Vorys on Labor : Labor Relations Lawyer & Attorney: Vorys, Sater, Seymour and Pease Law Firm: National Labor Relations

By Nelson Cary and Ben Shepler

New year, same controversial NLRB. In a decision that seems destined for appeal, the NLRB recently ruled that employers may not utilize individual arbitration agreements that prevent employees from joining in employment-related class or collective actions. The NLRB’s decision is notable because, among other things, it arguably conflicts with both the Federal Arbitration Act (FAA) and with a recent pro-arbitration decision issued by the United States Supreme Court.

In D.R. Horton, Inc., 357 N.L.R.B. No. 184 (Jan. 3, 2012) (pdf), the NLRB held that homebuilder D.R. Horton committed an unfair labor practice by requiring employees to sign a mandatory arbitration agreement that (1) forced employees to submit employment-related disputes to binding arbitration and (2) prohibited the arbitrator from considering these disputes as part of a class or collective action. This prohibition came under fire in 2008, when a former D.R. Horton employee attempted to initiate a collective action arbitration alleging violations of the Fair Labor Standards Act. 

In a 2-0 decision, with Member Hayes (R) having recused himself, the NLRB held that participation in class or collective actions is protected concerted activity under the NLRA. Accordingly, the arbitration agreement violated the NLRA because it prohibited employees from participating in protected concerted activity. The NLRB further held that the arbitration agreement violated the NLRA because the agreement appeared to prohibit employees from filing unfair labor practice charges with the NLRB.  

As part of its decision, the NLRB also considered an important issue of first impression:  whether the prohibition on class/collective action waivers in arbitration agreements the NLRB found in the NLRA put the NLRA in conflict with the pro-arbitration FAA. The NLRB determined that no conflict existed, noting that the NLRA would also prohibit other contracts that barred employment class or collective actions, regardless of whether the contract involved arbitration. 

Finally, the NLRB addressed concerns that its decision conflicted with a recent pro-arbitration opinion from the United States Supreme Court. In AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1753 (2011) (pdf), the Supreme Court held that the FAA preempted a California law that prohibited class action waivers in consumer arbitration contracts. The NLRB attempted to distinguish AT&T Mobility by pointing out that the case involved a conflict between the FAA and state law, whereas the arbitration agreement at issue in D.R. Horton involved a potential conflict between two federal statutes, the FAA and the NLRA. 

The strength of the NLRB’s reasoning will almost certainly be tested on appeal. In the interim, labor professionals should review all individual, non-collectively bargained arbitration policies. In particular, labor professionals should consider:

• Allowing employees to participate in employment-related class or collective actions. According to the NLRB, an arbitration agreement can prohibit class or collective arbitration so long as employees were allowed to bring these claims in court. The NLRB chose not to address the opposite scenario:  whether an arbitration agreement could allow class or collective arbitration claims, but prohibit those claims in court. 

• Allowing employees to file unfair labor practice charges with the NLRB. Excluding such claims from the scope of an arbitration agreement improves the likelihood that the arbitration agreement will not run afoul of the NLRA. 

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By Nelson Cary and Micah Dawson

In College Football Bowl week terminology, some would say President Obama ran an “end-around” play on the Senate yesterday.  Using his recess appointment power, he filled the three vacancies on the National Labor Relations Board, despite the Senate's refusal to act on those appointments.  President Obama appointed his two most recent nominees, Deputy Labor Secretary Sharon Block (D) and union attorney Richard Griffin (D), to year long positions.  Obama also appointed Board counsel Terence Flynn (R), whose appointment had lingered for nearly a year, to fill the final vacancy on the five-member board, giving it a full contingent for the first time in a number of years.

The Chamber of Commerce, and Republicans, expressed immediate outrage and questioned whether the recess appointments were legal.  The argument against the appointments centers on the meaning of the recess appointment power contained in the U.S. Constitution.  Republicans point out there is not currently a “recess” as neither chamber has passed an adjournment resolution, and both chambers have been holding pro-forma sessions every three days. 

Whether the Chamber of Commerce or other business groups will file a lawsuit challenging the recess appointments is yet to be seen.  Labor professionals should monitor these developments as such a lawsuit would join a growing string of litigation involving the NLRB.

