Tag Archives: National Labor Relations Board

Labor Policy Changes Under the Trump Administration

Most of the news about the Trump Administration in recent days has involved developments arising out of the special counsel’s investigation. But as Labor Day approaches, it is worth examining what the administration has accomplished in the labor arena. Many stories about changes in regulations are getting less media attention than they might have, had we not had daily stories about sensational prosecutions or pleas and inflammatory tweets about Russia’s meddling and campaign finance violations.

Here are a few of the more significant changes in labor policy under President Trump:

DOL seal.pngFair Labor Standards Act: Although the 80-year-old Fair Labor Standards Act remains largely unchanged, the Department of Labor has again started using DOL opinion letters, which the Obama Administration had abolished. Opinion letters provide guidance that employers can rely on for interpretation of the regulations, so returning to this practice is a help. Moreover, many of the Bush Administration opinion letters have been reinstated.

Furthermore, in June 2017 the Trump Administration withdrew the Obama-era interpretation on joint employment. The joint employment interpretation—designed to make large franchisors liable for the practices of independently owned franchisees—was roundly criticized by employers, so the return to the former DOL interpretation of when joint employment arises is a welcome relief for employers.

The Trump Administration has also rolled back rulemaking under the white collar overtime exemption and the tip pooling regulations. In both cases, DOL is now attempting to provide employers with broader exemptions and greater relief from regulation.

Still, any changes to current FLSA regulations are likely to engender future litigation, so even if DOL’s Wage & Hour Division issues favorable changes, employers will have a long time to wait until there is certainty in this area.

Broader Range of Health Plans for Small Businesses: As a result of a Trump executive order seeking to reverse or limit portions of Obamacare that can be addressed by regulation, DOL has proposed letting more small firms and individuals form association health plans (AHPs). Large businesses have the market power to get good discounts from health care providers; the proposal is intended to let small businesses, including self-employed workers, pool their populations to get similar discounts through an AHP. Under this proposal, companies or individuals involved in the same type of business or located in the same region could band together to form AHPs.

Any attempts to broaden access to healthcare insurance should be encouraged, even if they do not satisfy all the benefit coverage requirements or other restrictions of Obamacare. More choice in insurance options will help employers of all sizes attract and retain employees.

Union Negotiations: The Trump Administration has pushed federal agencies with unionized workforces to reopen collective bargaining agreements with their public unions. Agencies have also been directed to move swiftly to fire poor performers. The Administration argues it is trying to streamline costly government bureaucracy and improve accountability of the federal workforce.

As with changes under the FLSA, litigation over these changes is likely. (In fact, on August 25, 2018, just as I was finalizing this post, a district court judge overturned some of the executive orders implementing them.)

In Janus v. American Federation of State, County, and Municipal Employees, Council 31 (Sup. Ct. June 27, 2018), the Supreme Cout ruled against public unions in a different context (deciding that public employees could not be forced to pay union dues). This decision weakens public unions, and arguably indicates possible Supreme Court support for government efforts to push back against such unions. However, it remains to be seen whether the Court would help the Trump Administration roll back previously negotiated collective bargaining agreements.

And nothing in Janus changes how the NLRB deals with issues between private employers and their unions, which would be a more helpful area of focus during the next two years of the Trump Administration.

nlrb logoRestrictions on Employee Use of Employer Email: One helpful development for private employers that the Trump Administration has undertaken is that the National Labor Relations Board (NLRB) has invited briefs on whether it should overrule Purple Communications, Inc., 361 NLRB 1050 (2014). The Board held in that case that employees had a presumptive right to use employer email systems on nonworking time for organizing and other protected communications under the National Labor Relations Act.  In Purple Communications, the Board overruled its earlier decisions holding that employers could maintain union-neutral policies regarding permissible uses of their email systems, even if these policies had the incidental effect of limiting use of those systems for union–related communications. Presumably, the NLRB is now considering a return to the holding of those prior cases.

This and other NLRB actions could have far-ranging impact on employers’ efforts to maintain union-free workplaces. However, NLRB policy in recent decades has tended to shift with the party affiliations of the five NLRB members, so whatever the current administration does could once again be overruled.

Application of Religious Freedom Principles to the Workplace: DOL is attempting to make it easier for federal contractors to claim religious beliefs as a defense against anti-LGBTQ discrimination complaints. Recent directives state that the federal government has a duty to protect religious exercise, not to impede it. The Administration has instructed the Office of Federal Contract Compliance Programs (OFCCP) not to condition federal contracts “upon a recipient’s willingness to surrender his [or her] religiously impelled status.” Rather, faith-based organizations should be permitted to compete on a level playing field for federal contracts.

There will be a rulemaking process, so the impact of these directives may not be known for some time.

* * * * *

All in all, there have been some helpful changes at the DOL, the NLRB, and other labor policy-making agencies. However, much of the Obama Administration’s overreach in the labor arena remains in place.

Employers should encourage the current administration and Congress to pursue business-friendly policies designed to keep the economy growing. Perhaps the likelihood of continued media attention on the special prosecutor’s investigation will enable more good regulatory work to move labor laws and policy in directions conducive to business and employment growth.

