United States: Major NLRB Decisions Affect All Employers

The National Labor Relations Board (NLRB) General Counsel memorandum issued on December 1, 2017, previewed Obama Board decisions likely to be overturned in the future. (See our previous Alert.) The Trump Board acted quickly—while it still had a Republican majority of Board members prior to the expiration of Chairman Philip A. Miscimarra's term on December 16, 2017—and issued four decisions on December 14 and 15, 2017, impacting employee handbook rules, joint-employer and microunit issues, and the duty to bargain with a union over changes that are consistent with past practice.

Board Establishes New Standard Governing Workplace Policies

On December 14, 2017, the Board issued a new standard for determining if a work rule maintained by an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) in Boeing Company, 365 NLRB No. 154 (2017). The decision overrules the Board's prior decision in Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646 (2004), that held a work rule that does not explicitly restrict Section 7 activity (i.e., the right to engage in concerted activity for mutual aid or protection) is nonetheless unlawful if (1) employees would reasonably construe the language of the rule to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.

Under the Board's new test, when evaluating a facially neutral policy, rule or handbook that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (1) the nature and extent of the potential impact on NLRA rights and (2) legitimate justifications associated with the rule.

The Board also delineated three categories of employment policies, rules and handbook provisions:

  • Category 1 — Rules that the Board designates as lawful to maintain because (1) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights, or (2) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. Examples of Category 1 rules include no-camera rules, rules that require "harmonious interactions and relationships," and rules that require employees to abide by "basic standards of civility."
  • Category 2 — Rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.
  • Category 3 — Rules that the Board designates as unlawful to maintain because the rules would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule. An example of a Category 3 rule is one that prohibits employees from discussing wages or benefits with each other.

In Boeing Company, the rule at issue restricted the use of camera-enabled devices, including cell phones, on its property. The Board held that while the no-camera rule may, in some circumstances, potentially affect the exercise of Section 7 rights, this adverse impact is comparatively slight. The Board held the adverse impact is outweighed by substantial and important justifications associated with Boeing's maintenance of a no-camera rule, including maintaining the security of its facilities (which was not only critical to Boeing's success as a business but also for national security due to Boeing's work as a federal contractor). The Board classified the no-camera rule as a Category 1 rule, and held the rule did not violate the NLRA.

What This Means for Employers

The Obama Board greatly restricted which employer rules were lawful by finding that employees could reasonably construe such rules to prohibit Section 7 activity. With the Board's rejection of Lutheran Heritage and its progeny and the Board's new standard for evaluating employer rules, previously unlawful rules regarding civility and harmonious workplaces have now been deemed lawful. The Board's and administrative law judges' future decisions will use the Board's new standard to provide employers clarity regarding which rules are lawful and which are unlawful under the NLRA.

Board Overrules Browning-Ferris and Reinstates Prior Joint-Employer Standard

On December 14, 2017, the Board returned to its prior standard for analyzing when two or more entities are deemed joint-employers in Hy-Brand Industrial Contractors, 365 NLRB No. 156 (2017). The decision overrules the Board's decision in Browning-Ferris, 362 NLRB No. 186 (2015), which itself overruled more than 30 years of Board precedent and held that even when two entities have never exercised joint control over essential terms and conditions of employment and where joint control is not "direct and immediate," the two entities will still be joint-employers based on the mere existence of reserved joint control or based on indirect control, even when such control is "limited and routine."

Under the Board's now reinstated joint-employer standard, two or more entities will be deemed joint employers under the NLRA if there is proof that one entity has exercised control over essential employment terms of another entity's employees and has done so directly and immediately in a matter that is not limited and routine. Proof of indirect control, contractually reserved control that has never been exercised, or control that is limited and routine will be insufficient to establish a joint-employer relationship.

In overturning Browning-Ferris, the Board was sharply critical of its prior decision, stating that the Browning-Ferris standard was a distortion of common law as interpreted by the Board and the courts, was contrary to the NLRA, was ill-advised as a matter of policy, and would prevent the Board from fostering stability in labor-management relations, one of its primary responsibilities. The Board ultimately affirmed the administrative law judge's finding in Hy-Brand Industrial Contractors that two entities were joint employers, but disagreed with the Browning-Ferris standard applied by the judge in reaching that finding. Both joint employers were jointly and severally liable for the unlawful discharges of seven striking employees.

What This Means for Employers

Employers with contractor-subcontractor, franchise-franchisee, user-supplier and parent-subsidiary relationships should take particular note that the greatly expanded definition of joint employer from Browning-Ferris has been overturned in Hy-Brand Industrial Contractors. However, employers still would be wise to review their contracts with other entities to ensure the contract terms accurately reflect the business realities of the relationship and be cognizant of the fact that a joint employer relationship can be established where direct control is in fact exercised by one entity over another.

