On March 27, President Obama announced 15 recess appointees to administrative posts, including controversial Democratic nominee Craig Becker, along with union labor attorney Mark Pearce, as members of the National Labor Relations Board. The recess appointees, particularly Becker, were criticized by Republicans and business groups and praised by Democrats and labor leaders. Becker has been a controversial nominee due to some of his past academic writings and his current employment as in-house counsel at the Service Employees International Union and the AFL-CIO. Many fear that Becker and Pearce, along with current NLRB Chair Wilma Liebman, could effect significant labor law changes, either through the adjudication process with changes to significant case law or via administrative rule making. We have previously reported on some of the potential case law changes that may be in the offing.

The EEOC nominees given recess appointments were Jacqueline Berrien (Associate Director-Counsel of NAACP) to serve as EEOC Chair, Victoria Lipnic (Of Counsel to Seyforth Shaw) and Chai Feldblum (Georgetown University Law Center Professor) as EEOC Commissioners, and P. David Lopez as General Counsel (EEOC Trial Attorney).

The recess appointments will last until the end of 2011 Congressional session. Notwithstanding the recess appointments, the nominations will remain pending in the Senate for confirmation, according to the White House. Not included in the list of NLRB recess appointments was the third nominee to the agency – Republican Brian Hayes, a former management attorney and current Labor Policy Director for the Republicans on the Senate Committee on Health, Education, Labor and Pensions.
 

We previously reported on President Obama’s nomination of three individuals, Democrats Craig Becker and Mark Pearce, and Republican Brian Hayes, to the National Labor Relation Board (“NLRB”). The most controversial nominee, AFL-CIO Associate General Counsel Becker, has come under criticism from lawmakers and employers for his well-documented pro-union views. Becker’s nomination has been blocked by Republican senators in light of these concerns, as well as concerns that he would have to recuse himself from a great number of cases for up to two years after his confirmation in light of his current employment with the AFL-CIO and the Service Employees International Union.

Department of Labor Secretary Hilda Solis, speaking at the AFL-CIO’s Executive Council meeting on March 3, indicated that unions would be very pleased with how Becker’s nomination gets resolved. This implies that Becker will be appointed to the NLRB as a recess appointment later this month, which does not require Senate approval, for a term of up to 20 months.

If Becker and fellow Democratic nominee Pearce, a former NLRB Regional Attorney from Buffalo, are appointed, they would join current NLRB Chair Wilma Liebman to form a three person Democratic majority on the NLRB. There is concern that Becker, and this new found majority, might attempt to implement some parts of the Employee Free Choice Act via administrative rule making or by means of NLRB decisions and case law. Possible changes could include more expeditious representation elections and/or the use of card check for recognition in some situations.

This development bears watching. The potential for change in a number of areas with a change in the composition of the Board is great. This includes a number of Bush-Board NLRB decisions about which we have previously reported.
 

A recent determination by the United States Supreme Court serves as a reminder that dealing with strikes is a particularly dangerous activity for employers and requires careful planning and counsel at every step. In the midst of an economic strike in 1999, a Connecticut nursing home/assisted living facility made the decision to hire permanent replacements. Ten years later, the unfair labor practice case generated by hiring the replacements has finally come to a close with the United States Supreme Court refusing to hear the case, and leaving the employer with a back pay liability that could reportedly exceed $3 million. The saga of the case provides lessons on both an employer’s use of permanent replacements, and on the potential economic consequences of fighting an unfair labor practice charge.

As noted, the case began in 1999, when the employer, Church Homes, Inc., began hiring permanent replacement employees a month into a strike. Under federal labor law, an employer is permitted to hire permanent replacements for strikers involved in an economic strike. The strike was an economic strike, so permanent replacements were permitted, but what made this case different was the fact that Church Homes actively concealed its hiring of the replacements, bringing them on board without notice to the union or the strikers. It was not until several weeks later, after approximately 100 replacements had been hired, that the company revealed this fact during a mediation session. The union subsequently made an unconditional offer to return to work, but only 79 of the approximately 185 strikers were returned by the company. The company relied on its hiring of permanent replacements, as it is typically permitted to do in an economic strike situation, to deny reinstatement to the other strikers.

