On October 19, 2023, Faegre Drinker Partner Ryan Funk gave remarks at the 28th Annual Bernard Gottfried Labor Law Symposium, which was sponsored by the National Labor Relations Board, the Wayne State Law School, and the State Bar of Michigan. In his remarks, Funk critiqued three recent changes to the National Labor Relations Board’s remedial scheme.
Thryv, Inc.
Discussing Thryv, Inc., Funk voiced his concern that the labor law community was growing out of touch with workers, employers, and the public, and changing remedies in ways that hurt the overall mission of the agency.
He began by recalling Section 10(c) of the National Labor Relations Act:
The Board shall state its findings of fact and shall issue and cause to be served on such person an order requiring such person to cease and desist from such unfair labor practice, and to take such affirmative action including reinstatement of employees with or without backpay, as will effectuate the policies of this Act.
Funk pointed out that the trend over time has involved remedies becoming more complex. Make-whole remedies now include not just backpay, but benefits such as medical insurance and retirement benefits; holiday and vacation pay; tips; other forms of compensation; search for work expenses; compensation for excess taxes owed, and the accompanying report of backpay allocation to the Social Security Administration; other expenses; and interest on each of these. He noted that the NLRB’s compliance manual has grown to 382 pages.
Funk argued that Thryv makes NLRB remedies even more complicated by introducing the concept of indirect but foreseeable damages, which can remedy real losses for workers, but creates the following problems:
- Its complexity has inherent downsides;
- It creates a problem of diminishing returns; and
- It ultimately does not effectuate the purposes of the NLRA.
Discussing complexity, Funk began by acknowledging the reality of scarcity. He read from a Bloomberg Law article in which NLRB Chairman Lauren McFerran called last year’s nine percent increase to the NLRB budget a “down payment on rebuilding the agency” that protected against “worst case scenarios.” McFerran noted that potentially the most important use of that cash influx was supplementing the NLRB’s ranks of administrative law judges, saying, “I’m hearing a lot of feedback that people are having trouble scheduling hearings in a timely manner, and our judges have been at capacity right now,” she said, adding that the NLRB has a “failing electronic case management system that we’ve been patching together with Band-Aids.” Funk pointed out that in Fiscal Year 2023, Unfair Labor Practice charge filings are up another 10 percent, and union petitions are up another three percent.
Adding complexity to the remedies area creates more work for not just the agency, but also parties and the courts, Funk argued, noting that the agency has generated a large volume of Supreme Court cases over its lifetime.
Funk argued that practitioners on both sides play an important role in effectuating the purposes of the NLRA, because they counsel parties on labor law on the ground and in the moment, and that increased complexity hinders practitioners’ ability to explain the workings of the labor law system to non-lawyers and employees. He pointed out that the agency also wants the public to understand the law, which is why it previously explored rulemaking that would require employers to post a notice of rights to employees. Funk argued that complexity makes this task harder and hurts the reputation of the agency because it creates delay and adds to the agency’s appearance of bureaucracy, even in the eyes of the discriminatee employees it seeks to make whole. By the time an employee receives a remedy, they have typically been passed from the agency’s investigators to its litigators to a compliance officer, and because of Thryv, their last interaction with the agency will often involve being asked very personal questions about their finances, years after the event that brought them to the agency in the first place.
Discussing diminishing returns, Funk recalled times during his career as an NLRB agent when he could have been investigating open cases but instead had to perform tiny interest calculations that rounded to $1, particularly in the area of interest on excess tax calculations.
Funk concluded his general critique of Thryv remedies by arguing that they do not ultimately effectuate the purposes of the NLRA, as required by Section 10(c). He agreed with the Thryv minority’s description of those purposes:
The national labor policy established by Congress is to safeguard commerce from disruption by “protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection.”
Funk argued that under the NLRA, remedies are a means (making employees whole) to a means (freedom of association) to an end (protecting commerce). He argued that absolute precision in finding the very last dollar of damages has no impact on commerce, and that it also has no impact on freedom of association because a reasonable employee is not going to be less likely to engage in union activity in the future because at the end of a four-year legal saga they were compensated only for direct, rather than indirect harms. On the contrary, employees are less likely to engage in union activity if a four-year legal saga becomes six years due to added complexity in the compliance process, he argued.
Funk concluded by raising concerns about the mechanics of applying the Thryv standard. The majority in the case said that “evidence of pecuniary harm . . . should establish specific, defined costs which would not have been incurred but for the respondent’s unlawful conduct or were the foreseeable consequence of that conduct—and explain how those costs are due to the unfair labor practice.” But the majority immediately noted that “[u]ncertainties or ambiguities in the evidence” may be “resolved against the respondent whose unlawful actions created the dispute.” Funk identified an internal tension in those statements. If evidence can be uncertain and ambiguous rather than specific and defined, it would effectively put the burden on the respondent, usually the employer, to prove the agency’s case against it. Then, after the agency’s case is complete, “the burden is upon the employer to establish facts which would negative the existence of liability to a given employee or which would mitigate that liability.’” Funk noted that all of this requires a high volume of discovery, which will expend great agency and party resources for diminishing returns that ultimately do not effectuate the purposes of the NLRA.
