Labor Relations Today

Labor Relations Today

Administration Releases Final Blacklisting Regulations for Government Contractors

Posted in Department of Labor, Executive Orders, Government Contracting, Government Contracts

On Wednesday, August 24, 2016, the President’s administration published the Federal Acquisition Regulatory Council’s final rule and the Department of Labor’s guidance implementing the July 31, 2014 “Fair Pay and Safe Workplaces” Executive Order 13673. The “blacklisting” Order and its implementing regulations subject existing and prospective government contractors to a broad new set of record-keeping, reporting and compliance requirements. Failure to fulfill these obligations and exhibit compliance with all applicable federal and state labor laws would expose the contractor to the prospects of disqualification, suspension, or debarment.

What’s In the Final Blacklisting Rule

The final rule closely tracks the proposed rule issued in May 2015, and thus still requires offerors on contracts or subcontracts estimated to exceed $500,000 must disclose “any administrative merits determination, arbitral award or decision, or civil judgment” against the contractor under the following fourteen enumerated federal statutes and Executive Orders (labor law violations), for the three years preceding the contract bid:

  • the Fair Labor Standards Act (FLSA);
  • the Occupational Safety and Health Act of 1970 (OSHA);
  • the Migrant and Seasonal Agricultural Worker Protection Act (MSPA);
  • the National Labor Relations Act (NLRA);
  • the Davis-Bacon Act;
  • the Service Contract Act;
  • Executive Order 11246 (Equal Employment Opportunity);
  • the Rehabilitation Act of 1973;
  • the Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974;
  • the Family and Medical Leave Act (FMLA);
  • Title VII of the Civil Rights Act of 1964 (Title VII);
  • the Americans with Disabilities Act of 1990 (ADA);
  • the Age Discrimination in Employment Act of 1967 (ADEA); and
  • Executive Order 13658 (Minimum Wage for Contractors).

The information must be disclosed when submitting the bid, and then every six months during the term of the contract.

The information reported will then be considered by the contracting agency’s contracting officer when making responsibility determinations during the contract award process. The final rule left unchanged the new categories of labor law violations —i.e., “serious,” “repeated,” “willful,” and “pervasive” violations– that may be considered evidence of “a lack of integrity or business ethics” sufficient to disqualify a contractor from consideration for a contract. Covered contractors and subcontractors are required to update all this information every six months during the term of a contract.

As a result, the final rule establishes a standard in which contract awards, disqualification, and suspension can be based entirely on administrative allegations – before those allegations are fairly and fully adjudicated.  For example, contractors will be required to report NLRB complaints issued against them, but NLRB complaints are not final determinations on the merits. Rather, they are merely preliminary findings of probable cause that a violation has occurred, against which employers have the right to defend themselves, including the right to challenge evidence at a hearing and confront witnesses under oath. Indeed, in some instances, the employer has complied with the law but the regional director issues a complaint in an effort to ask the Board to change the law.

Finally, the final rule also requires inclusion of contract language under which the contractor declines to obtain or enforce pre-dispute arbitration agreements for Title VII, sexual assault or harassment claims; and, would require covered contractors and subcontractors to provide certain employees with additional wage and hour information every pay period.

The notable changes from the proposed rule are:

  1. The reporting of violations of “equivalent” state laws, with a few exceptions, is not covered by this rule, but will be addressed in a separate rulemaking.
  2. Instead of requiring subcontractors to report their violations to the prime contractor, the final rule requires subcontractors to disclose details regarding their labor law violations and remedial actions directly to the DOL for review and assessment. The subcontractor then makes a representation back to the prime contractor regarding the DOL’s response to its disclosure. The prime contractor will then consider any response from DOL in evaluating the integrity and business ethics of subcontractors.
  3. The final rule now compels public disclosure of certain information about violations, and provides the contractors the option to publicly disclose mitigating factors.

