Labor Law Articles
The General Counsel for the National Labor Relations Board issued a report providing
guidance to employers when drafting employee handbooks. Report. (GC 15-04). Over the past
few years many standard handbook provisions have been found to violate section 7 of the
National Labor Relations Act. That section allows both union and non-union employees to
engage in protected concerted activity for their mutual aid and protection. Employers have
struggled to keep current with the rapidly changing requirements, and have often found that their
good faith efforts to comply fall short of the Board’s expectations. The new report sheds greater
light on what has become an extremely nuanced approach to handbook drafting.
The report dissects numerous case decisions and tries to explain the subtle differences
between lawful and unlawful language. It covers the major areas which have been the focus of
recent litigation. These include confidentiality rules, employee conduct toward the company and
supervisors, employee conduct toward co-workers, employee interaction with third parties, use
of company logos and trademarks, restrictions on video and audio recordings at work,
restrictions on leaving work, and conflict of interest rules. Non-union employers in particular
will likely be astonished when reading the Board’s position on these issues, but failure to comply
can lead to serious repercussions.
While lengthy, employers are encouraged to read the full report, however, the following
summary provides a flavor for the types of issues companies need to be aware of when drafting
employee handbooks. Further, if your handbook has not been reviewed in the last year, it is
likely to be out of compliance.
The general rule is that any policy violates the NLRA if it has a chilling effect on section
7 rights, even if it doesn’t explicitly prohibit section 7 activity. The test is whether employees
would reasonably construe the rule as prohibiting their section 7 rights. Of course rules or
policies written in response to union organizing activity, or to expressly restrict employee rights
is illegal per se.
With this background in mind, the Board’s position is that employees have a section 7
right to discuss wages, hours, and other terms and conditions of employment with fellow
employees and outsiders. Any attempt to restrict such discussion through a confidentiality
provision is unlawful. Confidentiality provisions must be limited to protecting other forms of
proprietary information unrelated to wages, hours and conditions of employment.
Perhaps the most alarming area is the scope of conduct employees may engage in when
criticizing supervisors and management. The Board has found that rules prohibiting
disrespectful, negative, inappropriate or rude conduct toward management are generally
unlawful. Even if such statements are false or defamatory they are protected, unless they are
made with “malice,” Under the malice standard, an employer must prove the statement was
knowingly false, or was made with reckless disregard for the truth. With the rise of social media,
many of the offensive statements are now made online and reach an audience far greater than the
water cooler talk of the past. Under the Board’s rules, however, such statements are equally
protected.
Employers have more leeway in prohibiting negative statements regarding co-workers,
clients and competitors. Also, truly insubordinate statements are also prohibited, but given
recent rulings it is very difficult to determine when such statements may in fact be found lawful.
In addition, rules limiting criticism of the employer’s products are generally permitted.
Further, rules limiting the right to communicate with third parties, including government
agencies, unions, or the press are generally illegal. Employees also have the right to use
company names and logos in protest information such as signs and leaflets, provided they fall
under the non-commercial fair use doctrine.
Another puzzling position is the right of employees to photograph, videotape and record
activities in the workplace. Employers often prohibit such activity, but now do so at the risk of
violating the NLRA. The Board takes the position that such recordings are permissible during
non-work time if done in furtherance of section 7 rights. To defend such policies, employers
must be able to show some strong privacy interest, and the example provided is patient privacy
in a medical setting.
While the information above summarizes some of the Board’s positions, it is critical that
a careful review of the specific language used in handbooks be undertaken by labor counsel prior
to publication in order to avoid unfair labor practice charges.
guidance to employers when drafting employee handbooks. Report. (GC 15-04). Over the past
few years many standard handbook provisions have been found to violate section 7 of the
National Labor Relations Act. That section allows both union and non-union employees to
engage in protected concerted activity for their mutual aid and protection. Employers have
struggled to keep current with the rapidly changing requirements, and have often found that their
good faith efforts to comply fall short of the Board’s expectations. The new report sheds greater
light on what has become an extremely nuanced approach to handbook drafting.
The report dissects numerous case decisions and tries to explain the subtle differences
between lawful and unlawful language. It covers the major areas which have been the focus of
recent litigation. These include confidentiality rules, employee conduct toward the company and
supervisors, employee conduct toward co-workers, employee interaction with third parties, use
of company logos and trademarks, restrictions on video and audio recordings at work,
restrictions on leaving work, and conflict of interest rules. Non-union employers in particular
will likely be astonished when reading the Board’s position on these issues, but failure to comply
can lead to serious repercussions.
While lengthy, employers are encouraged to read the full report, however, the following
summary provides a flavor for the types of issues companies need to be aware of when drafting
employee handbooks. Further, if your handbook has not been reviewed in the last year, it is
likely to be out of compliance.
The general rule is that any policy violates the NLRA if it has a chilling effect on section
7 rights, even if it doesn’t explicitly prohibit section 7 activity. The test is whether employees
would reasonably construe the rule as prohibiting their section 7 rights. Of course rules or
policies written in response to union organizing activity, or to expressly restrict employee rights
is illegal per se.
With this background in mind, the Board’s position is that employees have a section 7
right to discuss wages, hours, and other terms and conditions of employment with fellow
employees and outsiders. Any attempt to restrict such discussion through a confidentiality
provision is unlawful. Confidentiality provisions must be limited to protecting other forms of
proprietary information unrelated to wages, hours and conditions of employment.
Perhaps the most alarming area is the scope of conduct employees may engage in when
criticizing supervisors and management. The Board has found that rules prohibiting
disrespectful, negative, inappropriate or rude conduct toward management are generally
unlawful. Even if such statements are false or defamatory they are protected, unless they are
made with “malice,” Under the malice standard, an employer must prove the statement was
knowingly false, or was made with reckless disregard for the truth. With the rise of social media,
many of the offensive statements are now made online and reach an audience far greater than the
water cooler talk of the past. Under the Board’s rules, however, such statements are equally
protected.
Employers have more leeway in prohibiting negative statements regarding co-workers,
clients and competitors. Also, truly insubordinate statements are also prohibited, but given
recent rulings it is very difficult to determine when such statements may in fact be found lawful.
In addition, rules limiting criticism of the employer’s products are generally permitted.
Further, rules limiting the right to communicate with third parties, including government
agencies, unions, or the press are generally illegal. Employees also have the right to use
company names and logos in protest information such as signs and leaflets, provided they fall
under the non-commercial fair use doctrine.
Another puzzling position is the right of employees to photograph, videotape and record
activities in the workplace. Employers often prohibit such activity, but now do so at the risk of
violating the NLRA. The Board takes the position that such recordings are permissible during
non-work time if done in furtherance of section 7 rights. To defend such policies, employers
must be able to show some strong privacy interest, and the example provided is patient privacy
in a medical setting.
While the information above summarizes some of the Board’s positions, it is critical that
a careful review of the specific language used in handbooks be undertaken by labor counsel prior
to publication in order to avoid unfair labor practice charges.
In its relentless pursuit of expanding non-union employee rights, the National Labor
Relations Board (“NLRB” or “Board”) overturned past precedent by ruling that employees can
now use their company email accounts to communicate about union organizing activities, and
their terms and conditions of employment. Purple Communications, Inc., and Communications
Workers of America, 361 NLRB no. 126 (Dec. 11, 2014). Just seven years earlier, the NLRB
had ruled that employers could prohibit employees from using company email systems for non-
work related purposes, including collective workplace concerns, as long as any prohibitions were
not limited to banning protected activities under the National Labor Relations Act (“NLRA” or
“Act”). Register Guard, 351 NLRB 1110 (2007).
For instance, employers were permitted to have policies that allowed the use of its email
systems for charitable solicitations while banning its use for non-charitable purposes, including
union organizing. Also, systems could be used for personal solicitations while prohibiting ones
of a commercial nature. These rules effectively prevented company systems from being used
against the employer during union organizing campaigns, or for employees to air their collective
concerns.
In reversing itself, the Board stated that its past precedent focused “too much on
employer’s property rights and too little on the importance of email as a means of workplace
communication, [therefore] it failed to adequately protect employees’ rights under the Act and
abdicated its responsibility to adapt the Act to the changing patterns of industrial life.” It went
on to say that email has “effectively become a natural gathering place pervasively used for
employee to employee conversations” and the fact that this gathering place is virtual does not
undermine the role that email plays in Section 7 protected workplace discussions. Further, given
the rise in telecommuting, email has become an even more important tool for co-worker
communications.
Under its new interpretation, employees who are granted the right to use an employer’s
email system for business purposes, now also have a presumptive right to use their account to
communicate about issues protected by Section 7 of the NLRA, including union organizing.
Such emails, however, must be drafted and sent during non-work hours. Also, there is no
requirement that all employees now be given access to an employer’s email system, if they
would not otherwise be given an account for work related purposes.
Employers wishing to overcome the presumptive right of employees to use their systems
for collective action must show that “special circumstances” necessitate a ban in order to
maintain production or discipline. More specifically, employers must “articulate the interest at
issue and demonstrate how the interest supports the email restrictions it has implemented.”
Employers may also place certain restrictions on the use of its systems, shy of a total ban, if it
can show such controls are necessary to maintain production and discipline. For instance,
employers can limit the size of attachments or audio/video files if such data would lead to
network damage or system overloads, provided the same restrictions apply to non-section 7
related communications. The Board, however, strongly suggested that a total ban, or set of
controls, will be found lawful only in rare situations, with the burden placed on the employer to
justify its rules.
The decision also leaves open the possibility that the concepts applied to email systems
could be expanded to the use of other company equipment and systems. The Board noted that
past decisions prohibiting non-work related access to bulletin boards, telephones, faxes, copy
machines, public address systems, and teleconferencing systems may eventually be reversed. It
expressly stated that “broad pronouncements in the [past] equipment cases, to the effect that
employers may prohibit all non-work use of such equipment…are best understood as dicta….
[and] nor is it clear that the Board endorsed those broader statements.” It went on to say that
“the supposed principle that employees have no right to use, for Section 7 purposes, employer
equipment that they regularly use in their work is hardly self-evident. We reject its application
here, and we question its validity elsewhere.”
The decision also leaves unclear how past decisions regarding the right of employers to
ban distribution of literature in work areas will now be affected. The traditional rule permitted
employees to engage in oral solicitation during non-work time, in work and non-work areas.
Distribution of literature was permitted during non-work time, but only in non-work areas. To
overcome the apparent problem of permitting employees to write, read and print emails in work
areas, the Board conveniently stated that emails are neither solicitations or distributions, but
merely “communications,” and that the space where they would be written, read or printed are
neither work or non-work areas, but “mixed-use” areas where the work area restrictions
prohibiting literature distribution generally will not apply. This newly created fantasy zone
within the workplace indicates the lengths the Board is willing to go to expand non-union worker
rights at the expense of the employer’s.
An additional complication is that under the NLRA surveillance of organizing efforts by
employers is generally unlawful. However, employers currently have the right to monitor their
systems and eliminate any privacy rights for employees using their systems. While the ruling
stated that such monitoring could lawfully continue, and employees would not enjoy greater
privacy rights when communicating about collective concerns, given the Board’s aggressiveness,
this fine line may become blurred over time. Already, the Board has stated that employers may
not change their monitoring policy in response to union organizing activity, or target protected
conduct or union activists. Therefore, having a policy in place in advance of any such activity is
critical.
Employers should review their handbook, and email and equipment use policies, as the
Board has long held that just having an express rule that violates the NLRA is unlawful, even if
the rule is never used to actually discipline an employee. Also, employers should carefully
analyze any disciplinary or termination decision that involves use of its systems, as at-will
employees will now have greater latitude to claim the adverse decision violated their section 7
right to engage in protected concerted activity. Such a finding can result in reinstatement and
back pay.
Finally, this latest ruling coupled with another recent Board decision to speed up the
election process once a union files a petition for recognition will make it much easier for
employees to unionize. By aiding their communications effort, and significantly reducing a
company’s reaction time from about 38 days to between 10-20 days, the NLRB has tipped the
balance significantly in favor of employees seeking union representation. As such, employers
may want to consider implementing a more robust preventive employee relations strategy, and
developing a rapid response plan in the event of union organizing activity, often referred to as a
“campaign in a box.”
