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

Developments in four different areas last week deserve some attention.  All of them touch on issues that this blog has tracked in the past, and all of them will be of interest to the labor professional.

NLRB Nominations. The President's nominations to the NLRB continue to move through the Senate confirmation process. The Senate's Health, Education, Labor and Pension ("HELP") Committee approved the nominations, although certainly not unanimously, and sent them to the full Senate.  Most of the dispute grew out of the nominations of Members Griffin and Block, who were recess appointed by the President last year.  Many of the Republican Senators on the HELP committee believe Members Griffin and Block should have stepped down after a federal court of appeals held that their appointments were unconstitutional.  Two things to watch as the nominations move to the full Senate:

• Will the Senate eliminate the filibuster so that the NLRB nominees (among others) can be confirmed?
• Will the Senate be able to act before Chairman Pearce's term expires in August, leaving the NLRB without the quorum necessary to act?

Persuader Rulemaking. The Chairman of the House Education and the Workforce Committee sent a letter to the DOL requesting that the agency withdraw its proposed regulation that would alter the interpretation of the LMRDA's "advice" exemption.  Perhaps the more significant development in this rulemaking activity, however, is the absence of the final rule. While appearing on the rulemaking agenda with an intended April 2013 publication date, the DOL has still not released a final rule. For labor professionals working for or representing management, no news is good news on this rule.

Recess Appointments.  Two significant briefs were filed with the Supreme Court this past week in the Noel Canning case, which held that the President's appointments of Members Griffin and Block were unconstitutional.  First, the employer filed its brief.  It didn't oppose review by the Court, but did argue that the D.C. Circuit correctly decided the case.  Second, all 45 Senate Republicans filed a brief, urging the Court to take the case, and criticizing the NLRB's presentation of the issue for decision as to narrow.

NLRB's General Counsel Nomination.  President Obama has again nominated Lafe Solomon to serve as the NLRB's General Counsel ("GC").  The GC is the "prosecutor" of alleged violations of the NLRA.  Mr. Solomon is currently serving as the Acting GC, and has been since 2010 given the Senate's refusal to confirm him the last time the President nominated him.

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Hobbled by controversy over the political appointees that run the NLRB, last week brought news that the agency may not be on the road to recovery anytime soon. In twin developments, occuring on the same day last week, actions by the courts and the Congress demonstrated the tough political road ahead for the NLRB.

In the courtroom, the U.S. Court of Appeals for the Third Circuit, which hears cases arising from Pennsylvania, New Jersey, and Delaware, confronted a recess appointment question similar to the one that the D.C. Circuit Court of Appeals addressed in Noel Canning. The court examined a case that former Member Craig Becker (D) participated in deciding. Member Becker began a recess appointment to the NLRB on March 27, 2010, prior to the recess appointments of Members Griffin and Block, which were at issue in Noel Canning. After a lengthy discussion analyzing the meaning of the term "recess," as used in the Constitution, the court in NLRB v. New Vista Nursing and Rehabilitation (pdf) held that the recess appointment of former Member Becker was unconstitutional.

In Congress, the Senate held a hearing on President Obama's appointments to the NLRB. Currently, there are five nominations pending:

• Chairman Pearce (D) (the only Senate-confirmed member currently serving on the NLRB) holds a term that expires in August 2013. The President has renominated him for another term, and to continue as Chairman.
• Member Griffin (D) holds one of the recess appointments the D.C. Circuit found unconstitutional in Noel Canning.
• Member Block (D) holds the other recess appointment at issue in Noel Canning.
• Harry Johnson (R), recently nominated, currently a labor and employment attorney representing management at the Arent Fox firm.
• Philip Miscimarra (R), recently nominated, currently a labor and employment attorney representing management at the Morgan, Lewis & Bockius firm. Mr. Miscimarra is also affiliated with the Center for Human Resources at the University of Pennsylvania's Wharton Business School.

The Senate committee posted video to its website of the confirmation hearing, as well as the nominees prepared statements to the committee.

