Executive Summary: The Sixth Circuit Court of Appeals has affirmed the decision of the National Labor Relations Board (NLRB) in Specialty Healthcare, which requires employers to prove employees share an "overwhelming community of interest" to successfully challenge the composition of a bargaining unit. The court held that: (1) the Board may depart from its own precedent if it explains its decision and the departure is not arbitrary and capricious; (2) the Board's clarification and use of its "overwhelming community-of-interest" standard was clearly explained and therefore not an abuse of its discretion: (3) the Board did not violate the National Labor Relations Act (the Act) because it based its decision on factors beyond the extent of the union's organization efforts; and (4) the Board did not abuse its discretion by choosing to follow an already existing principle through adjudication instead of rulemaking. See Kindred Nursing Centers East v. NLRB (Aug. 15, 2013).
Background: In Specialty Healthcare, the Board upheld the Regional Director's bargaining unit determination. In doing so, the Board: (1) overruled Park Manor Care Center, (2) returned to applying the "traditional community-of-interest approach" to nursing homes, and (3) "reiterated and clarified" that a challenger must show excluded employees share an "overwhelming community of interest" with included employees to successfully challenge the makeup of a bargaining unit.
The Sixth Circuit's Decision
Court Deference to Board Decisions
In upholding the Board's decision in Specialty Healthcare, the Sixth Circuit explained that courts must uphold the Board's bargaining unit determinations unless a decision is shown to be arbitrary, unreasonable, or an abuse of discretion. The court also noted that the Board is allowed wide discretion in determining the makeup of an appropriate bargaining unit, and in such matters this discretion borders on finality. If the Board's actions are reasonably defensible and clearly explained, the Board decision must be upheld. Further, courts give considerable deference to an agency's interpretation of its own precedents, and review is limited to whether the stated rationale is rationally justified or so unreasonable as to be arbitrary and capricious.
Appropriate Bargaining Units
The court then rejected the employer's argument that the Board adopted a new approach in Specialty Healthcare and did not return to the traditional community-of-interest approach. The court noted that while the Board must select an appropriate bargaining unit among what is often a range of appropriate bargaining units, it is not required to select the most appropriate unit. While the Act does not set out how the Board is to exercise this authority, it has traditionally applied the "community-of-interest" test, which considers: (1) similarity in skills, interests, duties and working conditions; (2) functional integration of the plant including interchange among the employees; (3) the employer's organization and supervisory structure; (4) the bargaining history; and (5) the extent of union organization among the employees.
The court found that the Board cogently explained why it adopted the approach it did in Specialty Healthcare. The Board claimed that it must make unit determinations that assure employees their rights of self-organization and collective bargaining, and that litigation over the composition of bargaining units hinders these rights. The court held that the Board's use of the "community-of-interest" test was not unprecedented, that the Board was free to adopt one of its own precedents over another, and that it did not abuse its discretion because the reason for using the "community-of-interest" test was clearly explained.
The court further held that if the Board had based its decision solely upon the 5th "community-of-interest" factor (the extent of union organization among the employees), it would have violated the Act because an employer could never successfully challenge a bargaining unit. However, the court found no such violation here because the Board considered all five of the factors.
Overwhelming Community-of-Interest Test When Challenging a Bargaining Unit
The court also rejected the employer's argument that the Board's "overwhelming community-of-interest" test was an abuse of discretion because it burdened employers with a heightened standard of proof when challenging the composition of bargaining units. The court held that the Board did not abuse its discretion in adopting the overwhelming community-of-interest standard because that standard is based on some of the Board's prior precedents, has been approved by the D.C. Circuit, and the Board cogently explained its reasons for adopting the standard.
The court noted that the Board applied the standard that the D.C. Circuit approved in Blue Man Vegas, LLC v. N.L.R.B. In Blue Man, the court held that an employer claiming that a unit should include more employees cannot merely show that there is another appropriate unit, because "more than one appropriate bargaining unit logically can be defined in any particular factual setting." The court held that if excluded employees share an overwhelming community of interest with included employees, there is no legitimate reason to exclude them from the bargaining unit. The Sixth Circuit held that the Board was entitled to overrule some of its precedents and follow the precedent approved by the court in Blue Man, as long as it explained why.
The Sixth Circuit then held that the Board had cogently explained why it was adopting the overwhelming community-of-interest standard. According to the Board, it needed to clarify its law because it had sometimes used different words to describe the standard and sometimes decided cases such as these without articulating a clear standard. The Sixth Circuit held that it was not an abuse of discretion "for the Board to take an earlier precedent that applied a certain test and to clarify that the Board will adhere to this test going forward." The court also noted that the Board had explained that placing the burden of proof on the employer in these cases is appropriate because employers are in full and often near-exclusive possession of all relevant evidence.
No Abuse of Discretion in Adopting the Overwhelming Community-of-Interest Standard through Adjudication Instead of Rulemaking
Finally, the court held that the Board did not abuse its discretion in adopting the overwhelming community-of-interest standard through adjudication instead of rulemaking in light of U.S. Supreme Court precedent permitting the Board to announce new principles in an adjudicative proceeding and granting the Board discretion to choose between rulemaking and adjudication. The Sixth Circuit held that if the Board can announce a new principle in adjudication, it can choose to follow one of its already existing principles.
Employers' Bottom Line: Employers should be wary of creating too much compartmentalization or division within employee ranks, as unions will use this to their advantage during organizational efforts. In general, a consistency in the terms and conditions of employment across departmental lines is recommended. If an employer can show: (1) similar working conditions for employees across departments; (2) the cross-training of employees to work in different departments; and (3) employees in various departments reporting to the same supervisors, the employer can make a strong argument that there is an overwhelming community of interest among those employees, which should help avoid problems with "micro-units."