The Implementation Schedule

The FAR rule and DOL guidance are being phased in pursuant to the following schedule:

  • Week of September 12, 2016: Preassessment begins, through which current or prospective contractors may come to DOL for a voluntary assessment of their labor compliance history, in anticipation of bids on future contracts but independent of any specific acquisition.
  • October 25, 2016: The final rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
  • January 1, 2017: The Paycheck Transparency clause takes effect, requiring contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
  • April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
  • October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.

Key Practical Issues Clarified by the Final Rule

  • Not Retroactive: According to the preamble, the final rule has no retroactive application as the rule will not apply to existing contract options for contracts which do not contain the FAR 52.222–59 clause. Companies will be brought into the labor law decision disclosure process with their first new contract issued after this rule is effective, thus there is no reporting requirements for existing contracts.
  • Related Entities: The reporting requirement applies only to the legal entity submitting the bid/offer and that will be legally responsible for performance of the contract. The reporting requirement will not apply to any parent, subsidiary, or other affiliates of the contractor.
  •  Classified Contracts: In response to comments regarding how to make reports on classified contracts, the rule simply states that it “does not compel the disclosure of classified information.”
  • Confidential Arbitrations: Despite comments opposing the requirement that confidential arbitrations must be reported, the final rule reaffirms that the disclosure of all arbitral awards or decisions must be reported without exception. The rule notes that it only requires contractors to publicly disclose four pieces of information: The labor law that was violated, the case number, the date of the award or decision, and the name of the arbitrator(s).


How Can Government Contractors Prepare for Compliance

While there certainly will be litigation challenging the final rule, government contractors should take steps immediately in anticipation of the Rule’s October 25, 2016 effective date. Contractors’ first steps should be to identify which department, group, and/or individual(s) within the organization are responsible for complying with the rule’s requirements. The responsible parties should then begin compiling relevant information regarding any labor law “violations” dating back to October 25, 2015, and develop a process for identifying and tracking future “violations” in a centralized database. The database should also include any mitigating factors and what steps the contractor has or will take to remedy the purported violations that the contractor might want to voluntarily report.

In addition, contractors should then work with their subcontractors to ensure that they understand the requirements of the final rule and to discuss what they can do to minimize delays in the subcontracting process. Contractors should also update their subcontracting agreements to incorporate the disclosure requirements, include any necessary representations, and address the consequences of any adverse responsibility and integrity determinations.

NLRB Axes Traditional Treatment of Search-for-Work and Interim Employment Expenses

Posted in NLRB, NLRB Decisions, Remedies

For nearly eighty years, when awarding back pay to unlawfully terminated employees, the National Labor Relations Board (the “Board”) treated search-for-work and interim employment expenses (“search-for-work expenses”) as an offset to interim earnings. With yesterday’s decision in King Soopers, Inc., 364 NLRB No. 93 (August 24, 2016), the Board announced that it will no longer do so and instead will treat search-for-work expenses as a separate element of damages.  As a result of King Soopers, in addition to back pay, wrongfully terminated employees will be able to recover their reasonable search-for-work expenses, regardless of interim earnings.

Under the Board’s traditional approach, wrongfully terminated employees who were unable to find interim employment did not receive any reimbursement for their search-for-work expenses. Likewise, wrongfully terminated employees whose search-for-work expenses exceeded their interim earnings could not recover the excess.  Explaining that the Board’s traditional approach to search-for-work expenses resulted in less than make-whole relief, the Board invoked its “broad, discretionary” authority to overturn nearly eight decades of precedent and fashion a new remedy.  The Board now will award search-for-work expenses regardless of interim employment earnings and separately from back pay.  Notably, the Board will apply its new approach retroactively in “all pending cases in whatever stage,” unless doing so would cause “manifest injustice.”

Although Member Miscimarra did “not discount the fact that parties and claimants experience substantial, often oppressive non-monetary consequences as the result of unfair labor practices,” he dissented from the Board’s new approach to search-for-work expenses. Noting that the new approach would produce a windfall when a wrongfully terminated employee’s interim earnings exceed his or her back pay, Member Miscimarra concluded that the new approach exceeded the Board’s statutory authority to provide only remedial relief.

