A newly composed National Labor Relations Board (NLRB or Board) with a new General Counsel moved swiftly late last week to upend a decade of rulings made by a more pro-labor, Obama-era NLRB by announcing decisions affecting workplace rules, employee manuals, an employer’s duty to bargain, and bargaining unit size. Employers may wish to revisit their policies and business practices under these more employer-friendly decisions.
On December 14, 2017, the NLRB announced a new standard for evaluating whether the maintenance of commonplace work rules would run afoul of the National Labor Relations Act (NLRA or Act). The Board’s new standard will almost certainly result in making work rules that had been invalidated in dozens of previous cases now acceptable under the NLRA. On the same day, the Board overruled a 2015 decision that deemed many organizations to be “joint employers” with various business partners and caused extreme concern on the part of franchise operators, subcontractors, and other business entities.
The very next day, December 15, 2017, the Board decided two more major cases. First, it reversed a 2011 decision that had paved the way for so-called micro-units in union representation cases, reverting to its prior standards to evaluate whether a unit chosen by a union for an election is an “appropriate unit” for collective bargaining. Second, it reversed a decision issued just last year that required employers to refrain from implementing long-standing updates to benefit plans without bargaining with a union that represents the employees.
These four decisions are likely to be followed with several more changes to Obama-era precedents.
Decision #1: Review of Workplace Rules
The first case, The Boeing Co., 365 NLRB No. 154, involved a policy that prohibited cameras in the workplace. The rule had not been adopted in response to any union activity, and it had not been applied to restrict any activity protected by the NLRA. The administrative law judge who initially decided the case applied existing Board precedent and determined that “employees would reasonably construe the language to prohibit Section 7 activity,” referring to the section of the NLRA that protects concerted activity by employees for mutual aid and benefit. The new Board disagreed with the administrative law judge and used the case to announce a sweeping new approach to its review of facially neutral workplace policies.
The Board announced that it would henceforth evaluate two factors when addressing such policies:
i. The nature and extent of the potential impact on NLRA rights; and
ii. The legitimate justifications associated with the challenged workplace policy.
The majority decision emphasized that the Board would in each case strike the proper balance between the asserted business justification and the invasion of employee rights. The Board applied its new standard to the no-camera rule at issue in the Boeing case after reviewing the evidence that Boeing had presented to justify its no-camera policy.
In addition, the Board declared that another category of rules not involved in Boeing would also be considered lawful in nearly all circumstances. Specifically, the Board’s decision singled out for criticism a line of cases decided in the past several years that involve policies requiring “harmonious interactions and relationships” and respectful conduct. While emphasizing that the application of such rules to undermine union activity or other concerted activity would run afoul of the Act, the Board held that such workplace civility policies would no longer be found to violate the Act merely by being maintained.
While employers may now wish to revise their policies, even under the new approach they may need to provide a business justification for any workplace policy that could restrict concerted activity by employees. Therefore, anytime an employer adopts a new policy or amends an old policy, it would be wise for the employer to articulate a justification for that policy that can be used in the event of any future challenge under the Act.
Decision #2: Joint Employer Status
Another subject that has caused many employers concern over the past several years is the determination of joint employer status by the NLRB. In its 2015 decision in Browning-Ferris, the Board loosened the standards used for determining whether two employers were jointly responsible for employees under the Act (see our prior Alert), and in 2016 it further liberalized the standard it used for including temporary employees in union bargaining units (see our prior Alert). On December 14, 2017, the new Board returned to the legal standards that existed before 2015.
The case the Board used to change the law, Hy-Brand Industrial Contractors, 365 NLRB No. 156, did not involve joint collective bargaining relationships or temporary employees. Moreover, the Board found in Hy-Brand that the two employers involved actually were joint employers under the new test, that they violated the NLRA by firing employees who had engaged in protected activity, and that each entity was liable for the firing of all employees, regardless of which entity formally employed the individual employees. Because the case raised the issue of joint employment status, however, the majority opinion took the opportunity to announce that the standard recently adopted in 2015 would no longer apply.
The 2015 Browning-Ferris decision broadly held that even indirect and unexercised control by one entity over the employees of another entity could suffice to make an employer jointly responsible for the unfair labor practices of its partner and give rise to joint bargaining obligations. In Hy-Brand, the Board returned to the pre-2015 common law standard that examines actual control over employees to determine whether there is a joint employment relationship.
Over the past two years, the Browning-Ferris decision had raised significant concerns for many business operations that subcontract work but retain some formal rights in their subcontracting agreement concerning the way in which employees of the subcontractor perform services on the premises, such as requiring drug tests, setting hours of operation, or controlling access to the facilities. Franchise operations were also extremely concerned that the sometimes detailed operations manuals provided to franchisees – which are primarily aimed at safeguarding the franchisor’s brand reputation – would give rise to joint employment status for many franchisors concerning the employees of their franchisees.