Relations Board (“NLRB” or “Board”) overturned past precedent by ruling that employees can
now use their company email accounts to communicate about union organizing activities, and
their terms and conditions of employment. Purple Communications, Inc., and Communications
Workers of America, 361 NLRB no. 126 (Dec. 11, 2014). Just seven years earlier, the NLRB
had ruled that employers could prohibit employees from using company email systems for non-
work related purposes, including collective workplace concerns, as long as any prohibitions were
not limited to banning protected activities under the National Labor Relations Act (“NLRA” or
“Act”). Register Guard, 351 NLRB 1110 (2007).
For instance, employers were permitted to have policies that allowed the use of its email
systems for charitable solicitations while banning its use for non-charitable purposes, including
union organizing. Also, systems could be used for personal solicitations while prohibiting ones
of a commercial nature. These rules effectively prevented company systems from being used
against the employer during union organizing campaigns, or for employees to air their collective
concerns.
In reversing itself, the Board stated that its past precedent focused “too much on
employer’s property rights and too little on the importance of email as a means of workplace
communication, [therefore] it failed to adequately protect employees’ rights under the Act and
abdicated its responsibility to adapt the Act to the changing patterns of industrial life.” It went
on to say that email has “effectively become a natural gathering place pervasively used for
employee to employee conversations” and the fact that this gathering place is virtual does not
undermine the role that email plays in Section 7 protected workplace discussions. Further, given
the rise in telecommuting, email has become an even more important tool for co-worker
communications.
Under its new interpretation, employees who are granted the right to use an employer’s
email system for business purposes, now also have a presumptive right to use their account to
communicate about issues protected by Section 7 of the NLRA, including union organizing.
Such emails, however, must be drafted and sent during non-work hours. Also, there is no
requirement that all employees now be given access to an employer’s email system, if they
would not otherwise be given an account for work related purposes.
Employers wishing to overcome the presumptive right of employees to use their systems
for collective action must show that “special circumstances” necessitate a ban in order to
maintain production or discipline. More specifically, employers must “articulate the interest at
issue and demonstrate how the interest supports the email restrictions it has implemented.”
Employers may also place certain restrictions on the use of its systems, shy of a total ban, if it
can show such controls are necessary to maintain production and discipline. For instance,
employers can limit the size of attachments or audio/video files if such data would lead to
network damage or system overloads, provided the same restrictions apply to non-section 7
related communications. The Board, however, strongly suggested that a total ban, or set of
controls, will be found lawful only in rare situations, with the burden placed on the employer to
justify its rules.
The decision also leaves open the possibility that the concepts applied to email systems
could be expanded to the use of other company equipment and systems. The Board noted that
past decisions prohibiting non-work related access to bulletin boards, telephones, faxes, copy
machines, public address systems, and teleconferencing systems may eventually be reversed. It
expressly stated that “broad pronouncements in the [past] equipment cases, to the effect that
employers may prohibit all non-work use of such equipment…are best understood as dicta….
[and] nor is it clear that the Board endorsed those broader statements.” It went on to say that
“the supposed principle that employees have no right to use, for Section 7 purposes, employer
equipment that they regularly use in their work is hardly self-evident. We reject its application
here, and we question its validity elsewhere.”
The decision also leaves unclear how past decisions regarding the right of employers to
ban distribution of literature in work areas will now be affected. The traditional rule permitted
employees to engage in oral solicitation during non-work time, in work and non-work areas.
Distribution of literature was permitted during non-work time, but only in non-work areas. To
overcome the apparent problem of permitting employees to write, read and print emails in work
areas, the Board conveniently stated that emails are neither solicitations or distributions, but
merely “communications,” and that the space where they would be written, read or printed are
neither work or non-work areas, but “mixed-use” areas where the work area restrictions
prohibiting literature distribution generally will not apply. This newly created fantasy zone
within the workplace indicates the lengths the Board is willing to go to expand non-union worker
rights at the expense of the employer’s.
An additional complication is that under the NLRA surveillance of organizing efforts by
employers is generally unlawful. However, employers currently have the right to monitor their
systems and eliminate any privacy rights for employees using their systems. While the ruling
stated that such monitoring could lawfully continue, and employees would not enjoy greater
privacy rights when communicating about collective concerns, given the Board’s aggressiveness,
this fine line may become blurred over time. Already, the Board has stated that employers may
not change their monitoring policy in response to union organizing activity, or target protected
conduct or union activists. Therefore, having a policy in place in advance of any such activity is
critical.
Employers should review their handbook, and email and equipment use policies, as the
Board has long held that just having an express rule that violates the NLRA is unlawful, even if
the rule is never used to actually discipline an employee. Also, employers should carefully
analyze any disciplinary or termination decision that involves use of its systems, as at-will
employees will now have greater latitude to claim the adverse decision violated their section 7
right to engage in protected concerted activity. Such a finding can result in reinstatement and
back pay.
Finally, this latest ruling coupled with another recent Board decision to speed up the
election process once a union files a petition for recognition will make it much easier for
employees to unionize. By aiding their communications effort, and significantly reducing a
company’s reaction time from about 38 days to between 10-20 days, the NLRB has tipped the
balance significantly in favor of employees seeking union representation. As such, employers
may want to consider implementing a more robust preventive employee relations strategy, and
developing a rapid response plan in the event of union organizing activity, often referred to as a
“campaign in a box.”
According to the U.S. Bureau of Labor Statistics union membership continued to decline
in 2012. Last year 11.3% of wage and salary workers belonged to a union, down from 11.8% in
2011, and 20.1% in 1983. In looking at just the private sector, only 6.6% of workers are
unionized. In comparison, some 35.9% of public employees are represented.
The study also revealed that private sector unions were most prevalent in the
transportation, utilities, telecommunications, and construction industries while teachers, police
officers and firefighters were most likely to be represented in the public sector. Conversely,
agricultural and finance employees were least likely to be organized.
Representation, however, has its benefits. Union workers earned an average of $943 per
week compared to their non-union brethren who earned $742.
Workers most likely to be union members included those over 55, African Americans,
and males. New York had the highest percentage of union workers (23.2%) followed by Alaska
(22.4%) and Hawaii (21.6%). California, however, had the greatest number of union workers,
2.5 million out of a total of 14.4 million total U.S. union workers. North Carolina had the lowest
percentage (2.9%) followed by Arkansas (3.2%), and South Carolina (3.2%).
In Connecticut the percentage of union workers slipped from 16.8% in 2011 to 14% in
2012, even though total employment remained constant at about 1.5 million workers.
in 2012. Last year 11.3% of wage and salary workers belonged to a union, down from 11.8% in
2011, and 20.1% in 1983. In looking at just the private sector, only 6.6% of workers are
unionized. In comparison, some 35.9% of public employees are represented.
The study also revealed that private sector unions were most prevalent in the
transportation, utilities, telecommunications, and construction industries while teachers, police
officers and firefighters were most likely to be represented in the public sector. Conversely,
agricultural and finance employees were least likely to be organized.
Representation, however, has its benefits. Union workers earned an average of $943 per
week compared to their non-union brethren who earned $742.
Workers most likely to be union members included those over 55, African Americans,
and males. New York had the highest percentage of union workers (23.2%) followed by Alaska
(22.4%) and Hawaii (21.6%). California, however, had the greatest number of union workers,
2.5 million out of a total of 14.4 million total U.S. union workers. North Carolina had the lowest
percentage (2.9%) followed by Arkansas (3.2%), and South Carolina (3.2%).
In Connecticut the percentage of union workers slipped from 16.8% in 2011 to 14% in
2012, even though total employment remained constant at about 1.5 million workers.
In February 2012 a NLRB Administrative Law Judge ruled that an employer’s at-will
language contained in its employee handbook violated the National Labor Relations Act
(NLRA). The violative language stated, “I further agree that the at-will employment relationship
cannot be amended, modified, or altered in any way.” American Red Cross, 28-CA-23443. The
judge found the language restricted an employee’s section 7 rights to organize a union and
bargain collectively. The ruling left many employers concerned and uncertain whether, and to
what extent, traditional at-will concepts still applied.
Even though the NLRB has become increasingly aggressive in applying the NLRA to
non-union workplaces, especially in the areas of social media, investigations, and confidentiality
language, it appears to have taken a step back in its at-will position. On October 31, 2012, the
NLRB’s Acting General Counsel (AGC) issued two Advice Memos that clarify the contours of
an acceptable at-will provision.
In Mimi’s Café, 28-CA-084365, the AGC found the following language to be acceptable:
“The relationship between you and Mimi’s Café is referred to as employment at-will. This
means that your employment can be terminated at any time for any reason, with or without
cause, with or without notice, by you or the Company. No representative of the Company has
authority to enter into any agreement contrary to the foregoing employment at-will
relationship. Nothing contained in this handbook creates an express or implied contract of
employment.” (emphasis added).
At issue was the bolded language that indicates no member of management has the
authority to change the at-will nature of the relationship, and whether such language was
overbroad and would chill employees in their exercise of section 7 rights. In making that
determination the AGC relied on a two step test. First, a rule is unlawful if it explicitly restricts
section 7 activities. Second, if not, it will still violate the Act if employees would reasonably
construe the language to prohibit section 7 activities, or if the rule was promulgated in response
to union activity, or if the rule has been applied to restrict section 7 rights. Further the rule must
not be read in isolation, but must be read in its proper context.
With regard to the specific language at issue, the AGC found the rule did not explicitly
restrict section 7 activity. Nor was it promulgated in response to union or other protected
activity, or applied to restrict section 7 rights. His analysis thus boiled down to whether
employees could reasonably construe the language to prohibit section 7 activities. In effect,
would employees read the language in a way that may reasonably lead them to think they were
restricted from trying to form a union or engage in concerted activity to change their at-will
status?
In finding no such restrictive interpretation, the AGC stated the language simply
highlights the employer’s policy that its own representatives are not authorized to modify an
employee’s at-will status. Further when read in the proper context, the purpose of the sentence
was to reinforce the concept that nothing in the handbook creates an express or implied contract
of employment.
At first blush, the language in both American Red Cross and Mimi’s appear to equally
foreclose a change in the at-will nature of the employment relationship; however, the AGC
distinguished the two. The former required the employee to agree that there would be no change
to the at-will relationship, and effectively forced him to waive any right to act in concert with
others to seek a change. The latter simply clarified that no member of management had the right
to make a change. This subtly based on whose actions were being restricted was apparently
enough to make the difference.
In Rocha Transportation, 32-CA-086799, the handbook language in dispute read, “No
manager, supervisor, or employee of Rocha Transportation has any authority to enter into an
agreement for employment for any specified period of time or to make an agreement for
employment other than at-will. Only the President of the Company has the authority to make
any such agreement and then only in writing.” The handbook also contained an
Acknowledgment of Receipt that the employee was required to sign that reiterated the disputed
language, and further stated that employees understood they are being hired at-will, and that
nothing in the handbook creates or is intended to create a contract or representation of continued
employment.
In using the same test outlined above, the AGC found this language lawful, and
commented positively on the provision that permitted the President to change the at-will nature
of the employment relationship. This language is at least more distinguishable than American
Red Cross, and is probably safer to use.
These Memos provide significant guidance for drafting at-will language. Employers
have the right to clearly state the at-will nature of the employment relationship. They also have
the right to state that no member of management has the authority to change the relationship, or
alternatively they can designate particular officials who are vested with the right to do so.
Employers should not require employees to affirmatively agree that the at-will relationship
cannot be changed under any circumstances, but they can be asked to acknowledge they
understand they are being hired at-will, and that nothing in the handbook creates or is intended to
create a contract or representation of continued employment. As this area of the law is still
unsettled, it would be prudent to have counsel review any at-will language and acknowledgments
currently being used, or contemplated in the future.
language contained in its employee handbook violated the National Labor Relations Act
(NLRA). The violative language stated, “I further agree that the at-will employment relationship
cannot be amended, modified, or altered in any way.” American Red Cross, 28-CA-23443. The
judge found the language restricted an employee’s section 7 rights to organize a union and
bargain collectively. The ruling left many employers concerned and uncertain whether, and to
what extent, traditional at-will concepts still applied.