The most interesting development to come out of this hearing was Senator Lamar Alexander's (R-Tenn.) position on the nominees. Senator Alexander is the ranking Republican member of the Senate committee. He announced that, because of the ruling in Noel Canning, he will not support the nominations of Members Griffin and Block and called on the President to nominate two other individuals. If the President did so, Senator Alexander "pledge[d]" to work towards their "speedy confirmation."

These twin developments are significant to labor professionals for at least five reasons:

• Acting together, they increase the likelihood that there will be no action on the President's nominees anytime soon. The Third Circuit's decision strengthens the hand of those opposed to the current nominees. Senator Alexander's position suggests that all five of the nominees will not be confirmed.
• Expect calls by unions for the exercise of the "nuclear option" -- that is, elimination of the filibuster rule in the Senate -- to increase. Senate Majority Leader Harry Reid (D-Nv.) suggests that he may move in this direction in July.
• While the additional circuit court decision against recess appointments is significant, do not expect that it will change the NLRB's position. It will likely continue to operate on a "business as usual" basis.
• For those hoping for a Republican majority on the NLRB during a Democratic administration, don't hold your breath. While this could be the outcome if the Senate confirmed only Chairman Pearce and Messrs. Johnson and Miscimarra, that is unlikely.  Among other reasons, the NLRB's majority has historically been from the political party of the President.
• Finally, remember that, absent the "nuclear option," time is on the side of those who would prefer to see the NLRB "inoperable." Chairman Pearce's term will end in just a few months. If Chairman Pearce's term expires without the Senate acting on the pending nominations, the NLRB will fall to just two members. Whether those members are recess appointees or not, the NLRB will lack a quorum and be unable to act.

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By Nelson Cary and Natalie McLaughlin

Last year, the NLRB issued a controversial decision in Banner Health System, 358 N.L.R.B. No. 93 (2012), finding that an employer violated the NLRA by prohibiting employees from discussing ongoing investigations of employee misconduct. The NLRB found that “[t]o justify a prohibition on an employee discussion of on-going investigations, an employer must show that it has a legitimate business justification that outweighs employees’ Section 7 rights.”  Section 7 rights are those that entitle employees to engage in, or refrain from engaging in, protected, concerted activity, like union organizing.

In the wake of this decision, the NLRB’s Division of Advice recently released a memorandum (pdf), issued earlier this year, regarding whether an employer’s confidentiality rule precluding employee disclosure of information about ongoing investigations unlawfully interferes with employees’ Section 7 rights. In Verso Paper, No. 30-CA-089350 (2013), the employer had a Code of Conduct that prohibited employees from discussing ongoing investigations. The confidentiality provision stated:

Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up. To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

Consistent with Banner Health, the Division of Advice found that an employer violates the NLRA when it maintains a blanket rule regarding the confidentiality of employee investigations. An employer may only prohibit employees’ discussions during an investigation if it demonstrates that it has a legitimate and substantial business justification that outweighs the Section 7 right.

The Division of Advice instructed that the employer could comply with the NLRA by deleting the last two sentences of the above provision and replacing them with the following language:

Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

Labor professionals should examine their existing policies and, if those policies could be interpreted as imposing a blanket prohibition on disclosure, consider whether language similar to the above is appropriate in their circumstances.

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The federal courts have dealt the NLRB’s notice posting rule another setback. In a ruling Tuesday, the court of appeals in Washington, D.C., the same court that earlier this year held President Obama’s recess appointments to the NLRB unconstitutional, vacated the NLRB’s notice posting rule. The court concluded that the rule violated an employer’s right to freedom of speech.

For those readers who may have forgotten what the controversy is about, a brief refresher. In 2011, just before former Chairman Liebman’s (D) term was to expire, the NLRB approved, by a vote of 3-1, a rule that required employers covered by the NLRA to post a notice in the workplace advising employees of various rights. Never before in the history of the NLRB has such a notice been required, and no provision of the NLRA explicitly requires a notice posting. 