These concerns are now largely allayed by the Board’s recent decision, and businesses that had changed operations due to the fear of joint employment status under the Act can and should consider returning to prior business arrangements. The law under the NLRA now more closely matches the joint employer standards under common law and other statutes, and considers a wide array of facts related to the exercise of control over the employees. Nevertheless, as demonstrated by the actual holding in Hy-Brand that both entities constituted joint employers, the legal concept is not defunct by any means. Employers still need to be aware of how much involvement will bring them into joint employer status with their business partners, but the risk is certainly reduced.
UPDATE: On February 26, 2018, the Board voided its decision in Hy-Brand after the Board’s ethics officer determined that Board member William Emanuel should have recused himself from the matter. Before joining the Board, Mr. Emanuel’s law firm had represented Browning-Ferris in the 2015 case that had adopted the looser joint employment standard, and the matter was still pending on appeal. The Board noted that “the overruling of the Browning-Ferris decision is of no force or effect.” It is likely that once the current nominee to the NLRB is confirmed, the Board will once again reverse Browning-Ferris, but for now the Browning-Ferris standard remains the law.
Decision #3: Scope of Appropriate Bargaining Units
Hot on the heels of the two December 14, 2017, decisions, the Board woke up on December 15, 2017, and announced that it was reversing its 2011 decision that gave rise to fears – in some notable cases justified – that unions would organize bargaining units that were too small to make sense, resulting in a proliferation of bargaining units, potentially represented by different unions, within a single organization.
A core tenet of the NLRA is that employees in an “appropriate bargaining unit” may, if a majority so choose, be represented by a union for purposes of collective bargaining. The NLRB is assigned the duty to determine which groups of employees make sense for collective bargaining and, thus, must determine in each case whether a group of employees is “appropriate” for bargaining. The process begins with a labor union filing a petition with the Board to represent a particular group of employees, and then the employer is allowed to weigh in on whether that group of employees is appropriate.
In Specialty Healthcare, 357 NLRB 924 (2011), the Board held that where an employer contends that a petitioned-for unit is too small and should include additional job classifications, the employer has the burden of showing that the additional job classifications share an “overwhelming” community of interest with the employees in the proposed unit. In the six years since Specialty Healthcare was decided, it has become clear that this is a nearly impossible standard, which results in the union’s proposed unit almost always being approved.
In PCC Structurals, Inc. 365 NLRB 160, the Board reversed Specialty Healthcare and reverted to the standard that existed before that decision. In addressing whether a particular unit is appropriate for collective bargaining, the Board will consider whether the employees at issue:
- Are organized into separate departments; Have distinct skills and training;
- Have distinct or overlapping job functions;
- Are functionally integrated with or have significant contact with other employees; and
- Have distinct supervision or terms and conditions of employment.
The primary change is that, with the very difficult standard of “overwhelming” community of interest jettisoned, employers will more easily be able to expand the proposed unit when confronted with a union organizing petition. Employers that believe their workforces are susceptible to unionization may wish to take steps to establish appropriate units before receiving a petition.
Decision #4: Bargaining Over Updates to Benefit Plans
The final decision in the mid-December flurry involved the ability of an employer to make annual changes to benefit plans consistent with prior annual changes without getting agreement from the union that represents some of its employees. Under the NLRA, an employer generally may not change terms and conditions of employment for employees represented by a union without first bargaining in good faith with the union over those changes. Instead, the employer must maintain the status quo until it reaches an agreement or a legal impasse with the union over the issue.
A difficult issue arises for an employer when it modifies benefit plans on an annual basis: what is the status quo? In 2016, the NLRB held that even where changes were made company-wide and were consistent with similar changes made on an annual basis for many years, the status quo is the particular benefit plan that exists at any given time in all its particulars. On December 15, 2017, the Board reversed that decision and held that if a past practice involves periodic updates and changes to benefit plans, then such changes themselves are part of the status quo and continuing such updates does not require bargaining with the union to agreement or impasse. Raytheon Network Centric Systems, 365 NLRB No. 161.
Employers with unionized workforces can take some comfort in this decision, as it makes it less likely that a union will derail normal company-wide changes to benefit plans. However, employers still have an obligation to bargain with any union that represents their workers, and they should remain cautious about making any change to wages, hours, and terms and conditions of employment, including to benefit plans, without bargaining.
Takeaways for Employers
What was particularly striking about all four decisions issued last week is that the Board went out of its way to reverse Obama-era precedent in cases that did not necessarily require it to do so. Moreover, as pointed out by dissents in each of the cases, the Board did not ask for briefing on the issues from the parties and did not seek input from other potential stakeholders through amicus briefs. Given its demonstrated willingness to undo recent precedent in these four decisions, we expect that the new Board will continue to proactively dismantle many of the pro-employee decisions of the previous Board in the first cases that even peripherally raise an issue that the new members are interested in revisiting.