In a recent decision, the 6th Circuit Court of Appeals declined to follow the prevailing approach among most federal circuit courts of appeal (and the Equal Employment Opportunity Commission [EEOC]) regarding employer liability for harassment by non-employees. In Bivens v. Zep Inc.,[1] the court held that an employer may be liable under Title VII for harassment committed by a customer only where the employer intended the harassment to occur — not merely where the employer was negligent in responding to it. This heightened standard creates a new hurdle for plaintiffs to establish employer liability in harassment cases where the alleged harasser is a non-employee.

Fact Summary

Dorothy Bivens, an African-American sales representative for Zep Inc., alleged that while she was on a sales call to a motel customer, she was subjected to sexual harassment by the motel’s manager.[2] According to Bivens, when she stepped into the motel manager’s office, he locked the door and asked her to date him.[3] Bivens declined and stated that she was married, and asked to leave the office and was allowed to do so by the manager.[4] Bivens reported the incident to her immediate supervisor, who promptly reassigned the customer to another sales representative so that Bivens would not have to interact with the motel’s manager again.[5] Neither Bivens nor her supervisor reported the incident to human resources.[6]

At around the same time, Zep determine that it needed to reduce costs.[7] Zep’s President Bill Moody made the decision to go with a reduction in force that was focused on small sales territories that generated less than $240,000 a year in revenue which included Bivens’ sales territory — projected to generate less than $100,000 annually.[8] In total, Zep eliminated 23 positions.[9] Biven’s supervisor informed her that she was being terminated.

Thereafter, Bivens sued, asserting sex-based hostile work environment harassment, retaliation and race discrimination claims under Title VII and the Michigan Elliott-Larsen Civil Rights Act (ELCRA), alleging that the customer’s manager subjected her to a hostile work environment and that she was terminated for reporting the actions of the customer’s manager and/or because of her race. The district court granted summary judgment to Zep on all claims, and Bivens appealed to the 6th Circuit Court of Appeals.

The Sixth Circuit’s Opinion

Title VII Hostile Work Environment Claim[10]

The Court of Appeals began its analysis by reviewing Bivens’ sex-based hostile work environment claim under Title VII, setting forth the prima facie elements that Bivens was required to prove:

To establish such a claim here, Bivens must show that (1) she was a member of a protected group who (2) faced unwelcome harassment, which (3) was based on her sex and (4) created a work environment that unreasonably interfered with her work performance, for which (5) Zep was responsible. Thornton v. Fed. Express Corp., 530 F.3d 451, 455 (6th Cir. 2008); cf. Meritor Sav. Bank, 477 U.S. at 63–69; Faragher v. City of Boca Raton, 524 U.S. 775, 786–93 (1998).[11]

The 6th Circuit stated that the fifth prima facie element was at issue, namely whether Zep was responsible for the alleged actions of its customer’s manager, and then proceeded to discuss the “paths” to employer liability.[12] The court noted that the first path to liability are actions taken by “owners, partners, proprietors, corporate officers, and some high-level managers” that can directly impose liability on the employer, since they “are treated as the organization’s proxy.”[13]  The court further noted that the second path to employer liability may be implicated by lower-level employees whose actions are not considered those of the company, “[b]ut in some circumstances, the employer nonetheless may be held ‘vicariously’ liable for actions taken by its lower-level employees.”[14]

The 6th Circuit turned to consider the question of whether an employer can ever be directly or vicariously liable for the actions of an alleged non-employee harasser, and if so, under what circumstances. The court first noted that “in passing Title VII, Congress created a federal species of intentional tort, ‘distinguish[ing]’ claims under Title VII from torts based on mere ‘negligent or reckless’ action” and that “[s]exual harassment under Title VII … ‘presupposes intentional conduct.’”[15] The court further noted “[b]ecause Title VII defines ‘employer’ to include ‘any agent’ of the company[16] … an employee counts as the employer’s ‘agent’ when he has agreed to ‘act’ on the employer’s ‘behalf’ and ‘subject to [its] control.’”[17]    Thus, under agency principles “the employer can be held liable either directly, for its own intentional actions, or vicariously, for those of its agent.”[18] The court noted that while employers are generally “liable for the torts that their employees commit within the scope of their employment … sexual harassment does not serve any business purpose, that tort falls outside the scope of employment.”[19] However, the court recognized that under agency law principles, an “employer is liable when the employee ‘was aided in accomplishing the tort by the existence of the agency relationship’ or the employer ‘was negligent or reckless’ in its own right in letting the employee commit the tort.”[20] 

The court stated that the “‘aided in the agency relation’ standard … encompasses instances where the harassing employee is a ‘supervisor’ who takes a ‘tangible employment action’ against the victim … as the supervisor can dock pay or demote a fellow employee only pursuant to authority afforded him by his employer” which results in the imposition of strict liability on the employer.[21]  The court then turned to address the “‘negligence’ standard … [which] governs all other cases of coworker [non-supervisor] harassment … [where] agency law principles dictate that a harasser’s unlawful intent may be imputed to the employer based only on the employer’s negligence in allowing the harassment.”[22] 

Turning to the issue of whether Zep could be responsible for the conduct of its customer’s manager, the court stated “[f]or their relationship to be deemed one of principal-agent, Zep (as the purported master) and the client (as the purported servant) each had to give their mutual “consent” to the notion that the client would “act” both “on [Zep’s] behalf” and “subject to [its] control”[23] but noted “[t]here was no such agreement here.” Here because Zep was merely a supplier to its customer and could not “exercise control over the [client’s] physical activities” the court found that “Ellerth’s agency-law-based negligence standard does not apply in these circumstances.”[24]

After determining that the negligence standard was not applicable, the court considered “whether Zep itself ‘intentionally treat[ed]’ Bivens ‘worse because of sex,’[25] — that is, whether the company intended for her harassment at the hands of the client to occur.”[26] The court noted that “the Supreme Court has explained, [that intent] is present when an actor ‘desires’ an unlawful consequence from his actions or is ‘substantially certain’ that it will result”[27] Therefore, the court reasoned that Bivens can only establish liability on behalf of Zep” by providing evidence that Zep either ‘desire[d] to cause’ her harassment or was ‘substantially certain’ that it would ‘result from’ its actions.”[28] 

In applying the intent standard to the facts presented by Bivens about the alleged harassment, the court found that “[n]one of this would allow a jury to conclude that Zep ‘desired’ such an interaction to occur or was ‘substantially certain’ that it would,”[29] and noted that “Zep is entirely absent from the timeline of this one-off event, even on Bivens’ telling, until after she returned from the unfortunate sales call and reported it to her supervisor.”[30] As such, the court affirmed summary judgment as to Bivens’ Title VII sex-based harassment claim.

In finding that a negligence-based liability standard was not appropriate in cases involving alleged harassment by non-employees, the court recognized that its holding “departs from the conclusion reached by most circuit courts to have addressed the issue as well as the EEOC’s reading of Title VII.”[31] With respect to the EEOC’s position, the court stated that the EEOC, is “authorized to issue only ‘procedural regulations’ setting forth the steps for pursuing a claim under Title VII, not substantive ones interpreting the statutory rights of parties” and that the agency’s interpretive guidelines — like § 1604.11(e) — have no ‘controlling’ effect on courts.”[32] The court further noted that “even if the agency had express authority to interpret Title VII’s substantive provisions, we would still be obliged, ‘as always,’ to ‘independently interpret the statute’”[33] and stated that it did not find the EEOC’s interpretation persuasive. With respect to the contrary holdings of most other circuit courts of appeal on the appropriate standard of liability, the court stated that “our other sister courts, seem to have ‘follow[ed] the EEOC’s guidelines on th[is] issue’ without undertaking an independent evaluation of the statute” [or] … “employ[ed] their own reasoning, [in what] … often seems like judicial policymaking.”[34]

Title VII Retaliation Claim

Addressing the merits of Bivens’ retaliation claim, the court found that the claim failed because she “cannot show that ‘her protected activity’ — complaining about a customer who sexually harassed her — 'was known to those who made th[e] decision’ to lay her off as part of the reduction-in-force.”[35] It was undisputed that Zep’s president and CEO Bill Moody, made the decision to eliminate Bivens’ sales territory and that he ‘didn’t even know who Ms. Bivens was until’ she sued the company — long after the workforce-reduction decision was final” and the court found that Bivens “‘failed to produce any direct or circumstantial evidence from which a reasonable jury could infer that’ Moody ‘knew or w[as] aware of’ her protected activity, dooming her retaliation claim.”[36] Therefore, the court found that summary judgment was appropriate as to Bivens’ retaliation claim. 

