PRO Act Would Upend U.S. Labor Laws for Non-Union and Unionized Employers Alike

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On February 4, 2021, House and Senate Democrats introduced the Protecting the Right to Organize (PRO) Act.  Introduction was expected, as President Biden pledged to be “the strongest labor president you have ever had” during his candidacy, and the PRO Act was a cornerstone of his election platform. As discussed in Littler’s WPI Election Report and on the eve of President Biden’s inauguration, the PRO Act would have significant implications for all private sector employers in the United States.  This sweeping legislation, which initially passed the House in February 2020, extends well beyond union organizing.  Non-union and unionized employers alike should understand the scope of its proposed changes, and the practical impact those changes would have on their relationship with employees, and their operations, should it ultimately become law.

Business leaders, in-house counsel, and even private practitioners commonly view the National Labor Relations Act (NLRA) as applicable only to unions and unionized employees; this is not the case. The NLRA has always applied to non-union employees, and over the last decade, National Labor Relations Board (NLRB or Board) decisions and administrative actions have applied the NLRA’s scope more broadly in non-union settings. The NLRB’s expansive application of the NLRA includes challenges to non-union employers’ company handbooks, use of mandatory arbitration agreements and policies prohibiting union organizing through corporate email systems. Expansive interpretations of whether employee internal complaints rise to the level of protected concerted activity have affected non-union employers as well. Thus, the impact of NLRB decisions should inform every organization’s human resource agenda, regardless of whether their employees are represented.  The novel concept of minority unions may gain further traction with an expansive interpretation of protected concerted activity and the PRO Act’s proposed enhanced remedies for alleged violations of the NLRA.

The PRO Act encompasses more than 50 significant changes to current law and seeks to overhaul the NLRA for the first time in more than 70 years. Set forth below are the most noteworthy aspects of the PRO Act, including that it would:

  • Effectively overturn state “right to work” laws
  • Codify the “ABC test” to deem independent contractors “employees” covered by the NLRA 
  • Limit the ability of employers to contest union election petitions and allow unions to engage in coercive tactics long held to be unlawful
  • Restrict the ability of employers to obtain labor relations advice
  • Facilitate union organizing in micro-units
  • Redefine the definition of “supervisor” to include more frontline leaders as “employees” covered by the NLRA
  • Change the definition of “joint employment” and force businesses to alter their structures or face liability
  • Give employees the right to utilize employer electronic systems to organize and engage in protected concerted activity
  • Prohibit employers from using mandatory arbitration agreements with employees
  • Force parties into collective bargaining agreements via interest arbitration
  • Expand penalties for violations of the NLRA

State Right-to-Work Laws Protecting Employee Freedom of Association Would Effectively be Eliminated

Twenty-seven states currently have right-to-work laws, permitted by the NLRA, that provide employees cannot be compelled to join or pay dues to a union as a condition of their employment. The PRO Act effectively overturns these state laws by amending the NLRA to permit “fair share agreements.” The PRO Act states contract provisions requiring that “all employees in a bargaining unit shall contribute fees to a labor organization for the cost of representation, collective bargaining, contract enforcement, and related expenditures as a condition of employment shall be valid and enforceable notwithstanding any State or Territorial law.” By compelling all employees in a bargaining unit to contribute fees to the union as a condition of keeping their jobs, the PRO Act would provide a financial benefit to unions at the expense of each covered employee.

Independent Contractors Likely Deemed “Employees” with the “ABC Test”

By limiting NLRA coverage to “employees,” Congress made a deliberate choice to exclude independent contractors from collective bargaining and instead to treat each independent contractor as a business governed by market forces. With the country’s workforce increasingly joining the gig economy as independent contractors, the PRO Act seeks to revise the NLRA to incorporate the “ABC test” and reclassify millions of traditional independent contractors as “employees” subject to union representation. The restrictive ABC test precludes independent contractor status unless “(A) the individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact; (B) the service is performed outside the usual course of the business of the employer; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.”