The final rule enforced the notice posting requirement using three different remedies. First, it declared that an employer’s failure to post the notice would be an unfair labor practice. Second, it provided that the failure to post the notice could be used as evidence of an employer’s anti-union motivation. Finally, it purported to suspend the running of the applicable statute of limitations for filing an unfair labor practice charge for the period of time during which the notice was not posted. 

District courts in Washington, D.C. and South Carolina came to differing conclusions on the validity of the rule.

The court of appeals, in a unanimous 3-0 decision (pdf), found the NLRB’s notice posting rule violated an employer’s right to freedom of speech. The NLRA contains a provision, known as Section 8(c), that guarantees the right to express and disseminate views, arguments and opinions about unions so long as such expression contains no threat of reprisal or force, or promise of any benefit.

Relying upon Supreme Court precedent interpreting the First Amendment, the court held that the first two remedies in the NLRB’s regulation violated Section 8(c). Although this section “precludes the [NLRB] from finding noncoercive speech to be an unfair labor practice, or evidence of an unfair labor practice, the [NLRB’s] rule does both.” The notice posting rule required the employer to speak on the issue of unions, and purported to control the content of that message, under the threat of an unfair labor practice charge, in contravention of the right to freedom of speech contained in the NLRA.

The court found that the third remedy for failing to post the notice was also invalid. Tolling of the statute of limitations was not permissible because the NLRB failed to demonstrate that Congress intended such an exception when it adopted the NLRA over 60 years ago. Because all three enforcement tools were invalid, and because the notice requirement could not be separated from these remedies, the entire notice requirement was struck down.

Two of the three judges on the court would have gone even further. In a concurring opinion, these judges explained that the rule was invalid because the NLRB had no statutory authority to issue it.

In an interesting side note, the court also held that the recess appointment of former Member Becker (D), which has since expired, was not permissible under Noel Canning. But, there were still three, Senate-confirmed appointees who voted on the final rule, a majority of those members voted in favor, and all three of them were serving under valid appointments at the time the final rule was filed. Thus, the regulation did not fail for lack of a valid quorum on the NLRB.

For the labor professional, three significant items should be noted:

• Since the litigation surrounding the rule began, the NLRB has declined to enforce the rule pending conclusion of that litigation. Given the court’s holding that the rule was “vacated,” it would be quite surprising if this position changed. At the time of this post, however, the NLRB has not formally announced its reaction to the ruling.
• No court has sustained all parts of the NLRB’s rule. The rule has either been invalidated in its entirety, as the Washington, D.C. court of appeals and the district court in South Carolina did, or some of the enforcement provisions have been invalidated, like the district court in Washington, D.C. did. Thus, the rule doesn’t have a good track record so far.
• The decision in the South Carolina case is still on appeal to a different court of appeals. Assuming the NLRB continues to fight for its rule, this ruling should come later this year.  If that ruling comes out differently, the likelihood increases that the Supreme Court will ultimately decide this issue.

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By Nelson Cary and Ashley Manfull

Recently, the District of Columbia Circuit Court of Appeals reigned in a union-friendly NLRB decision involving comments made during a union organizing drive. In Flagstaff Medical Center, Inc., the NLRB held, among other things, that Flagstaff’s President violated the NLRA during a meeting with food services employees during a union campaign. 

At the outset of the meeting, the President indicated he was there to learn about the employees’ issues, concerns, and problems. After discussing various issues raised by the employees, the President made a comment to the effect that if there was a union, “I would not be negotiating with the union,” or “you won’t be negotiating with me.” The NLRB found that the remark was unlawful because it could have been reasonably construed as indicating that the Company would not bargain with the Union or that negotiations with the Union would be futile.

Rejecting the NLRB’s finding, the Court expressed that it was “baffled by the Board’s interpretation of [the President’s] first-person-singular statement about negotiations as a comment about Flagstaff’s willingness to negotiate—rather than as a statement about his own attendance at whatever meetings occur.” The Court found that the NLRB made an interpretive leap that could not be justified based on the facts of the case. 