The union filed unfair labor practice charges against the company claiming that the employer’s hiring of permanent replacement workers was not for legitimate business reasons but rather was to punish the strikers and break the union. An Administrative Law Judge initially found merit in the charges and ruled against the employer. Church Homes appealed to the National Labor Relations Board. In a 2-1 decision the Board found in favor of Church Homes. The Board recognized the long standing right of an employer to hire permanent replacements during an economic strike and further found that the employer had no obligation to advise the union that it was hiring replacements. As a result, it concluded that the NLRB’s General Counsel had failed to carry its burden of proving that the employer acted unlawfully.

The Board’s decision was appealed to the United States Court of Appeals for the Second Circuit which, in 2006, reversed the Board’s decision. While the Court agreed that permanent replacements were appropriate in an economic strike and that there was no absolute obligation for an employer to notify a union in advance of the hiring permanent replacements, it concluded that active concealment of the hiring of replacements can support an inference of improper motive, absent proof of an affirmative legitimate reason for the secrecy. The Court remanded the case to the Board for further consideration.

On remand, the Board changed course and ruled against the employer. Finding a lack of credible evidence to support a legitimate reason for the employer’s secrecy, the Board concluded that “it would appear that the [Second Circuit] placed on the [employer] the burden of establishing a lawful motive for maintaining secrecy in the hiring of replacements.” Because the employer did not meet this burden, its failure to return the strikers to work because of the hiring of the replacements was found to be unlawful.

This second Board decision was affirmed on appeal back to the Second Circuit, which reinforced its prior conclusion that “the logical inference to be drawn from [the employer’s] secrecy, absent evidence of a legitimate purpose or credible explanation for the secrecy, was that [it] intentionally concealed its hiring of permanent replacements to remove Union members from its workforce and thereby break up the Union.” The employer subsequently sought review by the Supreme Court. Just a few weeks ago, the Supreme Court announced that it would not hear the case, finally bringing this saga to a close after nearly 10 years.

There are two significant lessons to be learned from this tortuous history. While the good news is that neither the Second Circuit nor the Board found that hiring permanent replacements in secrecy automatically proves improper motive, these decisions make clear that an employer must be able to articulate and document a legitimate business reason for the secrecy as part of its decision making process. The Court and the Board noted that concern over violence could be a legitimate justification for secrecy, but there must be credible evidence that such a fear is warranted. Presumably there could be other reasons which would support secrecy. But without credible contemporaneous evidence that such concerns in fact motivated the employer to maintain secrecy, an employer who does not provide advance notice of the hiring of replacements does so at great risk.

The second lesson of the case relates to the inordinate amount of time it can take to fully litigate unfair labor practice cases under the current statutory scheme. This case, with an Administrative Law Judge decision, two NLRB proceedings and two trips to the Second Circuit before a final rejection by the Supreme Court, took nearly 10 years. Recent reports indicate that potential back pay could exceed $3 million. Significant time delays mean that employers must either be prepared to face potentially enormous back pay exposure in their efforts to vindicate their rights, or prematurely forfeit their position on the merits because that potential liability is simply too great.
 

This blog was prepared with the assistance of Bond, Schoeneck & King PLLC attorney Kerry Langan.

On July 9, 2009, the White House announced that it had sent three nominees for membership to the National Labor Relations Board (“NLRB” or “Board”) to the Senate for confirmation.  The latest nominee, Republican Brian Hayes, joins previously announced nominees, Democrats Craig Becker and Mark Gaston Pearce, as the three President Obama nominees to the five member Board. 