Title VII Race Discrimination Claim

Finally, the court turned to consider whether summary judgment was also appropriate as to Bivens’ claim of race discrimination.  The court found that Bivens had to supplement her ordinary prima facie showing of discrimination with “additional direct, circumstantial, or statistical evidence tending to indicate that [Zep] singled [her] out ... for discharge” because of her race since she had been terminated as apart of a reduction in force,  but found her that “additional evidence” was unavailing.[37] The evidence showed, among other things, that most of the terminated employees were white, that the reduction in force was driven by territory size and revenue projections, and that Bivens was not replaced after her termination.[38] The court found no evidence from which a reasonable jury could infer discriminatory intent on the basis of race. Therefore, the court found that summary judgment was appropriate as to Bivens’ race discrimination claim. 

Takeaways

The Bivens decision places the 6th Circuit at odds with most other federal circuit courts of appeal and the EEOC’s long-standing guidance on customer harassment, and illustrates how courts will independently review statutory provisions, without deference to agency interpretations, under Loper. For employers in Kentucky, Michigan, Ohio and Tennessee, the ruling significantly narrows potential liability for third-party harassment under Title VII. This ruling will be of particular benefit to employers located within the 6th Circuit, such as retailers, where employees regularly interact with customers. Regardless, employers should continue to investigate when customer or other third-party harassment is reported and take prompt and effective remedial action as appropriate under the circumstances. Employers should also continue to conduct regular workplace training to educate managers and employees on their obligations and rights under Title VII, and company policies prohibiting discrimination, harassment and retaliation.  

In an article published in the November 23, 2021, edition of this newsletter, “NLRB General Counsel Issues ‘GC Memos’ Calling for Expansive Remedies in ULP Cases, Settlements,[1]” I discussed the pro labor policy changes advocated by NLRB General Counsel Jennifer A. Abruzzo. Since that time, Abruzzo has issued additional General Counsel Memos (GC Memo), including her most recent GC Memo 22-04, dated April 7, 2022, titled “The Right to Refrain from Captive Audience and other Mandatory Meetings.”[2] In GC Memo 22-04 Abruzzo advocates for the end of employer directed Captive Audience meetings which are common especially during union representation election campaigns.[3]   

By way of background, in the early days of the National Labor Relations Act (Act) the U.S. Supreme Court in NLRB v. Virginia Electric & Power Co., recognized that neither “the Act nor the Board's order here enjoins the employer from expressing its view on labor policies or problems, nor is a penalty imposed upon it because of any utterances which it has made.”[4] Later, the Board in Clark Bros. Co., Inc. found it was an unfair labor practice for an employer to compel employees to attend a meeting during work time on the employer’s premises to hear the employer’s views against union representation.[5] Soon thereafter, Congress repudiated the Board’s ruling in Clark Bros when it enacted the Taft-Hartley Act in 1947 that added Section 8(c)[6] to the Act which states:

(c) Expression of views without threat of reprisal or force or promise of benefit

The expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice under any of the provisions of this subchapter, if such expression contains no threat of reprisal or force or promise of benefit.

In 1948, in Babcock & Wilcox Co.[7], the Board made clear that it was not a violation of the Act for an employer to compel employees to attend meetings on worktime where the employer’s view on unionism was discussed. In so holding, the Board stated, “the language of Section 8 (c) of the amended Act, and its legislative history, make it clear that the doctrine of the Clark Bros. case no longer exists as a basis for finding unfair labor practices in circumstances such as this record discloses.” [8]

Later, the Board “devised the ‘Bonwit Teller[9]’ doctrine [that held] while the speech was protected by 8(c), an employer who made a privileged speech was guilty of an unfair labor practice if he denied a request by the union to reply on his time and property.” This doctrine was set aside in Livingston Shirt Corp. [10] where the Board held:

Accordingly, we are convinced that, absent special circumstances as hereinafter indicated, there is nothing improper in an employer refusing to grant to the union a right equal to his own in his plant. We rule therefore that, in the absence of either an unlawful broad no-solicitation rule (prohibiting union access to company premises on other than working time) or a privileged no-solicitation rule (broad, but not unlawful because of the character of the business), an employer does not commit an unfair labor practice if he makes a preelection speech on company time and premises to his employees and denies the union's request for an opportunity to reply.[11]

A limited time, place, and manner restriction during representative elections was placed on Captive Audience speeches by the Board in Peerless Plywood Co. Under the Peerless Plywood rule, “employers and unions alike [are]…prohibited from making election speeches on company time to massed assemblies of employees within 24 hours before the scheduled time for conducting an election…. [v]iolation of this rule will cause the election to be set aside whenever valid objections are filed.”[12]

Turning to GC Memo 22-04, Abruzzo characterizes Captive Audience Meetings as “inherently involv[ing] an unlawful threat that employees will be disciplined or suffer other reprisals if they exercise their protected right not to listen to such speech” and Board precedent is “at odds with fundamental labor-law principles, our statutory language, and our congressional mandate.”[13]

Abruzzo cites Section 7 of the Act as the basis for her argument that the Board should reconsider the legality of Captive Audience meetings and deem them unlawful under Section 8(a)(1) of the Act that “bars employers from interfering with employees’ choice of whether and how to exercise those rights.” She also argues the “inequality of bargaining power between individual employees and their employers,” and the “economic dependence on their employers” should guide the Board in reconsidering Captive Audience meetings.

Abruzzo essentially calls for a return to the pre-Section 8(c) Clark Bros. decision that viewed Section 7 rights as “meaningless …unless employees are also free to determine whether or not to receive” the employer’s views on unionism,[14] and criticizes the Board’s Babcock & Wilcox Co. decision as “an anomaly in labor law, inconsistent with the Act’s protection of employees’ free choice and based on a fundamental misunderstanding of employers’ speech rights.”[15] She concludes by stating that she intends to urge the Board hold as follows:

[I]n two circumstances, employees will understand their presence and attention to employer speech concerning their exercise of Section 7 rights to be required: when employees are (1) forced to convene on paid time or (2) cornered by management while performing their job duties. In both cases, employees constitute a captive audience deprived of their statutory right to refrain, and instead are compelled to listen by threat of discipline, discharge, or other reprisal—a threat that employees will reasonably perceive even if it is not stated explicitly. Inherent in the employment relationship is the understanding that employees cannot, without consequences, either fail to accede to their employer’s stated requirement (e.g., that they attend a meeting) or abandon their assigned work duties (e.g., by walking away from employer speech directed at them as they work).[16]

Take Aways

The latest GC Memo calls on the Board to overturn nearly 75 years of precedent which is grounded in the First Amendment and Section 8(c) of the Act which protects non-coercive employer speech. Further, the Memo ignores the requirement the Board balance “employees' Section 7 rights and employers' management interests.”[17] While a Biden Board may turn out to be receptive to Abruzzo’s call to end Captive Audience meetings, it is questionable whether any Court of Appeals would enforce such an order.

