Hunton Employment & Labor Perspectives

The last few weeks of a National Labor Relations Board Member’s term can be a busy time.  This is especially true when a Member’s imminent departure will leave the Board without any Members from the minority political party.  The Board historically has avoided major shifts in precedent without the participation of both parties.

Last month was no different.  As the clock wound down on Democrat Lauren McFerran’s term this December, the Board issued a flurry of significant rules and opinions that pare back many of the most anti-employer precedents set during the Obama-era.  Issuing these rulings prior to Member McFerran’s departure allowed the Board to include her dissenting views in most cases.  But ultimately, the Republican-majority prevailed–resulting in good news for employers going forward on multiple fronts.  We summarize the Board’s “December to Remember” below.

Relief for Employers on the Joint Employer Front

Perhaps no other area of Board precedent has been as closely watched in recent years as its joint employer precedent.  The Obama-Board initially stirred controversy in 2012 when union-allied groups filed unfair labor practice charges against McDonald’s alleging that several of its franchisees terminated and retaliated against employees during an organizing campaign.  The charging parties argued that McDonald’s exercised control over its franchisees and it should share liability as a joint employer.  The NLRB General Counsel negotiated a settlement with McDonald’s just days before arguments closed in one of the longest unfair labor practice trials in the Board’s history.  An administrative judge, however, rejected the proposed settlement as inadequate.   McDonald’s appealed the ALJ’s refusal to accept the parties’ settlement.

Additionally, in 2015, while the McDonald’s litigation was pending, the Board issued the highly controversial Browning-Ferris Industries decision, reversing decades of precedent and holding that companies can be joint employers based solely on reserved (but unexercised) or indirect control in relation to a third-party business.  The combination of this decision and the McDonald’s case caused significant concern in the regulated community. Subsequent attempts by the Trump-Board to overrule Browning Ferris were invalidated based on questionable ethics rulings by internal Board officials.

These events caused years of confusion and concern in the business community This month, however, the Board took steps to resolve this area of its precedent in a way that should benefit employers.   First, on December 12, the Board ordered an agency judge to approve the negotiated settlement in the McDonald’s case, ultimately excusing McDonald’s from any direct responsibility as a joint employer.

The Board is also expected to release its long-awaited proposed rule that would return the joint employer standard to that which existed prior to Browning Ferris—good news for employers looking to limit shared liability for collective bargaining and unfair labor practice violations.  To be deemed a joint employer under the proposed regulation, an employer must possess and exercise substantial direct and immediate control over the essential terms and conditions of employment in a manner that is not limited and routine.

Revised Election Regulations Benefit Employers

As we previously reported, on December 12, the NLRB also published a new final rule modifying its representation case procedures.

The final rule takes effect April 17, 2020, and scales back—but does not completely undo—changes to election regulations instituted by President Obama’s Board that have caused employers heartburn since 2015.  Those Obama-era changes effectively sped up the election process, putting employers at a disadvantage.

The most notable revisions provide employers a broader window during which to prepare for pre-election hearings, which are necessitated when parties do not agree on the voting unit and other issues.

Practically speaking, the Board’s latest revisions should provide employers with not only more time to make their case to the Board prior to a pre-election hearing, but also more time to communicate with workers about key issues prior to an election.  As employers may sometimes be unaware of growing support for unionization amongst their workforce until after the petition for an election is filed, such additional time can be invaluable to employers.

The Board’s election rule changes should help to level what had been an uneven playing field since the advent of the prior set of rules in 2015.

No Duty to Deduct Dues Once the Collective Bargaining Agreement Ends

 On December 16, the NLRB rolled back an Obama-era decision and reinstated an employer-friendly precedent regarding the operation of dues check-off provisions during renegotiation of a collective bargaining agreement.

In Valley Hospital Medical Center, Inc., the Board overruled Lincoln Lutheran of Racine, an Obama-era decision requiring employers to continue deducting dues from employee paychecks after the expiration of the collective bargaining agreement calling for such deductions.  Returning to the longstanding precedent set by Bethlehem Steel, the Board held that an employer’s statutory obligation to check off union dues ends upon expiration of the collective bargaining agreement containing the checkoff provision.

The Board found that there is no independent statutory obligation to check off and remit employee’s union dues after the expiration of the collective bargaining agreement even where the contract does not contain a union-security provision.

The majority reasoned that the rule of Bethlehem Steel represents a more appropriate view of an employer’s statutory dues check-off obligation because the obligation itself is rooted in the contract and therefore ceases when the contract does.  Additionally, it found that Lincoln Lutheran was an attempt to rebrand post expiration cessation of dues check-off as an unlawful unilateral change under Katz. NLRB v. Katz, 369 U.S. 736 (1962).  But, as a mandatory bargaining subject rooted in contract and enforceable under the NLRA only for the duration of the contract, dues checkoff is excepted from the Katz unilateral change doctrine.  Accordingly, the Board explicitly overruled Lincoln Lutheran and returned to the “longstanding, straight-forward, and correct standard established by Bethlehem Steel.”

This decision once again gives employers a powerful bargaining chip while renegotiating collective bargaining agreements—the ability to put financial pressure on unions by not collecting and remitting dues if the parties decide to allow the contract to expire during negotiations.

Employee Investigative Confidentiality Rules Are Lawful

The Board was busy December 16—issuing yet another win for employers, particularly those with investigative nondisclosure rules, in Apogee Retail LLC.

