Legal Updates

Employee Action Committees: A Trap For The Unwary

Imagine a company that is facing significant financial pressures. The company ultimately decides to preserve capital by cutting back on bonuses and wage increases. Following this decision, discontent at the company rises sharply. Employee morale is low, and a petition of protest begins circulating.

Concerned, the company’s president meets with supervisors and employees. Based on the responses, the president has the idea of repairing corporate-employee relations by involving the employees in coming up with solutions. The company distills the employees’ concerns into categories, and posts sign-up sheets for employee “Action Committees” — one for each category of concern. The committees are encouraged to talk to other employees, as well as amongst themselves, and asked to formulate proposals for the company’s management. The company provides conference rooms and other materials, and pays the employees for the time they spend on committee matters. The company’s hope is that this course of action will enable employees to feel heard, and give the company the benefit of thoughtful, relatively consensus-based proposals on the matters that concern its employees the most.

An unfair labor practice charge is then filed with the National Labor Relations Board (“NLRB” or “Board”). The Board finds that the above actions violated the National Labor Relations Act (“NLRA”), and orders the company to disestablish the action committees, cease and desist from its actions, and comply with a 60-day notice-posting obligation.

What Went Wrong?

The above tracks the fact pattern from a real-life unfair labor practice charge. In Electromation, Inc., 309 NLRB 990 (1992), the Board found that the above actions amounted to unlawful assistance and domination of a labor organization by the company-employer, in violation of Section 8(a)(2) of the NLRA.
First, the Board found that the action committees constituted statutory “labor organizations” under the NLRA. Under the NLRA, a “labor organization” is defined as:

[A]ny organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.

The action committees were held to easily satisfy this criteria. The main purpose of the committees, the Board found, was to “address employees’ disaffection concerning conditions of employment through the creation of a bilateral process involving employees and management in order to reach bilateral solutions on the basis of employee-initiated proposals.” This, the Board held, amounted to “dealing” with the employer on working conditions. In addition, the Board held that the action committees served in a “representational” capacity because the company contemplated that the committee members would get ideas from their coworkers and formulate solutions that would “satisfy employees as a whole.”

Next, the Board found that there was “no doubt” the company had dominated the action committees in violation of Section 8(a)(2). The Board reasoned that the company had come up with the idea to create the committees, established the purpose and goals of each committee, defined and limited the subject matter to be covered by each committee, and established criteria for each committee’s membership.

In addition, the company had allowed the employees to carry out committee activities on paid time and within the specific structure that the company itself had created — all of which amounted to unlawful support.

The Board concluded that the company’s actions had given the employees a sort of Hobson’s choice: “accepting the status quo, which they disliked, or undertaking a ‘bilateral exchange of ideas’ within the framework of the Action Committees, as presented by the [company].” As such, the Board held that by creating the committees and determining their structure and function, the employer had unlawfully dominated the committees in violation of Section 8(a)(2).

A Legislative Fix?

Following the Electromation decision, Congress passed a bill (the TEAM Act) that would have amended the NLRA to specifically permit employers to establish employee committees that permitted employees to “address matters of mutual interest” — so long as those committees did not claim or seek the authority to enter into collective bargaining agreements with the employer. See S. 295, 104th Cong. § 3 (1995).

Then-President Bill Clinton, however, vetoed the bill. In an accompanying 1996 veto statement, President Clinton expressed concern that carving out such committees from Section 8(a)(2) of the NLRA would “allow[] employers to establish company unions where no union currently exists,” and “abolish protections that ensure independent and democratic representation in the workplace.” 

Electromation Today

As the Electromation case approaches its 30-year anniversary, its doctrine is still alive and well.

In late 2018, for instance, the Board affirmed that a 9,000-employee hospital’s Environmental Support Service department’s Employee Council “easily” amounted to an employer-dominated labor organization, in violation of the NLRA. UPMC, 366 NLRB No. 185 (Aug. 27, 2018), reconsideration denied, 2018 WL6524011, at *1 (Dec. 11, 2018). In that case, the Employee Council submitted employee proposals to management for acceptance or rejection on such topics as employee bulletin boards, establishing an “Employee of the Month” award, and contacting employees on their lunch breaks. The Board found that through this bilateral process, the Council and the hospital were engaged in “dealing” with regard to employment terms and conditions.

The hospital was found to have unlawfully dominated and supported the Employee Council because the hospital (a) came up with the idea for the Council, (b) staffed the committee with the department manager and solicited employee volunteer members, (c) chose the place and time for the first meeting, as well as the employee chairs, (d) established the Council’s purpose as “team building and morale,” (e) set aside time at monthly department meetings for reports on the Council’s activities, and (f) financially supported the Council’s activities (including the Employee of the Month award and a Memorial Day picnic).

Likewise, in a 2017 decision, an Administrative Law Judge for the Board found that T-Mobile USA, Inc. had created (and unlawfully dominated) a labor organization through its “T-Voice” program that designated employee representatives to solicit, receive, and pass along complaints from their coworkers about “pain points” that, in actuality, were often proposals for changes in scheduling, benefits, and metrics. T-Mobile USA, Inc., No. 14-CA170229, 2017 WL 1230099 (NLRB Div. of Judges Apr. 3, 2017).

Takeaways For Employers

Not all company-created employee committees or suggestion mechanisms will amount to employer-dominated labor organizations. Committees whose purpose is to perform management functions (like a hiring or operating committee), or to deal solely with productivity or quality issues, will rarely pose problems.

However, the above cases show why it continues to be important for employers to exercise caution in establishing and supporting an employee action committee. Many employers may not realize that under the appropriate circumstances, any employee organization may amount to a statutory labor organization under the NLRA — even one established by the employer, and regardless of whether the organization refers to itself as a “union” or has a formal structure. In the 2018 UPMC case, the Board confirmed that a group may be a labor organization even if the employees themselves do not necessarily perceive the group as their representative with regard to making proposals on wages and other terms and conditions of employment.

While no employer wants unhappy employees, and while soliciting solutions from employees through an organized channel of feedback may seem like a helpful solution, it is important to carefully consider with counsel the NLRA’s limitations on the extent to which an employer may dictate the structure of that process.

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Reprinted with permission from the New Hampshire Bar Association. Originally printed in the New Hampshire Bar News on April 17, 2019; www.nhbar.org/publications/BarNews.