Even though the NLRB has become increasingly aggressive in applying the NLRA to
non-union workplaces, especially in the areas of social media, investigations, and confidentiality
language, it appears to have taken a step back in its at-will position. On October 31, 2012, the
NLRB’s Acting General Counsel (AGC) issued two Advice Memos that clarify the contours of
an acceptable at-will provision.
In Mimi’s Café, 28-CA-084365, the AGC found the following language to be acceptable:
“The relationship between you and Mimi’s Café is referred to as employment at-will. This
means that your employment can be terminated at any time for any reason, with or without
cause, with or without notice, by you or the Company. No representative of the Company has
authority to enter into any agreement contrary to the foregoing employment at-will
relationship. Nothing contained in this handbook creates an express or implied contract of
employment.” (emphasis added).
At issue was the bolded language that indicates no member of management has the
authority to change the at-will nature of the relationship, and whether such language was
overbroad and would chill employees in their exercise of section 7 rights. In making that
determination the AGC relied on a two step test. First, a rule is unlawful if it explicitly restricts
section 7 activities. Second, if not, it will still violate the Act if employees would reasonably
construe the language to prohibit section 7 activities, or if the rule was promulgated in response
to union activity, or if the rule has been applied to restrict section 7 rights. Further the rule must
not be read in isolation, but must be read in its proper context.
With regard to the specific language at issue, the AGC found the rule did not explicitly
restrict section 7 activity. Nor was it promulgated in response to union or other protected
activity, or applied to restrict section 7 rights. His analysis thus boiled down to whether
employees could reasonably construe the language to prohibit section 7 activities. In effect,
would employees read the language in a way that may reasonably lead them to think they were
restricted from trying to form a union or engage in concerted activity to change their at-will
status?
In finding no such restrictive interpretation, the AGC stated the language simply
highlights the employer’s policy that its own representatives are not authorized to modify an
employee’s at-will status. Further when read in the proper context, the purpose of the sentence
was to reinforce the concept that nothing in the handbook creates an express or implied contract
of employment.
At first blush, the language in both American Red Cross and Mimi’s appear to equally
foreclose a change in the at-will nature of the employment relationship; however, the AGC
distinguished the two. The former required the employee to agree that there would be no change
to the at-will relationship, and effectively forced him to waive any right to act in concert with
others to seek a change. The latter simply clarified that no member of management had the right
to make a change. This subtly based on whose actions were being restricted was apparently
enough to make the difference.
In Rocha Transportation, 32-CA-086799, the handbook language in dispute read, “No
manager, supervisor, or employee of Rocha Transportation has any authority to enter into an
agreement for employment for any specified period of time or to make an agreement for
employment other than at-will. Only the President of the Company has the authority to make
any such agreement and then only in writing.” The handbook also contained an
Acknowledgment of Receipt that the employee was required to sign that reiterated the disputed
language, and further stated that employees understood they are being hired at-will, and that
nothing in the handbook creates or is intended to create a contract or representation of continued
employment.
In using the same test outlined above, the AGC found this language lawful, and
commented positively on the provision that permitted the President to change the at-will nature
of the employment relationship. This language is at least more distinguishable than American
Red Cross, and is probably safer to use.
These Memos provide significant guidance for drafting at-will language. Employers
have the right to clearly state the at-will nature of the employment relationship. They also have
the right to state that no member of management has the authority to change the relationship, or
alternatively they can designate particular officials who are vested with the right to do so.
Employers should not require employees to affirmatively agree that the at-will relationship
cannot be changed under any circumstances, but they can be asked to acknowledge they
understand they are being hired at-will, and that nothing in the handbook creates or is intended to
create a contract or representation of continued employment. As this area of the law is still
unsettled, it would be prudent to have counsel review any at-will language and acknowledgments
currently being used, or contemplated in the future.
The National Labor Relations Board (NLRB) recently launched a separate webpage,
Protected Concerted Activity, to educate non-union employees of their rights under the National
Labor Relations Act (NLRA). In particular, the site discusses the right of employees to act
together for their mutual aid and protection even if they are not unionized, and encourages non-
union employees to contact the Board for help. Specifically, it states, in part: “[t]he law we
enforce gives employees the right to act together to try to improve their pay and working
conditions or fix job-related problems, even if they aren't in a union. If employees are fired,
suspended, or otherwise penalized for taking part in protected group activity, the National Labor
Relations Board will fight to restore what was unlawfully taken away. These rights were written
into the original 1935 National Labor Relations Act and have been upheld in numerous decisions
by appellate courts and by the U.S. Supreme.”
The webpage is part of an on-going effort by the NLRB to breathe new life into a law
largely ignored by non-union employers, and expand the role of the Board into areas outside its
traditional focus of regulating union-management relations, as less than 7% of private sector
employees now belong to a union.
Other efforts to prop up the Board include a proposed rule requiring employers to display
a poster describing rights under the NLRA; a more aggressive stance on social media policies
that prohibit employees from discussing sensitive issues on-line such as wages, benefits, working
conditions, and supervisory treatment; challenges to traditional “at-will” provisions; and
procedural changes that would result in “quickie elections” designed to reduce the time
employers have to educate employees when faced with union organizing activities.
Given the more aggressive marketing effort by the NLRB to encourage and protect
concerted activity among non-union employees, employers should review their policies and train
supervisors on these recent developments, which have converted long followed practices into
violations of federal law. For instance, the Board has taken the position that any policy that
could reasonably chill an employee’s right to exercise rights guaranteed under the NLRA is
unlawful. Examples include, broad non-disparagement policies; prohibitions on discussing
wages, benefits, or working conditions; prohibitions on the use of a company’s logo; requiring
company permission before posting comments on line; requiring the reporting of any
inappropriate comments; and restrictions on “friending” non-management co-workers.
Violations can lead to reinstatement, back pay, and the posting of notices informing the
workforce of the violation and their rights under the Act.
Protected Concerted Activity, to educate non-union employees of their rights under the National
Labor Relations Act (NLRA). In particular, the site discusses the right of employees to act
together for their mutual aid and protection even if they are not unionized, and encourages non-
union employees to contact the Board for help. Specifically, it states, in part: “[t]he law we
enforce gives employees the right to act together to try to improve their pay and working
conditions or fix job-related problems, even if they aren't in a union. If employees are fired,
suspended, or otherwise penalized for taking part in protected group activity, the National Labor
Relations Board will fight to restore what was unlawfully taken away. These rights were written
into the original 1935 National Labor Relations Act and have been upheld in numerous decisions
by appellate courts and by the U.S. Supreme.”
The webpage is part of an on-going effort by the NLRB to breathe new life into a law
largely ignored by non-union employers, and expand the role of the Board into areas outside its
traditional focus of regulating union-management relations, as less than 7% of private sector
employees now belong to a union.
Other efforts to prop up the Board include a proposed rule requiring employers to display
a poster describing rights under the NLRA; a more aggressive stance on social media policies
that prohibit employees from discussing sensitive issues on-line such as wages, benefits, working
conditions, and supervisory treatment; challenges to traditional “at-will” provisions; and
procedural changes that would result in “quickie elections” designed to reduce the time
employers have to educate employees when faced with union organizing activities.
Given the more aggressive marketing effort by the NLRB to encourage and protect
concerted activity among non-union employees, employers should review their policies and train
supervisors on these recent developments, which have converted long followed practices into
violations of federal law. For instance, the Board has taken the position that any policy that
could reasonably chill an employee’s right to exercise rights guaranteed under the NLRA is
unlawful. Examples include, broad non-disparagement policies; prohibitions on discussing
wages, benefits, or working conditions; prohibitions on the use of a company’s logo; requiring
company permission before posting comments on line; requiring the reporting of any
inappropriate comments; and restrictions on “friending” non-management co-workers.
Violations can lead to reinstatement, back pay, and the posting of notices informing the
workforce of the violation and their rights under the Act.
Effective April 20, 2012, the National Labor Relations Board implemented a new set of
union election rules that will limit the type of pre-election legal challenges available to
employers. With fewer permissible challenges, there will be fewer pre-election hearings and
balloting will take place more rapidly. Employers are concerned that faster elections will
prevent them from adequately educating their workforce prior to the vote.
In addition, because employers may no longer contest voter eligibility, including a
determination of who is a supervisor prior to the election, they are more susceptible to unfair
labor practice charges for acts committed by employees who are later found to be supervisory in
nature.
Prior to the rule change, Board policy had been to schedule elections within 42 days of
receiving the petition. Where there is no pre-vote litigation, and the election is held based on a
stipulated pre-election agreement, the average period from petition to election was 31 days. The
median period was 38 days. Where, however, pre-vote litigation was initiated; the time frame
averaged 101 days. By eliminating the grounds for pre-vote litigation, the Board intends to
speed up the election process in more cases.
Now, instead of being able to challenge unit appropriateness, voter eligibility, and Board
jurisdiction before the election, challenges in that timeframe will be limited to whether a union
has produced a show of interest. Further, under the new rules, when a pre-election hearing is
held, the hearing officer has the discretion of whether to accept post hearing briefs. Where they
are not accepted, the decision process and election time frame shrinks. Also, review of the
Regional Director’s pre-election decision is no longer permitted. In addition, the current 25 day
waiting period between the Regional Director’s decision and the election will be eliminated.
The Chamber of Commerce has already filed a legal challenge to the new rules, and the
House of Representatives passed HR 3094, the Workplace Democracy and Fairness Act, which
would reverse a number of the changes. In the meantime, the changes have taken effect and the
Board has issued a press release that among other things provides a link to a flow chart showing
the prior and current election processes. Click Here
union election rules that will limit the type of pre-election legal challenges available to
employers. With fewer permissible challenges, there will be fewer pre-election hearings and
balloting will take place more rapidly. Employers are concerned that faster elections will
prevent them from adequately educating their workforce prior to the vote.
In addition, because employers may no longer contest voter eligibility, including a
determination of who is a supervisor prior to the election, they are more susceptible to unfair
labor practice charges for acts committed by employees who are later found to be supervisory in
nature.
Prior to the rule change, Board policy had been to schedule elections within 42 days of
receiving the petition. Where there is no pre-vote litigation, and the election is held based on a
stipulated pre-election agreement, the average period from petition to election was 31 days. The
median period was 38 days. Where, however, pre-vote litigation was initiated; the time frame
averaged 101 days. By eliminating the grounds for pre-vote litigation, the Board intends to
speed up the election process in more cases.
Now, instead of being able to challenge unit appropriateness, voter eligibility, and Board
jurisdiction before the election, challenges in that timeframe will be limited to whether a union
has produced a show of interest. Further, under the new rules, when a pre-election hearing is
held, the hearing officer has the discretion of whether to accept post hearing briefs. Where they
are not accepted, the decision process and election time frame shrinks. Also, review of the
Regional Director’s pre-election decision is no longer permitted. In addition, the current 25 day
waiting period between the Regional Director’s decision and the election will be eliminated.
The Chamber of Commerce has already filed a legal challenge to the new rules, and the
House of Representatives passed HR 3094, the Workplace Democracy and Fairness Act, which
would reverse a number of the changes. In the meantime, the changes have taken effect and the
Board has issued a press release that among other things provides a link to a flow chart showing
the prior and current election processes. Click Here
Non-union employers often fail to consider the implications of federal labor law when
taking action against employees claiming to speak for co-workers. In a recent case decided by
the Connecticut Superior Court, an employee who was terminated after raising complaints about
employee morale was prevented from bringing a state law claim; however, her claim was found
to be governed by the National Labor Relations Act (“NLRA”). Hobson v. Mark Facey & Co.,
2006 Conn. Super. LEXIS 3303 (Nov. 3, 2006).
The plaintiff, Melinda Hobson, was employed as a telemarketer at defendant’s Bristol,
Connecticut office. Facing morale problems, the company formed an employee committee
charged with surfacing morale issues and bringing them to management’s attention. It appointed
Ms. Hobson to the committee. After serving on the committee for several months plaintiff met
with management to discuss the concerns of several telemarketing employees. Within an hour of
the meeting she was discharged. She subsequently sued the company for wrongful termination.