California’s implementation of the ABC test in Assembly Bill 5, which became law in 2019, resulted in a backlash from technology and other businesses. The California legislature enacted AB 5 to make the use of independent contractors in certain industries nearly impossible. At the urging of organized labor, AB 5 codified the modified ABC test as rewritten by the California Supreme Court in its Dynamex v. Superior Court1 decision. Prong B of the ABC test made it much harder for a worker to be classified legally as an independent contractor. As a result, California businesses had either to assume all liability associated with an employer-employee relationship or stop using the services of independent contractors who did not meet AB 5’s stringent test. In November 2020, 58.4% of voters in California passed Proposition 22, supporting the societal benefits of gig workers and rejecting California state and labor leaders’ efforts to force their pro-labor agenda on others.

Through the PRO Act, Congress seeks to decide “once and for all” at the federal level the independent contractor versus employee classification issue. Implementing the ABC test through the PRO Act would compel employers to terminate independent contractor relationships or submit to the added burdens of converting independent contractors to regular employees despite the preference of many contractors to remain independent.

New Rules for Organizing Campaigns Would Restrict Employer Rights While Legalizing Union Pressure Tactics Long Held to be Unlawful

In addition to giving employees the right to use employer systems to organize, the PRO Act would strip employers of “free speech” rights to communicate with employees. The PRO Act would prohibit employers from requiring employees to attend meetings regarding the employer’s views on unionization. There is no related restriction on union communication with employees. Moreover, the PRO Act would restrict an employer’s ability to obtain legal counsel during the organizing and election process by codifying the so-called “persuader rule” under which employers are required to report payments for labor relations advice and services they receive from attorneys.  A federal district court in 2016 blocked the “persuader rule” previously implemented during the Obama presidency.

In contrast to the elimination of employer rights, the PRO Act would magnify the power of unions to communicate with employees. The PRO Act mandates that employers turn over their employees’ personal contact information (home address, home phone number, personal cell phone, and personal email address) to union organizers in advance of any election. Compelled disclosure of personal contact information opens employees to solicitations and pressure from unions at home and otherwise, as well as to other outside influences used to assist in organizing efforts, without regard to the employees’ privacy rights and preferences not to associate with those groups.

The PRO Act also strengthens union rights to place undue pressure on neutral parties to coerce employers to succumb to union organizing threats. The NLRA’s prohibition against “secondary boycotts” would be removed so that the PRO Act would authorize union boycotts or picketing of neutral businesses, such as vendors for the primary employer, and directly pressuring consumers, to advance union organizing goals.

The PRO Act would further alter existing statutory rights by eliminating re-run elections in some instances where employees vote against unionization.  Under existing law, if employees vote against unionization but the Board ultimately determines that the results were influenced by impermissible employer conduct, the Board orders a re-run election. The PRO Act would dispense with re-run elections and declare the union the employees’ collective bargaining representative so long as the union can demonstrate that a majority of bargaining unit employees signed “union authorization cards” at any time during the pre-election campaign. This change would deprive employees of voting rights and encourage unions to file charges in order to gain representation rights without a majority of employees actually voting for representation.  

The PRO Act would for the first time prevent employers from having any say in the handling of union elections among their employees: “No employer shall have standing as a party or to intervene in any representation proceeding under this section.” This means employers would be denied any voice on such important issues as who should be eligible to vote, what unit is appropriate for bargaining, where and how the ballots will be counted, and many other issues.

During the Obama administration, for the first time in its history, the Board ruled that the group of employees a union seeks to organize is “appropriate” so long as no employees outside that group share an “overwhelming community of interest” with employees in that group.2  This decision was panned by the business community as allowing unions to organize discrete “micro-units” of employees, which could impact operational efficiencies and employee relations at a particular location, and lead to proliferation of bargaining units. The Board overturned the “micro-unit” standard in its 2017 PCC Structurals decision,3 and returned to the traditional “community of interest” standard, which it has historically used to assess the appropriate scope of proposed bargaining units, with limited exceptions. The Board has since set out a test for determining whether a group of employees form an appropriate bargaining unit under the NLRA: first, the Board must consider whether the proposed unit shares an internal community of interest; if so, it must consider the weight of those interest within and outside of the proposed unit, and finally, it must consider prior decisions regarding bargaining units in the industry in question.