On January 30, 2015, Board General Counsel Richard Griffin directed Regional Directors to “affirmatively allege in their initial unfair labor complaint that search-for-work and work-related expenses are being sought regardless of whether they exceed interim earnings.” The Board’s King Soopers decision thus concludes Mr. Griffin’s crusade to effectuate a change in the Board’s treatment of search-for-work expenses.

NLRB Holds That Graduate Teaching Assistants Could Be Employees Under the NLRA

Posted in Bush Board Reversal, NLRA, NLRB, NLRB Decisions

On August 23, 2016, in a 3-to-1 decision, the National Labor Relations Board (“the Board”) overturned long-standing precedent to hold that student graduate teaching assistants  are statutory employees under the National Labor Relations Act (“NLRA”).  The decision, Columbia University, 364 NLRB No. 90, marks a significant change in United States labor law and raises several issues for how private colleges and universities can address a union campaign on their campuses.

In reaching this decision, the Board explicitly overruled existing precedent from Brown University. The Board criticized its decision in Brown University for focusing too heavily on the fact that graduate students had both an employment and educational relationship with their college or university. The Board in Columbia University, instead, created a new, bright-line rule that: “the payment of compensation, in conjunction with the employer’s control, suffices to establish an employment relationship for purposes of the Act,” regardless of whether another non-economic relationship existed between the parties.   From that, the Board reasoned that the Act should cover graduate assistants “unless there are strong reasons not to do so.”

The Board found allowing student employees to unionize promoted the goals of federal labor policy without compromising academic freedom or raising serious concerns under the First Amendment.  In reaching that conclusion, the Board relied on anecdotal evidence to conclude “no major disasters [] have arisen because of [graduate-student] unions” in other settings and that “examples of collective bargaining in practice appear to demonstrate that economic and academic issues on campus can indeed be separated.”  Moreover, the Board noted that there was no empirical evidence showing that collective bargaining would “harm mentoring relationships between faculty members and graduate students.”

The Board declined to address a number of concerns that Columbia University raised about how collective bargaining would play out, including whether student demands would interfere with academic decisions involving class size, time, length, location, and structuring exams.  Instead of addressing these issues, the Board merely noted that, “the Board’s demarcation of what is a mandatory subject of bargaining for student assistants, and what is not, would ultimately resolve these potential problems.”  In conclusion, the Board succinctly held:

There is no compelling reason—in theory or in practice—to conclude that collective bargaining by student assistants cannot be viable or that it would seriously interfere with higher education.

Applying its new standard to the facts of the case, the Board held that the graduate students at issue were common-law employees under the Act.  According to the Board, Columbia University exercised sufficient control over the graduate assistants.  Columbia University, for example, directed and oversaw the assistants’ teaching activities and the assistants were subject to corrective counseling or removal if they did not meet the University’s teaching standards.

The Board also highlighted the fact that the relationship between the parties was economic in nature.  The Board, for example, noted that significant portions of the overall teaching duties conducted by universities are conducted through student assistants, and, “the delegation of the task of instructing undergraduates, one of a university’s most important revenue-producing activities, certainly suggests that the student assistants’ relationship to the University has a salient economic character.”  Moreover, the Board found that the assistants received compensation in the form of either stipends or financial aid, sufficient to trigger an employment relationship.

In a strongly worded dissent, Member Miscimarra argued that the majority’s holding ignored the reality of the university setting and improperly elevated labor issues over countervailing non-employment factors.  The dissent argued that the “paramount goal” for student assistants was to obtain a degree and that labor unrest could seriously undermine the educational experience.

The dissent raised a number of practical concerns – none of which the Board addressed.  Among other things, the dissent questioned whether (and to what degree) the Board’s other precedents would play out in the university setting and how other federal laws (such as FERPA) would be impacted by the decision.


