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April 2018

NLRB overrules and changes prior holdings

Nowhere is it more clear that “elections have consequences” than in issues arising before the National Labor Relations Board (“NLRB” or “Board”). In a 3-2 decision issued on December 14, 2017 the Board reversed the joint employer standard that was put in place in 2015, which had greatly expanded the potential reach of the standard in cases under the Board’s jurisdiction. The former standard—announced in the Browning Ferris decision (and which is still under review in the U.S. Court of Appeals for the D.C. Circuit)—stated that even indirect control and a reserved right to exercise such control might be enough to convey joint employer status. In a stunning reversal after just two years, the newly minted Republican-majority of the Board decried Browning Ferris as a “distortion of common law” that actually exceeded the Board’s authority under the Act, “ill-advised as a matter of policy,” and likely to foment uncertainty and instability rather than promoting labor peace. The new standard announced in Hy-Brand Industrial Contractors would have returned the law to where it was prior to Browning Ferris and would have required “proof that putative joint employer entities have 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.” Unfortunately, shortly after the NLRB issued its Hy-Brand decision, the Inspector General of the NLRB found that one of the Board members who voted to reverse Browning-Ferris should have recused himself from voting because of his former law firm’s involvement in the Browning-Ferris case. The vacating of the Hy-Brand decision brought about a highly unusual procedural effort by the NLRB. In this regard, even though the United States Court of Appeals for the D.C. Circuit had previously granted the NLRB’s request to remand the appeal of Browning-Ferris back to the NLRB, the NLRB asked and the Court undid its remand and will continue to review the Browning-Ferris case.

At the same time that the NLRB itself was is working on this remand issue, the General Counsel of the NLRB called a halt to a trial against McDonald’s Corporation and several of its franchisees, which had already consumed approximately 150 days of trial and he began attempting to settle these cases. On March 19, the General Counsel announced that he had reached a settlement on these matters that must now be approved by the Administrative Law Judge who had been presiding at the trial. Various union advocates have called his this settlement attempts a “euphemism” for abandoning at the 11th hour a “ground breaking” inquiry into joint employment.

In a second 3-2 decision decided on the same day Hy-Brand was announced, the new Republican-appointed majority of the Board overruled the 13-year old prior approach from the Lutheran Heritage case that had been used to throw into question many common sense employer rules such as requiring employees to “work harmoniously” or to conduct themselves in a “positive and professional manner,” both of which were ruled unlawful under cases arising under the prior test. Under that test, a work rule or policy could be (and usually was) deemed unlawful if “employees would reasonably construe the language to prohibit Section 7 activity,” regardless of the reason the employer had for promulgating the rule. As the new Board majority recognized in Boeing Company, the Board’s prior test skewed the analysis too far in favor of employee rights while affording the employer no consideration. Boeing performs classified work for the Government that is essential for national security. In upholding a Boeing policy prohibiting the use of cell phones and other mobile devices without a permit approved by Company security, the Republican Board majority applied a balancing test and held that the potential harm to employees’ Section 7 rights was minimal whereas the potential harm to the Company in allowing unfettered use of mobile devices by employees was much greater. According to the Board, “when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights; and (ii) legitimate justifications associated with the rule” and the Board will conduct this evaluation “consistent with the Board’s duty to strike the proper balance between . . . asserted business justifications and the invasion of employee rights . . .” This new Board standard is a welcome development to all employers who have struggled with how to write a policy that will survive NLRB scrutiny.

Two other decisions decided by the new Republican Board majority are worthy of mention. In Raytheon Centric Systems the new majority found that the Board’s 2016 decision in a case involving DuPont which limited the ability of unionized employers to implement changes to terms and conditions of employment even where the employer had a long history of making such unilateral changes, “distorts the long-understood commonsense understanding of what constitutes a ‘change’…” Also, the Board in PCC Structurals, Inc. overturned its 2011 decision in Specialty Healthcare which had allowed unions to unionize a “micro-unit.” The effect of this decision is a return to the long-standing test that employees who share a community of interest with each other should generally be included in the same bargaining unit despite the intent of a petitioning union to have the NLRB rule that a smaller and easier to unionize unit is an appropriate bargaining unit.

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