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Think that just because an employee has the title "supervisor" and is involved in the disciplinary process that the employee will necessarily be a supervisor under the NLRA?  Think again. 

In a recent decision, the NLRB examined the duties of an employee with the title "field supervisor."  This employee was the first level of leadership for hourly, non-supervisory employees.  The field supervisor monitored the productivity of those employees, examined their work, and inspected their vehicles.  The field supervisor could give verbal warnings to those employees for performance or attendance issues.  The field supervisor could also initiate what the employer called an "employee consultation form" (ECF), recommending to higher management that more significant disciplinary action be taken.  Following the referral of the ECF to higher management, multiple levels of management, along with a human resources manager, would review the ECF before accepting or rejecting it.  The employer established that higher management rarely rejected an ECF from a field supervisor.

In DirectTV, 357 N.L.R.B. No. 149 (Dec. 22, 2011) (pdf), the NLRB held in a 2-1 decision that the employer failed to prove that the field supervisor was a "supervisor" under the NLRA.  To be a supervisor under the NLRA, an employee must possess certain authority with respect to other employees.  One such authority is the power to discipline another employee, or to effectively recommend that disciplinary action be taken.

The NLRB noted that "effectively recommend" means that the recommended action is taken without an independent investigation by superiors, and not simply that the recommendation is ultimately followed.  The NLRB then found that the employer proved merely that management ultimately followed the recommendation.  According to the majority, the employer didn't prove what weight higher management attached to the field supervisor's recommendation.  It also found that the review by other levels of management constituted "independent investigation" by the superiors.  Finally, the majority found fault with the employer's proof because it didn't demonstrate what impact the ECFs had on an employee's job status, future tenure or discipline.

Member Hayes (R) dissented.  He found that the record clearly established that the field supervisor had the independent, discretionary authority to discipline other employees.  The subsequent review by higher levels of management was not unique and to be expected to "assure procedural compliance with myriad Federal and State employment law regulations."  He also noted that the record contained evidence that ECF's seeking discipline up to and including termination have been approved and implemented.  Accordingly, Member Hayes would have held that the field supervisors are supervisors under the NLRA.

For the labor professional, the NLRB's decision is an important reminder of four points:

• Titles don't matter; duties do.  Regardless of what title an employer bestows upon an employee, it is important to match the duties to that title.
• "Effectively recommend" is not easily proved.  The NLRB will clearly look closely at how the alleged supervisor interacts with other members of management and what authority the person actually exercises.
• The burden of proving supervisory status is on the party asserting it.  If an employer anticipates taking the position that an employee is a supervisor, then the employer should be prepared with documentary evidence to prove that the employee exercises the statutorily required authority.
• Knowing which employees are supervisors is critical.  In this case, the evidence suggested that the field supervisors were involved in prounion activity.  The union won the election by only a five vote margin.  Because the field supervisors were not "supervisors" under the NLRA, their prounion activities didn't require a second election.

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The NLRB announced today that it is delaying the effective date of its notice posting rule.  This is the second delay the NLRB has announced.  This time, however, the NLRB stated that the delay was at the request of the federal judge in Washington, D.C. who will decide two of the three cases that business groups and others filed challenging the rule.  At a court hearing earlier this week, the judge asked the NLRB to delay the effective date of the rule.  The new effective date for posting the required notice is April 30, 2012.

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By Nelson Cary and Micah Dawson

Earlier today, the NLRB formally published their new election rules in the Federal Register.  Chairman Pearce (D) and Member Becker (D), whose term ends next week, voted in support of the new rule. Member Hayes (R) withheld his vote. Member Hayes can vote against finalizing the rule and publish a statement of dissent any time before the rule takes effect on April 30, 2012.