NLRB’s Latest Joint Employer Decision Is Problematic for Temporary Staffing Firms and Their Clients

Posted in Joint Employer, NLRB Decisions, Representation Elections

Almost a year after rewriting its decades-old joint employer test in Browning-Ferris Industries of California, Inc., the National Labor Relations Board has finally issued a Board decision providing some guidance on what constitutes a joint employer relationship. To the surprise of no one given the facts of the case, the Board found that a joint employer relationship existed in Retro Environmental, Inc., 364 NLRB No. 70 (2016). Nevertheless, the Board’s Retro decision is alarming because the Board signals that the basic facts of a common and prevalent relationship between temporary staffing firms (supplier employers) and their clients (user employers) will create a joint employer relationship.

In Retro, the union filed a petition to represent demolition and asbestos workers jointly employed by Retro, the user employer, and Green JobWorks, a temporary staffing agency. The two companies had worked together on multiple projects for at least five years and were operating consistent to an expired contract. The Board summarized the facts of the relationship as follows:

When Retro needs temporary labor, [it] contacts Green JobWorks and requests a certain number of laborers. Green JobWorks recruits and hires employees. … Green JobWorks prescreens and drug tests each applicant, provides safety training, ensures that asbestos abatement laborers have current EPA AHERA certification and have passed a physical exam, and represents that all employees are qualified to perform the services. Additionally, Green JobWorks perform background checks and administers safety and general knowledge tests to applicants for demolition positions. Green JobWorks maintains a database of employees and assigns employees to project sites based on Retro’s needs. Green JobWorks determines the rate of pay for each position and issues employee paychecks. Green JobWorks also provides the employees with personal protective equipment.

At the project site, Retro’s superintendent determines the sequence of work, oversees the work, and directs the day-to-day activities of both Retro’s solely employed employees and those employees leased to Retro by Green JobWorks. Retro’s foreman provides more detailed instructions. Retro determines the start and end times of breaks, and Retro is responsible for keeping track of the employees hours. Retro also provides the necessary equipment to perform the assigned work on site.

Green JobWorks’ field supervisor is on site some days (he visits all project sites). He ensures that employees are present, handles concerns regarding particular employees, communicates with teh office, and manages injuries and near misses. Green JobWorks is responsible for disciplining and terminating employees. However, if Retro is unsatisfied with an individual’s performance, it can request a replacement, and Green JobWorks President…testified that Green JobWorks would acquiesce to Retro’s request. (At the time of the hearing, Retro had not exercised this right in the previous 6 months.) Green Jobworks may consult with Retro when reassigning employees to other sites.

Although the Regional Director found a colorable claim of a joint employer relationship, the Regional Director dismissed the petition because he found that a union election would serve no purpose given that there was an imminent cessation of operations between the two employers (the two projects they were working on were coming to an end, and Retro had no future projects or bids that involved Green JobWorks).

Disagreeing with the Regional Director’s imminent cessation finding (it found no evidence that they would not do business together again), the Board majority addressed the joint employer issue. The Board’s finding that Retro and Green JobWorks are joint employers was not unexpected as the facts could have justified such a finding under the Board’s old joint employer standard. What was unexpected, however, was the Board majority’s assertion, in response to Member Miscimarra’s dissent, that only three basic facts–facts that are fairly standard to many relationships involving temporary staffing firms–are needed to create a joint employer relationship.

Specifically, Member Miscimarra asserted that even if Retro and Green JobWorks do continue to work together on future projects, “it is entirely speculative whether they will constitute a joint employer of employees who might be supplied by Green JobWorks” because the “‘specific factual circumstances’ of any future projects are unknown.” In response, the majority opined:

even if the Employers’ relationships were altered on future projects, certain key aspects of their relationship will likely remain stable. For example, while Green JobWorks, as the supplier employer, will retain primary responsibility for hiring, assigning employees to project sites, and firing, Retro will assuredly continue to dictate the number of workers to be supplied by Green JobWorks, continue to impose conditions on Green JobWorks’ hiring to ensure that the workers supplied are adequately trained and qualified, and continue to retain the right to request a replacement if it is unsatisfied with a Green JobWorks-supplied employee. Therefore, given the distinct functions and areas of responsibility of each of the Employers, it is highly doubtful that the Employers’ relationship on future projects could change in such a manner that would render them no longer joint employers of the employees in the petitioned-for unit.