Board Eliminates "Overwhelming Community of Interest" Standard for Determining an Appropriate Bargaining Unit in Union Representation Cases

On December 15, 2017, the Board eliminated the "overwhelming" community of interest standard and returned to the traditional community of interest standard for determining whether a group of employees constitutes an appropriate collective bargaining unit in PCC Structurals, Inc., 365 NLRB No. 160 (2017). The decision overrules the Board's decision in Specialty Healthcare, 357 NLRB 934 (2011).

In Specialty Healthcare, the Board stated that when a union seeks to represent a unit of employees who are readily identifiable as a group (based on job classifications, departments, functions, work locations, skills or similar factors), and the Board finds that the employees in the group share a community of interest, the Board will find the petitioned-for unit to be an appropriate unit. If the petitioned-for unit satisfies that standard, the burden is on the employer who seeks a larger unit to demonstrate that the additional employees it seeks to include share an "overwhelming community of interest" with the petitioned-for employees, such that there is no legitimate basis upon which to exclude certain employees from the larger unit because the traditional community of interest factors overlap almost completely. As a practical matter, it was virtually impossible for employers to satisfy this heightened showing.

The Board has now returned to its traditional community of interest standard, which was utilized prior to Specialty Healthcare. In each case in which appropriateness of a petitioned bargaining unit is questioned, the Board will determine whether the employees in a petitioned-for group share a community of interest sufficiently distinct from the interests of employees excluded from the petitioned-for group to warrant a finding that the proposed group constitutes a separate appropriate unit. When making this determination, the Board applies a multi-factor test that requires the Board to assess: (1) whether the employees are organized into a separate department; (2) have distinct skills and training; (3) have distinct job functions and perform distinct work, including inquiry into the amount and type of job overlap between classifications; (4) are functionally integrated with the employer's other employees; (5) have frequent contact with other employees; (6) interchange with other employees; (7) have distinct terms and conditions of employment; and (8) are separately supervised.

In overturning Specialty Healthcare, the Board reasoned that by ignoring scrutiny of the interests that excluded employees have in common with those in the petitioned-for unit except in "rare cases" where the employer can satisfy its burden that excluded employees share an overwhelming community of interest, Specialty Healthcare created a regime under which the petitioned-for unit is controlling in all but narrow and highly unusual circumstances—a departure from the Board's congressional mandate to determine the appropriate bargaining unit "in each case."

The Board remanded the case to the Regional Director for appropriate action consistent with the Board's order. The Regional Director had earlier found that a petitioned-for unit of 100 welders was appropriate for collective bargaining and rejected the employer's contention that the smallest appropriate unit was a wall-to-wall unit of 2,565 production and maintenance employees.

What This Means for Employers

Employers facing the possibility of unionization should be comforted that they have a lesser burden to challenge a union's petitioned-for unit when it seeks to represent a small segment of an integrated workforce. Unions have attempted to unionize some employers by petitioning to represent microunits to get their foot in the door. This will now be more difficult to do based on the Board's return to the traditional community of interest standard.

Board Clarifies Duty to Bargain Over "Changes" Consistent with Past Practice

On December 15, 2017, the Board clarified bargaining obligations that are required before implementing a unilateral "change" in employment matters in Raytheon Network Centric Systems, 365 NLRB No. 161 (2017). The decision overrules the Board's decision in E.I. du Pont de Nemours, 364 NLRB No. 113 (2016), which held that if an employer made changes consistent with past practice, the employer must provide notice to the union and the opportunity for bargaining if the past practice was created under the management rights clause of an expired collective bargaining agreement (CBA) or, in the absence of a CBA, if the employer's actions involved some type of discretion.

In Raytheon Network Centric System, the Board held that regardless of the circumstances under which a past practice developed—i.e., whether or not the past practice developed under a management rights clause of an expired CBA—an employer's past practice constitutes a term and condition of employment that permits the employer to take actions unilaterally that do not materially vary from what has been customary in the past. The Board reasoned that when an employer takes such unilateral actions, the employer has not effected a "change" but has instead maintained the status quo by continuing its preexisting practice. The Board noted that its decision has no effect on the duty of employers to bargain upon request by a union over any and all mandatory subjects of bargaining.

Applying its new standard, the Board concluded the employer's changes to employee healthcare benefits in 2013 were a continuation of the employer's past practice involving similar unilateral changes made at the same time every year from 2001 to 2012. The Board held the employer did not violate the NLRA by failing to give its union advance notice and the opportunity to bargain before making the 2013 changes.

What This Means for Employers

Employers with expired CBAs or who are negotiating a first contract can make unilateral changes consistent with past practice without notifying the union and giving the union an opportunity to bargain prior to making changes. However, employers should be aware that upon request by the union, an employer is required to bargain over any and all mandatory subjects of bargaining.

Possibility of Circuit Court Reversal

While employers should celebrate these four Board decisions, employers should note that Board decisions may be appealed to either the United States Court of Appeals for the D.C. Circuit or the circuit court from where the case arises. Indeed, some of the decisions the Board overturned were already on appeal, although such appeals may now be dismissed as moot. It is possible that certain circuit courts will uphold the holdings in these decisions while other circuits will reject the holdings. We will continue to monitor the status of these decisions and update you on further developments.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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