But employers should also remain mindful of the need to comply with labor laws and regulations currently in effect.

What labor policies would you like to see changed and why?

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NLRB At It Again: Joint Employer Doctrine Changed By Administrative Fiat

I just wrote about the National Labor Relations Board (NLRB) a month ago, but the agency is making headlines again—this time for overturning a thirty year definition of “joint employers.”

The joint employer doctrine comes into play when one entity (the actual employer) employs workers to perform services for another entity (the so-called joint employer), and there is some reason to think the joint employer should have equal accountability with the actual employer. The second corporation might be a parent of the actual employer, the customer of a temporary staffing agency or service provider, or a franchisor.

For the past thirty years, the NLRB’s test for holding a corporation to be “joint employer” has been to require that entity to have “direct and immediate control” of the “essential terms and conditions” of the workers in question. “Essential terms and conditions” was defined to include hiring, firing, discipline, and termination.

Moreover, it was not enough for the second corporation simply to have the authority to act—that company had to actually exercise control. This “actual exercise of control” was a relatively bright line test, enabling parent companies, franchisors, businesses using staffing agencies, and other entities to avoid becoming responsible for people they knew very little about. If they didn’t exercise any control, they wouldn’t be a joint employer.

On August 27, 2015, in a 3-2 opinion issued along party lines, the NLRB adopted a new “economic realities” test. See Browning-Ferris Industries, Inc., 362 NLRB No. 186 (Aug. 27, 2015). This test creates new ambiguities on several points.

First, the definition of “essential terms and conditions” is broadened. The NLRB now defines these as “hiring, firing, discipline, supervision, direction, wages, hours, the number of workers to be supplied” and “controlling scheduling, seniority, overtime, assigning work and the manner and method of work performance.” In other words, any attempt to define how work is done on one’s premises can make an entity a joint employer in proceedings before the NLRB.

Second, the NLRB will now permit the “joint employer” doctrine to apply even where the second employer has not actually exercised immediate and direct control. Control through an intermediary is sufficient. Reserving the right to exercise control—even where that control is not actually exercised—can be sufficient. Even where the alleged joint employer reserves control over only a few of the terms and conditions, the NLRB might apply the doctrine.

For example, if a contractor provides janitorial services for a customer, that customer can become a joint employer simply by specifying the schedule when the services are to be performed. The NLRB’s language in the Browning-Ferris opinion is broad enough to support such an interpretation.

This means that all contracts between businesses and any parties providing services for that business potentially could give rise to joint employer status. If a standard for the quality of work the contractor provides is specified in the contract—and if it isn’t, why have a contract?—then the NLRB might swoop down to involve the business in the contractor’s labor problems.

The actual facts of the Browning-Ferris case did involve more involvement than the NLRB’s broad language supports. In that case, which involved a Browning-Ferris recycling facility with workers hired by a contractor, Browning-Ferris set out hiring criteria, reserved the right to terminate workers, set pay ceilings, and shift lengths. But the NLRB did not limit its ruling to cases with this much involvement by the alleged joint employer.

As a result of this decision, Browning-Ferris must now be involved in the negotiations if and when the contractor employees unionize. (The case involved a vote on unionization, and the ballots had not yet been counted.)

The ostensible purpose for the new test is to make businesses using contractors and staffing agencies more responsible for labor activities on their premises. But the potential application of the test is far broader. In “Labor Board Ruling Eases Way for Fast-Food Unions’ Efforts” by Noam Scheiber & Stephanie Stromaug (Aug. 27, 2015), The New York Times reports that

“Unions are expected to seek to apply the ruling beyond the circle of companies that rely on contractors and staffing agencies, extending it to companies with large numbers of franchisees — even, some argue, to money managers who own significant stakes in corporations.”

As a result of the Browning-Ferris ruling, companies cannot be sure the NLRB will not bring them into labor issues between a contractor and the contractor’s employees. Any business with non-employees performing services on its premises—or even off premises but clearly for the benefit of the business—now risks additional labor problems. These labor issues could include joint collective bargaining, strikes, and picketing. Moreover, the company might well become exposed to unfair labor practice charges for anything it does to enforce quality or other standards specified in its agreement with the contractor.

Money and management time are likely to be spent in dealing with the increased likelihood of NLRB and union involvement in what were previously private arrangements between businesses and their service providers.

As a first step, businesses need to consider all relationships with contractors that provide them with temporary workers or services on their premises. To minimize the risk of being found to be a joint employer, they should reduce the types of control they can exercise over workers under the contract—recognizing that they may be giving up some quality control, and balancing the legal risk with the desired outcome from the services.

Lest one think that this is primarily a concern for large corporations, many small businesses are not happy with the ruling either. The article, “2 Big Takeaways From the New Labor Ruling” by Jeremy Quittner, (Aug. 28, 2015), on Inc.com, makes the point that small businesses use contractors also. These small businesses are now more likely to be drawn into union negotiations and to have difficulty changing or terminating contract terms.