(emphasis added). In other words, the Board majority asserts that how much and to what extent the user employer supervises and directs the temporary employees is irrelevant to finding a joint employer relationship if the user employer simply: 1) states that it needs “x” number of employees with “y” qualifications and certifications and 2) has some ability to ask for a replacement if a particular temporary employee underperforms. Given that all three of those facts likely exist in many, if not most, relationships between supplier and user employers, the Board’s Retro decision certainly portends that the current Board takes the position that most temporary staffing firms and their clients are joint employers. As such, temporary staffing firms and their clients wondering how best to direct their resources–i.e., taking measures to mitigate against a joint employer finding or focusing on the practical implications (see #2-4) of a joint employer finding–may finally have their answer.

Court Enforces NLRB Investigatory Subpoena Seeking Employment Policies In Unfair Labor Practice Charge Filed by Purported Independent Contractor

Posted in Federal Court Litigation, NLRA, Subpoenas

Judge James C. Dever, III of the Eastern District of North Carolina entered an order in NLRB v. Raleigh Restaurant Concepts, Inc., Case No. 5-15-CV-438-D (Aug. 12, 2016),  enforcing a subpoena duces tecum issued by the NLRB in connection with its investigation of an unfair labor practice charge filed by an independent contractor alleging that Raleigh Restaurant Concepts unlawfully enforced a contractual waiver of the right to collectively pursue her claims in all forums, judicial and arbitral. The charge was filed by the exotic dancer after a court ordered her to arbitrate her Fair Labor Standards Act and North Carolina Wage and Hour Act claims in which she claims that she and other entertainers were misclassified as “independent contractors” as opposed to “employees.”

During the investigation of the unfair labor practice charge, the NLRB requested that Raleigh Restaurant Concepts provide “entertainer leases…and copies of all handbooks and work rules that apply to employees at Respondent’s facility.” However, Raleigh Restaurant Concepts provided only the documents that the dancer had signed, but not leases signed by other entertainers or handbooks that apply to employees. Because of the incomplete response, the NLRB issued a subpoena duces tecum for the documents.

Raleigh Restaurant Concepts filed a petition to revoke the subpoena based on three grounds:

  1. employee handbooks and work rules were not relevant because the dancers never saw those documents;
  2. the NLRB could only investigate the charge filed, not investigate potential violations of the NLRA regarding any non-charging parties; and
  3. because the NLRB is investigating a claim that enforcement of a class-action waiver violates the NLRA, the claim is meritless, and the NLRB cannot investigate meritless claims.

In rejecting Raleigh Restaurant Concepts’ arguments, the court found that the “identities of the putative victim class are reasonably relevant to the charge,” and thus the NLRB was entitled to copies of the entertainer leases. Second, the court found that the employee handbooks and policies are relevant because they “may contain evidence regarding company-wide enforcement of these policies–both as to individuals Raleigh Restaurant Concepts considers employees and as to the entertainers, who the NLRB may ultimately classify as employees.” Finally, the court found that the NLRB had jurisdiction to investigate the allegations because the Fourth Circuit had yet to decide whether a mandatory class-action waiver in an arbitration agreement violates the NLRA and that other federal circuits had reached conflicting conclusions.

West Virginia Judge Temporarily Enjoins Right-to-Work Law

Posted in Legislation, Right to Work, State/Local Issues

On Wednesday, August 10, a West Virginia judge issued a temporary injunction blocking the state’s enforcement of its new right-to-work law. The law, known as the Workplace Freedom Act, just took effect on July 1 and prohibits union security clauses–i.e., collective bargaining provisions that require all unit employees to pay union dues. West Virginia was the 26th state to enact a “right-to-work” statute.