The PRO Act would insert the “overwhelming community of interest” standard directly into the NLRA. The effect of the change would be to defer to unions’ proposed bargaining units, which are often based on where they expect to get the most votes, without regard to employee choice or employer operations. This would allow unions to organize only a portion of an employer’s employees when they cannot garner support from larger, traditional enterprise-wide units.

The PRO Act would similarly defer to unions’ choice with regard to the type and location of NLRB elections. Currently the timing and type (e.g., in-person manual, or mail ballot) of secret ballot elections is agreed to by the parties, or determined by an NLRB regional director after an evidentiary hearing. In-person manual elections at, or near, the employer’s premises (and often on pay day) have traditionally been the preferred method of conducting NLRB elections, as they are most likely to maximize voter access and turnout. The PRO Act would amend the NLRA to provide that “[a]t the request of the labor organization, the Board shall direct that the election be conducted through certified mail, electronically, at the work location, or at a location other than one owned or controlled by the employer.” This change would require regional directors to accede to the union’s selection of both method and, if in-person, the location of an election.

Deference to union selection of voting details would remove employers from important aspects of the representation process and handicap the Board’s own ability to promote employee freedom of association. Allowing unions to select off-site manual (in-person) elections or mail ballot elections would make one-sided strategy the primary determinant of voting methods, and often lead to disenfranchisement of employees who do not support unionization.

Frontline Leaders Would No Longer Be Part of Management

The PRO Act would restrict the definition of “supervisor,” thereby preventing employers from treating many frontline leaders as members of their management team. Under the NLRA, there are 12 primary indications of Section 2(11) supervisory status. An employee who engages in any of the enumerated exercises of authority or is empowered to do so is considered a supervisor. The PRO Act redefines “supervisor” to restrict it to those individuals who perform such “supervisory” duties “for a majority of the individual’s worktime.” Moreover, the PRO Act deletes the indicia of supervisory status of “assigning” work and having the “responsibility to direct” work of employees, thus eliminating the two factors that most commonly confer supervisory status on traditional frontline leaders.

Such restrictions of who is a supervisor would have two major impacts. First, many more individuals would be subject to the NLRA’s coverage and potential union representation. Second, employers would be prevented from relying upon frontline leaders to exercise Section 8(c) free speech rights under the NLRA and to communicate about unionization during union campaigns and otherwise.

Employers Would Need to Change their Business Structure or Face Joint Employer Liability 

The PRO Act seeks to end in unions’ favor the ongoing dispute regarding the applicable test for joint employment liability. The NLRB’s 2015 Browning-Ferris Industries of California, Inc.4 decision, which dramatically expanded the definition of joint employer and categorized many more independent companies as joint employers, upended years of precedent. Under Browning-Ferris, two entities were deemed joint employers based on the mere existence of reserved joint control, indirect control, or control that was limited and routine. Browning-Ferris drastically increased the universe of potential joint employers and was the subject of intense scrutiny, including congressional hearings geared toward overturning the decision. A joint employer may be required to bargain with a union representing jointly employed workers, may be subject to joint and several liability for unfair labor practices committed by the other employer, and may be subject to labor picketing that would otherwise be unlawful.

On February 25, 2020, the NLRB released its long-awaited final rule regarding joint-employer status under the NLRA, which became effective on April 27, 2020. The final rule restored the pre-Browning-Ferris joint-employer standard that an entity must possess “substantial direct and immediate control” over another’s employees to be considered a joint employer, and provided guidance on that key term. Under the final rule, a business is considered a joint employer of another’s employees only where its control of the other’s employees “has regular or continuous consequential effect on an essential term or condition of employment,” and is exercised on more than a “sporadic, isolated, or de minimis basis.”

The PRO Act would embed the Browning-Ferris rule in the NLRA, so that a putative joint employer’s reserved and indirect control could subject it to joint-employer status and liability. In that regard, the PRO Act states that a joint-employer relationship exists where each alleged joint-employer

codetermines or shares control over the employee’s essential terms and conditions of employment. In determining whether such control exists, the Board or a court of competent jurisdiction shall consider as relevant direct control and indirect control over such terms and conditions, reserved authority to control such terms and conditions, and control over such terms and conditions exercised by a person in fact: Provided, That nothing herein precludes a finding that indirect or reserved control standing alone can be sufficient given specific facts and circumstances.