The court dismissed her state complaint finding it was preempted by the NLRA because
her termination stemmed from activities protected by the Act. Specifically, section 7 of the
NLRA protects employees engaged in concerted activities for the purpose of mutual aid or
protection. Section 8 of the Act goes on to make it an unfair labor practice for an employer to
interfere with employees exercising their section 7 rights. Here, plaintiff brought group concerns
to management’s attention and was then fired. As a result, the proper forum for her claim was
the National Labor Relations Board, not state court.
While the employer in this case escaped liability in the state action, the court’s ruling
reinforces the concept that even non-union employers must be cognizant of the NLRA’s
provisions when dealing with employees claiming to represent group interests. Such employees
have rights similar to those belonging to unions, and improper handling of group complaints can
lead to unfair labor practice charges being filed with the Board.
taking action against employees claiming to speak for co-workers. In a recent case decided by
the Connecticut Superior Court, an employee who was terminated after raising complaints about
employee morale was prevented from bringing a state law claim; however, her claim was found
to be governed by the National Labor Relations Act (“NLRA”). Hobson v. Mark Facey & Co.,
2006 Conn. Super. LEXIS 3303 (Nov. 3, 2006).
The plaintiff, Melinda Hobson, was employed as a telemarketer at defendant’s Bristol,
Connecticut office. Facing morale problems, the company formed an employee committee
charged with surfacing morale issues and bringing them to management’s attention. It appointed
Ms. Hobson to the committee. After serving on the committee for several months plaintiff met
with management to discuss the concerns of several telemarketing employees. Within an hour of
the meeting she was discharged. She subsequently sued the company for wrongful termination.
The court dismissed her state complaint finding it was preempted by the NLRA because
her termination stemmed from activities protected by the Act. Specifically, section 7 of the
NLRA protects employees engaged in concerted activities for the purpose of mutual aid or
protection. Section 8 of the Act goes on to make it an unfair labor practice for an employer to
interfere with employees exercising their section 7 rights. Here, plaintiff brought group concerns
to management’s attention and was then fired. As a result, the proper forum for her claim was
the National Labor Relations Board, not state court.
While the employer in this case escaped liability in the state action, the court’s ruling
reinforces the concept that even non-union employers must be cognizant of the NLRA’s
provisions when dealing with employees claiming to represent group interests. Such employees
have rights similar to those belonging to unions, and improper handling of group complaints can
lead to unfair labor practice charges being filed with the Board.
Issue
What must companies do when eliminating union operations, subcontracting union work
to third parties, or relocating work from organized facilities, and how can they minimize their
obligations and legal exposure?
Brief Answer
Companies should avoid contract language that restricts their ability to reduce work at
unionized locations. Assuming no contractual bar, companies can always unilaterally close all or
part of their business. Conversely, they will normally be required to bargain over subcontracting
and relocation decisions. Recent case law, however, has eliminated bargaining obligations in
some subcontracting and work relocation situations where the decision can be characterized as a
core entrepreneurial right falling outside the scope of mandatory bargaining. Even when
decision bargaining is not required it may still be prudent to avoid charges that the decision was
motivated by anti union animus. Bargaining over the decisions impact on affected employees
will be required, even when decision bargaining is not. Issues not unique to union facilities such
as partial plan terminations, WARN, and COBRA obligations are not addressed in this memo.
Discussion
Assuming contract language does not prohibit a company from eliminating unit work, a
series of NLRB and court decisions provide guidance on employer obligations when reducing
work at union locations. The lead cases build on one another to construct a general roadmap, but
fail to provide bright lines for all situations. Employers must bargain over some decisions to
remove unit work, but not others. Primarily, the nature of the work elimination drives the
decision bargaining obligation. For instance, decision bargaining is required in most
subcontracting and relocation situations, but is not necessary when companies permanently close
all or part of their business. Adding confusion are those decisions that can be characterized in
more than one way. For example, one court treated a relocation as a partial business closure, and
therefore outside the scope of mandated bargaining. Also, some courts have failed to impose
bargaining obligations where subcontracting could be characterized as a core entrepreneurial
decision. Even when decision bargaining is not required, it may still be prudent in some cases to
counter any allegations that anti union animus, and not other legitimate business concerns,
underlie the proposed change. Aside from decision bargaining, employers must negotiate over
the impact their decision to eliminate work will have on affected employees.
I. Contract Issues.
Absent contractual work preservation clauses companies are free to eliminate, relocate or
subcontract union work after any midterm bargaining obligations are satisfied. As each contract
has unique language an examination of the pertinent provisions is critical. In general, where the
contract does not contain a work preservation clause, and expressly or implicitly gives
management the right to reduce unit work, companies may do so. Express work preservation
provisions and zipper clauses may prevent such changes. The specific language will determine
what if any midterm bargaining obligation exists.
Taking the most favorable first, where the contract contains no work preservation
language and an express or broad implicit right, typically in the management rights clause, to
eliminate, transfer or subcontract work, the employer may do so without engaging in midterm
decision bargaining. UAW v. NLRB, 765 F.2d 175, 183 n.30 (D.C. Cir. 1985). An employers
obligation arguably was met when contract renewal negotiations took place.
The language giving management the right to make the contemplated change, however,
must be "clear and unmistakable." Uforma/Shelby Business Forms, Inc. v. NLRB, 111 F.3d
1284, (6 th Cir. 1997) citing Metropolitan Edison Co. v. NLRB, 460 U.S. 693, 708 (1983). See
also Standard Motor Products v. UAW, 331 NLRB No. 195 (2000). In Uforma, the court found
an employer did not violate § 8(a)(5) of The Labor Management Relations Act, 29 USC 141-87
(2001) ("LMRA") when it abolished third shift operations and laid off some affected employees
without first bargaining with the union. It based its decision on the breadth of the management
rights clause, which gave the employer the right to make such decisions unilaterally. The
provision need not catalog every conceivable permutation of a decision to lay off, provided it is
broad enough to encompass the action taken. Uforma, 111 F.3d at 1290.
Where no work preservation language is in place, but management has not previously
bargained an express or broad implicit right to implement the contemplated change, decision
bargaining may be required. Milwaukee Spring v. UAW, 268 NLRB 601, 602 (1984). For
instance, work relocation and subcontracting situations will often trigger decision bargaining
obligations. See discussion infra section II. Once bargaining reaches an impasse, however, the
employer is free to implement its decision. Id. at 603.
Where there is a work preservation clause the employer will be required to bargain over
its decision and may not unilaterally implement the decision without union consent. Id. at 604.
Such language serves as an effective barrier to changes a union finds unacceptable, even in the
face of business necessity. For instance, in IAM v United Technologies Corp, 230 F.3d 569 (2d
Cir. 2000), a seemingly modest job security clause requiring the employer to make "every effort"
to preserve work was found to be an effective bar to transferring unit work. Even though other
contract provisions gave management the right to "direct operations," "assign work," and
"transfer any part of an operation," the "every effort" clause was enough to mitigate those rights
and require proof that every effort was taken. Construing the clause to require making "every
reasonable effort to preserve bargaining unit work" the court suggested steps necessary for
compliance. The employer must weigh restructuring options that explicitly take workforce
preservation into account as a separate and important value; pursue in good faith reasonable
concessions from the union or state; and show that a failure to transfer the work would entail
serious financial consequences. Id. at 579. Finding the company had violated § 301 of LMRA
when it failed to show it met the outlined test, the court upheld the lower court's action which
enjoined the planned move. Clearly, even seemingly loose language inserted to quiet union
concerns during negotiations about future work relocations will be strictly enforced by the Board
and require the company to show concrete efforts were taken before implementing its decision.
Lastly, where the contract contains a zipper clause union consent is required, and the
union need not even engage in midterm bargaining. UAW, 765 F.2d at 180.
Employers must avoid restrictive language limiting their right to move or eliminate work
from a union facility. Only when specific work preservation or zipper clauses are added to the
contract will an employer be effectively prevented from taking unilateral midterm action.
Absent such provisions an employer may at worst have to bargain to impasse on its decision
prior to implementing necessary operational changes.
II. Decision Bargaining Obligations.
LMRA requires employers to bargain over some decisions to eliminate unit work, and
encourages them to do so in all situations. Section 8(a)(5) of LMRA makes it an unfair labor
practice for an employer to refuse to bargain collectively with employee representatives. Section
8(d) defines the issues subject to mandatory bargaining; wages, hours, and other terms and
conditions of employment. Over time, pertinent case law has clarified the scope of § 8(d).
A. A Decision To Close All Or Part Of A Business Is Not A Mandatory Subject Of Bargaining.
When an employer permanently terminates its entire business it is under no obligation to
bargain about its decision. In Textile Workers Union of America v. Darlington Mfg. Co, 380
U.S. 263 (1965), the Court held that an employer has the absolute right to terminate its entire
business for any reason, including anti union animus, without violating LMRA. Id. at 268. In
Darlington, the company ceased all operations upon learning that its employees voted to
unionize. Although clearly motivated by vindictiveness, the company's decision was found not
to have violated § 8(a)(3) of LMRA because that section is designed to protect future collective
rights, which no longer exist in permanent closure situations. Id. at 272-74. In addition, the
Court found that there was no requirement to bargain concerning a business decision to terminate
an enterprise. Id. at 267 n5. Employers therefore are free to permanently cease their operations
at any time, and for any reason, without triggering decision bargaining obligations.
In 1981 the Supreme Court expanded the concept to partial business closures. In First
Nat'l. Maint. Corp. v. NLRB, 452 U.S. 666 (1981), the Court held an employer had no obligation
under LMRA to bargain over its decision to close a part of its business. Id. at 686. First
National Maintenance ("FNM") performed commercial cleaning services for a number of clients
in the New York City area. Each client location was considered a separate part of FNM's
business. The company decided to terminate its relationship with a client, which led to the
elimination of employees working at that site. FNM failed to bargain over its decision and the
union charged it with violating § 8(a)(5) of LMRA. The Court referred to the balancing test
outlined in Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203 (1964) in reaching its
decision. Id. at 679-80. See discussion of Fibreboard factors infra section II B 1.
Applying the factors, it found the employer had no obligation to bargain over
management decisions that have a substantial impact on employment unless the benefit for labor
management relations and the bargaining process outweighs the burden placed on the conduct of
the business. Id. at 679. Applying the criteria to partial closure decisions the Court held that the
harm likely to be done to an employer's need to operate freely in deciding whether to shut down
part of its business for economic reasons outweighed the incremental benefit union participation
in making the decision may bring. Id. at 686.
The Court, like it did in Fibreboard, ruled on narrow factual grounds. While exempting
partial closure decisions from § 8(a)(5) it signaled that subcontracting decisions will continue to
be treated differently and will normally trigger bargaining obligations, based on a case by case
analysis. Id. at 686 n22.
B. Most Subcontracting and Relocation Decisions Are Mandatory Subjects Of
Bargaining.
Companies deciding to subcontract unit work, or relocate work from a union facility will
normally be required to bargain over their decision.
1. Management Must Bargain Over Most Subcontracting Decisions.
Subcontracting decisions generally fall within the scope of LMRA § 8(d), and trigger
bargaining obligations. In Fibreboard, 379 U.S. 203, the Court held that a decision to replace
unionized maintenance employees with third party contracted employees was a mandatory
subject of bargaining, and a failure to do so violated § 8(a)(5) of LMRA. Id. at 209. It also
supported the Board's remedy, which required the company to bargain with the union, and
reinstate employees with back pay to the jobs they previously held. Id.
The Court took pains to emphasize that its holding was fact specific and did not apply to
each and every instance of subcontracting. In Fibreboard, the contractor performed the exact
same work done by union employees, in the very same plant. In effect, one group of workers
replaced another. The Court examined the plain language of the statute, the purpose of LMRA to
promote industrial peace, and industrial practices that indicated subcontracting was often a
subject of collective bargaining. It then balanced these factors against the right of an employer
to operate its business. In finding bargaining was required, the Court noted that the
contemplated change did not alter the company's basic operation, nor was capital investment
required. Therefore, the employer's right to manage its business was not significantly abridged,
and national labor policy warranted subjecting the issue to the process of collective negotiation.
Id. at 213-14.
