the benefit of all parties.” In December 2017, the Board had announced that it was seeking comments concerning parties’ experiences under the 2015 rule changes, to determine what, if any changes, would be beneficial.

The new final rule, which is over 300 pages in length, will, when it takes effect, change many of the most troublesome aspects of the 2014 rules.  The new rule will, among other things:

  • Extend the time between the filing of a representation petition from eight to 14 days,
  • Extend the time for employers to post the Notice of Petition from two to five days,
  • Extend the time for employers to file their the Statement of Position identifying any issues to be resolved before an election can be held eight days after an employer is served with the petition and confirm that the Board’s Regional Directors will have the discretion to allow additional time upon a showing of “good cause, and
  • Extend the time employers have to provide the petitioning union and the NLRB with the initial list of employees in the petitioned for unit from two days to five business days.

Significantly, the new final rule will extend the time for the holding of elections.  While the final rule continues to mandate that representation elections be conducted at “the earliest date possible,” the new final rule defines this as normally not “before the 20th business day after the day of the direction of election.”

The new final rule will add a requirement that a petitioning union also file a written Statement of Position, which will be due three days after the employer’s statement of petition which the Board explains will result in more orderly litigation by narrowing and focusing the issues to be litigated.”

Parties rights to file post-hearing briefs, which were severely curtailed under the 2014 rules are also substantially restored.  Under the 2014 rules, post-hearing briefs have only been permitted “only upon special permission of the regional director,” and only as to those issues allowed by the Regional Director.

A major change in the new final rule is that the Board will once again allow for the resolution of significant legal issues before an election will be directed, rather than after the vote is held.  Issues concerning the scope of the proposed bargaining unit, supervisory status and other issues will once again be “litigated at the pre-election hearing and resolved by the regional director before an election is directed.”  

Additionally, employers and unions will once again have the right to seek review of such issues by the Board before election results are certified by the Regional Director, who  “will no longer certify the results of an election if a request for review is pending” or before the deadline for filing a request for review.

What Happens Next

 The Board has also announced that it will be revising its Case Handling Manual, which provides guidance to the agency’s staff, to reflect the new final rule.   Litigation challenging the new rule remains a possibility.

The General Counsel for the National Labor Relations Board (“Board” or “NLRB”) has signaled what may be a major resetting of the law on the Board’s position concerning the legality of so called neutrality agreements, in which employers make concessions and accommodations to labor unions seeking to organize and represent their employees.  This occurred with the General Counsel’s consideration of an appeal by the National Right to Work Legal Defense Foundation, Inc. (the “Fund”) of a dismissal of an unfair labor practice charge had filed  against United Here! Local 8 (“Union”) and Embassy Suites by Hilton, Seattle Downtown Pioneer Square (“Employer”) on behalf of an employee who did not wish to be represented by the Union after the Employer had entered into an agreement with the Union that enabled the Union to gain recognition of employees of the Employer without having to win a secret ballot representation election conducted by the Board.

Challenges to Neutrality Agreements

The original charges alleged that the Employer unlawfully assisted the Union in numerous ways during the Union’s 2018 organizing campaign.  The charges alleged that one such way the Employer unlawfully assisted the Union was by entering into a “neutrality agreement” with the Union.  Under the neutrality agreement the Employer agreed to provide the Union with employees’ contact information to assist it in organizing, something it was not obligated to do under the National Labor Relations Act (the “Act”) and to recognize the Union, without an election if the Union presented cards signed by a majority of the employees in the proposed bargaining unit indicating the employees wished to be represented by the Union. The Fund arty alleged that the neutrality agreement, and various other actions on the part of the Employer constituted unlawful assistance and support to the Union and constituted things of value.  The Fund further alleged that these actions Union being granted and subsequently accepting recognition by the Employer even though the Union lacked uncoerced majority support, in violation of the Act and that the actions of the Employer and the Union unlawfully interfered with the right of the Employer’s employees to decide whether or not they wished to be represented by the Union.