In support of its decision, the Court cited NLRB precedent allowing employers to explain the advantages and disadvantages of collective bargaining to their employees in an effort to convince them that they would be better off without a union, provided such statements do not threaten or promise certain benefits to the employees. The Court found that this was the most plausible basis for the President’s comment to the employees, as the purpose of the meeting was to show the value in addressing employee concerns directly with the employees, instead of working through a union representative. Therefore, the Court found that there was insufficient evidence for a reasonable mind to accept the conclusion that the Flagstaff employees had been coerced or threatened with respect to their right to unionize. 

For the labor professional, the Court’s decision is significant for at least two reasons:

• The NLRB’s view on how employees will interpret an employer’s remarks, which can oftentimes make employers scratch their heads in puzzlement, is not absolute, and may be reversed on appeal.
• Careful legal review and consideration of supervisors’ and managers’ remarks, particularly senior level leaders in any organization, is very important during union organizing activity.

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Following up on my post on the story, I had the opportunity to speak with Colin O'Keefe of LXBN regarding the three new NLRB nominees. In the brief interview, I explain each of their backgrounds, share some insight on what we can expect from them, and offer my thoughts on whether they will be confirmed. 

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President Obama announced his intention today to nominate three individuals to the NLRB. The President's action comes at a time when the authority of the NLRB to act in cases and rulemaking activities is on appeal to the U.S. Supreme Court and when only one of the sitting NLRB members has been confirmed by the U.S. Senate.

The three individuals nominated are Mark Pearce (D), Harry Johnson, III (R), and Philip Miscimarra (R).  Mr. Pearce currently serves as the NLRB Chairman, and is the only Senate-confirmed member of the NLRB.  His term, however, ends in August 2013.  If he is not renominated, and confirmed, the NLRB will fall below three members and be unable to carry out its statutory duties.  President Obama's nomination intends for Mr. Pearce to continue as Chairman.

Mr. Johnson is a partner with the firm of Arent Fox, and is a labor and employment law attorney representing employers.  Mr. Miscimarra is a partner with the firm of Morgan, Lewis, and Bockius, and is also a labor and employment law attorney representing employers.  Additional information about Messrs. Johnson and Miscimarra can be found in the NLRB's press release. 

Already pending are the nominations of Richard Griffin (D) and Sharon Block (D).  Unlike Messrs. Johnson and Miscimarra, however, Mr. Griffin and Ms. Block already serve on the NLRB as a result of recess appointments President Obama made at the beginning of 2012.  Whether those appointments are constitutional is the issue currently on appeal to the Supreme Court in Noel Canning.

For the labor professional, the President's action today holds the possibility that an agreement can be reached on the membership of the NLRB.  The nominees for the NLRB now at least reflect the traditional bipartisan make-up of the five-member board, with the majority of members being of the President's party. 

Given the divisiveness of some of the NLRB's decisions and rulemaking efforts in the last few years, however, prompt Senate action is not at all guaranteed.  In fact, some may view it as a positive for employers if the NLRB is unable to decide cases and issue new administrative rules.  Inaction by the Senate ensures this outcome by August 2013 at the latest, when Chairman Pearce's term expires.

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During labor negotiations, an employer is obligated to provide certain information to the union. When that information implicates the employer’s financial performance, some employers are reluctant to disclose the information. A recent decision from the United States Court of Appeals for the Second Circuit helps define when an employer must provide that information, and does so in a narrow fashion.

The employer in SDBC Holdings, Inc. operated a bakery plant where a union represented employees. During negotiations for a new CBA, the employer highlighted for the union falling sales, rising expenses, and operating losses. The union asked to review financial statements that would support the employer’s assertion of operating losses. 