Furthermore, small business franchisees might well see more interference from their franchisors, as the franchisors seek to minimize the risk of liability if they are brought into labor problems of the franchisees. What, then, are the advantages of franchising for either franchisor or franchisee?

Because this new test was adopted by a regulatory agency, Congress can reverse it. Business groups are already calling for Congress to reinstate the more limited definition of “joint employer.” But Congressional action would likely be met by a veto from President Obama.

Do you think the expanded joint employment doctrine will help or hurt businesses? What about employees?

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Recent NLRB Activity: Another Agency Running Amok

I have always believed elections were important mostly because the winners get to pick judges and the heads of regulatory agencies. The courts and the bureaucrats rule our day-to-day lives much more than our elected officials, but the elected officials choose who will set the rules by which we live.

And sometimes courts and agencies run amok.

In the last year, we have seen agency regulations promulgated by the Obama Administration overturned because they were overreaching—the Environmental Protection Agency over its failure to consider the cost implications of regulations under the Clean Air Act (see Michigan v. Environmental Protection Agency (U.S., June 29, 2015)), and the Department of Homeland Security over its attempt to issue regulations to limit deportation of many illegal immigrants without public comment (see Texas v. United States, (S.D. Tex., Feb. 16, 2015)) are two examples.

The Obama Administration has also used the National Labor Relations Board (NLRB) to set a progressive agenda. Issue by issue, the NLRB has pushed labor policy to the left. The NLRB has changed several past precedents through both regulations and agency adjudications. Although Congress can overrule the agency with new legislation, President Obama is likely to veto any changes this Congress passes. Therefore, these changes are likely to survive at least until 2017—and beyond, if another Democrat is elected President.

Here are some major recent revisions to NLRB policy:

1.  Quickie Elections

On April 14, 2015, the NLRB’s new regulations on union representation elections became effective. The so-called “quickie election” rules permit the electronic filing of election petitions and other documents, mandatory postings (including electronic postings in many cases) by employers, disclosure of employee names to the union (including electronic lists of employees), and fewer automatic stays on representational issues.

These rules will force employers to be much more proactive during union organizing campaigns and elections. Most employers already jumped into crisis mode at the sign of an organizing campaign. Now they will feel even more pressure to respond quickly.

2.  Confidentiality in Employee Investigations

Since its 2012 decision in Piedmont Gardens, 359 NLRB No. 46 (2012), the NLRB has pushed to require employers to disclose employee witness statements when a union requests them. Piedmont Gardens reversed a 1978 precedent, Anheuser-Busch, Inc., 237 NLRB 982 (1978), which unanimously held that such statements were exempt from disclosure. Although the Supreme Court’s decision in NLRB v. Noel Canning (2014)  invalidated Piedmont Gardens (along with hundreds of other cases), the NLRB continues to demand disclosure of employee witness statements.

In a new ruling in Piedmont Gardens, 362 NLRB No. 139 (June 26, 2015), a divided NLRB held that it would balance the union’s need for the witness statement against “any legitimate and substantial confidentiality interests established by the employer.” This test is subjective and difficult to meet. The NLRB will weigh the employer’s interest against the union’s purported need for the information. Even then, the employer will still have to seek an accommodation with the union, such as a confidentiality agreement.

Needless to say, this will not be easy. The issue of disclosure is likely to result in litigation in many cases, because the employer and union will not be able to agree on the terms of confidentiality.

3.  Temporary Employees:

The NLRB currently does not include temporary employees in a bargaining unit without consent. This long-established rule was changed briefly during the Clinton Administration, then changed back. Now, however, the NLRB seems to want to reverse this precedent again in the case of Miller & Anderson, Inc. (05-RC-079249, July 6, 2015).

4.  Social Media Rules:

Since April 2013, the NLRB has held that social media activity can constitute protected and concerted activity. In Bettie Page Clothing, 20-CA-035511, the Board found that three employees were unlawfully terminated for criticizing their manager on Facebook. The case is now on appeal to the U.S. Court of Appeals for the District of Columbia, and the Obama Administration is vigorously defending the NLRB’s position. See Bettie Page Clothing v. NLRB, briefs available on the NLRB website.

If the NLRB position in the Bettie Page Clothing case is upheld, then employers can expect the Board to let employees say about anything they want on social media sites.

* * * * *

In summary, employers can expect continued aggressiveness from the NLRB as long as the Democratic majority on the Board continues. It will take a new President to appoint members to the NLRB that are less pro-employee than the current Democratic members.

What is your view of the current NLRB position on these issues?

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Succession Planning: Developing Future CEOs

I’ve been interested in succession planning throughout most of my career. As many readers of this blog know, my novel Playing the Game deals in part with CEO succession in a family-owned business—an issue the organization was not prepared for and had to face as the novel begins. The novel, of course, is fiction, but the topic is real in many businesses.