Greg Grisham is an Attorney in the Memphis Office of Fisher & Phillips LLP and focuses his practice on counseling and representing employers in all aspects of labor and employment law. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

In an article published in the May 14, 2021 edition of this Newsletter, "'The Times They Are A-Changin'": President Biden Fires Trump Appointed NLRB General Counsel as Shift in Labor Policy Begins,” I discussed the changes at the National Labor Relations Board (NLRB) that had occurred immediately after President Biden took office and previewed the policy changes to come. On July 21, 2021, President Biden’s nominee for General Counsel of the NLRB, Jennifer A. Abruzzo, was confirmed by the Senate on a 51 to 50 vote. Since taking office, Abruzzo has, among other things, issued several General Counsel Memos (GC Memos) which are issued to provide policy guidance field offices and/or Washington offices. The GC Memos reflect a continued aggressive enforcement policy that started in January 2021. Two of the GC Memos issued by GC Abruzzo deal with remedies in unfair labor practice cases which are discussed below.

GC MEMO 21-06 “SEEKING FULL REMEDIES”

In GC Memo 21-06, issues Sept. 8, 2021, GC Abruzzo stated “Regions should request from the Board the full panoply of remedies available to ensure that victims of unlawful conduct are made whole for losses suffered as a result of unfair labor practices” citing the Board’s authority to fashion “just remedies” under Section 10(c) of the Act.[i] Continuing, Abruzzo stated “consequential damages” should be considered by Regions (and requested from the Board) in addition to the traditional monetary remedies of back-pay and lost benefits in fashioning “make-whole” relief based on statements made by Board Chairman Lauren McFarren and examples cited in a recent Board decision.[ii]

Abruzzo stated in cases involving “unlawful firings of discriminatees … Regions should seek compensation for consequential damages, front pay, and liquidated backpay in a combined complaint and compliance specification where appropriate.” In addition, Abruzzo stated “[w]here unlawful firings of undocumented workers are implicated, Regions should seek, in addition to the remedies previously highlighted in GC Memorandum 15-03, compensation for work performed under unlawfully imposed terms (such as work performed under an unlawfully reduced pay rate), employer sponsorship of work authorizations, and any other remedies that would prevent an employer from being unjustly enriched by its unlawful treatment of undocumented workers.”

With respect to unfair labor practices that occur in the context of a union organizing campaign, such as terminations, threats, surveillance, etc., GC Abruzzo provided a non-exhaustive list of remedies that Regions should request from the Board:

• Union access (e.g., requiring an employer to provide a union with employee contact information, equal time to address employees if they are convened by their employer for a “captive audience” meeting about union representation, and reasonable access to an employer’s bulletin boards and all places where notices to employees are customarily posted);
• Reimbursement of organizational costs (e.g., requiring an employer to pay for organizational costs that a union incurs in a re-run election because the employer has engaged in unlawful conduct sufficiently egregious as to cause the results of the prior election to be set aside);
• Reading of the Notice to Employees and the Explanation of Rights to employees by a principal or, in the alternative, by a Board Agent, in the presence of supervisors and managers, with union representatives being permitted to attend all such readings, or, where appropriate, video recording of the reading of the notice and the Explanation of Rights, with the recording being distributed to employees by electronic means or by mail;
• Publication of the notice in newspapers and/or other forums (such as online publications and websites maintained by an employer, including social media websites), chosen by the Regional Director and paid for by the employer, so as to reach all current and former affected employees, as well as future potential hires;
• Visitorial and discovery clauses to assist the Agency in monitoring compliance with the Board’s Orders (e.g., requiring an employer to grant a Board Agent access to its facility and to produce records so that the agent can determine whether the employer has complied with posting, distribution, and mailing requirements, or permitting the Agency to obtain discovery under the Federal Rules of Civil Procedure for compliance purposes);
• Extended posting periods for notices where the unfair labor practices have been pervasive and occurred over significant periods of time;
• Distribution of notices and the Board’s Orders to current and new supervisors and managers;
• Training of employees, including supervisors and managers, both current and new, on employees’ rights under the Act and/or compliance with the Board’s Orders (e.g., requiring an employer to provide such training, one time or ongoing, with an outline of the training submitted to the Agency in advance of what will be presented, or requiring that a Board Agent be permitted to conduct such training);
• Instatement of a qualified applicant of the union’s choice in the event a discharged discriminatee is unable to return to work; and
• Broad cease-and-desist orders requiring violating parties to cease and desist “in any other manner” from interfering with, restraining, or coercing employees in the exercise of their Section 7 rights.

GC Abruzzo also addressed remedies in the context of “unlawful failures to bargain” and indicated she was “considering make-whole remedies that would compensate employees for the losses they sustain as a result of their employers’ failures to bargain.” She indicated Regions should seek the following remedies “in all appropriate cases:”

• Bargaining schedules (e.g., requiring a respondent to bargain not less than twice a week, at least six hours per session, until an agreement or a bona fide impasse is reached);
• Submission of periodic progress reports to the Agency on the status of bargaining (e.g., requiring a respondent to submit sworn written reports to the Agency every 30 days, over the course of a specified period, showing in detail the nature and course of bargaining with the union and attaching any written communications between the parties with respect to such bargaining);
• 12-month insulation periods, including extensions of the certification year, from the date an employer commences compliance with its bargaining obligations pursuant to a Board’s Order, during which a union’s status as bargaining representative may not be challenged;
• Reinstatement of unlawfully withdrawn bargaining proposals;
• Reimbursement of collective-bargaining expenses (e.g., requiring a respondent to reimburse an opposing bargaining party for negotiation expenses incurred during the entire period in which it fails to bargain in good faith);
• Engagement of a mediator from the Federal Mediation and Conciliation Service (FMCS) to help facilitate good-faith bargaining between parties;
• Training of current and/or new supervisors and managers in cases involving failures to bargain (Regions should be aware that such training has routinely been incorporated in settlement agreements to resolve contempt allegations over chronic failures to timely furnish information to unions); and
• Broad case-and-desist orders.

Abruzzo concluded by directing Regions to seek Orders requiring that Notices (as part of the Remedy) be distributed “by text messaging and by posting on social media websites and on any internal apps used by an employer to communicate with its  employees” in addition to the traditional posting locations and distribution methods.

GC MEMO 21-07  “FULL REMEDIES IN  SETTLEMENT AGREEMENTS”

On Sept. 15, 2021,  a week after the issuance of GC Memo 21-6, Abruzzo issued a second Memo “focusing on the types of remedies that Regions should seek in their informal and formal settlement agreements.”[iii]  GC Memo 21-7 sets out the types of remedies that Regions should seek in negotiating settlement agreements in particular cases. For example, in cases involving discharge, Abruzzo states “in addition to seeking no less than 100 percent of the backpay and benefits owed, Regions   should always make sure to seek compensation for any and all damages, direct and consequential, attributable to [the] unfair labor practice.” Abruzzo provided examples of the types of consequential damages that should be considered in the settlement of discharge cases:

• Compensation for damages caused to an employee’s credit rating following an unlawful firing;
• Compensation for financial losses suffered by an unlawfully fired employee from having to liquidate a personal savings account or an investment account to cover living expenses; and
• Fees and/or expenses for training or coursework required to obtain or renew a security clearance, a certification, or a professional license that had been denied or lost as a result of an unfair labor practice;
• The cost of obtaining comparable health insurance coverage following an unlawful firing, or the cost of medical expenses incurred through loss of medical insurance;
• Moving expenses (e.g., where an unlawfully fired employee is forced to move to obtain comparable employment and/or thereafter returns after accepting an unconditional offer of reinstatement);
• Medical expenses incurred by an employee who suffers physical injury in retaliation for engaging in activity protected under the Act; and
• Legal expenses that an employee incurs in connection with the  employer’s unlawful conduct.