Following an investigation of the ULP charges, the Board’s Regional Director in Seattle found that the allegations lacked legal merit, explaining that current Board law finds that such neutrality agreements are lawful and enforceable and do not interfere with employees’ rights under the Act.  Following the Regional Director’s dismissal of the ULP charges, the Fund requested review of the Regional Director’s decision by the General Counsel in Washington.

What Happens Next

Upon review of the appeal, the General Counsel agreed in part with the Fund and concluded that it was the view of the Office of the General Counsel that portions of the charge had legal merit and that a complaint should issue so that the General Counsel could ultimately ask the Board to hold that such neutrality agreements violated the Act.   In his letter partially sustaining the Fund’s request for review, the General Counsel opined that in his view the Employer appeared to have violated the Act by entering into and maintaining a neutrality agreement with the Union, because the neutrality agreement provided the Union with far more than “ministerial aid” during the Union’s organizing campaign.  For the same reasons the General Counsel opined that the Union violated the Act by accepting such aid from the Employer. Accordingly, the case was remanded to the Regional Director of Region 19 for further action.  Absent a settlement, it is expected that the Regional Director will issue a complaint, against the Employer and the Union, alleging that the Employer provided and the Union accepted unlawful assistance and presumably seeking an order directing the Employer to withdraw its recognition of the Union unless and until the Union is certified in a Board-conducted secret ballot election. While the hearing will be heard before an NLRB administrative law judge who will be bound to follow existing Board precedents, it can be expected that the General Counsel will ultimately seek to have the five member Board in Washington consider the issue and adopt a new standard for determining whether a neutrality agreement is lawful or goes too far.

What This Means

The significance of the General Counsel’s decision to challenge the existing standards surrounding neutrality agreements conclusions revolve around the fact that in many areas and industries unions have been shunning the use of NLRB secret ballot elections when they seek to organize employees and instead attempting to pressure employers to enter into broad neutrality and card check agreements.  In many localities where unions are strong, cities and counties are also seeking as a condition of various tax incentives and other benefits to force employers to agree to neutrality agreements and labor peace agreements.

The General Counsel’s actions described above are a clear signal that the Office of the General Counsel will be taking the position that many, if not all, such agreements constitute a form of unlawful assistance and interference with the rights of employees under the Act. It cannot be overstated how significant the impact would be of such a reversal in the law.

One of the matters of significance to employers and unions under the National Labor Relations Act that became a point of contention under the National Labor Relations Board (“NLRB” or “Board”) during the Obama Administration was the movement to allow representation elections in what were commonly referred to as “micro-units,” which many believed made it easier for unions to score victories and gain bargaining rights. The Board’s recent decision in Boeing Co. and International Association of Machinists and Aerospace Workers provides important guidance for employers regarding how the Board will assess the appropriateness of proposed bargaining units going forward, and is evidence of the NLRB’s repudiation of Specialty Healthcare.

The case came before the Board after the International Association of Machinists and Aerospace Engineers (the “IAM”) filed a representation petition to represent a bargaining unit that included certain Boeing aircraft engineers but excluded production and maintenance employees at the company’s South Carolina plant, a non-union facility. The NLRB Regional Director determined that the proposed bargaining unit was appropriate, directed an election and then certified the Union after its election win. In a split decision issued on September 9, 2019, the Board reversed the Regional Director’s approval of the petitioned-for unit, vacated the certification of the Union, and dismissed the petition. Explaining that the Regional Director had misapplied the PCC Structurals standard for evaluating the appropriateness of a petitioned-for unit, the Board’s Republican-appointed majority adopted a three-part test for analyzing the scope of proposed bargaining units under the traditional community-of-interest standard.

How We Got Here

The new three-part test is the latest evolution in the Board’s method for determining whether a petitioned-for unit is appropriate. In 2011, the Board upended nearly 20 years of precedent when it held in Specialty Healthcare that a petitioned-for unit would be appropriate unless the employees inside and outside the proposed unit share “an overwhelming community of interest.”  After Specialty Healthcare, Employers challenging the scope of a petitioned-for unit were tasked with the heavy burden of proving that the interests of excluded employees overlap almost completely with those in the unit proposed by the union.