The narrow nature of Fibreboard is reflected in a more recent case decided by the Court
of Appeals for the Third Circuit. Dorsey Trailers, Inc. v. NLRB, 134 F.3d 125 (3d Cir. 1998).
In Dorsey, the company, a maker of flatbed and dump trailers, unilaterally decided to subcontract
a portion of its work to another manufacturer, without prior notice to, and without bargaining
with the union. Id. at 128. The reason alleged by the company was to increase capacity and
avert a loss of sales. It was not to avoid labor costs. The Board found the company violated §
8(a)(5) when it failed to bargain because the decision to subcontract work was not a change in
the scope and direction of the business, but a direct replacement of unit employees with
contractor employees. Id. at 129. The court reversed. Noting the narrow application of
Fibreboard, and the Court's thinking in the later First National Maintenance case dealing with
partial business closures, the Dorsey court looked at the reasons underlying the company's
decision to subcontract work, instead of the type of decision being made. Id. at 131. Finding
economic profitability was the sole reason for the company's action, the court relieved the
employer of any decision bargaining obligation. Id. Relying principally on First National
Maintenance, the court noted that given the employer's need for unencumbered decision making
to run a profitable business, bargaining should be required only if the benefit from collective
bargaining outweighs the burden placed on the business. Id. at 131. Where, as here, the
employer's decision was prompted by factors outside the control of the union, bargaining places
too great a burden on management.
The Dorsey court was careful to limit its decision to the facts presented and emphasized
that certain subcontracting decisions must be submitted to union bargaining. Id. at 132. Where
the motivation is avoidance of labor costs, including a desire to reduce or eliminate overtime,
decision bargaining is required. Id. at 133.
Reinforcing the requirement to bargain where labor costs prompt the subcontracting
decision is the Board's decision in Standard Motor Products, 331 NLRB No. 195. The company
informed the union that it would subcontract work if necessary concessions were not provided.
Finding that subcontracting is a mandatory subject of bargaining, unilateral action is
impermissible prior to impasse. Rejecting the company's contention that impasse had been
reached, the Board found the company violated § 8(a)(5). Impasse requires evidence that there is
no realistic possibility that continued discussions will be fruitful. Standard Motor Products
suggests the Board will continue to require decision bargaining in most subcontracting situations,
and employers will be required to prove that impasse has been reached prior to implementing its
plans.
When subcontracting work, bargaining obligations are fact sensitive. When third parties
replace a current workforce and perform identical work within the same facility bargaining is
required. Likewise, negotiations are necessary when labor costs are part of the economic
rationale for the subcontracting decision. Only when economic considerations beyond the ability
of the union to address drive the decision is an employer relieved of the obligation. It is better to
err toward meeting with the union unless a clear case can be made that factors other than labor
costs motivated the decision.
2. Work Relocation Decisions Will Often Require Negotiations.
Management obligations regarding work relocation decisions were substantially clarified
in 1993. Where at least part of the company's basis for relocating work is labor cost, and
negotiations could possibly cure employer concerns, bargaining over the decision is required. In
United Food & Commercial Workers v. NLRB, 1 F.3d 24 (D.C. Cir. 1993) ("Dubuque"), the
court approved the Board's test to determine decision bargaining obligations in work relocation
situations. Id. at 1. In Dubuque, the company announced its decision to relocate operations from
one plant to another without bargaining with the union over its decision. The Board concluded
the failure to bargain violated LMRA § 8(a)(5). It made its decision by applying a newly
announced test that drew on prior Supreme Court decisions which had shaped the contours of
bargaining obligations in other settings. First National Maintenance Corp., 452 U.S. 666 (partial
business closures), and Fibreboard, 379 U.S. 203 (subcontracting).
Specifically, the test initially places the burden on the Board's General Counsel to
establish that the relocation was unaccompanied by a basic change in the nature of the
employer's operation. Where met, an employer will only be able to escape a bargaining
obligation if it can prove that the relocation involves a change in the scope and direction of the
enterprise, or that the work at the new location varies significantly from that at the former
location, or that the work is no longer performed anywhere. Alternatively, the employer may
proffer a defense that direct and indirect labor costs were not a factor in the decision, or that even
if they were the union could not have offered concessions that could have changed the
employer's decision. Id. at 29-30.
In interpreting the test the court noted that it involves three layers of analysis. First, it
recognizes a category of decisions lying at the core of entrepreneurial control in which
employers may take unilateral action. Second, it looks at the subjective reasons for the move and
only where labor costs are a factor is the third layer implicated. The third layer provides a
futility provision permitting the employer to escape bargaining obligations where the union
either would not, or could not offer sufficient concessions to change the employer's mind. Id. at
30. Even when bargaining is required the court noted that the Board pledged to consider
circumstances, such as the need to implement relocations expeditiously, in determining when an
impasse has been reached. Id.
The Dubuque test gives employers guidance when structuring the rationale for a
relocation decision. Decisions based on factors other than labor cost, or when projected labor
savings exceed what a union would or could offer in concessions, excuse an employer from any
decision bargaining obligation. Even where bargaining is required, impasse may be reached
quickly if time is of the essence in moving to the new location.
At least one Appellate Court, however, has rejected Dubuque. Dorsey Trailers, Inc. v.
NLRB, 233 F.3d 831 (4 th Cir. 2000). Dorsey, the same company involved in the subcontracting
case discussed above, decided approximately two years after subcontracting the work in the first
case, to actually relocate its operations to a facility in Georgia. Following failure of contract
renewal bargaining, the decision to relocate was made. Although bargaining continued during the
strike, and the company gave the union specific demands that may have prevented the relocation,
the Board found the company implemented its decision before impasse was reached and violated
§ 8(a)(5). Id. at 837.
The court failed to uphold the Board's decision, and found the relocation not to be a term
or condition covered under LMRA § 8(d). Id. at 841. Relying on First National Maintenance
instead of Dubuque, the court considered the relocation decision to be more akin to an
elimination of part of a business than one that falls within the definition of a term or condition of
employment. Quoting First National Maintenance, it noted that "Congress had no expectation
that the elected union representative would become an equal partner in the running of the
business enterprise in which the union's members are employed." Id. at 841. While noting that
the First National Maintenance Court did not reach the question of whether its decision applied
to relocations, the Dorsey court inferred it did. Id. at 842. Preferring to look at the Court's
reasoning in First National Maintenance instead of rigid categorization by decision type, the
Dorsey court found the company's decision to commit investment capital fundamental to the
basic direction of a corporate enterprise, and that a plant relocation is not a term or condition of
employment. Although the decision may affect "tenure," tenure is a distinct and separate
concept from a term or condition. Id. at 842-43. While bargaining over the impact the relocation
had on employees is required, decision bargaining is not. Id. at 843.
The court specifically rejected Dubuque in making its findings. It found Dubuque flatly
inconsistent with First National Maintenance. It also found Dubuque's logic flawed in trying to
separate labor costs from other economic considerations. Id. at 844. In summing up its position,
the court stated that § 8(a)(5) simply does not cover plant relocations or partial closures.
Expanding § 8(a)(5) to cover such decisions would expand the statute beyond all proper bounds.
Id. at 843.
Although the judiciary has not universally followed Dubuque it continues to be the test
used by the Board. In two post Dorsey cases the Board relied on Dubuque to analyze whether an
employer met its decision bargaining obligations in relocation situations. See Vico Products Co.
v. UAW, 2001 NLRB LEXIS 836 (2001) (finding employer failed to meet obligations); and Bell
Atlantic Corp. v. CWA, 2001 NLRB LEXIS 944 (2001) (finding employer did meet obligations).
While Dorsey has brought some uncertainty to decision bargaining over relocations it is
still prudent to engage in the process until a more definitive ruling is issued by the U.S. Supreme
Court, especially for firms located outside the Fourth Circuit.
3. Timely Notice Requirements.
When decision bargaining is required it is critical that timely notice be given to the union.
A union's failure to request decision bargaining following receipt of notice waives its right to file
a § 8(a)(5) charge. The waiver though must be clear and unmistakable. Dunbar v. Carrier Corp,
66 F. Supp. 2d 346 (N.D. N.Y. 1999).
An employer desiring to make material changes in terms and conditions has a duty under
LMRA to give timely notice to the union, and afford it a meaningful opportunity to bargain
before implementing the changes. Bell Atlantic Corp., 2001 NLRB LEXIS 944. Where notice is
given too close to the date of implementation, or under circumstances where it is clear that the
employer has no intention of bargaining, the act is violated.
While union notification after a general announcement will often be considered untimely,
employers may announce plans to the workforce just after, or simultaneously with, informing the
union, provided implementation of the plan is not immediate, and the union has an opportunity to
change the company's mind. Id. Employers may even present a fully developed plan as long
legitimate consultation can occur before the plan takes effect. Id.
For instance, in Bell Atlantic, the company informed the union, and several hours later
announced a relocation plan to the workforce that would not be implemented for some six
months. It then gave the union an opportunity to bargain. Finding effective notice, the Board
refused to merit a § 8(a)(5) claim, and additionally found the union waived its rights when its
only request was for information related to the move some two months following the
announcement. Id. See also Mercy Hosp. of Buffalo v. CWA, 2001 NLRB LEXIS 994 (2001)
(union's failure to seek decision bargaining after effective notice waived its right to claim §
8(a)(5) violation).
Consistent with national labor policy, only clear and unmistakable waivers will be
recognized. Dunbar, 66 F. Supp. at 351. Where, however, untimely notice is given, a failure to
request bargaining will not be fatal to a union § 8(a)(5) charge. In such cases the union faces a
fait accompli and is effectively denied a meaningful opportunity to negotiate. Id. See also
Standard Motor Products, 331 NLRB No. 195.
C. Job Eliminations May Also Trigger Charges Of Anti Union Animus.
In making changes that impact employment levels companies should conduct themselves
in a way that prevents claims of anti union animus. Section 8(a)(3) makes it an unfair labor
practice for an employer to discriminate in regard to hire, tenure, or on the basis of any term or
condition of employment based on union affiliation. Section 8(a)(1) makes it unlawful to
interfere with, restrain, or coerce employees in the exercise of self-organization and concerted
activity rights guaranteed them in § 7 of the Act.
When anti union animus is claimed, and §§ 8(a)(1) and (3) are invoked, courts will often
apply the test outlined in NLRB v. Wright Line, Inc., 662 F.2d 899, 901-02 (1 st Cir. 1981). The
General Counsel must first make a prima facie showing sufficient to support the inference that
the employer's opposition to protected conduct was a motivating factor in its decision. Once
established, the burden shifts to the employer to demonstrate the same action would have taken
place even in the absence of the protected conduct. Id. at 901-02. Where legitimate economic
reasons drive the company's decision, the employer will be found to have met its burden. Dorsey
Trailers, Inc., 233 F.3d at 840-41.
Actions taken solely to avoid the costs and obligations of a collective agreement do not
fall within the spectrum of legitimate business reasons. Such single focused decisions have been
found to violate §§ 8(a)(1) and (3). Los Angeles Marine Hardware Co. v. International Bhd. of
Teamsters, 235 NLRB 720, 736 (1978).
In reviewing claims of anti union animus courts will also closely inspect the employer's
motivation leading to the contemplated change. In International Paper Co. v. NLRB, 115 F.3d
1045 (D.C. Cir. 1997), the court relying on NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 34
(1967), divided employer conduct into two categories. That which is "inherently destructive"
and that which is "comparatively slight." Id. at 1048. Where the conduct is inherently
destructive of important employee rights no proof of anti union motivation is needed, and the
Board can find an unfair labor practice even if the employer introduces evidence that the conduct
was motivated by business considerations. If the adverse effect is comparatively slight, anti
union motivation must be proved if the employer offers evidence of legitimate and substantial
business justification for the conduct. Id. In International Paper the court concluded that the
company's decision to permanently subcontract work while engaged in a lockout, but after
fulfilling its bargaining obligation, feel into the comparatively slight category.
In then looking at the company's proffered reasons for its decision the court found no §
8(a)(3) violation. Specifically, the company proved the economic benefits of implementing the
permanent subcontract during the lockout. The court also found no improper motive even
though reductions in labor and overtime costs were part of the subcontracting rationale. The
court noted, however, that an improper motive, even when accompanied by legitimate business
considerations, is enough to prove a § 8(a)(3) violation. Id. at 1052 n6. While employers must
be prepared to articulate legitimate business reasons for their decision, they must also avoid
appearances of unlawful motivation.