(emphasis added).

This new standard would nullify the Board’s joint employer rule.  In practice it would subject franchisors to potential liability for actions taken by their franchisees, and in conjunction with the expansive new definition of “employee,” would likely also define employees of franchisees as employees of the national brand. Employers that currently contract for leased or temporary workers would also be affected and may have to reassess or change their business practices.

Employees Would Gain the Right to Use Employer Electronic Systems for Non-Business Reasons

The NLRA does not address employee rights to access an employer’s communication system and case law about this has flip-flopped over the years depending on the political bent of the NLRB. The PRO Act seeks to mandate that employees be allowed to use an employer’s email and other technology to organize unions or engage in other protected concerted activity. The PRO Act is broadly written to give employees who have “access to such devices and systems in the course of the[ir] work” the right to “use electronic communication devices and systems (including computers, laptops, tablets, internet access, email, cellular telephones, or other company equipment) of the employer” absent “a compelling business rationale for denying or limiting such use.”

Such unrestricted access would drastically undermine a company’s current right to control its own technological equipment and infrastructure.

Mandatory Arbitration Agreements Prohibited, Disallowing Class Action Waivers

Since the NLRB’s 2012 D.R. Horton decision, the legality of class and collective action waivers in arbitration agreements has been a hot topic for all U.S. employers. Commonly implemented to build efficiencies into employment-related disputes, class and collective action waivers generally prevent employees from filing claims related to their employment on behalf of a proposed class of other employees. In D.R. Horton, and subsequently in Murphy Oil, the NLRB ruled that arbitration agreements that preclude employees from pursuing employment claims on a class basis violate the NLRA’s protection of concerted activity. In May 2018, the Supreme Court overruled the Board’s decision in Epic Systems Corp. v. Lewis,5 finding that the Federal Arbitration Act (FAA) requires enforcement of arbitration agreements and that the NLRA does not override the FAA.

In order to avoid the Supreme Court’s ruling, the PRO Act would make it illegal for any employer “to enter into or attempt to enforce any agreement, express or implied, whereby … an employee undertakes or promises not to pursue … any kind of joint, class, or collective claim arising from or relating to the employment of such employee … .” Thus, the PRO Act would overrule Epic Systems, which permitted individual arbitration agreements, and force employers nationwide to revise handbooks, restructure employment agreements, and defend against broad litigation from an expanded pool of “employees.”

Collective Bargaining Agreements Imposed via Binding Arbitration

The heart of the NLRA is the Section 8(d) duty of both unions and employers to bargain in good faith, but the NLRA does not compel either side to agree to a proposal from the other, or make any concession with respect to its bargaining position. First collective bargaining agreements for newly certified unions commonly take several months or even more than a year to complete, as the parties are literally bargaining every term and condition of employment, rather than making select changes to a mature collective bargaining agreement. The PRO Act would effectively eliminate the mutual good faith bargaining obligation by compelling parties bargaining for an initial collective bargaining agreement to submit to mediation, and eventually binding interest arbitration, should they not reach an agreement within a mere 90 days.

The PRO Act would insert new language into the NLRA that obligates the parties to commence negotiations “[n]ot later than 10 days after” a union’s initial request to bargain, unless the parties agree to a different time period.  Thereafter, “[i]f after the expiration of the 90-day period beginning on the date on which bargaining is commenced, or such additional period as the parties may agree upon, the parties have failed to reach an agreement, either party may notify the Federal Mediation and Conciliation Service … .” FMCS then steps in for a 30-day period to “bring the parties to agreement by conciliation,” and if it is not successful, FMCS “shall refer the dispute to a tripartite arbitration panel … with one member selected by the labor organization, one member selected by the employer, and one neutral member mutually agreed to by the parties.” This panel of arbitrators then imposes a complete collective bargaining agreement upon the parties, based upon statutory factors like the geographic cost of living, and “the employees’ ability to sustain themselves, their families, and their dependents on the wages and benefits they earn from the employer,” and “the employer’s financial status and prospects.”  The panel’s determination of contractual terms “shall be binding upon the parties for a period of 2 years, unless amended during such period by written consent of the parties.” The PRO Act also would remove employees’ rights to ratify a collective bargaining agreement.