Affording such extraordinary deference to the union’s proposed unit increased the risk of fractured bargaining units—otherwise known as “micro-units”—that frustrated employers, ignored the substantial interests and rights of excluded employees under the National Labor Relations Act, and often defied well-established industry norms. In 2017, the Board remedied these problematic results when it decided PCC Structurals, which overturned Specialty Healthcare and restored the traditional community-of-interest test the Board had previously applied. Under PCC Structurals, when an employer challenges the appropriateness of a petitioned-for unit, the Board must consider:

[W]hether the employees are organized into separate departments; have district skills and training; have distinct job functions and perform distinct work, including inquiry into the amount and type of job overlap between job classifications; are functionally integrated with the Employer’s other employees; have frequent contact with other employees; interchange with other employees; have distinct terms and conditions of employment and are separately supervised.

If after weighing these factors—a fact-based, case-by-case inquiry—the Board determines that excluded employees also share a community of interest with the petitioned-for unit, it will conclude that the petitioned-for unit is inappropriate due to the exclusion of employees with a shared community of interest and will not allow bargaining in such unit.

Although PCC Structurals is clear that both the shared and distinct interests of the employees included and excluded from the petitioned-for unit will be considered, the Board majority in Boeing acknowledged that there has been little clarity as to how those shared and distinct interests should be weighed.

The Boeing Case

Boeing operates a commercial 787 aircraft facility in North Charleston, S.C. For several years, the IAM had tried unsuccessfully to organize the approximately 2,700 production-and-maintenance employees who work at the facility. In its third attempt, the IAM successfully petitioned for an election involving a proposed bargaining unit consisting of only two employee classifications: Flight-Line Readiness Technicians (“FRTs”) and Flight-Line Readiness Technician Inspectors (“FRTIs”). Though the FRTs and FRTIs hold an additional license, receive higher pay, and work in a separate part of the North Charleston facility, these approximately 178 employees are in the same department and have meaningful similarities in their job functions as the other production and maintenance employees. Nonetheless, the Regional Director for the Board’s Atlanta Regional Office concluded that the Union’s petitioned-for unit excluding the production and maintenance employees was an appropriate unit under PCC Structurals. After the Union won an election among the FRTs and FRTIs, Boeing filed a request for review and the Board reversed.

The Three-Part Test

In disagreeing with the Regional Director’s decision, the majority noted that the community-of-interest analysis requires consideration of not only the shared interests of the employees in the petitioned-for unit, but also whether those shared interests are sufficiently distinct from the interests of employees excluded from the proposed unit. To facilitate future agency decisions, the Board announced a three-step process for analyzing challenges to the scope of proposed bargaining units under the PCC Structurals community-of-interest standard.

Under the Boeing decision, the NLRB will now consider whether:

  1. The employees in the proposed unit share a community of interest;
  2. The workers excluded from the unit “have meaningfully distinct interests in the context of collective bargaining that outweigh similarities” with the employees in the proposed unit; and
  3. There are already Board-established guidelines for determining an appropriate unit configuration for the employer’s industry.

The Board applied this three-step test and found that the FRTs and FRTIs themselves had interests that were too disparate to show that the two classifications shared a community of interest. Moreover, the majority held that the excluded production-and-maintenance employees generally had the same interests as FRTs and FRTIs in the context of collective bargaining, and therefore the interests of employees in the petitioned-for unit were not sufficiently distinct from the interests of excluded employees to allow a unit of only FRTs and FRTIs. The NLRB also noted the absence of any existing industry-specific guidelines applicable to Boeing’s operations.

The Board’s Commentary on Wall-to-Wall Units

In addition to providing and applying the new three-part test, the Board recognized prior NLRB precedent finding plant-wide or wall-to-wall units to be presumptively appropriate for integrated manufacturing facilities. However, the presumption does not mean that less-than-plant-wide units at functionally integrated facilities are inappropriate, nor does it place a heightened burden on unions seeking to organize smaller units at such locations. Rather, functional integration is only one factor in the community-of-interest analysis.

