Most collective bargaining agreements contain “management rights” provisions that many employers, unsurprisingly, believe grant them the right to manage their businesses without union interference. The National Labor Relations Board (“NLRB” or “Board”), however, has taken an increasingly dim view of such provisions. The NLRB has long held that any waiver of a union’s right to bargain over management issues must be stated in “clear and unmistakable” language, and, in recent years, has interpreted this to require detailed and specific references to all particular issues that may arise. This approach threatens to render most management rights provisions a dead letter. The NLRB has persisted in this interpretation despite repeated reversals from the federal appeals courts, essentially forcing employers to give in or to fight the issue for years.

In a positive development for employers, however, the U.S. Court of Appeals for the District of Columbia Circuit recently called the NLRB to task for this position, calling it a “roguish form of nonacquiesence,” and ordered the NLRB to pay the employer the costs it incurred on appeal. Heartland Plymouth Court MI v. NLRB, No. 15-1034, 2016 U.S. App. LEXIS 17688 (D.C. Cir. Sept. 30, 2016). While this decision is unlikely to convince the NLRB that its substantive position is incorrect, it may curb the Board’s more abusive applications of that position. In the meantime, unionized employers should take proactive steps to reduce the risk that they will be caught up in this escalating war between the NLRB and the D.C. Circuit.

The disagreement between the Board and the D.C. Circuit goes back more than two decades, and relates to an employer’s duty to bargain with a union. Under the National Labor Relations Act, once a labor organization is certified as the representative of a group of employees, the employer has a duty to bargain in good faith with that labor organization over wages, hours, and other terms and conditions of employment. This duty encompasses many management issues that impact employees. Most unions and employers fulfill this obligation by entering into a collective bargaining agreement that lasts for several years. While the duty to bargain continues during the life of the collective bargaining agreement, the parties generally rely on the terms of the agreement to govern the bargaining relationship. For example, if the collective bargaining agreement provides for specific wage scales for the life of the agreement, then the employer is not obligated to bargain over wage adjustments in the middle of the term because the agreement already addresses that issue.

A management rights provision is an agreement by the union that certain issues are reserved to management; it is essentially a waiver by the union of the right to bargain over certain issues during the life of the collective bargaining agreement. As noted above, the NLRB asserts that any waiver must be expressed in “clear and unmistakable” language. Several federal appeals courts, however, have disagreed with the NLRB, requiring only that a topic be “covered” by the collective bargaining agreement to relieve the employer of the obligation to bargain on that subject during the life of the agreement.

This dispute between the Board’s “clear and unmistakable” standard and the courts’ “contract coverage” test has percolated for years without resolution. In the past several years, however, the NLRB has further refined its standard, interpreting “clear and unmistakable” to require a highly specific reference to the particular situation that arises. For example, in June of this year, the Board considered a management rights clause that gave the employer:

The sole and exclusive rights to manage, to direct its employees; . . . to evaluate performance, … to discipline and discharge for just cause, to adopt and enforce rules and regulations and policies and procedures; [and] to set and establish standards of performance for employees.

The NLRB ruled that this broad language did not allow the employer to implement changes to its work rules and absenteeism policy because it did not mention “absenteeism” specifically, nor, despite specifically mentioning “rules,” did it specify “work rules.” The Board held that before the employer implemented any such changes, the employer needed to negotiate with the union and could not implement any changes until it reached either agreement or impasse. Graymont PA, 346 NLRB No. 37 (June 29, 2016). This almost unattainable application of the “clear and unmistakable” standard has surfaced in prior and subsequent cases, notwithstanding federal appellate court decisions rejecting it.

This is illustrated by the recent Heartland Plymouth case in which the D.C. Circuit sanctioned the NLRB. That case arose out of a layoff at a nursing facility in 2011. The at-issue collective bargaining agreement specifically allowed the employer to reduce hours or staff. The NLRB held that the employer nonetheless needed to bargain over the effect of a staff reduction before implementing it because the agreement did not contain a “clear and unmistakable waiver” of the obligation to do so. Adhering to its prior rulings rejecting the Board’s position, the D.C. Circuit refused to enforce the NLRB’s decision in May 2016, and the successful employer made an application for sanctions.

In its decision awarding sanctions, the D.C. Circuit took the NLRB to task for dragging the employer through a long, drawn-out process that the Board knew it would lose given preexisting binding precedent in the court in which the appeal would be heard. In addition to chastising the Board for effectively telling employers, “We don’t care what the law says, if you want to beat us, you will have to fight us,” the D.C. Circuit also chided the NLRB for not seeking to resolve the difference of opinion by elevating the issue to the U.S. Supreme Court, noting that the Board had actively opposed having the issue heard by the high court. In the end, the court ordered the Board to reimburse the attorneys’ fees that the employer unnecessarily expended on appealing the decision.

This issue is unlikely to go away. While the D.C. Circuit decision provides hope for employers expecting to exercise the management rights for which they negotiated, it certainly does not settle the issue. There will ultimately be a test case that goes to the Supreme Court, and most employers would prefer not to be involved in such a case. One way to avoid this is to renegotiate the management rights clause at the next formal collective bargaining process by insisting on the “clear and unmistakable” language that the NLRB demands. Another option is to expand the scope of any arbitration provision to clearly encompass this type of dispute. Of course, there are a host of issues to raise in connection with collective bargaining negotiations, some of them of more immediate concern than the phrasing of the management rights clause or the contract’s arbitration provision. Gaining clarity on such provisions, however, can assist the overall bargaining relationship and provide for far smoother ongoing operations.