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Federal Appellate Court Affirms NLRB's Broad Authority In Awarding Damages

In a recent decision, Macy’s Inc. v. Int’l Union of Operating Engineers, Local 39, the U.S. Court of Appeals for the Ninth Circuit endorsed a wide view of the National Labor Relations Board’s (“NLRB” or the “Board”) authority under the federal labor laws to order expansive “make-whole” remedies for employees affected by an employer’s unfair labor practices (“ULPs”).

Background

The Macy’s case involved a clash between the International Union of Operating Engineers Local 39 (the “Union”) and the Macy’s department store company as they negotiated a successor collective bargaining agreement (“CBA”) in 2020.

After rejecting a final contract offer by Macy’s, the Union went on strike. Months later, the Union made an unconditional offer for its members to return to work. Macy’s responded by asking the Union for time to respond to this “unexpected offer.”

The Union refused to allow Macy’s time to consider and asked the company whether it planned to lock the Union members out. Macy’s denied that this was its intention. Nonetheless, when the Union members reported to work three days later, they were turned away. Subsequently, the Union filed a ULP charge, claiming that Macy’s had violated the National Labor Relations Act (“NLRA”) by imposing an illegal lockout.

Procedural History

After issuing a formal Complaint on the Union’s ULP charge, the NLRB held a six-day hearing before an administrative law judge (“ALJ”) in June 2021. At the time, the Union and Macy’s still had not reached a new CBA, and the lockout of the Union members continued.

In April 2022, the ALJ issued a post-hearing decision, concluding that Macy’s had violated Sections 8(a)(1) and (3) of the NLRA “[b]y locking out its employees” without providing them with a “timely, clear, or complete offer, which sets forth the conditions necessary to avoid the lockout[.]” The ALJ recommended that Macy’s be required to “offer reinstatement to all employees who were unlawfully locked out and make them whole for any losses of pay and benefits that they may have suffered by reason of the lockout,” including “search-for-work and interim employment expenses, regardless of whether those expenses exceed interim earnings.” Macy’s appealed the ALJ’s ruling to the full NLRB.

After reviewing the ALJ’s decision, the Board adopted the ALJ’s recommended order while making two modifications. Of note is the second modification, which amended the “make-whole remedy” suggested by the ALJ to provide that Macy’s “shall also compensate the employees for any other direct or foreseeable pecuniary harms incurred as a result of the unlawful lockout.”

The NLRB included this language in keeping with its 2022 decision in Thryv, Inc., in which the Board held that appropriate “make-whole relief” for a ULP includes compensation “for all direct or foreseeable pecuniary harms” to affected employees. The Thryv decision represented a significant departure from prior Board decisions, which had generally limited financial remedies to clearly quantifiable losses such as back pay.

Both Macy’s and the Union petitioned federal appellate courts to review the Board’s decision, and the NLRB also filed a request for enforcement of its order. Ultimately, the appeals were consolidated for review by the Ninth Circuit.

The Ninth Circuit’s Ruling

As a preliminary matter, the Ninth Circuit held that substantial evidence supported the Board’s finding that Macy’s had violated the NLRA by failing to inform the Union fully and clearly, before locking the employees out, as to the conditions necessary for employees to be reinstated or avoid a lockout.

Turning to the remedies issued by the Board, the Ninth Circuit stated that the Board’s “discretion in selecting remedies is ‘exceedingly broad’” and subject only to limited judicial review. The court also noted that the NLRA empowers the Board to “take any ‘affirmative action’ that ‘will effectuate the policies’ of the Act,” and concluded that a court should not disturb an NLRB remedial order unless the order “is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act.” As no such showing had been made, the Ninth Circuit declined to disturb the Board’s order.

In opposition, Macy’s argued that the Board, in its Thryv decision, had improperly authorized itself to award a broad range of compensatory damages, including for foreseeable financial harms, and that Congress did not intend for the Board to pursue the “adjudication of private rights” in this way. Finding this argument unpersuasive, the Ninth Circuit noted that while the NLRA “does not authorize punitive measures…making the workers whole for losses suffered on account of an unfair labor practice is part of the vindication of the public policy which the Board enforces.”

The Ninth Circuit likened the so-called Thryv remedies to a back-pay order – long recognized as appropriate relief under the NLRA – which “restores to employees in some measure what was taken from them because of the company’s unfair labor practices.” Viewed in that light, the court reasoned, any resemblance that the Board’s make-whole relief bears to a court’s award of compensation for a private injury is “merely incidental” to “the effectuation of the policies of the Act,” because the remedy is designed to further the NLRA’s goal of minimizing industrial conflict.

The Ninth Circuit also took note of the Board’s assurance that it would not issue remedial orders for unquantifiable harms, and that the Thryv decision expressly required that any make-whole relief comprising direct or foreseeable pecuniary harms would be fully litigated in a later compliance proceeding, during which the NLRB General Counsel would have to prove that the relief is easily quantifiable.

What’s Next?

While the Ninth Circuit’s Macy’s decision is a win for unions, a recent Third Circuit decision on this topic is also noteworthy. In its NLRB v. Starbucks Corp. decision last December, the Third Circuit vacated the Board’s imposition of similar Thryv remedies, holding that the agency had exceeded its authority under the NLRA. The Third Circuit expressly held that the Board’s remedial authority does not extend to imposing consequential damages, as in Thryv as well as the Ninth Circuit’s Macy’s decision. The Supreme Court may eventually be asked to resolve this Circuit split.

Additionally, given the recent change in the NLRB’s General Counsel, and the likelihood that the Board will soon again have a Republican majority, the Thryv holding may become a target for reversal, along with a number of other Biden-era NLRB decisions that favor unions and workers.

Given these uncertainties, employers are advised to seek experienced labor counsel to help them navigate union-related issues, such as potential lockouts. Schwartz Hannum’s labor team is ready to assist.