The AFL-CIO and a coalition of other unions are challenging the statute on the ground that it violates the West Virginia constitution. The judge found that the challengers were able to show that the statute could harm workers, and was also concerned by the fact that the statute included criminal penalties. The judge indicated that a decision on whether to permanently enjoin the statute could come within the next few months, but the state representatives asserted that they intend to appeal Judge Bailey’s ruling.

Related coverage:


Board Finds Management Rights Provision Too Vague

Posted in NLRA, NLRB, NLRB Decisions, Uncategorized, Unfair Labor Practices

The National Labor Relations Board recently ruled in Graymont PA, Inc., 364 NLRB No. 37, that the Respondent violated Section 8(a)(5) and (1) of the National Labor Relations Act by unilaterally implementing changes to various policies and by failing to timely inform the Union that it did not possess information requested relevant to the policy changes.  In doing so, the Board found a management rights clause which gave the Respondent the sole discretion to adopt and enforce rules, regulations, policies, and procedures too vague to waive the Union’s right to bargain over the proposed policy changes.

The management rights clause at issue provided that the Respondent:

[R]etains the sole and exclusive rights to manage; to direct its employees; . . . to evaluate performance, . . . to discipline and discharge for just cause, to adopt and enforce rules and regulations and policies and procedures; [and] to set and establish standards of performance for employees . . . .

The Respondent announced that it would implement changes to its work rules, absenteeism policy, and progressive discipline schedule. The Union asked to meet to discuss the changes and requested information relevant to the changes.  In response, the Respondent informed the Union that it had no obligation to bargain over the changes or furnish the requested information under the management rights clause.  Regardless, the Respondent met with the Union and made a few revisions to the policy changes based on the Union’s comments and concerns.

The Board determined that the management rights clause did not clearly and unmistakably waive the Union’s right to bargain over the changes because “none of the contractual management-rights provisions specifically reference work rules, absenteeism, or progressive discipline.” Further, the Board found “no evidence that the parties discussed these subjects during negotiations, let alone fully discussed and consciously explored them during bargaining” as required for a waiver.

Relying on Raley’s Supermarkets & Drug Centers, 349 NLRB 26 (2007), the Administrative Law Judge had found that the Respondent did not violate the Act by failing to timely inform the Union that it did not possess the information requested because the complaint did not mention the nonexistence of the requested information.  The Board reversed the ALJ and overruled Raley’s Supermarkets.  The Board found the failure to timely disclose the nonexistence of the information to be “closely connected” to the subject matter of the complaint even if not specifically alleged.

Member Miscimarra dissented, finding that, under the management rights provision, the Respondent “reserved the right, without exception, ‘to adopt and enforce rules and regulations and policies and procedures.’ No reasonable person reading this language could conclude that [the Respondent]’s right of unilateral action extended to rules, regulations, policies and procedures concerning some matters but not others.”

More Employee Handbook Provisions Found to Violate the National Labor Relations Act

Posted in NLRA, Unions

On July 18, 2016, Administrative Law Judge Robert A. Giannasi (the “ALJ”) concluded that an employer violated the National Labor Relations Act (the “Act”) by maintaining employee handbook rules that 1) prohibited employees from conducting “personal business” while on the employer’s premises; 2) banned solicitation if it caused “discomfort or unreceptiveness”; 3) required the posting of a disclaimer for online content about work issues; and 4) required the employer’s approval for solicitations “in support of any causes.” Casino Pauma, NLRB ALJ, No. 21-CA-161832 (July 18, 2016).

Since mid-2015, the employer maintained an employee handbook rule providing, in relevant part: “Team members are to conduct only [employer] business while at work. Team members may not conduct personal business or business for another employee during their scheduled working hours.”  The ALJ concluded that this prohibition against conducting “personal business” on “while at work” was unlawful, as it could reasonably be read to restrict employee communications about union or other protected rights in non-work areas and on non-work time.  Specifically, the “while at work” restriction was overly broad because it banned protected activity during lunch, breaks, and before and after work.