Often, however, § 8(a)(1) and § 8(a)(3) allegations are brought in conjunction with §
8(a)(5) claims. These so-called "runaway shop" claims allege anti union animus, and not a
legitimate entrepreneurial rationale is behind the company's conduct, and its failure to engage in
decision bargaining further evidences its animosity. See, e.g., Fibreboard Paper Products Corp.,
379 U.S. 203; Dorsey Trailers, Inc., 233 F.3d 831; International Paper Co., 115 F.3d 1045;
Uforma/Shelby Business Forms, Inc., 111 F.3d 1284; Bell Atlantic Corp., 2001 NLRB LEXIS
944; Vico Products Co., 2001 NLRB LEXIS 836; Westchester Lace, Inc. v. Unite, 326 NLRB
1227 (1998); and Milwaukee Spring, 268 NLRB 601.
To avoid "runaway-shop" claims employers should eliminate any basis for a claim of
discrimination, and may also want to bargain even when not strictly required. Voluntary
bargaining will help avoid anti union animus claims. For instance, in Milwaukee Spring the
Board held that absent a § 8(a)(5) violation, there is no basis for a derivative § 8(a)(3) claim.
Therefore, decision bargaining in the absence of an independent § 8(a)(3) claim allows the
employer to avoid both § 8(a)(5) and § 8(a)(3) charges. Conversely, a failure to bargain at least
opens the door to both claims.
Some scholars believe that Milwaukee Spring also implicitly overturned the Board's
holding in Los Angeles Marine, and employers can now base their decision solely on labor cost
avoidance, without violating § 8(a)(3), if they engage in decision bargaining. This too provides
an incentive to engage in decision bargaining where a claim may be made that contract cost
avoidance was the sole reason for the employer's decision. Others, however, believe Los
Angeles Marine remains firmly entrenched, and bargaining will not prevent § 8(a)(3) violations
when labor cost alone drives the employer's decision. See Jan W. Sturner, An Analysis of the
NLRB's "Runaway Shop" Doctrine in the Context of Mid-Term Work Relocations Based on
Union Labor Costs, 17 HOFSTRA LAB. & EMP. L.J. 289, 306-10 (2000). Employers should probably
continue to avoid basing decisions solely on labor cost avoidance, even when it otherwise meets
§ 8(a)(5) requirements until the issue becomes fully settled.
While bargaining can protect employers from derivative § 8(a)(3) charges, an
independent § 8(a)(3) claim eliminates the right of an employer to defend its failure to bargain on
the grounds that its decision was based on legitimate entrepreneurial considerations outside the
scope of § 8(d). Westchester Lace, Inc., 326 NLRB at 1227 citing Joy Recovery Tech. Corp.,
320 NLRB 356, 356 fn.3 (1995). In Westchester Lace the Board found the employer violated §
8(a)(3) when it threatened to close its plant if the union continued to complain about layoffs
stemming from subcontracting decisions. Having established an independent basis for the §
8(a)(3) violation, the Board rejected the company's defense that it was not obligated to bargain
over the subcontracting decision because it was a core entrepreneurial right motivated solely by
economic reasons. Once anti union animus is found the employer loses its right to raise effective
defenses against § 8(a)(5) charges. Id.
III. Impact Bargaining Obligations.
Even when decision bargaining is not required, employers will still be required to
negotiate the effects the decision will have on affected employees. See, e.g., First National
Maintenance Corp., 452 U.S. at 679 n15 (requiring impact bargaining in partial closure);
Fibreboard Paper Products, Corp., 379 U.S. at 208 n2 (recognizing duty to bargain effects from
subcontracting); NLRB v. Nat'l. Car Rental Sys., Inc., 672 F.2d 1182, 1187-88 (3d Cir. 1982)
(requiring impact bargaining over work relocation); Universal Sec. Instr., Inc. v. NLRB, 649
F.2d 247, 257 (4 th Cir. 1981) (requiring impact bargaining over closure); NLRB v. Royal Plating
& Polishing Co., 350 F.2d 191, 196 (3d Cir. 1965) (requiring impact bargaining in plant
closures).
In addition, the notice given must be provided sufficiently in advance of the actual date of
impact to give the union a meaningful opportunity to bargain with the employer. NLRB v. Borg-
Warner Corp., 663 F.2d 666, 668 (6 th Cir. 1981). Also, the information must be accurate. NLRB
v. Waymouth Farms, Inc., 172 F.3d 598 (8 th Cir. 1999). In Waymouth Farms the court found the
company violated § 8(a)(5) when it misrepresented material facts that thwarted the union's ability
to effectively bargain about the impact a plant closure would have on employees. Id. at 600. The
company told the union it planned to close the plant and possibly relocate to another state when
in fact it had purchased another facility seven miles away. Instead of bargaining about relocation
rights the union concentrated on severance benefits. To remedy the situation the court upheld the
Board's order requiring the company to renegotiate an impact agreement. Id. at 599.
Section 8(a)(5) requires timely notice, truthful information, and good faith bargaining to
impasse on the impact a company's decision will have on affected employees. All decisions
involving business closures, partial closures, third party subcontracting, or relocations to other
company facilities trigger effects bargaining.
Conclusion
Employer obligations when eliminating bargaining unit work are complex and fact
sensitive. In most subcontracting and relocation situations decision bargaining will be required.
Conversely, companies may make decisions to close all or part of a business unilaterally. Even
when decision bargaining is not required, engaging in the process may prevent unions from
effectively bringing anti union animus claims. Aside from any decision bargaining obligations,
employers must always bargain over the impact their decision has on affected employees.
Employers can take a number of practical steps to reduce legal exposure when
eliminating, subcontracting or relocating unit work. First, they should avoid work preservation
and zipper clauses in collective bargaining agreements. Instead, a strong management rights
clause should be sought, preferably spelling out an express right to subcontract and relocate
work.
Second, employers should err toward bargaining about the decision unless it clearly
involves a total or partial business closure, or labor costs are not part of the rationale, or potential
labor cost savings are so great that the union could not or would not grant concessions sufficient
to equal them. Bargaining, even when not required, also serves as a shield against derivative anti
union animus claims. It also serves a practical purpose in informing the union about the reasons
for the change and may convince them the factors leading to the action are beyond their ability to
cure.
When bargaining obligations exist companies should provide the union with timely
notice and accurate information so that the union is unable to claim they were presented with a
fait accompli. Where negotiations fail to produce an agreement, companies must be sure an
impasse has been reached prior to unilaterally implementing any changes. Alternatively, when
the union fails to engage in negotiations employers must make sure the union has clearly and
unmistakably waived its right to do so before going forward with the planned action.
Third, aside from decision bargaining obligations employers should conduct themselves
in a manner that produces no fodder for the union to use in alleging an independent claim of anti
union animus. Not only will employers face sanctions for their unlawful conduct, they will also
lose the right to claim that their decision is based on legitimate business considerations and is
therefore outside the scope of any bargaining obligation.
Fourth, employers should always be prepared to bargain about the effects that a decision
has on affected employees. While the law continues to evolve, taking these steps will help
prevent charges, and place employers in a stronger position to defend themselves.
What must companies do when eliminating union operations, subcontracting union work
to third parties, or relocating work from organized facilities, and how can they minimize their
obligations and legal exposure?
Brief Answer
Companies should avoid contract language that restricts their ability to reduce work at
unionized locations. Assuming no contractual bar, companies can always unilaterally close all or
part of their business. Conversely, they will normally be required to bargain over subcontracting
and relocation decisions. Recent case law, however, has eliminated bargaining obligations in
some subcontracting and work relocation situations where the decision can be characterized as a
core entrepreneurial right falling outside the scope of mandatory bargaining. Even when
decision bargaining is not required it may still be prudent to avoid charges that the decision was
motivated by anti union animus. Bargaining over the decisions impact on affected employees
will be required, even when decision bargaining is not. Issues not unique to union facilities such
as partial plan terminations, WARN, and COBRA obligations are not addressed in this memo.
Discussion
Assuming contract language does not prohibit a company from eliminating unit work, a
series of NLRB and court decisions provide guidance on employer obligations when reducing
work at union locations. The lead cases build on one another to construct a general roadmap, but
fail to provide bright lines for all situations. Employers must bargain over some decisions to
remove unit work, but not others. Primarily, the nature of the work elimination drives the
decision bargaining obligation. For instance, decision bargaining is required in most
subcontracting and relocation situations, but is not necessary when companies permanently close
all or part of their business. Adding confusion are those decisions that can be characterized in
more than one way. For example, one court treated a relocation as a partial business closure, and
therefore outside the scope of mandated bargaining. Also, some courts have failed to impose
bargaining obligations where subcontracting could be characterized as a core entrepreneurial
decision. Even when decision bargaining is not required, it may still be prudent in some cases to
counter any allegations that anti union animus, and not other legitimate business concerns,
underlie the proposed change. Aside from decision bargaining, employers must negotiate over
the impact their decision to eliminate work will have on affected employees.
I. Contract Issues.
Absent contractual work preservation clauses companies are free to eliminate, relocate or
subcontract union work after any midterm bargaining obligations are satisfied. As each contract
has unique language an examination of the pertinent provisions is critical. In general, where the
contract does not contain a work preservation clause, and expressly or implicitly gives
management the right to reduce unit work, companies may do so. Express work preservation
provisions and zipper clauses may prevent such changes. The specific language will determine
what if any midterm bargaining obligation exists.
Taking the most favorable first, where the contract contains no work preservation
language and an express or broad implicit right, typically in the management rights clause, to
eliminate, transfer or subcontract work, the employer may do so without engaging in midterm
decision bargaining. UAW v. NLRB, 765 F.2d 175, 183 n.30 (D.C. Cir. 1985). An employers
obligation arguably was met when contract renewal negotiations took place.
The language giving management the right to make the contemplated change, however,
must be "clear and unmistakable." Uforma/Shelby Business Forms, Inc. v. NLRB, 111 F.3d
1284, (6 th Cir. 1997) citing Metropolitan Edison Co. v. NLRB, 460 U.S. 693, 708 (1983). See
also Standard Motor Products v. UAW, 331 NLRB No. 195 (2000). In Uforma, the court found
an employer did not violate § 8(a)(5) of The Labor Management Relations Act, 29 USC 141-87
(2001) ("LMRA") when it abolished third shift operations and laid off some affected employees
without first bargaining with the union. It based its decision on the breadth of the management
rights clause, which gave the employer the right to make such decisions unilaterally. The
provision need not catalog every conceivable permutation of a decision to lay off, provided it is
broad enough to encompass the action taken. Uforma, 111 F.3d at 1290.
Where no work preservation language is in place, but management has not previously
bargained an express or broad implicit right to implement the contemplated change, decision
bargaining may be required. Milwaukee Spring v. UAW, 268 NLRB 601, 602 (1984). For
instance, work relocation and subcontracting situations will often trigger decision bargaining
obligations. See discussion infra section II. Once bargaining reaches an impasse, however, the
employer is free to implement its decision. Id. at 603.
Where there is a work preservation clause the employer will be required to bargain over
its decision and may not unilaterally implement the decision without union consent. Id. at 604.
Such language serves as an effective barrier to changes a union finds unacceptable, even in the
face of business necessity. For instance, in IAM v United Technologies Corp, 230 F.3d 569 (2d
Cir. 2000), a seemingly modest job security clause requiring the employer to make "every effort"
to preserve work was found to be an effective bar to transferring unit work. Even though other
contract provisions gave management the right to "direct operations," "assign work," and
"transfer any part of an operation," the "every effort" clause was enough to mitigate those rights
and require proof that every effort was taken. Construing the clause to require making "every
reasonable effort to preserve bargaining unit work" the court suggested steps necessary for
compliance. The employer must weigh restructuring options that explicitly take workforce
preservation into account as a separate and important value; pursue in good faith reasonable
concessions from the union or state; and show that a failure to transfer the work would entail
serious financial consequences. Id. at 579. Finding the company had violated § 301 of LMRA
when it failed to show it met the outlined test, the court upheld the lower court's action which
enjoined the planned move. Clearly, even seemingly loose language inserted to quiet union
concerns during negotiations about future work relocations will be strictly enforced by the Board
and require the company to show concrete efforts were taken before implementing its decision.