In Apogee, an employee challenged the legality of two employee rules related to confidentiality.  The first concerned reporting illegal or unethical behavior, stating that “[r]eporting persons and those who are interviewed are expected to maintain confidentiality regarding . . . investigations.”  The second rule provides that that refusal to cooperate in company investigations is grounds for disciplinary action.  Specifically, refusal to cooperate “includes, but is not limited to, unauthorized discussion of investigation or interview with other team members . . . .”

Overruling Banner Estrella Medical Center, an Obama-era decision demanding a case-by-case determination of whether confidentiality can be required in a specific investigation, the Board held that investigative confidentiality rules are lawful so long as they only apply for the duration of the investigation.  Citing EEOC guidance endorsing blanket rules requiring confidentiality during employer investigations, the majority found that Banner Estrella failed to consider the importance of confidentiality assurances to both employers and employees during an ongoing investigation.

Because the rules at issue in the case were not limited on their face to the duration of any investigation, the Board remanded for further consideration of whether Apogee’s business justifications for post-investigation confidentiality outweigh the effect on employees’ exercise of Section 7 rights.

Although the result in Apogee remains uncertain, the Board’s larger precedential ruling is a huge victory for employers.  Businesses with investigative confidentiality rules limited to the duration of a workplace investigation can now be relatively confident that such policies are lawful if enforced in a manner consistent with the Apogee Board’s guidance.

Employers Can Restrict Employee Use of Email for Protected Activity

In another important decision overturning Obama-era precedent, on December 16 the NLRB held that employees do not have a statutory right to use employer IT resources unless the employer’s email system furnishes the only reasonable means for employees to communicate with one another.

In Caesar’s Entertainment, employees complained that Ceasar’s policy restricting computer resource use to business purposes only violated their Section 7 rights.  The Board found these rules to be lawful.

In finding for the employer, the Board expressly overruled a controversial Obama-era decision, Purple Communications, Inc. which held that employees could use their employer’s email system for union business absent special circumstances making a ban necessary to maintain production or discipline.  In Caesar’s, the Trump-appointed majority held that employees don’t have the right to use employer equipment for Section 7 purposes.

After Caesar’s, employers can again restrict the use of company equipment, including IT systems like e-mail, without running afoul of the NLRA.

Employer Dress Code Policy Limiting Union Insignia Found Lawful

On Member McFerran’s last day, the Board issued yet another win for businesses—allowing employers to maintain policies restricting union paraphernalia at work.

In Wal-Mart Stores, Inc and the Organization United for Respect at Walmart (“Our Walmart”), Our Walmart challenged two dress code policies limiting the wearing of union insignia.  The content-neutral policies grant employees the right to wear “small, non-distracting logos or graphics” no larger than the size of employee name badges.  The challengers argued that these rules violated Section 8(a)(1) by infringing on employees Section 7 rights to wear union buttons and other insignia.

The Board found that such rules do not violate the National Labor Relations Act, insofar as they apply to areas of Walmart stores where its employees encounter customers in the course of performing their jobs.

Traditionally, the Board has evaluated the lawfulness of facially neutral work rules that prohibit the wearing of all union buttons and insignia by examining whether the employer has shown special circumstances for the prohibition.  But, because the dress code policies at issue do not prohibit, but merely restrict, the wearing of union insignia the Board reasoned that the infringement on Section 7 rights is less severe and an employer’s legitimate justifications for maintaining the restriction do not need to be as compelling.  Accordingly, the Board applied the analytical framework in Boeing, considering (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the policy.

Here, the Board found that Wal-Mart’s proffered business goals of enhancing the customer shopping experience and protecting merchandise from theft outweighed any potential harmful impacts on workers’ rights to organize.

This decision may signal the Board’s intention to use the less-protective Boeing analytical framework to evaluate all kinds of unfair labor practice cases – even those that currently require their own subject-matter specific analyses.

Board Restores Arbitral Deferral Standards

Finally, on December 23, after Member McFerran’s departure, the Board took the opportunity to reconsider the standard announced in Babcock & Wilcox Construction Co, Inc., a 2014 Obama-era decision, for deferring to arbitral decisions in discharge or discipline unfair labor practices cases.  Under the Babcock postarbitral deferral standard, the Board will not defer to an arbitral decision unless (i) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (ii) the arbitrator was presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (iii) Board law reasonably permits the award.  The burden rests with the party urging deferral.

In United Parcel Service, Inc., a joint grievance panel upheld the discharge of employee Robert Atkinson, Jr.  The central issue in the case before the NLRB was whether to defer to the arbitrators’ prior resolution of the grievance or reconsider the grievance on the merits.

Expressly overruling Babcock, the Board dismissed the employee’s complaint and deferred to the unanimous decision of the joint grievance panel.  Citing the longstanding arbitral deferral standards laid out in Spielberg Mfg. Co., and Olin Corp., the Board sought to continue safeguarding the exercise of Section 7 rights while better promoting the strong federal policy in favor of arbitrations as the parties’ agreed-upon mechanism for resolving employment disputes.

Under the restored standard, the Board will only defer to an arbitral decision where (i) the arbitral proceedings appear to have been fair and regular, (ii) all parties have agreed to be bound, (iii) the arbitrator considered the unfair labor practice issue, and (iv) the arbitrator’s decision is not clearly repugnant to the Act.  This standard makes it easier for employers to save time and money by avoiding NLRB cases when the underlying claims have already been arbitrated.