A National Association of Corporate Directors survey reports that two-thirds of U.S. companies admit they have no formal CEO succession plan in place. See CEO succession starts with developing your leaders, by Asa Bjornberg & Claudio Feser, McKinsey Quarterly, May 2015. And even those corporate boards who have some plan underway are not satisfied with the results of their succession planning.

leadership sign 2The McKinsey article focuses on the need for a long-term plan for developing CEO successors. Succession is not a short-term project that can wait until the current CEO is ready to step down. Any board members, executives, or Human Resources professionals with significant experience have seen situations where illness, death, poor performance, or a significant lapse in judgment has required an immediate change in corporate leadership.

The authors state:

“Ideally, succession planning should be a multiyear structured process tied to leadership development. The CEO succession then becomes the result of initiatives that actively develop potential candidates.”

Developmental tools that companies can use include new assignments (including international and cross-divisional moves), coaching, mentoring, and outside leadership development programs.

Based on my experience, the important components to include when developing executive talent are

  • providing broad knowledge of the world in which the business operates,
  • a deep understanding of the organization’s unique strategies and goals, and
  • the interpersonal competencies needed to motivate and focus large groups of people through a multi-tiered organization.

The authors of the McKinsey article stated and “clumped” these attributes somewhat differently, but the themes are the same:

“. . . three clusters of criteria can help companies evaluate potential candidates: know-how, such as technical knowledge and industry experience; leadership skills, such as the ability to execute strategies, manage change, or inspire others; and personal attributes, such as personality traits and values.”

It is likely that each potential internal candidate for the CEO role will need an individual leadership development plan. The goal of the succession plan as a whole should be to have two or three strong candidates ready when the role needs to be filled.

Even organizations that want to develop a good CEO succession plan face risks. The plan will not work unless the current leaders have some idea of the future needs of the business. Those involved in selecting potential candidates must base the selection on these future requirements rather than on interpersonal factors not related to strategy. For example, sometimes current CEOs want to perpetuate the roles they have played in the organization. Other times, current leaders who plan to remain a while want weaker candidates in the succession plan, so no one is nipping at their heels.

And, of course, the analysis of future strategic needs and of the candidates themselves cannot be static, but must evolve over time. Too often, once someone is the “golden boy” (or girl) that person remains in the line of succession, regardless of performance.

It is also important to constantly compare the internal candidates with potential outsiders. So those involved in succession planning must know other leaders by staying involved with industry associations and community groups.

But the biggest risk is ignoring CEO succession needs altogether. Starting a plan now is better than waiting until the CEO role is suddenly vacant.

Which succession strategies have you seen work in your organization? Which have failed?

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NLRB Permits Use of Employer Email Systems for Union Organizing

nlrb logoThe National Labor Relations Board may be one of the government agencies pursuing the Obama Administration’s progressive agenda most aggressively. I wrote last August about the NLRB considering McDonald’s Corporation and its franchisees to be joint employers, and I wrote in September about the NLRB expanding the scope of “concerted activity” to cover individual employee claims.

On December 10, 2014, the NLRB ruled that employers could not adopt a policy limiting their employees’ use of work email systems for work purposes only. The Board said that work-only email policies limit employees’ rights to engage in protected concerted activities, because email systems are a good way to discuss working conditions. See Purple Communications, Inc., 361 NLRB No. 126 (2014). According to the Board, email is a “natural gathering place” where workers can discuss the terms and conditions of their employment.

This is a reversal of NLRB policy. In 2007, the Board had ruled that email policies forbidding personal use of employer email systems was acceptable. See Register Guard, 351 NLRB 1110 (2007). In Register Guard, the NLRB held that employees had no rights under the National Labor Relations Act to use employer email systems. So long as the company applied its work-only policy to all outside activities, and didn’t discriminate against unions, the policy was valid.

But after the Purple Communications decision, the Register Guard ruling is no longer good law. The majority in Purple Communications held that “by focusing too much on employers’ property rights and too little on the importance of email as a means of workplace communication, the Board [in Register Guard] failed to adequately protect employees’ rights under the Act and abdicated its responsibility ‘to adapt the Act to the changing patterns of industrial life.”

The Board in Purple Communications cited the Supreme Court in Republic Aviation Corp. v. NLRB, 324 U.S. 793 (1945), which said the Board must balance “the undisputed right of self-organization assured to employees” with “the equally undisputed right of employers to maintain discipline in their establishments.” Unfortunately, the NLRB in Purple Communications found that the balance fell with employees’ “core Section 7 right to communicate in the workplace about their terms and conditions of employment.”

The NLRB in Purple Communications did permit employers to place some controls on use of their email systems. First, employers do not have to give all employees email accounts, if not required for their jobs. In addition, employers can prohibit the use of company email systems for the discussion of non-work-related topics on work time, though this may be a hard limitation to police. Furthermore, employers can also regulate email use to maintain productivity and discipline, though enforcement of these regulations sounds like an invitation of unfair labor practices complaints. Although the Board did state that employers could demonstrate “special circumstances” to ban non-work use of email, it will be the rare situation that this Board would uphold as “special” enough.

