United States: Hunton Employment & Labor Perspectives: Employer's Posting Of Side Letter Explaining NLRB Settlement Notice Breaches Settlement Agreement

Last Updated: May 30 2019
Article by Cullan E. Jones and Robert T. Quackenboss

On May 13, 2019, in Outokumpo Stainless USA, LLC v. N.L.R.B., No. 17-15498 (11th Cir.), the Court of Appeals for the Eleventh Circuit enforced an NLRB order finding that stainless steel producer Outokumpo's posting of a side letter along with a NLRB settlement notice "constituted non-compliance with the terms of the Settlement Agreement" and that "default judgment was thus proper under the plain terms to which the Company had previously agreed."

The Eleventh Circuit's three-judge panel backed the NLRB's majority finding that Outokumpu Stainless USA LLC breached a settlement it reached with the United Steelworkers to resolve unfair labor practice complaints the union lodged following efforts to represent a group of workers at an Alabama facility. The Eleventh Circuit held the company violated the agreement by way of a so-called side letter explaining the settlement, which was posted next to a NLRB-approved notice it had been required to disseminate to workers pursuant to the terms of a settlement agreement. The Eleventh Circuit ruled that the side letter undermined the point of the notice, because the side letter blamed the union for holding up an election from occurring and said the company was not at fault. Specifically, the Eleventh Circuit opined that "[t]he company is a sophisticated employer" and that "[i]t is bound by the contract that it signed with the NLRB and must face the consequences, regardless of whether the result may seem harsh or whether the NLRB no longer regularly includes these default provisions in its settlement agreements."

The union filed unfair labor practice charges in 2011 related to interference with the union's petition seeking to represent a group of employees. The parties reached settlement in April of 2012. As part of the settlement agreement, Outokumpu agreed to post a notice at its facility and on its intranet for a 60 day period. Although it posted the notice, Outokumpu also posted the side letter on its bulletin board and intranet site for the same 60 day period that, among other things: (1) blamed the union for preventing employees from exercising their right to vote and having a choice; (2) repeatedly emphasized that the company had not been found guilty of labor law violations; and (3) suggested that the Company had no other obligations under the Settlement Agreement. According to the Eleventh Circuit, "[t]he Side Letter thus subverted the purpose and effectiveness of the Notice, constituting non-compliance with the terms of the Settlement Agreement...by undermining the negotiated resolution of the unfair labor practice charges lodged by the union."

After the NLRB's General Counsel filed a complaint, an ALJ determined that the side letter constituted noncompliance with the settlement agreement and granted the General Counsel's request for a default judgment on the underlying unfair labor practice allegations. Outokumpu appealed, arguing that it lived up to all the settlement's express terms, that there was nothing in the side letter suggesting the NLRB-required notice was just a "formality" and that there was nothing in the settlement barring Outokumpu from posting its own letter laying out its own settlement explanation. Both the NLRB and Eleventh Circuit found these arguments unconvincing.

This case serves as a reminder of the limits an employer faces in posting a notice or letter along with an NLRB issued notice when settling unfair labor practice charges.

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