Labor Law: Looking Back On 2018 And Ahead To The New Year
A barrage of new rules, guidance, and rulemaking from the National Labor Relations Board ("NLRB" or the "Board") over the last twelve months has sent employers, unions, and labor law practitioners nationwide scurrying to keep up. From handbooks to the joint-employer test to employee use of employer email systems, the Board has been busily undoing or reexamining a number of employee-friendly labor standards established under previous administrations. Meanwhile, the U.S. Supreme Court overturned a major 2012 Board decision relating to employee arbitration agreements.
Regardless of whether your workforce is union-represented, your organization should be aware of these developments, of which several of the most important are detailed below.
Guidance On New Framework For Handbook Rules
On June 6, 2018, NLRB General Counsel Peter B. Robb issued a memorandum ("GC 18-04") guiding NLRB Regional Directors on how to analyze employee handbook rules under the Board's new evaluative framework established in The Boeing Co., 365 NLRB No. 154 (2017). The memorandum provides employers with a long-awaited roadmap for how the Board will apply the new Boeing standard to work rules not specifically referenced in that decision, and confirms that some of the most common employer rules (like those prohibiting incivility, defamation, or recording without consent) will now be treated as presumptively lawful.
Section 8(a)(1) of the federal National Labor Relations Act ("NLRA") provides that employers may not "interfere with, restrain or coerce" employees in the exercise of their rights to engage in union organizing or other protected concerted activity (known as "Section 7 rights"). Previously, under Lutheran Heritage Village-Lavonia, 343 NLRB 646 (2004), the Board deemed it a violation of Section 8(a)(1) for an employer to maintain a work rule if an employee would "reasonably construe" the rule as prohibiting Section 7 activity. The Obama-era Board broadly applied this standard to invalidate a host of common employee handbook rules, such as no-camera rules, bans on disrespectful behavior, and social media policies.
In its Boeing decision, the Board overruled Lutheran Heritage in favor of a more common-sense approach that weighs the likelihood that maintaining a particular rule would actually have the effect of limiting employees' Section 7 rights against the employer's countervailing business and operational needs and interests. In balancing these rights and interests, the Board held, it will now assign employer rules to the following categories:
- Category 1: Rules that are lawful because, when reasonably interpreted, they do not prohibit or interfere with the exercise of NLRA rights, or because the potential adverse impact on protected rights is outweighed by the justifications on the rule;
- Category 2: Rules that warrant individualized scrutiny; and
- Category 3: Rules that generally are unlawful because they prohibit or limit NLRA-protected conduct without a countervailing justification outweighing the burden on NLRA rights.
In its 2018 GC 18-04 memo, the Board's General Counsel identified several types of rules the Board would henceforth consider to be presumptively lawful ("Category 1") under Boeing. These include civility and no-disruption rules, rules prohibiting defamation or insubordination, and rules prohibiting photography in the workplace.
The General Counsel's memo also cited some examples of clearly unlawful ("Category 3") rules - including confidentiality rules regarding wages, benefits, or working conditions, rules that prohibit joining outside organizations, and rules that require employees to refrain from voting on matters concerning the employer - all of which were also impermissible under the Board's prior Lutheran Heritage approach.
In the past year, the Board has released several Administrative Law Judge ("ALJ") decisions and General Counsel advice memoranda applying the Boeing framework to uphold various workplace policies, including confidentiality rules, bans on making false or malicious statements, social media policies, intellectual property policies, ethics policies, and no-recording policies. Although the Board has yet to release a significant decision expounding on these principles, it has remanded dozens of pending ALJ decisions for further consideration in light of Boeing.
While awaiting more guidance from the Board, employers should remember that the new Boeing standard does not affect the assessment of rules for which the Board already has developed a specific evaluative framework. This would include, for instance, no-solicitation/distribution rules and union apparel rules. See, e.g., UPMC, 366 NLRB No. 142 (Aug. 6, 2018) (rejecting ALJ's application of Boeing to no-solicitation/distribution rule, and instead applying older precedent).
Furthermore, even under the Boeing framework, an employer's application of a facially valid rule still may constitute an unfair labor practice if the rule is applied more harshly to employees engaging in protected, concerted activities.
Proposed Joint-Employer Rule
In September 2018, the Board published a Notice of Proposed Rulemaking ("Notice") intended to overturn the Obama-era Board's broad standard for joint-employer relationships, set forth in Browning-Ferris Industries, 362 NLRB No. 186 (2015), and to provide staffing agencies, on-site contractors, outside suppliers, employers with franchise relationships, and similar types of entities with clarity in handling potential joint-employer matters.
Under the proposed new rule, a business would be deemed to jointly employ another company's workers only if the business (i) possesses and actually exercises substantial, direct, and immediate control over the essential terms and conditions of the workers' employment, such as hiring, firing, discipline, or supervision, and (ii) has exercised such control in a manner that is not limited and routine. If the Board adopts this new rule, establishing a joint-employer relationship will be much more difficult than under the Browning-Ferris standard, under which the Board considers an entity a joint employer if the entity exercises direct or indirect control over employees or contractually reserves the right to exercise such control.
Clarity over this standard has become a critical issue for employers, as a joint-employer relationship means both parties may be subject to collective bargaining obligations and liability for unfair labor practices under the NLRA. Many Republican lawmakers and management representatives have strongly opposed the Browning-Ferris standard, arguing that its breadth permits application to almost any business relationship and provides employers no clear basis to determine whether they are in a joint-employer relationship with another company. Thus, in its Notice, the Board concludes that the new rule would "provide greater clarity to joint-employer determinations without leaving out parties necessary to meaningful collective bargaining."