Binding arbitration to settle a collective bargaining agreement, commonly referred to as “interest arbitration,” is rare in private sector labor relations in the United States. Under this system, unions and employers lose their right to negotiate an agreement that meets their respective needs, and instead, a panel of third parties unrelated to the bargaining relationship mandates the terms of their deal. This system would ignore both the parties’ respective bargaining power and the traditional right of employees to vote to approve the terms of an agreement reached between the union and employer.

Greatly Expanded Liability for “Unfair Labor Practices”

The PRO Act would expand both the scope of remedies and the avenues to challenge allegedly impermissible conduct under the law. Currently, the NLRA’s enforcement mechanism is through “unfair labor practice” charges, which are administered by the Board and its regional offices. Violations of the NLRA are generally addressed through equitable and/or monetary remedies (i.e., back pay and interest) that reinstate the status quo between the parties.

The PRO Act goes much further by adding significant monetary obligations, including back pay without reduction for interim earnings (e.g., unemployment or earnings from a new job), front pay, and liquidated damages equal to twice the amount of other damages awarded. The PRO Act would also expand the type of available remedies to include civil penalties for non-compliance with Board orders, enforceable by civil action in federal district court. These penalties begin at $50,000 for each failure to comply with a Board order, could be doubled where the employer committed a similar unfair labor practice in the prior five years, and could apply to individual directors and officers of the employer. The PRO Act would also empower the Board to reinstate terminated employees during the course of any litigation over their terminations, and establish a private right of action for individuals allegedly harmed by an unfair labor practice, with possible recovery of the enhanced civil penalties outlined above, as well as attorneys’ fees, and even punitive damages.

The expanded scope of damages available under the PRO Act would force employers to defend against unfair labor practice claims on several fronts. The NLRA already provides individuals with back pay and reinstatement remedies. The expansion of monetary penalties, including enhanced back pay liquidated damages, and the initiation of a private right of action in addition to those enhanced available awards, would significantly change the landscape of unfair labor practice litigation. Moreover, the possible recovery of such extensive monetary remedies would invite employees and unions to file more charges.

Differences between the 2021 and 2020 Versions of the PRO Act

The version of the PRO Act recently introduced differs from the version that passed the House last year. The current version of the bill lacks a whistleblower protection provision that would have empowered the Secretary of Labor to investigate and adjudicate certain retaliation claims, including through civil enforcement efforts. There is also no requirement in the recent version that the Government Accountability Office prepare a report on “sectoral bargaining,” which was a feature of last year’s version. Most collective bargaining in the United States occurs at an enterprise level, meaning that different businesses within the same industry (or a business with multiple unionized locations) will generally bargain separate contracts for each location. Sectoral bargaining, which is legal in countries like Germany but is not currently viable in the United States, generally means that all workers within an industry fall under the same collective bargaining agreement, regardless of location or employer.

More to Come

Prospects for passage are unclear at this time. It is expected that the PRO Act will pass the House again, but it is unclear if the legislation has support from all 50 Senate Democrats or if all Senate Republicans will oppose it. If options for full passage are too narrow, it is possible that discrete portions of the bill might pass as add-on or trailer bills with must-pass pieces of legislation like defense bills. It is also possible that concepts from the legislation will be applied to federal contractors through executive action, for example the requirement to provide employee contact information to unions during election campaigns, the “persuader” rule, or mandatory interest arbitration of first contracts.

Littler’s WPI will continue to track the legislation, and to provide updates and analysis where appropriate, as will our OFCCP and Traditional Labor Law Practice Groups.

 

Footnotes

1 4 Cal. 5th 903 (2018).

2 Specialty Healthcare, 357 NLRB No. 83 (2011)

3 PCC Structurals, Inc., 365 NLRB No. 160 (2017)

4 Browning-Ferris Industries of California, d/b/a BFI Newby Island Recyclery (Browning-Ferris), 326 NLRB No. 186 (2015).

5 584 U.S. ___, 138 S. Ct. 1612 (2018).

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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