NLRB Issues Several Significant Decisions For Employers

Nelson Mullins Riley & Scarborough LLP

Nelson Mullins Riley & Scarborough LLP

The NLRB issued a number of recent decisions helpful for employers – both non-union and unionized – related to the (1) enforceability of class/collective action waivers and arbitration agreements, (2) application of the National Labor Relations Act (“NLRA” or “Act”) to employee misclassification as independent contractors, (3) limitations on union organizing in “micro units” and (4) broadening unionized employers’ ability to make unilateral changes.

Class/Collective Action Waivers and Arbitration Agreements Gain Support

Until the United States Supreme Court decided Epic Systems Corp. v. Lewis, 584 U.S. ___, 138 S.Ct. 1612 (2018), in which the Court held that arbitration agreements and class/collective action waivers were lawful under the Federal Arbitration Act, the NLRB declared such arbitration agreements and class/collective action waivers a violation of the NLRA and, thus, unenforceable.

However, in Cordúa Restaurants, Inc., Cases 16– CA–160901, 16–CA–161380, 16–CA–170940, and 16–CA–173451 (Aug. 14, 2019), the Board considered two primary issues under the NLRA: (1) whether an employer can require such an arbitration agreement in response to employees opting in to a collective action; and (2) whether an employer can threaten termination when an employee refuses to sign a mandatory arbitration agreement. The Board concluded that both actions by an employer did not violate the Act. Yet, the Board reiterated long-standing principles that an employer is prohibited under the NLRA from threatening an employee for engaging in protected, concerted activity under Section 7 of the NLRA (“Section 7 rights”), which includes filing a class or collective action to oppose a violation of law that protects an employee’s wage, hours or other terms of employment. 

Significantly, in Cordúa, after several employees brought a collective action wage lawsuit against a non-union employer that required its employees to sign arbitration agreements, the employer issued a revised, mandatory arbitration agreement under which employees waived their rights to opt in to class/collective actions. The Board held that even an arbitration agreement introduced in response to employees engaging in Section 7 rights is not unlawful because the underlying arbitration agreement was lawful. The Board also clarified that its holding did not validate an unlawful restriction on Section 7 rights, such as a rule that interfered with lawful employee solicitation. Here, an employer telling an employee that he would be removed from a workshift for not signing the arbitration agreement did not violate the Act because the employer had a lawful right to impose the agreement. The Board made additional findings and conclusions in other non-precedent-setting parts of the decision.

This decision reinforces an employer’s ability to use arbitration agreements and class/collective action waivers, and even to introduce such agreements during collective and class actions to minimize litigation. Nevertheless, the decision should not be interpreted as a blanket opportunity to discipline employees or discourage employees from bringing or opting in to class and collective actions.

It is noteworthy that certain enforcement proceedings at the District of Columbia, Circuit Court are ongoing.

Contractor Misclassification under State or Federal Law Not Automatic NLRA Violation

In a prior, obscure pronouncement by the former NLRB General Counsel, an employer violated the NLRA when it misclassified an employee as an independent contractor. Recently, in Velox Express, Inc., 15-CA-184006, 368 NLRB No. 61 (Aug. 29, 2019), the Board held that although the employer in the case violated the Act by discharging individuals who the Board found to be employees – and not independent contractors as the employer classified them – in response to their exercising Section 7 rights, the mere fact that the employer misclassified the individuals is not, alone, a violation of the Act. The Board rejected the argument that misclassifying an employee as an independent contractor deprived the employee of Section 7 rights and impliedly coerced them, which in and of itself violates the Act. Instead, the NLRB reasoned that when an employer classifies an employee, it forms a legal opinion about the worker’s status. Under Section 8 of the NLRA an employer is free to express its opinion. Moreover, an employer’s classification of an employee is not a threat of reprisal or coercion that interferes with union activity in violation of the Act. Finally, the Board noted that it is possible for an employer to make a mistake when forming a legal opinion.  For all of these reasons, a misclassification is not a per se violation of the NLRA.

It is possible that the NLRA principles espoused by the former General Counsel minimally affected employers’ decisions about the independent contractor classification – particularly given that non-union employers often are less familiar with NLRB law. Yet, the Velox decision gives employers less concern about collateral legal action regarding its classification of independent contractors.

Micro-Units Organizing Strategy Hindered by NLRB

The Labor Board found that a smaller petitioned-for unit, also known as a “micro unit,” within a larger production and maintenance line at a Boeing assembly plant, in a union certification proceeding, was not an appropriate unit to certify for an NLRB election. In Boeing Co., Case 10-RC-215878 (Sept. 9, 2019), the Board reversed and dismissed a union certification petition, holding that the two units in the petition were inappropriate because they did not share a community of interest with each other, and even if they had, they did not share a community of interest sufficiently distinct from the community of interest with the larger production and maintenance unit excluded from the petition.