The Purple Communications decision was, as one might expect, a 3-2 decision, with the Democratic appointees constituting the majority and the two Republican appointees wanting to abide by the earlier Register Guard decision. Board members Miscimarra and Johnson issued dissents arguing that the majority’s ruling was contrary to precedent, improperly burdened employer property rights, and violated the First Amendment by forcing companies to pay for speech that they do not support.

Unfortunately, the NLRB under the Obama Administration is creating new rights in favor of union organizers. Even where an employer has a nondiscriminatory policy, the Democratic majority believes that employees seeking to organize the workplace must be granted special access to employer-owned systems to communicate about possibly protected concerted activities.

Moreover, the Purple Communications decision is likely to be followed by more expansive NLRB rulings—on employees’ use of employer phone and other communications systems and on how far employers can go to read emails on their own system (might it become illegal surveillance?). Employers are required to monitor their email and other communications systems, for example, to be sure all relevant documents are produced during litigation. It is only a matter of time before some union sympathizer complains when his or her emails are produced and files an unfair labor practice complaint because the employer has done what it is legally mandated to do.

Union organizing through electronic communications is here to stay, and employers need to be ready. Unfortunately, the NLRB has just given employees a major victory in permitting them to use the employers’ own systems to organize. Unless the courts are prepared to overrule the Purple Communications ruling, it is a brave new world under the National Labor Relations Act.

For more on this decision, see:

Not Just Your (Company) Email System Anymore! re: NLRB Purple Communications Ruling, by Rufino Gaytán,  December 12, 2014

NLRB’s decision in Purple Communications means employers must take a close look at policies restricting employee email use, by Hogan Lovells, Stanley J. Brown, Christine M. Burke , George W. Ingham and Dianne Milner, December 15 2014

The NLRB Shakes Things Up: Purple Communications and the Board’s New “Ambush” Elections Rule, by Judith Kong, December 19, 2014

Another employer policy gets axed by the NLRB, by Christian Schappel , January 21, 2015

What do you think of the NLRB’s Purple Communications decision?

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Fresh But Not So Easy: NLRB Expands Scope of “Concerted Activity” To Individual Claims

recently described the NLRB General Counsel ruling that McDonald’s Corporation is a joint employer of its franchisees’ employees. The NLRB has now given me another hot topic, just in time for Labor Day. I’ve written previously about NLRB decisions impacting both union and non-unionized employers—this new topic is another such situation.

In Fresh & Easy Neighborhood Market, Inc., the NLRB decided that an employee who solicited statements from her coworkers about the employee’s individual complaint was engaged in “concerted activity” under Section 7 of the National Labor Relations Act (NLRA). As the Board and courts have long been established, “concerted activity” requires that two or more employees take action for their mutual aid or protection regarding the terms and conditions of their employment. The NLRA prohibits all employers, whether unionized or not, from doing anything to quell employees concerted activities. What is new in the Fresh & Easy decision is the NLRB application of this principle to a single employee’s activity in pursuit of her individual claim.

In Fresh & Easy Neighborhood Market, Inc., an employee filed a complaint of sexual harassment over a cartoon drawn on a whiteboard in the breakroom that she believed was sexual harassment directed at her. Because she had no camera, she drew a picture of the offending whiteboard, then asked her coworkers to verify that the picture was an accurate representation of what they saw in the breakroom.

During the NLRB hearing, she testified that she filed her harassment complaint for her own behalf only. Moreover, the co-workers said that they had no intent of filing complaints themselves.

For a complete description of the facts, see the Littler post by Jonathan E. Kaplan here, or read the opinion.

Nevertheless, despite the emphasis on the individual nature of her complaint, the three Democrat members of the NLRB held that the employee’s actions amounted to concerted activity “for the purpose of mutual aid and protection.” This majority of the Board found that the simple solicitation of support from fellow employees was “concerted,” even though the co-workers did not support the complainant’s claim.

Moreover, the majority held that the coworkers had an interest in helping the complainant, even if only the complainant had a stake in this case, because “next time it could be one of them that is the victim.”

Of course, this rationale applies whenever an employee complains about any employment issue, so completely abrogates the earlier limitations in case law on what constitutes “concerted activity.”

By contrast, the two Republican NLRB members dissented from this extension of the “concerted activity” principle. Each of the dissenters filed a separate opinion. Member Miscimarra criticized the majority’s opinion as having “limitless application” to workplace claims. He concluded that the Board majority expanded Section 7 coverage “for every individual employee—regarding every individual complaint implicating any individual non-NLRA right—as soon as the individual seeks the involvement of anyone else who is a statutory employee.”

Member Johnson’s dissent argued that the majority had created created an irrebuttable presumption that an employee seeking the support of coworkers is always acting for the purpose of “mutual aid or protection.” This would impose Section 7 protection any time an employee seeks assistance on an individual employment issue from a coworker, contrary to the intent of the NLRA.

The only good news in this case is that all five members of the NLRB ruled that Fresh & Easy (the employer) acted appropriately in asking the complaining employee not to solicit statements from her co-workers while it investigated her complaint, because the employer had a legitimate interest in conducting a fair and impartial investigation. None of the employees involved was disciplined for their actions.