In response to this request, the employer brought its most recent financial statement to the negotiations, showed it to the union, and advised the union that the bargaining committee could inspect and take notes on the statement all day at the location where the negotiations were occurring. The employer declined, however, to provide a photocopy of the financial statement to the union. The employer also rejected a confidentiality agreement the union offered, expressing concerns about the difficulty of enforcing such agreements. 

In subsequent bargaining sessions, the employer again brought the financial statement, repeatedly inviting the union to examine it and take notes. The employer also informed the union that the statement was available at the employer’s attorney’s office where the union’s attorney or accountant could examine and take notes on it. The union’s spokesperson at the negotiations agreed to this arrangement. Later, however, the union reversed its position and demanded a photocopy. 

On these facts, the NLRB found a violation. The NLRB reasoned that the employer had asserted an inability to pay wages to the employees, rather than an unwillingness to pay wages. Under established law, therefore, the employer was obligated to provide the information. The NLRB further held that the employer’s failure to provide a photocopy of the document to the union was unlawful. One NLRB member dissented from these conclusions.

The Court found that the employer’s position was not that it was unable to pay the union’s wage demands, but rather that it was not willing to do so. The Court emphasized the need to look at the entire context of the negotiations, and in that context the employer had expressed willingness to invest money in equipment, expend significant sums extricating itself from a union pension plan, and sustain operating losses as an “investment” in the plant in order to return it to greater profitability. When viewed in the context of these statements, the Court concluded that the employer did not plead an inability to pay.  Thus, it was not obligated to provide its financial statement.

Moreover, the Court found that the NLRB was wrong when it concluded that the access to the financial statements was insufficient. The NLRB did not adequately take into account all of the evidence that demonstrated the multiple venues the employer made available for the union to examine the financial statement and take notes.

One of the judges on the Court wrote a concurring opinion. In it, he provided a roadmap for the NLRB to explain that “an employer claims an ‘inability to pay’ for particular labor costs, …when the employer asserts in the course of bargaining that its operations are unprofitable given those costs.” 

Labor professionals can takeaway three key points from the case:

• A further explanation of the distinction between an inability to pay and an unwillingness to pay bargaining position. 
• An important reminder that information sharing during negotiations will often be required, but need not necessarily occur in precisely the format or fashion in which the union has requested. 
• The possibility of an expanded employer obligation to provide information, should the NLRB adopt the concurring opinion's formulation of the duty to provide information.

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Earlier this year, the Acting General Counsel met with the Practice and Procedure Committee of the American Bar Association's Labor and Employment Law Section.  This meeting is an annual undertaking.  The AGC answered questions the Committee collected from labor law practitioners around the country.

Earlier this month, the AGC released a memorandum (pdf) summarizing the questions that were posed to him and the answers he provided.  The memorandum covers a broad range of topics, far too broad to cover effectively in this post.  Labor professionals with a particular interest in practice and procedure issues in front of the NLRB will want to review the memorandum in detail.

Some of the more noteworthy topics covered in the memorandum are listed below.  The parenthetical reference is to the page(s) in the memorandum on which the discussion appears:

• The only additional rulemaking activity under review at this time are the portions of the election rule that were originally proposed, but which were not included in the final rule when published in December 2011 (pp. 22, 26);
• The AGC has no plan to issue any further guidance on social media policies (as he has done three previous times), but cases involving rules for use of an employer's computer or e-mail systems must be submitted to Washington, D.C. for advice (pp. 16-17);
• A statistical summary of the use, and outcomes of, subpoenas issued by the regional offices in the course of investigating unfair labor practice charges (pp. 6-9);
• An extensive discussion of the routine use of default language in settlement agreements with the NLRB (pp. 10-16), including a discussion of the cases where the use of this language has been litigated (p. 10-11) as well as cases where regional directors have agreed to modify the default language (p. 12);
• A review of bargaining unit decisions under Specialty Healthcare (pp. 22-23); and  
• A discussion of the use of mail ballots in union elections and holding such elections someplace other than the employer's place of business (pp. 19-20).

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