GC Abruzzo also addressed the situation where a discharged employee declines reinstatement. In such situations, “in addition to seeking no less than 100 percent of the backpay and benefits owed, and all compensation owed for any consequential damages, Regions should also include front pay as part of their settlement calculations.” Further, Abruzzo directs Regions to negotiate provisions that provide for “in-house outplacement service or services of a third-party outplacement firm for a certain duration at the employer’s expense” [and] “neutral references and agreements by employers not to contest unemployment compensation.”

Moreover, in cases involving immigrant workers, GC Abruzzo directed Regions “to require the employer, at its own expense, to sponsor the work authorization of the affected employee, such as payment of any fees in having to sponsor the affected employee’s non-immigrant visa (such as H-1B, H-2B, J-1, F-1, TN), and reimbursement for any legal     fees, application fees, and travel costs that the affected employee may incur in seeking to regain a lost work authorization.”

Finally, in cases where the settlement is structured, GC Abruzzo directed Regions to use “confessions of judgment, promissory notes, and other forms of security” and “absent special circumstances, Regions should continue insisting on the exclusion of non-admission clauses in all settlement agreements and strongly consider the inclusion of admission clauses for repeat violators.”

Take Aways

The recent GC Memos provide further evidence that the NLRB’s General Counsel plans to press for expansive traditional and non-traditional remedies in unfair labor practice cases, including settlements. With the Senate’s confirmation of two pro-labor Board Members, the Board now has a Democratic majority who likely will be willing to adopt non-traditional remedies such as consequential damages in appropriate cases. Such has the potential to raise the economic stakes for employers in unfair labor practice proceedings and may make settlement of claims more difficult and expensive.     

Greg Grisham is an Attorney in the Memphis Office of Fisher & Phillips LLP and focuses his practice on counseling and representing employers in all aspects of labor and employment law. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

In addition to death and taxes there is one thing for certain — a major shift in labor policy occurs when the new president is of a different political party. The shift begins when the new president appoints a new chairman of the National Labor Relations Board (“NLRB” or “Board”), fills vacant Board member positions (subject to Senate confirmation) until three of the five board members are from the president’s party, and appoints the Board’s General Counsel (“GC”) (subject to Senate confirmation).

The NLRB General Counsel

The GC “is independent from the Board and is responsible for the investigation and prosecution of unfair labor practice cases and for the general supervision of the NLRB field offices in the processing of cases.”[i] Historically the new president has appointed a new GC when the four-year term of the incumbent GC expires, or he/she resigns as the NLRB is an independent federal agency. Section 3(d) of the National Labor Relations Act (“NLRA”) states, among other things, “[t]here shall be a General Counsel of the Board who shall be appointed by the President, by and with the advice and consent of the Senate, for a term of four years,” but there is no statutory language addressing removal from office.[ii]  By contrast, Section 3(a) of the NLRA (which applies to Board members) states that “[a]ny member of the Board may be removed by the President, upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause.”[iii]

Trump appointed NLRB General Counsel fired.

On Jan. 20, President Biden requested Trump-appointed GC Peter Robb to resign by 5 p.m. or he would be fired. Robb had 10 months remaining on his four-year term. When Robb refused to resign, he was fired by President Biden who also fired the Board’s Deputy GC Alice Stock the following day when she refused to resign. According to a Bloomberg Report, “Robb appears to be the first NLRB general counsel to be forced out in more than half a century.”[iv] Some Republican members of Congress complained the move would create “a disturbing precedent for politicizing” the general counsel’s office while four Republican Senators argued that the firing was “illegal.”[v]

Interim NLRB General Counsel appointed

President Biden quickly appointed NLRB attorney Peter Sung Ohr as the agency’s acting GC.[vi] Ohr previously served as regional director of the NLRB’s Chicago office. Within a week of becoming acting GC, Ohr “rolled back” 10 GC Memos issued by ex-GC Robb.[vii] This included “GC-18-04” which had provided guidance to Board investigators and attorneys on how to interpret the Board’s decision in The Boeing Company[viii] which addressed the legality of employer handbook policies under the NLRA.[ix] More recently, Ohr issued GC Memo 21-03 (3/31/2021) “Effectuation of the National Labor Relations Act Through Vigorous Enforcement of the Mutual Aid or Protection and Inherently Concerted  Doctrines” where he expressed a commitment to vigorous enforcement of the Labor Act: “I look forward to robustly enforcing the Act’s provisions that protect employees’ Section 7 rights with full knowledge that recent decisions issued by the current Board have restricted those protections.”[x]

On Feb. 17, President Biden nominated Jennifer Abruzzo to be the next GC of the NLRB.[xi] Abruzzo is currently a special counsel for the Communications Workers of America (CWA). Prior to her work at CWA, Abruzzo was a long-time NLRB attorney holding several positions including a stint as acting GC of the NLRB.  

New NLRB Chairman

President Biden also named Board Member Lauren McFerran, a Democrat, as chairman on Jan. 20. The five-member Board currently has four members (three Republican members and McFerran) and the term of one Republican member expires on Aug. 27. In a recent public appearance, McFarran “signaled she would aggressively seek to reverse Trump-era policies once Democrats take control of the five-seat board, sharply criticizing the Republican majority’s decisions.”[xii]

Take Aways

The Trump Labor Board reversed many decisions issued by the Obama Board and we can expect a Democratic majority on the Biden Board to reinstate many Obama Board rulings. The process will begin later this year after President Biden fills the current vacancy on the Board and the vacancy that will be created when Republican board member William J. Emanuel’s term expires in August. In the interim we can expect Acting GC Ohr and later Ms. Abruzzo (if confirmed by the Senate) to direct NLRB investigators and attorneys to more aggressively enforce the NLRA.     

J. Gregory Grisham is an attorney in the Memphis Office of Fisher & Phillips, LLP and focuses his practice on counseling and representing employers in all aspects of labor and employment law. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

In Wynn Las Vegas, LLC.,[i] (“Wynn”), the National Labor Relations Board reexamined the Board’s definition of “union solicitation” for the purpose of determining whether discipline issued to a pro union employee for violation of the employer’s Solicitation Policy, based on a conversation she had with a co-worker during worktime encouraging the co-worker to vote for the union in an upcoming representation election, violated the National Labor Relations Act (“Act”).

Fact Summary

Wynn is a hotel and casino located on the Las Vegas strip. The employee Kanie Kastroll (“Kastroll”), whose discipline was at issue in the case, is a table games dealer (“TGD”). The TGDs are represented by a union. Since May 13, 2014, Wynn has “maintained a written Solicitation and Distribution Policy (Solicitation Policy)… [whose] purpose… is to promote ‘a productive, ef­ficient, and clean work environment, as well as to mini­mize the potential of any disruption to the Respondent's guests.’”[ii] The Solicitation Policy states in pertinent part:[iii]

2. All . . . solicitation by employees is prohibited in work areas during the work time of the employee initiating the solicitation or the employee being solicited.

4. Solicitation is oral communication asking or seeking a person to take some action, such as buying a product or service, contributing to a charity, or joining an organ­ization. It also includes requests for employees to sign union authorization cards or representation petitions and the exchange of such documents for signature.

On February 2, 2015, Kastroll approached security officer Johnny Moreno (“Moreno”) who was working at “Priority One Post which is the highest customer traffic area on [the] property.” At Priority One Post, security officers “are responsible for assisting guests as well as ensur­ing casino security.” Kastroll spoke to Moreno about the upcoming election where security officers would vote on whether to have union representation. Kastroll encouraged Moreno and his fellow security officers to vote in favor of union representation and the conversation lasted approximately three minutes. “Numerous guests and other employees walked by Of­ficer Moreno during Kastroll’s interaction with him.” Several guests appeared to need directions but were unable to get Moreno’s attention and one guest had to ask another security officer Joshua Browning (“Browning”) for assistance. Browning, who was stationed nearby, overheard part of Kastroll’s conversation with Moreno and reported it to Wynn’s President who in turn informed Wynn’s General Counsel Kevin Tourek (“Tourek”).