As expected, the new rule makes significant changes to union election procedures, including:

• Empowering the hearing officer to limit evidence produced at the initial hearing to only that necessary to determine whether a question concerning representation exists;
• Eliminating the automatic right to file briefs with the regional director after the initial hearing;
• Eliminating a party's right to appeal the regional director's determinations to the NLRB prior to the election, and providing for only a single appeal, after the election, and then only over issues that the election hasn't rendered moot;
• Eliminating language in the NLRB's regulations providing that elections are typically not scheduled for a date sooner than 25 days after the election petition has been filed;
• Clarifying the standard for seeking special permission to appeal to the NLRB from a regional director's decision; and
• Making NLRB review of the regional director's decisions discretionary, rather than mandatory.

The rule, which has increasingly been referred to as the “ambush election” rule by those opposed to it, significantly limits employers’ legal right to object to the petitioned-for unit prior to a union election.  By shortening the amount of time between petition and election, it also curtails employers' ability to communicate with workers during the union election process.  With less ability to communicate, the rule limits the time during which an employee is certain to hear both sides of the story:  both the case for and the case against union representation.   

Even before the NLRB announced that it would publish this final rule, the U.S. Chamber of Commerce sought to nullify it.  On December 20, 2011, the Chamber filed a federal lawsuit challenging the new rule. The lawsuit attacks the validity of the new rule, stating that it violates Board procedure and denies employers' free speech rights. In addition to asking the court to vacate the rule, the Chamber’s lawsuit (pdf) seeks a preliminary injunction barring the rule from being enforced.

For the labor professional, the final rule is a major development.  Employers that are currently non-union should carefully consider the implications of the rule in light of their individualized circumstances.  Those employers may want to revisit their strategies given this development. 

The Chamber's lawsuit adds an additional level of complexity for the labor professional.  After business groups filed court challenges against the NLRB's notice posting rule, the NLRB delayed the effective date of that rule.  It is uncertain whether a similar delay will be announced here, given that the NLRB is at risk of losing one of its three members, and thus being unable to act.

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The NLRB announced today that it has formally adopted the revisions to the election rules that were originally proposed earlier this year.  The official notice will be published in the Federal Register tomorrow.  The rule, which some have referred to as the "quickie" or "ambush" election rule, will become effective on April 30, 2012.  Stay tuned to vorysonlabor.com for additional details about the final rule.

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Earlier this week, President Obama nominated two Democrats, Sharon Block and Richard Griffin, to serve as members of the NLRB.  Ms. Block currently works at the U.S. Department of Labor, an agency which has attracted attention over its controversial proposal to modify the rules governing "persuaders" in labor organizing campaigns.  Mr. Griffin serves as General Counsel for the International Union of Operating Engineers.  Additional information about Ms. Block and Mr. Griffin can be found in the NLRB's press release regarding their nominations.

The nominations come at an interesting time for the NLRB.  Currently, there are only three members on the NLRB.  One of those members, Craig Becker (D), holds a recess appointment that will expire at the end of the year.  If the Senate does not act on these nominations, or the nomination of Terence Flynn (R), whose nomination has been pending for months, the NLRB will fall to two members.  It will then no longer be able to issue decisions or new administrative rules.

Labor law professionals should not expect quick action on these nominations.  Sen. Lindsey Graham (R-S.C.) declared, even before the President announced his nominations, that he would continue to place a "hold" on any nominees to the NLRB.  According to his press release:  "I will continue to block all nominations to the NLRB until we get satisfactory answers regarding their role in [the decision to issue a complaint against The Boeing Company's decision to open a new plant in South Carolina]. Given its recent actions, the NLRB as inoperable could be considered progress." 

While the President could make recess appointments to the NLRB, like he did with Member Becker, the House has taken steps to remain in session.  Reportedly, these steps will prevent the Senate from going into full recess, preventing recess appointments from being made. 

Issues awaiting NLRB action, and that could be delayed if the NLRB were unable to act, range from a proposed rule that would speed up the union election process to a decision on a case with potentially significant impact on employer solicitation and distribution rules. 

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The NLRB headed into a public vote today over a proposed rule on election procedures summarized yesterday on this blog.  It did so without assurances that one of its members, Brian Hayes (R), would be present. While tensions were high, Member Hayes did attend the meeting and the NLRB voted along party lines, 2-1, to move forward with the slimmed down, but still controversial, election rule proposal. As the lone dissent, Member Hayes again made it clear that he opposed the short time frame for elections under the proposal. Despite that opposition, the final language of the rule will now be drafted for another NLRB vote before it goes into effect. 