At Boeing’s 787 aircraft assembly line in Charleston, South Carolina comprised of approximately 2700 maintenance and production employees, planes are assembled in multiple buildings during the process. A smaller group of technicians and inspectors (who were the subject of the union’s petition) review the assembly final production for safety. The technicians are considered to be part of a larger production department, and the inspectors are considered to be part of a larger quality department. Although the employees in the smaller technician and inspection groups share common supervision with the excluded, larger groups, the smaller group of employees are not interchangeable with the larger groups. Overall, the groups participated in the same benefits and shared other commonality in terms and conditions of employment, yet the smaller groups typically earned higher wages.

The Board -- citing a more recent NLRB decision (PCC Structurals, Inc., 365 NLRB No. 160 (2017)) -- confirmed its return to “traditional community of interest principles” to determine appropriate bargaining units involving a union’s claim to represent a subset of employees within a larger group. The Board went on to create a new analysis for the community of interest test: “First, the proposed unit must share an internal community of interest. Second, the interests of those within the proposed unit and the shared and distinct interests of those excluded from that unit must be comparatively analyzed and weighed. Third, consideration must be given to the Board’s decisions on appropriate units in the particular industry involved.” Applying this analysis, the Board determined that the smaller group of technicians’ and inspectors’ interests were too disparate from each other to form a community of interest because they performed different jobs, did not interchange and had separate supervisors. Moreover, the smaller group of combined technicians and inspectors did not share a distinct community of interest from the larger unit of maintenance and production employees based on their functional integration, job duties, and terms and conditions of employment. 

Significantly, the result and the Board’s analysis in Boeing Co. re-affirm the Board’s abandoning the micro unit principles it espoused in Specialty Healthcare, 357 NLRB No. 83 (2011), in which it determined that it need not consider whether shared interests among employees in petitioned-for units are sufficiently distinct from excluded units to find the smaller unit is appropriate. Rather in Specialty Healthcare, the Board created a new standard, holding that if the petitioned-for unit shared a community of interest, the unit is appropriate, despite employees in the petitioned-for unit also sharing a community of interest with a larger group of employees who were not included in the requested unit.  

The opportunity for unions to establish micro units has expanded organized labor’s ability to represent smaller factions of employees within a much larger organization whose employees were functionally integrated. The Specialty Healthcare standard, infamous for leading to micro units, is now put to rest. It remains be seen whether the proliferation of micro units will continue under the new Board standard.  

More Leeway for Employers to Make Unilateral Changes for Unionized Workers

In general, the ability of an employer to make changes to terms and conditions of employment for workers represented by a union stems from either the relevant collective bargaining agreement, past practice, or from both. The historical analysis for an employer under NLRB law to make unilateral changes to terms covered by a collective bargaining agreement has been whether there exists a “clear and unmistakable waiver” by the union of its opportunity to negotiate over the terms of the intended change. In MV Transportation, Inc., 28-CA-173726 (Sept. 10, 2019), the Board replaced the “clear and unmistakable standard” with the new “contract coverage” standard, thereby relaxing it for employers to make unilateral changes.

In looking toward court caselaw, in particular the D.C. Court of Appeals, and ordinary contract interpretation principles, the Board held that if the matter is encompassed by or within the scope of the relevant contract provision, the employer is within its right to make the intended change. The Board gave as an example, that if the contract provides for the right to introduce new rules or procedures, it would be lawful to implement a new safety rule or re-visit disciplinary or off-duty access policies. In contrast, if the contract provision does not cover the intended act, but rather it veers materially, substantially or significantly from existing terms and conditions of employment, it violates Sections 8(a)(5) and (1) (which first requires employers to bargain to make changes to terms and conditions of represented employees) unless the union clearly and mistakably waived its right to bargain over the change. Consequently, now when deciding this type of scenario, the Board first considers whether under ordinary contract principles the employer has the right to act unilaterally, and only if it does not, the Board applies the “waiver analysis” above.          

In reviewing the operations and safety policies, leave policy and expense reimbursement policy at issue in MV Transportation, the Board concluded the employer did not violate Sections 8(a)(5) and (1) because the management rights provision and other work rules provision of the collective bargaining agreement encompassed the changes.

This decision has the effect of enabling employer changes during the term of a contract provided the changes fall within the scope of the contract. It also potentially limits the legal backlash against employers at the NLRB level to make such changes. However, it is possible that instead of those challenges by unions taking place at the NLRB, they may default to arbitration which requires arbitrators to decide based on federal labor law – typically more favorable to employers than NLRB law.

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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