Tourek, assisted by employee relations manager Courtney Prescott (“Prescott) initiated an investigation which included interviews with and written statements from Kastroll, Moreno and Browning and a review of the casino’s surveillance video. At the conclusion of the investigation, Prescott issued Kastroll a first written warning for violation of the Solicitation Policy based on her conversation with Moreno. The discipline was challenged as a violation of the Act, but the Administrative Law Judge (“ALJ”) who presided over the hearing dismissed the complaint finding Kastroll’s conversation constituted “union solicitation.”[iv] An appeal followed to the Board.

NLRB’s Opinion

In deciding the issue, the Board first examined earlier Board decisions in Wal-Mart Stores[v] and ConAgra Foods[vi] (cases cited by the General Counsel who argued in favor of reversal of the ALJ decision) and concluded both cases defined “solicitation” too narrowly. The Board then reviewed the U.S. Supreme Court’s decision in Republic Aviation Corp. v. NLRB[vii] noting the Court’s directive that the “Board is required to balance ‘the undisputed right of self-organ­ization assured to employees’ with ‘the equally undis­puted right of employers to maintain discipline in their es­tablishments.’”[viii] In conducting this balancing of rights, the Board noted “[t]he balance between employees’ right to organize and employers’ property rights ‘must be ob­tained with as little destruction of one as is consistent with the maintenance of the other.’”[ix] The Board further explained it “has long distinguished union solicitation from other types of employee activities that support union organizing.”[x] While prior Board decisions recognized that union solicitation, in the context of a union organizing campaign, “usually means” a request to sign a union authorization card, the Board stated the Wal-Mart Stores and ConAgra Foods decisions went further holding “that, in order to constitute union solicitation, the solicitor’s conduct must include the contemporaneous tender of a union authoriza­tion card.”[xi]

The Board further stated “this extremely narrow definition of ‘solicitation’ was inconsistent with long-standing Board law establishing that the act of requesting an employee to sign an authori­zation card constitutes solicitation, even if a card is not presented at the time of the conversation” and therefore “overrule[d] this aspect of the Wal-Mart and ConAgra decisions.”[xii]

In clarifying the definition of “union solicitation,” the Board held:[xiii]

…that solicitation for or against a union also encompasses the act of encouraging employees to vote for or against union representation. Such conduct constitutes union solicitation because the employee is selling or promoting the services of the union (or urging employees to reject those services). This understanding of solicitation comports both with prior Board precedent and with the dictionary definition of the word.

The Board then considered whether an actual work interruption had to occur as part of a “union solicitation.” In rejecting this requirement, the Board stated “a rule prohibiting solicitation during working time is presumed valid, and employers may law­fully discipline an employee who violates such a rule, even if the employee has not interrupted work….[and that such a requirement] interferes with the balance between em­ployees’ right to organize and ‘the equally undisputed right of employers to maintain discipline in their establish­ments’”[xiv] In concluding its analysis, the Board stated “where an employee makes statements to a coworker during working time that are in­tended and understood as an effort to persuade the em­ployee to vote a particular way in a union election, that employee has engaged in solicitation subject to discipline under an employer’s validly enacted and applied no-solic­itation policy.”

Next turning to the facts of the case before it, the Board affirmed the ALJ’s dismissal of the complaint stating “Kastroll engaged in prohibited union solici­tation on February 2 because she was encouraging another employee to vote a particular way in a union election dur­ing that employee’s working time.”[xv] 

Take Aways

The Board’s decision in Wynn provides employers with a stronger hand to discipline employees who violate published “No Solicitation” policies when they encourage co-workers during work time to support union organizational efforts even when there is no actual interruption of work. All employers should have a published no solicitation/no distribution policy that clearly explains when and where solicitation of co-workers and the distribution of material is prohibited. That said, employers must be diligent in enforcing such policies in an even-handed manner. For example, employers should not permit employees to solicit co-workers during worktime to purchase products or services that are unrelated to union organizing since this can expose the employer to unfair labor practice charges if pro-union employees are disciplined for engaging in union solicitation during worktime.

 J. Gregory Grisham is an attorney in the Memphis office of Fisher & Phillips, LLP and focuses his practice on counseling and representing employers in all aspects of labor and employment law. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

In UPMC Presbyterian Hospital(”UPMC”)[1], the National Labor Relations Board (“NLRB” or “Board”) considered the question of whether the Employer UPMC unlawfully ejected nonemployee union or­ganizers from its hospital cafeteria, an area open to the public. In ruling in favor of UPMC, the Board overruled existing Board precedent “regarding access to public restaurants and cafete­rias within an employer’s private property by nonemployee union representatives.”

Fact Summary

In UPMC, two union representatives met with six employees using two tables in a cafeteria located in the employer’s hospital to eat lunch and discuss“union organizational campaign matters.” Union flyers and pins were displayed on the two tables and one off-duty employee present passed out some union flyers. The union representatives also spoke to other employees that stopped at the tables. After receiving complaints from a manager and an employee, the Employer’s Security Operations Manager approached the two union representatives, and asked them to leave. When the union representatives refused to leave, a call was made to 911 and several police officers arrived to escort them off the property.

At the time the union representatives were removed, there were no rules posted in the cafeteria regulating access. While the Employer did “not actively monitor who is using the cafeteria” the Employer’s Security Department responded “to reports of solicitation by nonemployees.”[2] The Employer introduced evidence (which was not rebutted) establishing a consistent past practice of removing nonemployees who had engaged “in pro­motional activity, including soliciting or distributing, in or near the cafeteria.” [3]

NLRB’s Opinion

The Board began its analysis by reviewing U.S. Supreme Court precedent on the issue of union access and employer property rights.The CourtinNLRB v. Babcock & Wilcox Co.[4] made clear that “no restriction could be placed on the employees’ right to discuss self-organization among themselves (absent a demonstration that a restriction was necessary to main­tain production or discipline).” However, the Court ruled “no such obligation is owed [to] nonemployee organizers” by Employers. The Court then set out the standard governing union access to Employer private property:

It is our judgment . . . that an employer may validly post his property against nonemployee distribution of union literature if reasonable efforts by the union through other available channels of communication will enable it to reach the employees with its message and if the employer’s notice or order does not discrimi­nate against the union by allowing other distribution.[5]

 The Board noted that the exceptions set forth in Babcock have been described by the Court as “narrow ones and that the union’s burden of proof to establish that one or the other exception applies is a heavy one.”[6] The Board then turned to review Lechmere, Inc. v. NLRB[7]where the Court ruled the Employer “did not violate the Act by restricting nonemployee union access to an em­ployee parking lot on the employer’s property.”[8] Lechmere, the Board noted, further “strengthened Babcock’s general pro­hibition on nonemployee access, emphasizing that the Babcock inaccessibility exception would apply only in ‘rare case[s]’ and that only where ‘such access is infea­sible’ would it become necessary to accommodate em­ployees’ Section 7 rights and employers’ property rights.”[9]

The Board, using its own application of Babcock, finding that while the “inaccessibility” and “nondiscrimination” exception had been “generally applied,” the Board created a third exception when “union organizers seek access to a portion of the employer’s private property that is open to the public, such as a cafeteria or restaurant.”[10] In such cases, the Board held “nonemployee union organizers cannot be denied access to cafeterias and restaurants open to the public if the organizers use the facility in a manner consistent with its intended use and are not dis­ruptive.”[11] This third exception, in the Board’s view, effectively eliminated Babcock’s “general rule limiting nonemployee union access to private property and found discrimination based solely on the fact that nonemployee union organizers were ex­cluded.”[12] The Board further noted that this third exception “has been soundly rejected by multiple circuit courts.”[13] The Board concluded by overruling prior Board precedent to the extent the “‘pub­lic space’ exception … requires employers to permit nonemployees to engage in promotional or organization­al activity in public cafeterias or restaurants absent evi­dence of inaccessibility or activity-based discrimination.”[14]  The Board stated “[a]bsent discrimination between nonemployee union representatives and other nonemployees… the employer may decide what types of activities, if any, it will allow by nonemployees on its property.”[15]

Take Aways

The UMPC decision is another example of the current NLRB strengthening the hand of employers in dealing with organized labor, although it is difficult to reconcile the NLRB created “public space” exception with the Supreme Court’s holdings in Babcock and Lechmere. Employers now may freely exclude nonemployee union representatives from public areas on their private property absent a showing of inaccessibility or discrimination. Employers, however, must ensure that rules against solicitation by nonemployees are consistently enforced in an even-handed manner to avoid claims of discrimination against union organizers/representatives.