The ALJ also found that the employer could not require employees to cease solicitation or distribution if “the intended recipient expresses any discomfort or unreceptiveness whatsoever.” Relying on Ryder Truck Rental, Inc., 341 NLRB 761 (2004), which held that employees have a right to “engage in persistent union solicitation even when it annoys or disturbs the employees who are being solicited,” the ALJ concluded that the seemingly innocuous rule still violated the Act.

The employer’s online disclaimer rule, which required employees posting online content about work issues to include a disclaimer that the opinions being posted were the employee’s and not the employer’s, similarly failed to pass muster under the Act. The ALJ reasoned that the rule was written so broadly as to interfere with rights protected under the Act. The ALJ found, for example, that the rule could be read to restrict employees from “using their own private computers and email accounts” to complain to each other about their working conditions.  Similarly, according to the ALJ, the rule unlawfully banned the personal use of photographs taken at the employer’s property.  As the ALJ explained, “[m]odern technology has made the use of the photographic ability of the ubiquitous iPhone commonplace in today’s society.  One can easily imagine an employee who observes unsafe conditions in the workplace taking a photo for use by a union, to obtain the support of fellow employees in an effort to revolve the unsafe working conditions, or even to report them to the appropriate government agencies.”

Finally, the ALJ struck down the employer’s rule prohibiting solicitation “in support of any causes” without the employer’s prior approval because the rule was broad enough to apply to protected rights to solicit of fellow employees on behalf of unions, and the prior-approval requirement constituted an unlawful restriction on those rights.

Employers can add these and similar provisions to the growing list of work rules found unlawful under the Act. Given the National Labor Relations Board continued focus on employee handbook rules, employers should review their employee handbooks and revise handbook rules and prohibitions such that they are tailored to the employers’ legitimate business interests and not likely to be “reasonably construed” as interfering with employees’ rights under the Act.

NLRB Takes Issue with Noncompetes and Employment At-Will

Posted in NLRB Decisions, Unfair Labor Practices

The Board continued its expansion of employee rights in its July 29th decision in Minteq International, Inc., 364 NLRB No. 63, finding that two common provisions in a non-compete agreement interfered with employees’ rights in violation of Section 8(a)(1) of the National Labor Relations Act. Among other allegations, the General Counsel in Minteq asserted that the “Interference with Relationships” and “At-Will Employee” provisions of the employer’s non-compete agreement could reasonably be construed to interfere with employee’s Section 7 rights.

In Minteq, the union represented some of the employer’s employees, and the employer and the union had a collective bargaining agreement in effect. The collective bargaining agreement provided that employees are probationary for their first six months of employment and that the employer’s discipline, layoff or discharge of a probationary employee “shall not be a violation of this Agreement.” After six months, the CBA imposes on the employer a “just cause” standard for any discipline, suspension, and discharge.

Unbeknownst to the union, the employer began having new hires sign a “Non-Compete and Confidentiality Agreement” (NCCA) containing the following provisions:

4. Interference with Relationships. During the Restricted Period Employee shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity intentionally solicit or encourage any present or future customer or supplier of the Company to terminate or otherwise alter his, her or its relationship with the Company in an adverse manner.

12. At-Will-Employee. Employee acknowledges that this Agreement does not affect Employee’s status as an employee-at-will and that no additional right is provided herein which changes such status.

The NCCA also included a non-compete provision and acknowledgements from the employee that the employer would be irreparably damaged if the employee were to compete against the employer by providing services to any person or entity in violation of the provisions of the NCCA.

While the administrative law judge found that the employer violated Section 8(a)(5) and (1) by unilaterally having new hires sign the NCCA, the ALJ did not find that employees would construe the “Interference with Relationships” rule to prohibit Section 7 activity. The ALJ noted that “it would be quite an extrapolation from Section 4 to conclude that employees were prohibited, for example, from striking, because it would interfere with Minteq’s relationship with suppliers or customers.”  The Board, despite the requirement that it “refrain from reading particular phrases in isolation,” disagreed:

The “Interference with Relationships” rule clearly places restrictions on employees’ ability to communicate with the Respondent’s customers and restricts employee efforts to “improve terms and conditions of employment or otherwise improve their lot as employees through channels outside the immediate employee-employer relationship.” … These efforts could include asking customers to boycott the Respondent’s products or services, as the General Counsel argues, but they could also encompass other forms of appeals to the Respondent’s customers. A prohibition of this type of conduct is an unlawful restriction of employees’ Section 7 rights.