Noah’s Ark
Discussing Noah’s Ark, Funk noted that labor law remedies should not be punitive, as the Thryv majority seemed to acknowledge when it wrote:
[I]f we were to issue this make-whole relief only to address the most deplorable or flagrant violations of the Act, these remedies run the risk of becoming punitive rather than restorative. Consolidated Edison Co. of New York v. NLRB, 305 U.S. 197, 235–236 (1938) (“[The Board’s] authority to order affirmative action does not go so far as to confer a punitive jurisdiction enabling the Board to inflict upon the employer any penalty it may choose because he is engaged in unfair labor practices, even though the Board be of the opinion that the policies of the Act might be effectuated by such an order.”)
. . .
The underlying policy of Section 10(c) . . . is “a restoration of the situation, as nearly as possible, to that which would have obtained but for the illegal discrimination.”
Funk agreed that recidivism can justify enhanced remedies, but only to the extent that the recidivism itself creates more harm to remedy. He again quoted the Noah’s Ark majority for this principle:
Where a proclivity to violate the Act has been established or where widespread or egregious misconduct demonstrates a general disregard for employees’ Section 7 rights . . . employees . . . reasonably believe that the respondent does not respect their rights. In such circumstances, employees will reasonably fear that the respondent will continue to disregard the Act; consequently, to ensure that they are not chilled from exercising their rights under the Act, employees will need extra information about those rights and credible assurances that the respondent is bound by the Act and not free to violate employees’ rights.
Enhanced remedies can be restorative rather than punitive if seen through employees’ eyes, Funk said. But he criticized the Noah’s Ark majority as opening the door to punitive remedies when it zoomed back out to describe these remedies as simply intended to “encourage compliance with the Act.” And he argued that the majority in fact entered that punitive door with some of the remedies it outlined. The “tell” for Funk, he said, is when the Board starts trading logic for flowery statements. When discussing a “publication remedy,” which requires a respondent to publish the notice and any explanation-of-rights document in “local publications of broad circulation and local appeal” (both print and electronic versions), the Board’s main argument was:
Where the violations are flagrant and repeated, the publication order has the salutary effect of neutralizing the frustrating effects of persistent illegal activity by letting in a warming wind of information and, more important, reassurance. NLRB v. Union Nacional de Trabajadores, 540 F.2d 1, 12 (1st Cir. 1976) (internal quotations omitted), cert. denied, 429 U.S. 1039.
Funk described the Board’s only concrete rationale for the publication remedy as a pretextual afterthought. The Board argued: “where there may be many employees affected by any number of unfair labor practices over a potentially lengthy period of time by an employer with a proclivity to violate the Act . . . a respondent may not have current mailing information for former employees who will not see a posted notice.” But Funk argued that this would matter only to employees who no longer work at the employer, who are not going to be chilled by further violations by that recidivist employer; and that including an additional explanation of rights in the publication makes even less sense than publishing the traditional notice to employees. Funk concluded that this remedy is designed instead to be punitive by embarrassing an employer in public.
Funk similarly faulted the agency’s attempts to compel the speech of individual managers. He pointed out that organizations violate the NLRA, not individuals, and argued that requiring particular individuals to speak a particular message is designed to embarrass them. Quoting the flowery language Noah’s Ark used, Funk described the “warming wind” as coming from the heat of the supervisor’s face as they read the notice. Further, he raised First Amendment concerns with the state requiring an individual to stand up and speak a particular message, or be in the presence of a particular message, noting that even in criminal proceedings a defendant can “plead the fifth.” He described requiring someone to sign a particular statement, in this case a notice to employees, as another form of forced speech.
Funk concluded that this kind of public shaming hurts the reputation of the agency by making it appear vindictive and partisan, which is ultimately not good for its stakeholders.
Cemex
Discussing Cemex, Funk distinguished between its two pillars, the first of which he argued is not truly remedial, but instead creates a substantive violation.
Focusing on the second pillar, Funk argued that it is remedial and in conflict with the Supreme Court decision Gissel, which the Cemex majority itself described as holding that.
[T]he Board should issue a bargaining order if it concluded (1) that a future reliable election could not be held because of an employer’s “outrageous” and “pervasive” conduct whose impact could not be eliminated by the Board’s traditional remedies; or (2) that the possibility of conducting a future reliable election was slight because of the continuing impact of an employer’s “less pervasive” misconduct; but that a third category (3) of “minor or less extensive unfair labor practices,” would not sustain a bargaining order because they would not prevent the Board’s traditional remedies from assuring a free and fair election at some undefined future date.
Funk noted that the most-discussed impact of Cemex is its effect on elections. He recalled that when he was finishing his undergraduate studies, the agency recruited him for a field examiner job with materials that touted “democracy in the workplace,” a catchphrase of the agency for decades. He argued that democracies use elections to choose representatives. He acknowledged that labor law has had exceptions to this rule, including those in Gissel, but he argued that elections were the preferred method for determining whether employees wanted a union to represent them, until Cemex.
