In Latest Pro-Labor Rulings, NLRB Sharply Curtails Management’s Ability to Change Union Workers' Employment Terms

Fox Rothschild LLP

Fox Rothschild LLP

In a pair of decisions issued on Aug. 30, 2023, the National Labor Relations Board (NLRB) established new, restrictive standards for evaluating when a unionized employer may avoid bargaining over changes to employees’ terms and conditions of employment based upon “past practice.” As explained below, the Board’s decisions in these cases dismantle yet another employer-friendly legal standard established by the Trump NLRB and reflect the current Board’s priority of requiring employers to bargain in an expanding set of circumstances, purportedly to effectuate national labor policy and avoid “industrial strife.”

Wendt Corporation, 372 NLRB No. 132

In Wendt Corporation, the Board ruled that an employer negotiating a first contract with a newly certified union could not rely upon its past practice of laying off employees during business downturns to avoid bargaining with the union over temporary layoffs the employer implemented in February 2018. The case first went to the NLRB in 2020. Initially, the Board ruled that the employer had failed to meet its burden under Raytheon Network Centric Systems to show that it had a longstanding regular and consistent past practice of layoffs that were similar in kind and degree to the layoffs implemented in February 2018. On review, the D.C. Circuit Court of Appeals found that the Board had failed to account for certain layoffs previously implemented by Wendt Corp. that could affect the analysis.

On remand, the Board held that even accounting for these other layoffs, the employer still had not carried its burden under Raytheon. Not content to stop there, the Board went further and announced that an employer can avoid bargaining over a change to employees’ terms of employment based on past practice only if it can establish that past practice is sufficiently and well-established, and, further that the proposed change does not entail the exercise of significant managerial discretion. To qualify as “longstanding,” the past practice must occur with such regularity, frequency and consistency that employees reasonably could expect the practice to continue or reoccur on a regular and consistent basis. The Board stated that determining whether a practice has been “regular and consistent” requires a numerical analysis and further that the “paradigmatic showing of regularity and frequency sufficient to establish the past-practice defense is an annually recurring event over a significant period of years.” Under this new standard, the Board found that Wendt Corp. was not privileged to refuse to bargain with the union over the February 2018 layoffs, both because it did not have a regular and consistent practice of implementing layoffs, and further that its decision was informed by a large degree of discretion.

At the invitation of the NLRB’s General Counsel, the Board went even further and announced that an employer bargaining for a first contract can never rely upon past practice developed prior to the time it was statutorily obligated to bargain with the union. In so doing, the Board pronounced that permitting a newly organized employer to continue to act unilaterally following a union’s certification is antithetical to the policies of the Act, which aims to “encourage the practice and procedure of collective bargaining.”

Tecnocap LLC, 372 NLRB No. 136

Hot on the heels of Wendt Corp., the Board held in Tecnocap that an employer cannot rely on past practices developed and implemented pursuant to a contractual “management’s right” clause to avoid bargaining over changes to employees’ terms and conditions of employment during a hiatus between contracts. Issued on the same day as Wendt Corp., Tecnocap erects yet another barrier to employers seeking to make changes to employment terms for unionized employees without bargaining with the employee’s union.

In Tecnocap, the employer had been party to a series of collective bargaining agreements (CBAs) with a union representing the employer’s production, maintenance and warehouse employees. From March 21, 2018 through September 30, 2019, the CBA included language that established three eight-hour shifts as the standard workweek for unionized employees but also permitted the employer to change employees’ schedules from time to time upon request, with reasonable notification. During the 2018 CBA, the employer periodically implemented longer shifts for employees. Following the expiration of the 2018 CBA, the employer continued to make changes to shift schedules, including implementing two 12-hour shifts for several weeks, followed by a period of three 10-hour shifts and thereafter two 11-hour shifts. According to the Board’s decision, the employer did not engage in bargaining with the union over these changes, claiming that it had “an established right under the expired agreement and past practice to change schedules.”

The union filed charges alleging that the employer’s refusal to bargain over the shift changes was unlawful. Applying the Raytheon framework for evaluating the employer’s past practice defense, an Administrative Law Judge dismissed the union’s charges, reasoning that the shift changes at issue were similar in “kind and degree” to changes the employer had made previously.

The NLRB’s General Counsel filed exceptions to the ALJ’s decision. In deciding the case, the Board did not apply the Raytheon framework, which it had just repudiated in Wendt Corp. Instead, the Board evaluated the case under Wendt Corp. and found that because the employer’s decision to change shift times was informed by a large measure of discretion, the employer could not establish its past practice defense. Specifically, the Board stated: “the past practice defense is limited . . . to situations where the employer’s unilateral change is fixed by an established formula based on nondiscretionary standards and guidelines.” The Board found that the employer had failed to establish any such nondiscretionary standards and guidelines. The Board also found that the employer had failed to establish a regular and consistent past practice of implementing 12-hour and 11-hour work shifts.

Finally, the Board announced that an employer cannot rely on any “past practice” developed and implemented pursuant to a management’s right clause to establish a defense to bargaining after the expiration of the CBA. In this regard, the Board stated that a contractual management’s rights clause is properly understood as a union’s voluntary waiver of its right to bargain over those managerial actions within the ambit of the clause only for the duration of the CBA. In so doing, the Board overruled yet another Trump-era decision that held an employer could rely upon such practices.

Takeaways from Wendt Corp. and Tecnocap

In both Wendt Corp. and Tecnocap, the Board chose to apply its decision retroactively to those and all pending cases. In doing so, the Board gave short shrift to the employers’ arguments that they justifiably relied upon the Board’s prior decision in Raytheon in making the unilateral changes the Board deemed unlawful. In Tecnocap, the Board flatly stated that “any reliance by parties on Raytheon is far outweighed by the mischief of continuing to allow unilateral discretionary changes based on a past practice developed under an expired management rights’ clause . . . [which is] detrimental to collective bargaining.” Accordingly, any employer that already has made unilateral changes based on Raytheon may find that such changes will be evaluated under a much more stringent standard and potentially face liability for such actions.

Moreover, with these decisions, the Board continues to wipe away Trump-era Board decisions that provided employers with a more favorable legal framework. Unfortunately for employers, several other cases that have the potential to swing the pendulum even further in the direction of organized labor are still pending before the Board, and employers should not harbor any illusions about how they may be decided.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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