However, the majority of the Board also stated that employers cannot issue blanket instructions not to discuss complaints, because that might chill concerted activity. So the case ended up being a soap box for the majority to expand the application of the “concerted activity” principle in a non-union context, without any liability imposed on the particular employer in question.

Thus, it remains important for non-unionized employers, as well as unionized workplaces, to consider potential NLRB action when handling employee complaints. After the Fresh & Easy decision, all employers must be careful whenever they investigate an individual complaint, including interrogating employees, conducting workplace surveillance, and email and property searches.

Moreover, as Member Miscimarra pointed out, after Fresh & Easy, employers cannot know which individual complaints may be subject to NLRA protection, because they cannot even ask employees whether their actions are “concerted.” In the Fresh & Easy case itself, the employer incurred years of litigation because it asked two questions during an investigation of a sexual harassment complaint, questions that were ultimately found to be lawful. Many more employers are likely to incur similar costs in the future due to NLRB involvement in matters already handled by the EEOC, OSHA, and a variety of other federal, state, and local agencies.

For more information on the Fresh & Easy decision, see

Fresh & Easy Neighborhood Market, Inc. (the NLRB opinion)

Employers Dealing With Harassment Retaliation Claims Now Have To Deal With the NLRB, by Christina Stoneburner (Fox Rothschild), August 13, 2014

NLRB Again Expands Its Definition of Protected Concerted Activity – One Hand Clapping May Be Concerted, by Ian Gabriel Nanos (Epstein Becker & Green), August 15, 2014

NLRB Expands Reach of NLRA by Finding Employee Who Sought Help From Coworkers For Her Sex Harassment Complaint Was Protected, Littler, by Jonathan Kaplan (Littler), August 19, 2014

NLRB Continues to Broaden its Reach Over Non-Union Employers, by McMahon Berger, August  21, 2014

What changes will your workplace make in response to the expanded NLRB definition of “concerted activity”?


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McDonald’s Ain’t Loving This: NLRB General Counsel Says McDonald’s Is Joint Employer With Its Franchisees

I’ve been searching for a good topic involving the National Labor Relations Board to write about for Labor Day next month. But the latest news from the NLRB fell into my lap a month early.

Richard F. Griffin Jr., the General Counsel of the NLRB has ruled that McDonald’s Corporation is a joint employer of its franchisees’ employees.  The rationale for the General Counsel opinion is that McDonald’s Corporation dictates certain standards of cleanliness, food preparation, and employment practices that the franchise owners must follow

To the extent that McDonald’s Corporation imposes employment practices on its franchisees, the “joint employment” doctrine may make sense.

But it is my impression after working with licensees and franchisees for many years that typically the franchisors go to great lengths to distance themselves from their franchisees’ hiring, firing, and management decisions. For precisely this reason—the franchisors do not want to be held responsible for what their franchisees do.

This NLRB General Counsel opinion has the potential to upend franchising as we know it. If franchisors can be joint employers, why should they bother franchising? As joint employers, they acquire the risks of having employees in all the locations where they license their operations. They multiply their employee bases far beyond what their in-house HR departments are prepared to handle. They could become liable for employment discrimination claims, wage and hour violations, FMLA and disability claims, and unfair labor practices charges.

Franchised operations touch the lives of most Americans every day.

  • About 90% of McDonald’s restaurants are owned by franchisees.
  • Many other restaurant and food chains are also largely franchise operation, such as Subway, Jimmy John’s, and Menchie’s Frozen Yogurt.
  • Other small businesses also set themselves up under license or franchise agreements, in industries as diverse as Ace Hardware, Allstate Insurance, Cottage Care home cleaning, Geeks On Call, Hallmark Cards shops, and O’Reilly Auto Parts

Moreover, millions of Americans are employed by small business franchisees in almost every community in the U.S.

The NLRB General Counsel ruling imposes a huge hurdle on the development of small business. Many individuals wanting an entrepreneurial opportunity start by pursuing franchising. By making franchising less attractive to franchisors because it imposes costs on the franchisors, the ruling insures that fewer franchises will be made available.

It appears that this General Counsel opinion is politically motivated, and is a blatant attempt to foster unionizing attempts at large franchisors. It is no secret that labor would like to increase wages at small businesses across the nation and similarly would like to see more union members at these businesses.

The Service Employees International Union has supported increased wages and organizing efforts by fast food workers for years. It is far easier for SEIU and other unions to put pressure on one McDonald’s Corporation than on hundreds of franchisees across the nation.

If a majority of the five NLRB members (three of whom are Democrats and typically support unions) agree with the General Counsel, it is likely that McDonald’s will pursue this case through the federal courts, probably all the way to the Supreme Court. The joint employment issue is that important to both franchisors and franchisees—and to both labor and management representatives throughout the nation.

For more on this issue from a variety of news sources, see

McDonald’s Ruling Sets Ominous Tone for Franchisers (Wall Street Journal)

McDonald’s Ruling Could Open Door for Unions (New York Times)

McDonald’s Told It Has Responsibility Over Store Workers (Bloomberg)

McDonald’s Ruling By NLRB Counsel Puts SEIU’s Unionization Goal Within Reach (Forbes)

McDonald’s loses big on labor ruling (Fortune)

In your opinion, should franchisors be responsible for employees of their independently incorporated franchisees?