Lastly, where the contract contains a zipper clause union consent is required, and the
union need not even engage in midterm bargaining. UAW, 765 F.2d at 180.
Employers must avoid restrictive language limiting their right to move or eliminate work
from a union facility. Only when specific work preservation or zipper clauses are added to the
contract will an employer be effectively prevented from taking unilateral midterm action.
Absent such provisions an employer may at worst have to bargain to impasse on its decision
prior to implementing necessary operational changes.
II. Decision Bargaining Obligations.
LMRA requires employers to bargain over some decisions to eliminate unit work, and
encourages them to do so in all situations. Section 8(a)(5) of LMRA makes it an unfair labor
practice for an employer to refuse to bargain collectively with employee representatives. Section
8(d) defines the issues subject to mandatory bargaining; wages, hours, and other terms and
conditions of employment. Over time, pertinent case law has clarified the scope of § 8(d).
A. A Decision To Close All Or Part Of A Business Is Not A Mandatory Subject Of Bargaining.
When an employer permanently terminates its entire business it is under no obligation to
bargain about its decision. In Textile Workers Union of America v. Darlington Mfg. Co, 380
U.S. 263 (1965), the Court held that an employer has the absolute right to terminate its entire
business for any reason, including anti union animus, without violating LMRA. Id. at 268. In
Darlington, the company ceased all operations upon learning that its employees voted to
unionize. Although clearly motivated by vindictiveness, the company's decision was found not
to have violated § 8(a)(3) of LMRA because that section is designed to protect future collective
rights, which no longer exist in permanent closure situations. Id. at 272-74. In addition, the
Court found that there was no requirement to bargain concerning a business decision to terminate
an enterprise. Id. at 267 n5. Employers therefore are free to permanently cease their operations
at any time, and for any reason, without triggering decision bargaining obligations.
In 1981 the Supreme Court expanded the concept to partial business closures. In First
Nat'l. Maint. Corp. v. NLRB, 452 U.S. 666 (1981), the Court held an employer had no obligation
under LMRA to bargain over its decision to close a part of its business. Id. at 686. First
National Maintenance ("FNM") performed commercial cleaning services for a number of clients
in the New York City area. Each client location was considered a separate part of FNM's
business. The company decided to terminate its relationship with a client, which led to the
elimination of employees working at that site. FNM failed to bargain over its decision and the
union charged it with violating § 8(a)(5) of LMRA. The Court referred to the balancing test
outlined in Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203 (1964) in reaching its
decision. Id. at 679-80. See discussion of Fibreboard factors infra section II B 1.
Applying the factors, it found the employer had no obligation to bargain over
management decisions that have a substantial impact on employment unless the benefit for labor
management relations and the bargaining process outweighs the burden placed on the conduct of
the business. Id. at 679. Applying the criteria to partial closure decisions the Court held that the
harm likely to be done to an employer's need to operate freely in deciding whether to shut down
part of its business for economic reasons outweighed the incremental benefit union participation
in making the decision may bring. Id. at 686.
The Court, like it did in Fibreboard, ruled on narrow factual grounds. While exempting
partial closure decisions from § 8(a)(5) it signaled that subcontracting decisions will continue to
be treated differently and will normally trigger bargaining obligations, based on a case by case
analysis. Id. at 686 n22.
B. Most Subcontracting and Relocation Decisions Are Mandatory Subjects Of
Bargaining.
Companies deciding to subcontract unit work, or relocate work from a union facility will
normally be required to bargain over their decision.
1. Management Must Bargain Over Most Subcontracting Decisions.
Subcontracting decisions generally fall within the scope of LMRA § 8(d), and trigger
bargaining obligations. In Fibreboard, 379 U.S. 203, the Court held that a decision to replace
unionized maintenance employees with third party contracted employees was a mandatory
subject of bargaining, and a failure to do so violated § 8(a)(5) of LMRA. Id. at 209. It also
supported the Board's remedy, which required the company to bargain with the union, and
reinstate employees with back pay to the jobs they previously held. Id.
The Court took pains to emphasize that its holding was fact specific and did not apply to
each and every instance of subcontracting. In Fibreboard, the contractor performed the exact
same work done by union employees, in the very same plant. In effect, one group of workers
replaced another. The Court examined the plain language of the statute, the purpose of LMRA to
promote industrial peace, and industrial practices that indicated subcontracting was often a
subject of collective bargaining. It then balanced these factors against the right of an employer
to operate its business. In finding bargaining was required, the Court noted that the
contemplated change did not alter the company's basic operation, nor was capital investment
required. Therefore, the employer's right to manage its business was not significantly abridged,
and national labor policy warranted subjecting the issue to the process of collective negotiation.
Id. at 213-14.
The narrow nature of Fibreboard is reflected in a more recent case decided by the Court
of Appeals for the Third Circuit. Dorsey Trailers, Inc. v. NLRB, 134 F.3d 125 (3d Cir. 1998).
In Dorsey, the company, a maker of flatbed and dump trailers, unilaterally decided to subcontract
a portion of its work to another manufacturer, without prior notice to, and without bargaining
with the union. Id. at 128. The reason alleged by the company was to increase capacity and
avert a loss of sales. It was not to avoid labor costs. The Board found the company violated §
8(a)(5) when it failed to bargain because the decision to subcontract work was not a change in
the scope and direction of the business, but a direct replacement of unit employees with
contractor employees. Id. at 129. The court reversed. Noting the narrow application of
Fibreboard, and the Court's thinking in the later First National Maintenance case dealing with
partial business closures, the Dorsey court looked at the reasons underlying the company's
decision to subcontract work, instead of the type of decision being made. Id. at 131. Finding
economic profitability was the sole reason for the company's action, the court relieved the
employer of any decision bargaining obligation. Id. Relying principally on First National
Maintenance, the court noted that given the employer's need for unencumbered decision making
to run a profitable business, bargaining should be required only if the benefit from collective
bargaining outweighs the burden placed on the business. Id. at 131. Where, as here, the
employer's decision was prompted by factors outside the control of the union, bargaining places
too great a burden on management.
The Dorsey court was careful to limit its decision to the facts presented and emphasized
that certain subcontracting decisions must be submitted to union bargaining. Id. at 132. Where
the motivation is avoidance of labor costs, including a desire to reduce or eliminate overtime,
decision bargaining is required. Id. at 133.
Reinforcing the requirement to bargain where labor costs prompt the subcontracting
decision is the Board's decision in Standard Motor Products, 331 NLRB No. 195. The company
informed the union that it would subcontract work if necessary concessions were not provided.
Finding that subcontracting is a mandatory subject of bargaining, unilateral action is
impermissible prior to impasse. Rejecting the company's contention that impasse had been
reached, the Board found the company violated § 8(a)(5). Impasse requires evidence that there is
no realistic possibility that continued discussions will be fruitful. Standard Motor Products
suggests the Board will continue to require decision bargaining in most subcontracting situations,
and employers will be required to prove that impasse has been reached prior to implementing its
plans.
When subcontracting work, bargaining obligations are fact sensitive. When third parties
replace a current workforce and perform identical work within the same facility bargaining is
required. Likewise, negotiations are necessary when labor costs are part of the economic
rationale for the subcontracting decision. Only when economic considerations beyond the ability
of the union to address drive the decision is an employer relieved of the obligation. It is better to
err toward meeting with the union unless a clear case can be made that factors other than labor
costs motivated the decision.
2. Work Relocation Decisions Will Often Require Negotiations.
Management obligations regarding work relocation decisions were substantially clarified
in 1993. Where at least part of the company's basis for relocating work is labor cost, and
negotiations could possibly cure employer concerns, bargaining over the decision is required. In
United Food & Commercial Workers v. NLRB, 1 F.3d 24 (D.C. Cir. 1993) ("Dubuque"), the
court approved the Board's test to determine decision bargaining obligations in work relocation
situations. Id. at 1. In Dubuque, the company announced its decision to relocate operations from
one plant to another without bargaining with the union over its decision. The Board concluded
the failure to bargain violated LMRA § 8(a)(5). It made its decision by applying a newly
announced test that drew on prior Supreme Court decisions which had shaped the contours of
bargaining obligations in other settings. First National Maintenance Corp., 452 U.S. 666 (partial
business closures), and Fibreboard, 379 U.S. 203 (subcontracting).
Specifically, the test initially places the burden on the Board's General Counsel to
establish that the relocation was unaccompanied by a basic change in the nature of the
employer's operation. Where met, an employer will only be able to escape a bargaining
obligation if it can prove that the relocation involves a change in the scope and direction of the
enterprise, or that the work at the new location varies significantly from that at the former
location, or that the work is no longer performed anywhere. Alternatively, the employer may
proffer a defense that direct and indirect labor costs were not a factor in the decision, or that even
if they were the union could not have offered concessions that could have changed the
employer's decision. Id. at 29-30.
In interpreting the test the court noted that it involves three layers of analysis. First, it
recognizes a category of decisions lying at the core of entrepreneurial control in which
employers may take unilateral action. Second, it looks at the subjective reasons for the move and
only where labor costs are a factor is the third layer implicated. The third layer provides a
futility provision permitting the employer to escape bargaining obligations where the union
either would not, or could not offer sufficient concessions to change the employer's mind. Id. at
30. Even when bargaining is required the court noted that the Board pledged to consider
circumstances, such as the need to implement relocations expeditiously, in determining when an
impasse has been reached. Id.
The Dubuque test gives employers guidance when structuring the rationale for a
relocation decision. Decisions based on factors other than labor cost, or when projected labor
savings exceed what a union would or could offer in concessions, excuse an employer from any
decision bargaining obligation. Even where bargaining is required, impasse may be reached
quickly if time is of the essence in moving to the new location.
At least one Appellate Court, however, has rejected Dubuque. Dorsey Trailers, Inc. v.
NLRB, 233 F.3d 831 (4 th Cir. 2000). Dorsey, the same company involved in the subcontracting
case discussed above, decided approximately two years after subcontracting the work in the first
case, to actually relocate its operations to a facility in Georgia. Following failure of contract
renewal bargaining, the decision to relocate was made. Although bargaining continued during the
strike, and the company gave the union specific demands that may have prevented the relocation,
the Board found the company implemented its decision before impasse was reached and violated
§ 8(a)(5). Id. at 837.
The court failed to uphold the Board's decision, and found the relocation not to be a term
or condition covered under LMRA § 8(d). Id. at 841. Relying on First National Maintenance
instead of Dubuque, the court considered the relocation decision to be more akin to an
elimination of part of a business than one that falls within the definition of a term or condition of
employment. Quoting First National Maintenance, it noted that "Congress had no expectation
that the elected union representative would become an equal partner in the running of the
business enterprise in which the union's members are employed." Id. at 841. While noting that
the First National Maintenance Court did not reach the question of whether its decision applied
to relocations, the Dorsey court inferred it did. Id. at 842. Preferring to look at the Court's
reasoning in First National Maintenance instead of rigid categorization by decision type, the
Dorsey court found the company's decision to commit investment capital fundamental to the
basic direction of a corporate enterprise, and that a plant relocation is not a term or condition of
employment. Although the decision may affect "tenure," tenure is a distinct and separate
concept from a term or condition. Id. at 842-43. While bargaining over the impact the relocation
had on employees is required, decision bargaining is not. Id. at 843.
The court specifically rejected Dubuque in making its findings. It found Dubuque flatly
inconsistent with First National Maintenance. It also found Dubuque's logic flawed in trying to
separate labor costs from other economic considerations. Id. at 844. In summing up its position,
the court stated that § 8(a)(5) simply does not cover plant relocations or partial closures.
Expanding § 8(a)(5) to cover such decisions would expand the statute beyond all proper bounds.
Id. at 843.
Although the judiciary has not universally followed Dubuque it continues to be the test
used by the Board. In two post Dorsey cases the Board relied on Dubuque to analyze whether an
employer met its decision bargaining obligations in relocation situations. See Vico Products Co.
v. UAW, 2001 NLRB LEXIS 836 (2001) (finding employer failed to meet obligations); and Bell
Atlantic Corp. v. CWA, 2001 NLRB LEXIS 944 (2001) (finding employer did meet obligations).