[1] 368 NLRB No. 2 (June 14, 2019).

In SuperShuttle DFW, Inc. (“SuperShuttle”),[i]the National Labor Relations Board (“NLRB” or “Board”) reexamined the Board’s test for determining independent contractor status under the National Labor Relations Act (“Act”) in the context of a union’s request to represent franchisees in a petitioned-for bargaining unit.[ii] The Board was presented with the question of “whether franchisees who oper­ate shared-ride vans for SuperShuttle Dallas-Fort Worth are employees covered under Section 2(3) of the Nation­al Labor Relations Act or independent contractors and therefore excluded from coverage.”

Facts

The issue came before the Board after the Acting Regional Director dismissed the union’s petition on the ground that the franchisees were independent contractors and the Board granted the union’s subsequent request to review the decision.

SuperShuttle is an independ­ent business entity that has a licensing agreement with “SuperShuttle International [“SSI”] and SuperShuttle Franchise Corporation for the right to use the SuperShuttle trade­mark and transportation system in the Dallas-Fort Worth area. SSI owns the SuperShuttle name, logo, and color scheme, develops pro­prietary software for dispatching, cashiering, and taking reservations for use in administering a shuttle van trans­portation system.” Under the licensing agreement, SuperShuttle has the right “to market and deploy the SuperShuttle transportation system in its designated local market.” Franchise owners sign a one-year “Unit Franchise Agreement” (“UFA”) that, among other things, designates them as independent contractors. Franchisees’ pay “an initial franchise fee” and a weekly “flat fee” to use the SuperShuttle brand name and for the “Nextel dispatch and reservation apparatus” and a “decal fee.” Franchisees are able to set their own work schedules and get to keep all fares they earn on the assignments they select. They are also permitted to hire “relief drivers” to operate the vans, which are owned or leased by the franchisees. The franchisees are not entitled to receive any benefits from SSI and are required to indemnify and hold SSI harmless for any claims arising out of the franchisees’ actions or failure to act.

NLRB’s Opinion

The NLRB began its analysis by reviewing the its prior decision in FedEx Home Delivery, 361 NLRB 610 (2014) (FedEx), enf. denied ,849 F.3d 1123 (D.C. Cir. 2017) (FedEx II), and found the Board had “significantly limited the importance of entrepreneurial opportunity” by making it “one aspect” of the “rendering services as part of an independent business” factor which is part of the common-law agency test set forth in Restatement (Second) of Agency §220 (1958) and required under United States Supreme Court precedent.[iii] The common-law agency test, which sets out a list of “non-exhaustive” factors[iv], looks at:

1. The extent of control which, by the agreement, the master may exercise over the details of the work.
2. Whether or not the one employed is engaged in a distinct occupation or business.
3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direc­tion of the employer or by a specialist without supervi­sion.
4. The skill required in the particular occupation.
5. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
6. The length of time for which the person is em­ployed.
7. The method of payment, whether by the time or by the job.
8. Whether or not the work is part of the regular busi­ness of the employer.
9. Whether or not the parties believe they are creating the relation of master and servant.
10. Whether the principal is or is not in business.

The Board found the Board’s prior decision in FedEx Home Delivery should be overruled since it “did far more than merely ‘refine’ the common-law independent contractor test” but rather “fundamentally shifted the independent contractor analysis… to one of economic realities.”[v]

Turning to the facts before it, the Board examined the relationship between SSI and the franchisees and determined the Acting Regional Director correctly found the franchisees to be independent contractors excluded from the Act’s coverage. In applying the common-law factors, the Board noted that the franchisees had to make a significant initial investment (buying or leasing a van and agreeing to make an initial and weekly payments under the UFA) and that they had “total control over their schedule” which established the franchisees had “significant opportunity for economic gain and significant risk of loss” which “strongly” supported the finding that they were independent contractors.[vi] In considering the factor “extent of control by the employer” the Board noted that the franchisees had little communication with SSI (other than assignment bid opportunities sent through the Nextel device), that they had no set routes and were not confined within the Dallas-Fort Worth area, and the UFA’s indemnification requirement “which greatly lessens SSI’s motivation to control a franchisee’s actions.”[vii] The Board also found the “method of payment” factor supported a finding of independent contractor status, since the franchisees were able to keep all of the revenue they generated and simply paid SSI a flat fee. On the “instrumentalities, tools, and place of work” factor, this also weighed in favor of independent contractor status, since the franchisees made a significant initial investment, were required to pay a weekly fee and had to “pay for gas, tolls, repairs and any other costs associated with operating their vans.”[viii] On the supervision factor, the Board found that franchisees had “near-absolute autonomy in performing their daily work without supervision” which supported a finding of independent contractor status.[ix] With respect to the “relationship the parties believed they created” factor, the Board cited the language of the UFA which stated in bold letters that the franchisees were independent business owners and not employees of SSI.[x] Under the “engagement in a distinct business, work as part of the employer’s regular business, and the principal’s business”  factors, which the Acting Regional Director viewed as “closely related, ” the Board found these factors favored a finding of employee status, since “driving is not considered a distinct occupation.”[xi] The Board concluded its analysis by examining the remaining two factors “length of employment” and “skills required” and found the former to be a neutral indicator (based on the one-year UFA term vs. facts showing the arrangement typically continued beyond one year) and the later to favor employee status since driving the vans did not require special skills or training.[xii] The Board ended its analysis by finding the franchisees were independent contractors based on its application of the common-law test, since the franchisees have “significant entrepreneurial opportunity and control over how much money they make each month” and SSI does not exercise significant control “’over the manner and means by which the drivers conduct[] business’” and “’the relationship between the company’s compensation and the amounts of fares col­lected.’”[xiii] (the latter two points important from prior Board taxicab cases).

Takeaways

The Board’s decision in SuperShuttle offers up another example of the Trump Board’s shift away from Obama-era precedents and signals an openness to endorse work arrangements that favor the use of independent contractors as can be seen in the growth of Gig Economy employers. While the independent contractor analysis remains a fact intensive inquiry, the Board’s decision in SuperShuttle indicates that significant evidence of “entrepreneurial opportunity” may carry the day for businesses who wish to construct work arrangements that fall outside the reach of the Act and its requirements. However, it must be noted that the independent contractor status inquiry under other employment laws, such as the Fair Labor Standards Act, can be different and a separate legal analysis should be conducted for each.

— J. Gregory Grisham is Of Counsel in the Memphis Office of Fisher & Phillips, LLP and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his Juris Doctor (with honors) from the University of Memphis, Cecil C. Humphreys School of Law in 1989. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

In Silvan Industries,[i]the National Labor Relations Board (NLRB or Board) considered the question of whether an employer can file an RM Petition[ii] to determine whether an existing union continues to enjoy majority support, despite the existence of a finalized collective bargaining agreement that has not yet become effective.