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Pending Supreme Court Cases That Will Impact the Workplace

Supreme Court building, from Wikipedia

Supreme Court building, from Wikipedia

Two major employment issues are still pending before the Supreme Court this term. The first are the Affordable Care Act cases (Sebelius v. Hobby Lobby Stores, Inc., and Conestoga Wood Specialities Corp. v. Sebelius). The second involves the constitutionality of President Obama’s recess appointments to the NLRB and the validity of decisions made by those appointments (National Labor Relations Board v. Noel Canning).

Both questions could have huge impacts on the workplace. Given the complexity and contentiousness of these decisions, we may not see either of them until June 30. Or they could be issued today.

  1. The Affordable Care Act Mandates

The employers in the Hobby Lobby and Conestoga Wood Specialties cases are both privately held corporations, their stock shares controlled by their founding families. The employers argue that their rights under the Religious Freedom Restoration Act (RFRA), 42 U.S.C. Sections 2000bb et seq., are violated if they are forced to pay for certain forms of birth control, as mandated by the HHS regulations implementing the Affordable Care Act. The owners of these corporations argue that they have longstanding beliefs that these forms of birth control are immoral.

Hobby Lobby and Conestoga Wood Specialties state that they should not have to pay for insurance coverage subsidizing their employees’ purchase of these forms of birth control, nor should they be forced to pay the financial penalties in the ACA for employers that don’t provide health insurance coverage meeting the HHS requirements.

Although these are statutory cases under RFRA, there is an underlying constitutional question. The First Amendment provides, among other things, that “Congress shall make no law . . . prohibiting the free exercise” of religion. The issue is whether a law that applies generally (like the ACA), which says nothing directly about religion, but which does in fact impact the religious beliefs of some people, can violate the Free Exercise Clause.

Congress, when passing RFRA, ruled that the federal government cannot “substantially burden a person’s exercise of religion” unless the burden is the least restrictive means to further a compelling governmental interest. So the issues before the Supreme Court are (1) whether the ACA mandate furthers a compelling governmental interest and (2) whether the ACA mandate is the least restrictive means to do so.

While it seems odd to think that corporations could have rights to exercise religion, privately held corporations are often seen as extensions of their owners. Moreover, under the Supreme Court’s controversial decision in Citizens United, if corporations have freedom of speech rights under the First Amendment, why wouldn’t they also have freedom of religion rights under the same amendment?

During the Supreme Court arguments in March, it appeared that the justices would split 5-4 in favor of Hobby Lobby and Conestoga Wood Specialties. But we won’t know until the opinion is issued.

Moreover, we don’t know how broadly the Court will rule.

  • Will the decision be limited to privately held corporations?
  • Will it cover other aspects of the ACA than the mandated coverage of certain classes of birth control, such as blood transfusions and other types of medical treatments that some religious groups object to?
  • Might it be read to cover far more than the ACA, such as statutes and regulations mandating equal treatment of women and homosexuals, contrary to some religious beliefs?

It will probably take years of litigation to resolve the unanswered questions from the Court’s coming ruling.

  1. Recess Appointments to the NLRB

In National Labor Relations Board v. Noel Canning, the issues are at least as far-reaching as those in the ACA cases. The Supreme Court will decide whether President Obama’s recess appointments of three NLRB members were appropriate.

The Recess Appointments Clause of the Constitution authorizes the president “to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”

The issue in the Noel Canning case is whether the president can only make recess appointments if the vacancy is created during the recess, or whether he can fill any vacancies that existed at the beginning of the recess—which is how modern presidents have interpreted it. While the text of the Constitution seems to indicate the former interpretation, there is clear practice supporting the latter interpretation.

If the justices use a strict constructionist interpretation, then far more than the Noel Canning decision—or even NLRB decisions for the last couple of years—are at stake. President Obama has made many recess appointments beyond those to the NLRB, as have other recent presidents. Many administrative decisions could be subject to challenge if the Supreme Court narrowly interprets the Recess Appointments Clause.

More Perspectives on Health Care ReformI think it is likely that President Obama will lose on these specific appointments, which were made when the Senate was still in pro forma sessions. However, the fact that the Court has not yet ruled probably means that there is a debate over how broad the opinion should be.

In other situations, Chief Justice Roberts has tried to find a minimally disruptive way to rule on major cases. We shall see if he attempts to do so in this case.

So, stay tuned! The next week should be interesting for SCOTUS watchers.

Any guesses as to what the Court might decide?

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Happy Labor Day from the NLRB to Nonunion Workplaces

The percentage of private sector employees who are union members is down to about 7%. Many nonunion employers think that the National Labor Relations Act, and the National Labor Relations Board that administers the NLRA, don’t apply to them. But under the Obama administration, the NLRB is aggressively pursuing non-union employers and seeking to intrude on workplace policies.