What Happens Next?

The Boeing decision supplies much-needed guidance as to how the NLRB will analyze the appropriateness of petitioned-for units. The Board’s clarified standard provides employers with a means for challenging the appropriateness of petitioned-for bargaining units of a limited number of classifications and/or defined solely by the extent of organizing, and potentially reduces the potential for proliferation of fractured units that exclude arbitrary portions of an employer’s workforce at a facility. Rather than force employers to expend significant time and resources in after-the-fact challenges to Regional Director directions of elections in micro or other units that may be composed of gerrymandered groups of employees or units that actually represent no more than the extent of organizing, the Board’s decision in Boeing affords better opportunities for employers to resolve unit appropriateness prior to elections taking place.

On October 24, 2019, Senator Mike Lee (R-UT) introduced the Protecting American Jobs Act.  The bill, cosponsored by Senators Tom Cotton (R-AR), Rand Paul (R-KY), Marsha Blackburn (R-TN), Ted Cruz (R-TX), and Marco Rubio (R-FL), would significantly amend the National Labor Relations Act (“NLRA”) by removing much of the authority currently held by the National Labor Relations Board (“NLRB” or “Board”).

Under the NLRA, the Board’s General Counsel is responsible for investigating unfair labor practice (“ULP”) charges, issuing complaints regarding ULP charges, and prosecuting those ULP complaints before NLRB administrative law judges.  Senator Lee’s bill would strip the Board of the authority to prosecute and adjudicate labor disputes, and limit the NLRB to investigating such disputes.  Instead of prosecution and adjudication by the NLRB, Senator Lee’s bill would provide individuals with the right to bring civil actions in the United States district court where the labor violation occurred or, at the parties’ option, the United States District Court for the District of Columbia.  The authority to adjudicate labor disputes would remain with the district courts.

The Protecting American Jobs Act would also significantly curb the NLRB’s rulemaking authority concerning matters other than the internal functions of the Board.  Senator Lee’s bill would prohibit the NLRB from promulgating “rules or regulations that affect the substantive or procedural rights of any person, employer, employee, or labor organization, including rules and regulations concerning unfair labor practices and representation elections.”  The bill would implement conforming amendments to the NLRA and require the NLRB to rescind or revise its regulations as necessary to conform with the amendments.

The Protecting American Jobs Act was referred to the Committee on Health, Education, Labor, and Pensions, which is where similar bills Senator Lee introduced in 2014 and 2015 also landed.  Neither of the previous versions of the bill ever proceeded beyond committee assignment.

“For far too long the NLRB has acted as judge, jury, and executioner, for labor disputes in this country, Senator Lee commented after introducing the bill.  “The havoc they have wrought by upsetting decades of established labor law has cost countless jobs.  This common sense legislation would finally restore fairness and accountability to our nation’s labor laws.”

Passage of the Protecting American Jobs Act would significantly alter the role of the NLRB and the adjudication of labor disputes.  Without significant Republican gains in the 2020 elections, however, the prospect of Senator Lee’s bill ever becoming law is remote.  While such a sea change is unlikely, the labor landscape continues to shift under the current Board.

As covered in previous blog posts, the NLRB is engaged in, or planning to initiate, rulemaking on a number of issues, including the standard for determining joint-employer status, whether students fall within the definition of “employee” under Section 2(3) of the NLRA, and election protection rules concerning the Board’s blocking charge policy, voluntary recognition bar, and Section 9(a) recognition in the construction industry.

At the same time, the Board continues to issue decisions concerning a number of important labor law issues. (See our previous posts: January 28, June 18, October 8, October 15).  In the last year alone, NLRB decisions have resulted in significant changes to the legality of work rules, employers’ ability to implement unilateral changes, union solicitation on employer property, and the status of independent contractors.  If anything can be predicted, it’s that change at the Board is nearly certain to continue through the 2020 elections.