Fact Summary

The Employer, Silvan Industries, a Division of SPVG (Silvan) operated a plant in Wisconsin. On October 16, 2015, a Union[iii] “was certified as the exclusive collective-bargaining representa­tive of Silvan’s production and maintenance em­ployees.” On October 13, 2016, a tentative agree­ment was reached and Silvan was notified by the Union on October 15 that it had been ratified by the bargaining unit membership. The agreement stated that it was to be effective “from November 7, 2016, through November 3, 2019.” Silvan and the union set a meeting for October 25 to execute the agreement.

However, on October 25, Silvan received a petition “in which employees expressed opposition to continued union representation.”[iv] Silvan viewed the petition as raising “a good-faith reasonable doubt” as to whether the Union continued to represent a majority of unit employees and filed an RM petition with the NLRB regional office that same day. That same day, Silvan and the union signed the agreement. The NLRB’s Regional Director dismissed the RM petition without a hearing because it was filed after the parties had agreed to a contract. Silvan then filed a request for review of the Regional Director’s decision with the Board.

NLRB’s Opinion

The NLRB began its analysis by noting that “the Board will generally decline to process an election petition that is filed during the term of a collective-bargaining agreement” in order to “promote stability in collective bargaining and labor relations.”[v] However, the Board cited a countervailing concern, namelythat a “delay in resolving an otherwise-valid question con­cerning representation necessarily affects the Section 7 rights of employees who do not support continued union representation.”[vi] To balance “these competing considerations,” the Board cited the requirements for applying the “contract bar” to an election petition, specifically “the collec­tive-bargaining agreement [must] be in writing, signed by the parties, and specify its effective date on its face.”[vii] The NLRB then noted that the “contract bar” period “runs from [the agreement’s] effective date.”[viii] Based on the facts presented, the Board found Silvan’s October 25 Petition was not barred by the agreement, since the contract did not become effective until November 7. The Board also found that the standard used to determine whether a withdrawal of recognition from an existing union was legal was not applicable, since Silvan did not withdraw recognition from the union. Rather, the Board found that Silvan “engaged in good-faith bar­gaining as required by the Act, and when itreceived the employee petition opposing continued union representa­tion, the Employer filed an appropriate petition with the Board” which was lawful under the National Labor Relations Act.[ix] In closing, the Board noted that the sequence of events in the case had “never happened before” and downplayed the precedential value of its decision noting “it is destined to occupy a deservedly obscure nook in the Board’s representation case law.”[x] The Board concluded its analysis by reversing the decision of the Regional Director, reinstating the petition, and remanding the case for further action.

Take Aways

The Silvan decision is another example of the stark policy shift that has occurred with the Trump Labor Board. The Board, in balancing stability in collective bargaining and labor relations with employee free choice, opted to weigh the scales in favor of employee free choice. Collective bargaining over initial contracts is often a slow and cumbersome process. The Silvan decision may incentivize employers to delay the bargaining process and push off the effective date of any agreement reached in the hope that disgruntled unit employees come forward to raise doubts of the union’s continued majority status, thus opening the door for the employer to file an RM petition.

*J. Gregory Grisham is Of Counsel in the Memphis Office of Fisher & Phillips, LLP and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his Juris Doctor (with honors) from the University of Memphis, Cecil C. Humphreys School of Law in 1989. Greg may be reached at ggrisham@fisherphillips.com or 901-333-2076.

On June 6, 2018, Peter Robb, the National Labor Relations Board (“NLRB” or “Board”) General Counsel issued GC 18-04 entitled “Guidance on Handbook Rules Post-Boeing”[i](“Guidance”) to provide “general guidance for Regions regarding the placement of various types of [employer] rules into the three categories set out in Boeing, and regarding the Section 7 interests, business justifications, and other considerations that Regions should take into account” in presenting arguments to the Board regarding the illegality of certain handbook rules. [ii]

By way of background, former General Counsel Richard F. Griffin, Jr., on March 18, 2015, issued GC15-04 “Report of the General Counsel Concerning Employer Rules”[iii] which “offer[ed] guidance on [Griffin’s]views of this evolving area of labor law, with the hope that it will help employers to review their handbooks and other rules, and conform them, if necessary, to ensure that they are lawful.”[iv] The views expressed in GC 15-04 were based on the Board’s decision in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004)(“Lutheran Heritage”), that held ‘the mere maintenance of a work rule may violate Section 8(a)(1) of the Act if the rule has a chilling effect on employees' Section 7 activity.”[v]GC 15-04 was withdrawn by General Counsel Robb on 12/1/2017shortly after he was confirmed by the U.S. Senate. 

The “Boeing” Standard

InThe Boeing Company, 365 NLRB No. 154 (Dec. 14, 2017) (“Boeing”), the NLRB overruled its decision in Lutheran Heritageand changed the standard for evaluating the legality of “the maintenance of facially neutral rules.”[vi]The Board in Boeingestablished a “standard that focuse[s] on the balance between the rule’s negative impact on employees’ ability to exercise their Section 7 rights and the rule’s connection to employers’ right to maintain discipline and productivity in their workplace”. It also placed employer rules into three categories: (1) Rules that are Generally Lawful to Maintain; (2) Rules Warranting Individualized Scrutiny; and (3) Rules that are Unlawful to Maintain.[vii]

Categories of Employer Rules under Boeing:

Category 1 Rules

The Guidance first discusses employer rules that fall within Category 1 which are generally lawful “because the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of rights guaranteed by the Act, or because the potential adverse impact on protected rights is outweighed by the business justifications associated with the rule.”[viii]However, “the applicationof a facially neutral rule against employees engaged in protected concerted activity is still unlawful.”[ix]

The Guidance lists categories of employer rules (with multiple examples under each) that fall within Category 1 including: “Civility Rules;” “No-Photography Rules and No-Recording Rules;” “Rules Against Insubordination, Non-cooperation, or On-the-job Conduct that Adversely Affects Operations;” “Disruptive Behavior Rules;”“Rules Protecting Confidential, Proprietary, and Customer Information or Documents;” “Rules against Defamation or Misrepresentation;” “Rules against Using Employer Logos or Intellectual Property;” “Rules Requiring Authorization to Speak for Company;” and “Rules Banning Disloyalty, Nepotism, or Self-Enrichment.”[x]

 Category 2 Rules

In contrast to Category 1 employer rules, Category 2 Rules “must be evaluated on a case-by-case basis to determine whether the rule would interfere with rights guaranteed by the NLRA, and if so, whether any adverse impact on those rights is outweighed by legitimate justifications.”[xi]The Guidance notes that “context” must be considered and “such rules should be viewed as they would by employees who interpret work rules as they apply to the everydayness of their job.” [xii]Other factors to be considered “include the placement of the rule among other rules, the kinds of examples provided, and the type and character of the workplace” and whether the “rule has actually caused employees to refrain from Section 7 activity is a useful interpretive tool.” [xiii]The Guidance sets out some possible examples of rules that may fall in Category 2 contrasting them with Category 1 rules:[xiv]

•       Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment … and do not restrict membership in, or voting for, a union….;

•       Confidentiality rules broadly encompassing “employer business” or “employee information” (as opposed to confidentiality rules regarding customer or proprietary information… or confidentiality rules more specifically directed at employee wages, terms of employment, or working conditions…);

•       Rules regarding disparagement or criticism of the employer(as opposed to civility rules regarding disparagement of employees...);

•       Rules regulating use of the employer’s name (as opposed to rules regulating use of the employer’s logo/trademark…);

•       Rules generally restricting speaking to the media or third parties (as opposed to rules restricting speaking to the media on the employer’s behalf…);

•       Rules banning off-duty conduct that might harm the employer (as opposed to rules banning insubordinate or disruptive conduct at work… or rules specifically banning participation in outside organizations…); and

•       Rules against making false or inaccurate statements (as opposed to rules against making defamatory statements…).