Although there was information suggesting that Member Hayes was seriously considering resigning in an effort to eliminate the NLRB’s power to move forward on the proposal, he has apparently decided against resignation. Member Hayes explained at the meeting that “it is not my nature to be obstructionist.” Further, he believed that “resignation would cause the very same harm and collateral damage to the reputation of this agency” as the rule changes the majority voted to advance.

With Hayes staying put, labor professionals should stay alert for the final language of the rule, as it is certain to have a impact on employer policies.  Nor should labor professionals expect any legislative change from Congress that would trump the administrative rule.  Although the U.S. House voted today to approve legislation that would do so, the prospects of that legislation appear dim in the Senate.

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As reported on this blog last week, the NLRB will meet tomorrow to consider a resolution on the rule it proposed in June 2011.  Today, Chairman Pearce (D) made public the resolution (pdf) that will be voted on at tomorrow's meeting.  In doing so, the Chairman has disclosed what was left unanswered in the announcement of the meeting last week:  what will the final rulemaking contain?  According to the resolution, and the NLRB's accompanying explanation, the resolution would commit the NLRB to moving forward on six changes to the NLRB's rules:

• Limiting evidence produced at the initial hearing to only that necessary to determine whether a question concerning representation exists;
• Eliminating the automatic right to file briefs with the regional director after the initial hearing;
• Eliminating a party's right to appeal the regional director's determinations to the NLRB prior to the election, and providing for only a single appeal, after the election, and then only over issues that the election hasn't rendered moot;
• Eliminating language in the NLRB's regulations providing that elections are typically not scheduled for a date sooner than 25 days after the election petition has been filed;
• Clarifying the standard for seeking special permission to appeal to the NLRB from a regional director's decision; and
• Making NLRB review of the regional director's decisions discretionary, rather than mandatory.

These six changes are in line with the NLRB majority's desire to "streamline" the NLRB's election petition process. The result is to speed up the time between the filing of an election petition and the holding of a secret ballot election. This has caused many to refer to the rulemaking as the NLRB's "quickie election" rule.

As the effort to finalize these regulations moved forward, Member Hayes (R) wrote a letter to Congressman John Kline, Chairman of the U.S. House Committee on Education and the Workforce, in response to a request by Kline for information from the NLRB. Hayes was critical of the rulemaking process in this letter. When Hayes' letter became public, the Chairman responded with a scathing letter to Hayes, rebutting the statements contained in Hayes' letter. A good summary of these unusual letters can be found here.

The originally proposed rule contained a number of additional changes that the NLRB has apparently decided it will not pursue at this time.  For example, the NLRB's resolution does not address the original proposal to:

• Require a position statement before the initial hearing summarizing all of the parties' issues;
• Require that the initial hearing be held within seven days of the date the petition is filed;
• Require that the eligible voter list be produced within two days, rather than the seven currently required; and
• Require that the eligible voter list contain employee e-mails and phone numbers, in addition to addresses.

It appears that the NLRB will, however, continue to deliberate over the other portions of the proposed rule.  This leaves open the possibility that the other changes proposed in June could yet find their way into the NLRB's regulations. 

For the labor professional, the NLRB's resolution reveals the agency's desire to get at least some final rule published prior to the end of the year.  Indeed, the NLRB's explanation specifically references the "possibility that the Board will lose a quorum at the end of the current congressional session. . . ."  By slimming down the proposal, the NLRB can move the proposal to a final rule more quickly while still leaving on the table the other changes proposed. 

There is a wild card still in play that is important to note.  The Hayes/Pearce letters reveal that Hayes has threatened to resign.  If he did so, it would take the NLRB down to only two members.  This would likely deprive the NLRB of the necessary quorum to adopt the final rules.

Finally, the NLRB's announcements today do not reveal the actual language of the amendments.  They simply summarize which portions of the regulations will be changed.  Thus, the full impact of the proposed changes is difficult to assess.  It is clear, however, that for those on the management side, the changes will not be welcome.

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