The NLRB’s justification for its intrusion into nonunion workplaces is found in the broad language of Sections 7 and 8(a)(1) of the NLRA. Section 7 provides that employees have the right to “form, join, or assist” unions, to bargain collectively with their employers, and to “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 8(a)(1) of the NLRA states that it is unlawful for employers to “interfere with, restrain, or coerce employees” regarding their Section 7 rights.

It is likely that the NLRB will aggressively prosecute any employer policies that the agency believes will restrict concerted activity in nonunion workplaces. “Concerted activity” under the NRLA is extremely broad – it applies to any activity where two or more employees act together in furtherance of matters of mutual interest.  These matters of mutual interest can include compensation, benefits or a variety of workplace conditions.

“Concerted activity” comes into play any time an employee alleges he or she is working with another employee or on behalf of another employee. No union or employee representative needs to be involved; two disgruntled employees working together can be engaged in “concerted activity.”

Here are some specific policies and situations in nonunion workplaces that the NLRB is fighting:

  • Retaliatory discharge.  See Family Healthcare, Inc., 354 NLRB No. 29 (2009), where a physician-employee claimed she was discharged in retaliation of her rights under the NLRA after she questioned the changes in contracts that she and her fellow employees were asked to sign, because she acted not only for herself but for other employees.  See also In Re Trompler v. NLRB, 338 F.3d 747 (7th Cir. 2003), where production employees walked off the job at a nonunion machine shop.  They had complained about their supervisor, which was found to be “concerted activity.” 
  • Dispute resolution programs that condition employment on arbitration and prohibit employee class actions.  See D.R. Horton, 357 N.L.R.B. No. 184 (Jan. 3, 2012). Although this case is now on appeal to the Fifth Circuit Court of Appeals, the NLRB continues to pursue the theory in other cases.  See 24 Hour Fitness, Case No. 20-CA-35419, where the employer provided employees with an opt-out provision, but the NLRB still argues that the arbitration agreement is unlawful. In fact, in Advanced Services Inc., Case No. 26-CA-63184 (July 2, 2012), the NLRB even argues that the confidentiality of arbitration proceedings unlawfully chills employees’ rights to discuss the terms and conditions of their employment.
  • At will employment policies that suggest they can’t be changed through collective bargaining by a union. See American Red Cross Arizona, Case No. 28-CA-23443 (Feb. 1, 2012), where the employer’s policy provided that an employee’s “at-will employment relationship cannot be amended, modified or altered in any way,” and the NLRB found that such a policy interfered with employees’ rights to form a union.
  • Requirements that employees keep workplace investigations confidential. See Banner Health System, 358 N.L.R.B. No. 93 (July 30, 2012), where the NLRB said an employers’ “generalized concern with protecting the integrity of [workplace] investigations is insufficient to outweigh employees’ Section 7 rights.” Basically, the NLRB ruled that “blanket” confidentiality rules are illegal, and an employer must justify confidentiality on a case-by-case basis.
  • Restrictive social media policies. See Hyatt Hotels Corporation, Case No. 28-CA-61114, where the employer required employees to report “any known or suspected violations of [its code of conduct], including any violations of the laws, rules, regulations, or policies that apply to Hyatt.” The NLRB said employers must permit employees to report employer violations via social media channels, rather than only to the employer.
  • Notices in nonunion workplaces stating that employees have the right to unionize.  See Notification of Employee Rights Under the National Labor Relations Act, NLRB, Final Rule, published in the Federal Register on August 30, 2011, 76 Fed. Reg.  54,007. The effective date of this Final Rule was delayed until April 30, 2012, but in U.S. Chamber of Commerce v. NLRB, the U.S. District Court in South Carolina stayed these regulations.
  • Requiring nonunion employers to permit employees to have a representative present during investigative meetings.  These so-called “Weingarten” rights have been pushed and retracted several times, depending on whether Republicans or Democrats control the NLRB.  Currently, there is no right for nonunion employees to have a representative present during inquiries, but under the current Democratic Administration, I suspect this right would be reinstated if a case were brought before the Board.

The only way a nonunion employer can avoid investigation and prosecution by the NLRB is to make sure before terminating an employee that that employee has not engaged in any activity of mutual benefit with other employees – i.e., that there has not been any “concerted activity” that could give rise to an unfair labor practice charge.

Moreover, employers must review their policies to be sure they don’t run afoul of policies that the NLRB disapproves of.  And they should be sure to follow all NLRB requirements regarding posters, employee representation, and what supervisors can and cannot tell employees.

Additional resources on this topic include NLRB Extends Reach To Nonunion Workplaces, by Jonathan C. Fritts, Ross H. Friedman and Doreen S. Davis (Morgan Lewis), and Avoid Violations of Nonunion Employees Under NLRA, by Gigi O’Hara (Kutak Rock), and a new book entitled NLRA Rights in the Nonunion Workplace,by Kenneth Lopatka (BNA).

Readers might also check the NLRB’s webpage on protected concerted activity.


Filed under Human Resources, Law, Management, Politics, Workplace