While Dorsey has brought some uncertainty to decision bargaining over relocations it is
still prudent to engage in the process until a more definitive ruling is issued by the U.S. Supreme
Court, especially for firms located outside the Fourth Circuit.
3. Timely Notice Requirements.
When decision bargaining is required it is critical that timely notice be given to the union.
A union's failure to request decision bargaining following receipt of notice waives its right to file
a § 8(a)(5) charge. The waiver though must be clear and unmistakable. Dunbar v. Carrier Corp,
66 F. Supp. 2d 346 (N.D. N.Y. 1999).
An employer desiring to make material changes in terms and conditions has a duty under
LMRA to give timely notice to the union, and afford it a meaningful opportunity to bargain
before implementing the changes. Bell Atlantic Corp., 2001 NLRB LEXIS 944. Where notice is
given too close to the date of implementation, or under circumstances where it is clear that the
employer has no intention of bargaining, the act is violated.
While union notification after a general announcement will often be considered untimely,
employers may announce plans to the workforce just after, or simultaneously with, informing the
union, provided implementation of the plan is not immediate, and the union has an opportunity to
change the company's mind. Id. Employers may even present a fully developed plan as long
legitimate consultation can occur before the plan takes effect. Id.
For instance, in Bell Atlantic, the company informed the union, and several hours later
announced a relocation plan to the workforce that would not be implemented for some six
months. It then gave the union an opportunity to bargain. Finding effective notice, the Board
refused to merit a § 8(a)(5) claim, and additionally found the union waived its rights when its
only request was for information related to the move some two months following the
announcement. Id. See also Mercy Hosp. of Buffalo v. CWA, 2001 NLRB LEXIS 994 (2001)
(union's failure to seek decision bargaining after effective notice waived its right to claim §
8(a)(5) violation).
Consistent with national labor policy, only clear and unmistakable waivers will be
recognized. Dunbar, 66 F. Supp. at 351. Where, however, untimely notice is given, a failure to
request bargaining will not be fatal to a union § 8(a)(5) charge. In such cases the union faces a
fait accompli and is effectively denied a meaningful opportunity to negotiate. Id. See also
Standard Motor Products, 331 NLRB No. 195.
C. Job Eliminations May Also Trigger Charges Of Anti Union Animus.
In making changes that impact employment levels companies should conduct themselves
in a way that prevents claims of anti union animus. Section 8(a)(3) makes it an unfair labor
practice for an employer to discriminate in regard to hire, tenure, or on the basis of any term or
condition of employment based on union affiliation. Section 8(a)(1) makes it unlawful to
interfere with, restrain, or coerce employees in the exercise of self-organization and concerted
activity rights guaranteed them in § 7 of the Act.
When anti union animus is claimed, and §§ 8(a)(1) and (3) are invoked, courts will often
apply the test outlined in NLRB v. Wright Line, Inc., 662 F.2d 899, 901-02 (1 st Cir. 1981). The
General Counsel must first make a prima facie showing sufficient to support the inference that
the employer's opposition to protected conduct was a motivating factor in its decision. Once
established, the burden shifts to the employer to demonstrate the same action would have taken
place even in the absence of the protected conduct. Id. at 901-02. Where legitimate economic
reasons drive the company's decision, the employer will be found to have met its burden. Dorsey
Trailers, Inc., 233 F.3d at 840-41.
Actions taken solely to avoid the costs and obligations of a collective agreement do not
fall within the spectrum of legitimate business reasons. Such single focused decisions have been
found to violate §§ 8(a)(1) and (3). Los Angeles Marine Hardware Co. v. International Bhd. of
Teamsters, 235 NLRB 720, 736 (1978).
In reviewing claims of anti union animus courts will also closely inspect the employer's
motivation leading to the contemplated change. In International Paper Co. v. NLRB, 115 F.3d
1045 (D.C. Cir. 1997), the court relying on NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 34
(1967), divided employer conduct into two categories. That which is "inherently destructive"
and that which is "comparatively slight." Id. at 1048. Where the conduct is inherently
destructive of important employee rights no proof of anti union motivation is needed, and the
Board can find an unfair labor practice even if the employer introduces evidence that the conduct
was motivated by business considerations. If the adverse effect is comparatively slight, anti
union motivation must be proved if the employer offers evidence of legitimate and substantial
business justification for the conduct. Id. In International Paper the court concluded that the
company's decision to permanently subcontract work while engaged in a lockout, but after
fulfilling its bargaining obligation, feel into the comparatively slight category.
In then looking at the company's proffered reasons for its decision the court found no §
8(a)(3) violation. Specifically, the company proved the economic benefits of implementing the
permanent subcontract during the lockout. The court also found no improper motive even
though reductions in labor and overtime costs were part of the subcontracting rationale. The
court noted, however, that an improper motive, even when accompanied by legitimate business
considerations, is enough to prove a § 8(a)(3) violation. Id. at 1052 n6. While employers must
be prepared to articulate legitimate business reasons for their decision, they must also avoid
appearances of unlawful motivation.
Often, however, § 8(a)(1) and § 8(a)(3) allegations are brought in conjunction with §
8(a)(5) claims. These so-called "runaway shop" claims allege anti union animus, and not a
legitimate entrepreneurial rationale is behind the company's conduct, and its failure to engage in
decision bargaining further evidences its animosity. See, e.g., Fibreboard Paper Products Corp.,
379 U.S. 203; Dorsey Trailers, Inc., 233 F.3d 831; International Paper Co., 115 F.3d 1045;
Uforma/Shelby Business Forms, Inc., 111 F.3d 1284; Bell Atlantic Corp., 2001 NLRB LEXIS
944; Vico Products Co., 2001 NLRB LEXIS 836; Westchester Lace, Inc. v. Unite, 326 NLRB
1227 (1998); and Milwaukee Spring, 268 NLRB 601.
To avoid "runaway-shop" claims employers should eliminate any basis for a claim of
discrimination, and may also want to bargain even when not strictly required. Voluntary
bargaining will help avoid anti union animus claims. For instance, in Milwaukee Spring the
Board held that absent a § 8(a)(5) violation, there is no basis for a derivative § 8(a)(3) claim.
Therefore, decision bargaining in the absence of an independent § 8(a)(3) claim allows the
employer to avoid both § 8(a)(5) and § 8(a)(3) charges. Conversely, a failure to bargain at least
opens the door to both claims.
Some scholars believe that Milwaukee Spring also implicitly overturned the Board's
holding in Los Angeles Marine, and employers can now base their decision solely on labor cost
avoidance, without violating § 8(a)(3), if they engage in decision bargaining. This too provides
an incentive to engage in decision bargaining where a claim may be made that contract cost
avoidance was the sole reason for the employer's decision. Others, however, believe Los
Angeles Marine remains firmly entrenched, and bargaining will not prevent § 8(a)(3) violations
when labor cost alone drives the employer's decision. See Jan W. Sturner, An Analysis of the
NLRB's "Runaway Shop" Doctrine in the Context of Mid-Term Work Relocations Based on
Union Labor Costs, 17 HOFSTRA LAB. & EMP. L.J. 289, 306-10 (2000). Employers should probably
continue to avoid basing decisions solely on labor cost avoidance, even when it otherwise meets
§ 8(a)(5) requirements until the issue becomes fully settled.
While bargaining can protect employers from derivative § 8(a)(3) charges, an
independent § 8(a)(3) claim eliminates the right of an employer to defend its failure to bargain on
the grounds that its decision was based on legitimate entrepreneurial considerations outside the
scope of § 8(d). Westchester Lace, Inc., 326 NLRB at 1227 citing Joy Recovery Tech. Corp.,
320 NLRB 356, 356 fn.3 (1995). In Westchester Lace the Board found the employer violated §
8(a)(3) when it threatened to close its plant if the union continued to complain about layoffs
stemming from subcontracting decisions. Having established an independent basis for the §
8(a)(3) violation, the Board rejected the company's defense that it was not obligated to bargain
over the subcontracting decision because it was a core entrepreneurial right motivated solely by
economic reasons. Once anti union animus is found the employer loses its right to raise effective
defenses against § 8(a)(5) charges. Id.
III. Impact Bargaining Obligations.
Even when decision bargaining is not required, employers will still be required to
negotiate the effects the decision will have on affected employees. See, e.g., First National
Maintenance Corp., 452 U.S. at 679 n15 (requiring impact bargaining in partial closure);
Fibreboard Paper Products, Corp., 379 U.S. at 208 n2 (recognizing duty to bargain effects from
subcontracting); NLRB v. Nat'l. Car Rental Sys., Inc., 672 F.2d 1182, 1187-88 (3d Cir. 1982)
(requiring impact bargaining over work relocation); Universal Sec. Instr., Inc. v. NLRB, 649
F.2d 247, 257 (4 th Cir. 1981) (requiring impact bargaining over closure); NLRB v. Royal Plating
& Polishing Co., 350 F.2d 191, 196 (3d Cir. 1965) (requiring impact bargaining in plant
closures).
In addition, the notice given must be provided sufficiently in advance of the actual date of
impact to give the union a meaningful opportunity to bargain with the employer. NLRB v. Borg-
Warner Corp., 663 F.2d 666, 668 (6 th Cir. 1981). Also, the information must be accurate. NLRB
v. Waymouth Farms, Inc., 172 F.3d 598 (8 th Cir. 1999). In Waymouth Farms the court found the
company violated § 8(a)(5) when it misrepresented material facts that thwarted the union's ability
to effectively bargain about the impact a plant closure would have on employees. Id. at 600. The
company told the union it planned to close the plant and possibly relocate to another state when
in fact it had purchased another facility seven miles away. Instead of bargaining about relocation
rights the union concentrated on severance benefits. To remedy the situation the court upheld the
Board's order requiring the company to renegotiate an impact agreement. Id. at 599.
Section 8(a)(5) requires timely notice, truthful information, and good faith bargaining to
impasse on the impact a company's decision will have on affected employees. All decisions
involving business closures, partial closures, third party subcontracting, or relocations to other
company facilities trigger effects bargaining.
Conclusion
Employer obligations when eliminating bargaining unit work are complex and fact
sensitive. In most subcontracting and relocation situations decision bargaining will be required.
Conversely, companies may make decisions to close all or part of a business unilaterally. Even
when decision bargaining is not required, engaging in the process may prevent unions from
effectively bringing anti union animus claims. Aside from any decision bargaining obligations,
employers must always bargain over the impact their decision has on affected employees.
Employers can take a number of practical steps to reduce legal exposure when
eliminating, subcontracting or relocating unit work. First, they should avoid work preservation
and zipper clauses in collective bargaining agreements. Instead, a strong management rights
clause should be sought, preferably spelling out an express right to subcontract and relocate
work.
Second, employers should err toward bargaining about the decision unless it clearly
involves a total or partial business closure, or labor costs are not part of the rationale, or potential
labor cost savings are so great that the union could not or would not grant concessions sufficient
to equal them. Bargaining, even when not required, also serves as a shield against derivative anti
union animus claims. It also serves a practical purpose in informing the union about the reasons
for the change and may convince them the factors leading to the action are beyond their ability to
cure.
When bargaining obligations exist companies should provide the union with timely
notice and accurate information so that the union is unable to claim they were presented with a
fait accompli. Where negotiations fail to produce an agreement, companies must be sure an
impasse has been reached prior to unilaterally implementing any changes. Alternatively, when
the union fails to engage in negotiations employers must make sure the union has clearly and
unmistakably waived its right to do so before going forward with the planned action.
Third, aside from decision bargaining obligations employers should conduct themselves
in a manner that produces no fodder for the union to use in alleging an independent claim of anti
union animus. Not only will employers face sanctions for their unlawful conduct, they will also
lose the right to claim that their decision is based on legitimate business considerations and is
therefore outside the scope of any bargaining obligation.
Fourth, employers should always be prepared to bargain about the effects that a decision
has on affected employees. While the law continues to evolve, taking these steps will help
prevent charges, and place employers in a stronger position to defend themselves.