 Category 3 Rules

The Guidance next addresses employer rules in Category 3 which are “generally unlawful because they would prohibit or limit NLRA-protected conduct, and the adverse impact on the rights guaranteed by the NLRA outweighs any justifications associated with the rule.”[xv]Examples of rules that the Board has found to fall within Category 3 include “Confidentiality Rules Specifically Regarding Wages, Benefits, or Working Conditions” and “Rules Against Joining Outside Organizations or Voting on Matters Concerning Employer.”[xvi]

Take Away

The NLRB’s decision in Boeingmarks a dramatic shift from Board’s prior standard in Lutheran Heritage that regularly invalidated the maintenance of facially neutral employer rules as violative of the National Labor Relations Act. However, Employers and their counsel should consult the Guidance as it is a helpful resource to use in assessing the legality of existing facially neutral work rules under the new Boeing standard.

J. Gregory Grisham is a Partner in the Nashville and Memphis Offices of Ford Harrison, LLP and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his JD, with honors, from the University of Memphis, Cecil C. Humphreys School of Law in 1989. Greg may be reached at ggrisham@fordharrison.com or 615-574-6707.

Joshua J. Sudbury is a senior associate at Ford Harrison, LLP in its Nashville office, where he concentrates his practice on representing management in a variety of labor and employment matters. He received his J.D. at University of Memphis School of Law in 2009. Josh may be reached at jsudbury@fordharrison.com or 615-574-6705

President Trump’s Senate confirmed appointments to the National Labor Relations Board (“NLRB” or “Board”),Marvin E. Kaplan and William J. Emanuel, recently joined with now former Chairman Philip A. Miscimarra to overturn several important Obama-era NLRB decisions. While more Obama-era NLRB precedents are expected to be reversed, this article will examine four NLRB decisions issued in December 2017 that changed the labor landscape in a positive way for employers.

1. UPMC Presbyterian Hospital, 365 NLRB No. 153 (Dec. 11, 2017)

InUPMC Presbyterian Hospital, the Board revisited the issue of whether an administrative law judge (ALJ”) could accept a partial settlement offer made by a respondent to resolve an important issue in the case where the NLRB’s general counsel and/or the charging party objected to the settlement offer. One of the respondents (“respondent 1”) in the case was alleged to be a single employer and responsible for alleged unfair labor practices committed by a subsidiary (“respondent 2”). Respondent 1 made a settlement offer to the ALJ to resolve the single employer issue by agreeing to guarantee any remedy ultimately awarded based on the conduct of respondent 2. The ALJ agreed to accept the offer over the objections of the general counsel and charging party. The ALJ’s decision to accept the settlement offer was appealed to the Board.

In finding that the ALJ acted properly in accepting the settlement offer, the Board reversed its prior decision in United States Postal Service, 364 NLRB No. 116 (2016), which held “judges are no longer permitted to accept a respondent’s offered settlement terms, over the objection of the General Counsel and charging party or parties, unless the offer constitutes ‘a full remedy for all of the violations alleged in the complaint.’”[i] The NLRB agreed with Chairman Miscimarra’s dissenting opinion in United States Postal Servicewhich argued the holding “imposed an unacceptable constraint on the Board itself, which retained the right under prior law to review the reasonableness of any respondent’s offered settle­ment terms that were accepted by the judge.”[ii]In overruling United States Postal Service  the Board “return[ed] to the Board’s prior practice of analyzing all settlement agreements, including consent settlement agreements, under the “reasonableness” standard set forth in Independent Stave, 287 NLRB 740 (1987).”[iii]

2. Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (Dec. 14, 2017)

The Board revisited its decision in Browning-Ferris Industries of California, Inc. (Browning-Ferris), 362 NLRB No. 186 (2015) which held “even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any 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 or control that is ‘limited and routine.’” [iv] The Board “concluded that the common law and numerous policy considerations favor abandoning the Browning-Ferris joint-employer standard [and]… reinstate[d] the joint-employer standard that existed prior to the Brown­ing-Ferris decision.”[v] In place of the standard announced in Browning-Ferris, the Board held “a find­ing of joint-employer status requires proof that the al­leged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise con­trol), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”[vi]

3. PCC Structurals, Inc., 365 NLRB No. 160 (Dec. 15, 2017)

The Board overruled the so-called “micro-unit” bargaining unit test established in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934 (2011) (“Specialty Healthcare”) and “reinstate[d] the traditional community-of interest standard as articulated in United Operations, Inc., 338 NLRB 123 (2002).” Under the Specialty Healthcare standard, “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 after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit’ for bargaining.”[vii] If the employer seeks to add additional employees to the unit found to be appropriate by the Board, the employer has the burden “to demonstrate that the additional employees the proponent 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 petitioned-for unit because the traditional community-of-interest factors ‘overlap al­most completely.’”[viii] In abandoning the Specialty Healthcare standard, the NLRB reaffirmed the community of interest test noting that the Board in each case must determine:

whether the employees are organized into a separate department; have distinct skills and training; have dis­tinct job functions and perform distinct work, including inquiry into the amount and type of job overlap be­tween classifications; are functionally integrated with the Employer’s other employees; have frequent contact with other employees; interchange with other employ­ees; have distinct terms and conditions of employment; and are separately supervised.[ix]

In making a determination on the appropriateness of a petitioned-for unit, the Board further stated that it was “not constrained by whether or not an ‘overwhelming’ community of interest exists be­tween petitioned-for employees and those excluded from that unit [and noted]…, where applicable, the analysis must con­sider guidelines that the Board has established for specific industries with regard to appropriate unit configurations.”[x]

4. Raytheon Network Centric Systems, 365 NLRB No. 161 (Dec. 15, 2017)

In Raytheon, the Board overruled its decision in E.I. DuPont de Nemours, 364 NLRB No. 113 (2016) (“DuPont”), which prohibited unilateral changes after the expiration of a collective bargaining agreement (“CBA”) where the CBA or a past practice allowed the employer to take unilateral action. In DuPont, the Board held “even if an employer continues to do precisely what it had done many times previously—for years or even decades—taking the same actions consti­tutes a ‘change,’ which must be preceded by notice to the union and the opportunity for bargaining, if a CBA permitted the employer’s past actions and the CBA is no longer in effect.”[xi] In overruling DuPont, the NLRB explained the basis for its decison:

Under Katz, an employer must provide notice and the opportunity for bargaining before making a “change” in employment matters. It is equally clear, as demonstrated by innumerable Board and court decisions interpreting Katz, that bargaining is not required when no “change” has occurred. Where, as here, the employer takes actions that are not materially different from what it has done in the past, no “change” has occurred and the employer’s unilateral actions do not violate Section 8(a)(5) of the Act.[xii]

5. Takeaways.

 The recent NLRB decisions discussed above reflect the Trump Board’s interest in reviewing and overturning significant Obama-era decisions that departed from established precedents. This is welcomed news for employers. All four decisions issued prior to the December 16 departure of Republican Member Chairman Miscimarra upon the expiration of his term. President Trump has nominated management-side attorney John Ring to fill the current Board vacancy.Once Ring is confirmed by the Senate, the 3 to 2 Republican majority on the Board will no doubt continue to look for opportunities to overturn additional Obama-era Board decisions which will likely further benefit employers.

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J. Gregory Grisham is a Partner in the Nashville and Memphis Offices of Ford Harrison, LLP and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his JD, with honors, from the University of Memphis, Cecil C. Humphreys School of Law in 1989. Greg may be reached at ggrisham@fordharrison.com

 or 615-574-6707.