The ALJ also found that the “at-will” disclaimer did not violate the Act as it “merely advises the new hire that he or she is an at-will employee [temporarily] and that nothing in the NCCA affects that status. … There is nothing in Section 12 that reasonably would lead an employee to conclude that he or she is waiving his or her Section 7 rights (assuming that he or she is aware that they have such rights). Even employees who are at-will employees throughout their employment retain their Section 7 rights.” Once again, the Board disagreed.

However, the Board did not find a violation because the employer purported to change the terms of the CBA unilaterally in violation of Section 8(a)(5). Instead, the Board found that Section 12 of the NCCA violates the Act because it would somehow discourage employees from engaging in Section 7 activities for fear that they could be terminated for such conduct:

We find that employees thus would reasonably doubt whether the CBA’s “just cause” provision remains in effect. Thus, the “At-Will” rule has a reasonable tendency to discourage employees from engaging in conduct that would be protected by the CBA’s “just cause” provision and by Section 7 of the Act, including the exercise of rights under the collective-bargaining agreement and other protected, concerted activity (such as, for example, communicating among themselves or with the Respondent’s customers concerning their terms and conditions of employment), for fear that they could be discharged without the contractual “just cause” protection. Similarly, the conflict between the “At-Will” provision and the “just cause” provision would reasonably discourage employees from engaging in the Section 7 activity of utilizing the contractual grievance and arbitration procedures to challenge disciplinary actions they believe were not for “just cause.”

The Board’s rationale for finding that the provision discourages employees from engaging in Section 7 activities is a stretch, as no employee–whether “at will” or with “just cause”–can be discharged because of their protected, concerted activity. As such, it stands to reason that no reasonable person could conclude that the “At-Will” provision prohibits Section 7 activities because, as the ALJ noted, “[e]ven employees who are at-will employees…retain their Section 7 rights.” Given the Board’s effort to go out of its way to rationalize a violation, Minteq begs the question of whether the Board wants to revisit the legality of “at-will” employment disclaimers.

Employer Violates Labor Law by Terminating Employee for His “Careless” Testimony Before a Legislative Body

Posted in NLRB Decisions, Unfair Labor Practices

In Oncor Electric Delivery Co., 364 NLRB No. 58 (July 29, 2016), the National Labor Relations Board found that the employer, an electric utility, violated the Act by terminating an employee for his testimony before the Texas Senate. The employee testified before the Senate regarding the employer’s use of new smart meters that the employee claimed were “burning up” and were causing damage to customers’ homes. The employer asserted that the employee’s conduct was not protected activity because it contained “malicious falsehoods” damaging to the employer’s business.

The Board found that the employee’s conduct was protected because the employee’s testimony was union activity and that the employee was testifying as a union official. Moreover, the Board found that the employee’s testimony was “for the purpose of collective bargaining or other mutual aid and protection” because 1) his testimony “was at least partially motivated by his attempt to gain leverage for the Union in bargaining negotiations with the Respondent,” and 2) the safety of smart meters “bears a more ‘immediate relationship to employees’ interests’ in seeking to improve their own working conditions…” as there were related safety issues for the employees.

The Board also rejected the employer’s argument that the employee’s testimony was maliciously false. While the employee’s testimony was arguably “imprecise, even careless,” it was not maliciously untrue because there was evidence that there were issues with the smart meters including parts heating up, melting and burning.  The employer asserted that damage to the meter “is not tantamount to the meter itself causing damage to a customer’s home.” The Board, however, found the employer’s argument to be “highly technical…, one which belies any suggestion that [the employee] knowingly made a false statement or testified recklessly when stating that smart meters are a cause of increased heating and burning.”