Currently, the Board has been operating with just two members, Chairperson Wilma Liebman (a Democrat) and Member Peter Schaumber (a Republican).  The United States Court of Appeals for the D.C. Circuit has recently held that the two-member Board lacks authority to issue decisions.  See Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB, No. 08-1162 (D.C. Cir. May 1, 2009).  Three other federal Circuits have held to the contrary.  See Northeastern Land Services Ltd. d/b/a The NLS Group v. NLRB, No. 08-1878 (1st Cir. Mar. 13, 2009);  Snell I sland SNF LLC, d/b/a Shore Acres Rehab. & Nursing Ctr. v. NLRB , No. 08-3822 (2d Cir. June 17, 2009); New Process Steel, L.P. v. NLRB, Nos. 08-3517, 08-3518, 08-3709, 08-3859 (7th Cir. May 1, 2009).

 

The new nominees, assuming they are confirmed by the Senate, which now has 60 Democratic members, will address the quorum issue and allow the Board to operate with a 3-2 Democratic majority.  And, the three Democratic members are all on record as being staunchly pro-union in their views.  Chair Liebman has been a vigorous dissenter in a number of Bush-era Board decisions.  Nominee Becker is currently Associate General Counsel to both the Service Employees International Union and the AFL-CIO.  See NLRB Press Release.  Nominee Pearce is a former NLRB attorney at the Regional level and has been a union-side labor lawyer in recent years.  See NLRB Press Release.

 

Although the proposed Employee Free Choice Act (“EFCA”) and other potential labor law reforms have received the lion’s share of attention from commentators and labor and management advocates, the composition of the NLRB may well have a greater impact on labor-management relations than any compromise EFCA or labor law reform ultimately enacted.

 

Board decisions in many areas have historically been heavily influenced by presidential appointments.  With a newly minted 3-2 majority, here are some cases that might be ripe for reversal by the new Board:

•  Weingarten Rights in a Non-Union Setting.  IBM Corp., 341 NLRB No. 148 (2004).  In IBM, the Board held 3-2 that employees in a non-union workplace are not entitled to a co-worker representative in investigatory interviews that may result in discipline.  The Board has flip-flopped on this issue over the years and will likely return to the prior rule of Epilepsy Foundation of Northeast Ohio, 331 NLRB No. 92 (2000), holding that non-union employees are entitled to employee representatives in those cases.

• Graduate Students Rights to Organize as Employees Under the Act.  Brown University, 342 NLRB No. 42 (2004).  Chair Liebman vigorously dissented in the Brown case, which held that graduate students, whose duties were primarily related to their status as students, were not statutory employees and therefore could not organize under the Act.  This decision overruled New York University, 332 NLRB 1205 (2000).  A change in this rule, reverting to the New York University rule, could have significant implications for institutions of higher education.

• Organization of Employees of Joint Employers in a Single Bargaining Unit.  H.S. Care LLC, 343 NLRB No. 76 (2004).  The Board returned to the long standing rule that employees of a temporary agency cannot be included in a bargaining unit of regular employees of the employer unless both the employer and temporary agency consent.  The new Board may return to the M.B. Sturgis, 331 NLRB 1298 (2000), rule to the contrary, with significant implications for employers who use temporary employees.

• Salting Cases.  Exterior Systems, Inc., 338 NLRB No. 82 (2002).  A Board majority found that union salts – employees who work for a union and apply for employment with an employer with an intent to organize the employer or an intent to not be hired so a charge may be filed – must have a genuine interest in gaining employment to be protected by the Act.  It is likely that this standard will be repudiated, returning to FES, 331 NLRB 9 (2000), making it easier for unions to maintain unfair labor charges against employers which they target for organization.

• Email Solicitation.  The Guard Publishing Co., 351 NLRB 1110 (2007).  In Guard Publishing, the Board decided, in a 3-2 decision, that employers may lawfully maintain a policy prohibiting use of its email system for “non-job related solicitations.”  The new Board may reverse this decision and require employers to allow union adherents to use email systems to solicit employees to support and join unions during union organizing drives.

The following examples are just a few of the changes that may be in store with a new Board.  The changes could be many and their impact will likely be great.  As is often the case in the analogous situation of Supreme Court composition, the changes effected by the new Obama NLRB may well have greater impact than any legislative changes we see in the next four years.