The National Labor Relations Board yesterday issued the long-awaited Macy’s, Inc. decision.  The Board majority consisting of Chairman Pearce and Members Hirozawa and Schiffer determined that the petitioned-for unit of cosmetics and fragrance employees at a Macy’s retail store is appropriate, while Member Miscimarra dissented by asserting that not only is the petitioned-for unit inappropriate, but the Board should set aside its controversial Specialty Healthcare ruling.  

The case reached the Board after the Acting Regional Director for Region 1 issued a Decision and Direction of Election (DDE) on November 8, 2012, providing that the United Food and Commercial Workers’ (UFCW) petitioned-for unit of only the cosmetics and fragrance employees at a Macy’s retail location in Saugus, MA was an appropriate unit.  Macy’s contested the DDE, arguing that the smallest appropriate unit must include either all employees at the Saugus location or at least all selling employees at the store.  The Board granted Macy’s request for review on December 4, 2012. 

The Board’s lengthy decision confirms that Specialty Healthcare is alive and well.  Under Specialty Healthcare, when a union seeks to represent a unit of employees: 

“who are readily identifiable as a group . . . and the Board finds that the employees in the group share a community of interest after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit . . ..”

Once the petitioned-for unit is deemed an appropriate unit, the proponent of a larger unit must show that the employees it wishes to include share:

“an overwhelming community of interest with the petitioned for employees, such that there is no legitimate basis upon which to exclude certain employees from the larger unit because the traditional community of interest factors overlap almost completely.”   

The Board found the petitioned-for unit appropriate for several reasons.  First, the cosmetics and fragrance employees are readily identifiable “based on classification and function.”  Second, the proposed unit “is coextensive with a departmental line” Macy’s drew, which means that Macy’s chose to create a cosmetics/fragrance department at the Saugus location.  Third and most importantly, the petitioned-for employees undoubtedly share a community of interest. According to the Board, they are the only employees who sell cosmetics and fragrances and rarely come into contact with products sold in other departments.  While the cosmetics and fragrances department is split into two floors, the Board determined that this was of no moment because the two areas are connected by an escalator. 

Because the UFCW showed that the petitioned-for employees shared a community of interest, Macy’s bore the burden of proving that the petitioned-for unit shared an “overwhelming community of interest” with other employees at the store.  The Board found that Macy’s failed to meet its burden.  Not only do the petitioned-for employees work in a separate department from all other selling employees, but the petitioned-for employees are separately supervised as well.  The petitioned-for employees also work in their own “distinct selling areas.”  Moreover, the Board found little significant interchange between the petitioned-for employees and other selling employees.  Cosmetics and fragrance employees do not sell other products in other departments, just like other sales employees do not sell cosmetics and fragrance products.

Macy’s argued that the petitioned-for unit was not appropriate because the petitioned-for employees are “functionally integrated” with the rest of the store pursuant to DTG OperationsDTG Operations explained that “functional integration” of employees exists where all employees “pitch in” or perform the functions of different classifications.  The Board noted that Macy’s reliance on DTG Operations was misplaced.  Even if the petitioned-for unit was “functionally integrated” with the remainder of the selling employees, “the significance of functional integration is reduced where . . . there is limited interaction between” the proposed unit and other employees. 

The Board also reiterated that even though two groups of employees may share a community of interest, that fact by itself would not render a separate unit inappropriate.  The petitioned-for employees and other sellers are subject to the same employee handbook, maintain similar hours, are evaluated on the same rating system, and receive the same benefits.  But, the distinctions explained above ensure that Macy’s could not establish “an almost complete overlap.” Macy’s thus failed to establish that the petitioned-for unit and other sellers share an overwhelming community of interest. 

The Board also rejected Macy’s claim that the Board’s own precedent requires a store-wide unit of all employees.  The Macy’s decision traces the evolution of the Board’s reasoning concerning retail establishments.  “[O]ver time, the overall trend [in decision-making] has been an unmistakable relaxation of a presumption in favor of a storewide unit.”  Rather, a less-than-storewide unit would be found appropriate as long as unit employees share an identifiable community of interest and are “sufficiently distinct” from other employees. 

Member Miscimarra penned a spirited dissent, finding that the petitioned-for unit is not an appropriate unit under either pre or post-Specialty Healthcare reasoning.  According to Member Miscimarra, the smallest appropriate unit here must consist of all selling employees at the Saugus location because the proposed unit employees are so similarly situated to other sellers. 

Member Miscimarra then explained that long-standing Board precedent presumed that a store-wide unit would be an appropriate unit.  “Employees in a single retail outlet form a homogenous, identifiable, and distinct group . . . [and] generally perform related functions under immediate supervision.”  In the instant case, a store manager rates, hires, and fires employees, which effectively demonstrates that a community of interest exists and affirms the appropriateness of a presumption of a storewide unit.

Lastly, the dissent faults the Specialty Healthcare ruling on three grounds.  It undercuts the Board’s “responsibility to evaluate each proposed unit on its own merits because it upholds petitioned-for units except in limited circumstances.  The decision also throws out the presumption that a store-wide unit is an appropriate unit in the retail industry.  Most damningly, the “overwhelming community of interest” standard enunciated in Specialty Healthcare renders the relationship between proposed-unit members and their excluded coworkers “irrelevant in all but the most exceptional circumstances.”

The Macy’s decision demonstrates that the current Board is determined to cement Specialty Healthcare’s place in labor law, and that industry-specific presumptions for appropriate bargaining units are meeting their demise as we predicted in June 2012.  Unfortunately for employers, the fear that Specialty Healthcare will lead to a proliferation of micro-units is proving true.  As noted in the instant case, there are several other departments at the Saugus location.  If those departments chose to organize, Macy’s would be forced to bargain with several different unions within the same store location. 

Labor watchers now expect that the Regional Director’s Decision and Direction of Election in Bergdorf Goodman, Case No. 2-RC-076954, will also be affirmed and thus join the Macy’s decision as the death knell of the retail industry’s presumption of wall-to-wall bargaining units.   In that case, the Regional Director found the petitioned-for unit of women’s shoes associates on the second and fifth floors of Bergdorf Goodman’s New York City location to be an appropriate unit.   

Stay tuned to @LRToday for further developments concerning this case and all things related to the field of labor relations.