On December 28, 2018, while the notice and comment process was still pending, the U.S. Court of Appeals for the D.C. Circuit issued a decision partially striking down the Board's decision in Browning-Ferris. As a broad matter, the Court held that the Board could properly consider an entity's "indirect control" and "reserved right to control" in determining whether an entity qualified as a joint employer, finding that under the common law of agency both were "relevant" considerations to the "employer" analysis. The D.C. Circuit went on to conclude, however, that Browning-Ferris failed to provide a "blueprint" for what constitutes indirect control, and failed to properly differentiate between indirect control "relevant to status as an employer" and the more generic form of indirect control over "objectives, basic ground rules, and expectations for a third party contractor."
Expressing concern that, in Browning-Ferris, the Board may have pushed the definition of "employer" beyond its "traditional common-law meaning," and noting that it could not tell from the record "what facts proved dispositive in the Board's determination that Browning-Ferris is a joint employer," the D.C. Circuit remanded the case to the Board for further proceedings to "erect some legal scaffolding that keeps the inquiry within traditional common-law bounds."
The NLRB's proposed new joint-employer rule initially was open for 60 days for public comment. The Board, however, extended that period twice in 2018. On January 11, 2019, the Board extended the deadline for a third time in light of the D.C. Circuit's decision, with comments now due by January 28, 2019. To date, the Board reports receiving approximately 26,000 individual comments. (For employers looking to submit feedback to the Notice, the Board has established an email address (email@example.com) to receive public comments in light of the current partial government shutdown.)
Pending the publication of the final rule, employers should continue applying contracting practices established under Browning-Ferris. Employers at risk of a joint-employer finding under the Browning-Ferris standard - particularly those that engage contractors to supply labor or materials, or who operate in a franchise relationship - should continue to closely evaluate their contracts and business practices, and exercise care to avoid any appearance of control over employees of their suppliers, contractors, and other business partners.
Class-Action Waivers In Arbitration Agreements
Resolving a longstanding and fiercely-debated circuit split, the U.S. Supreme Court, in Epic Systems v. Lewis, No. 16-285 (May 21, 2018), rejected the Board's 2012 D.R. Horton decision, holding that class-action waivers in individual employment arbitration agreements do not interfere with employees' Section 7 of the NLRA rights to engage in protected, concerted activity.
Writing for the majority, Justice Neil Gorsuch confirmed that, contrary to the Board's interpretation in D.R. Horton, the NLRA does not override the Federal Arbitration Act's ("FAA") clear requirement that arbitration agreements be enforced according to their terms. The majority held that the NLRB's contrary interpretation of the FAA was not entitled to any deference, and noted the Executive branch's (namely, the Board and the Solicitor General) internal disagreement on the issue. The Court also disagreed with the Board's interpretation that Section 7 even grants workers the right to bring class or collective actions in the first place.
Following the release of the Court's opinion, the Board immediately issued an announcement to confirm that the agency "respects the Court's decision, which clearly establishes that arbitration agreements providing for individualized proceedings, and waiving the right to participate in class or collective actions, are lawful and enforceable," and pledging to "expeditiously resolve" any currently-pending cases on the issue in accordance with Epic Systems. As a result, employers with mandatory arbitration agreements may continue to include class-action waivers in such agreements.
Access To Employer Email Systems: What's Going On With Purple Communications?
In 2014, the Board held in Purple Communications, 361 NLRB 1050 (2014), that employees who are given access to their employer's email system for business purposes have a presumptive right to use the system to communicate about union organizing activity and other protected concerted activity during non-working time.
The effect of Purple Communications was to invalidate common handbook limitations restricting the use of an employer's email system to business purposes. The decision was an about-face from the Board's 2007 decision in Register Guard, 351 NLRB 1110 (2007), in which the Board held that facially neutral limitations on use of an employer's email system do not violate the Act simply because they have the incidental effect of restricting employees from using the system for union-related communications.
On August 1, 2018, the Board issued a Notice and Invitation to File Briefs in Caesars Entertainment Corp., Case 28-CA-06084, seeking input from interested parties on whether the Board should adhere to, modify, or overrule the Purple Communications rule. Specifically, the Board is seeking feedback on (a) whether the Board should return to the Register Guard standard; (b) whether any Register Guard-like rule should have exceptions for circumstances where employees are unable to communicate with one another other than through their employer's email system; and (c) whether the Board should apply a different rule to the use of other types of communication systems (e.g., instant messages, texts, postings on social media).
Amicus briefs were due in October 2018, and additional briefing from the parties is expected by the end of January 2019. In the meantime, employers revising their employee handbooks for 2019 should consider avoiding wholesale prohibitions on employees' use of employer email for personal purposes, or broad statements that employer email may be used for business purposes only.
Comprehensive Revisions To Election Rules Not Expected Anytime Soon
Finally, despite indications last year that the Board was looking to roll back its "quickie election" rules, it now appears that employers may have to wait a bit longer for any significant revisions to the Board's representation case procedures.
At the end of 2017, almost exactly three years after the Board issued its "quickie election" rules significantly reducing the time between filing a representation petition and an election, the Board published a Notice and Request for Information seeking public input about whether those procedures should be retained, modified, or rescinded. Comments were due in early 2018.
Unfortunately for employers, this matter now has been downgraded to a "long-term action." NLRB Chairman John Ring reportedly has stated that the Board's proposed rulemaking on this issue likely will proceed in a more piecemeal format, with the first proposal to be released sometime this winter. Thus, employers likely should not expect broad-based changes to the Board's "quickie election" rules to be proposed or rolled out in the near term.
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If you have questions regarding these developments, or on what policy and procedure changes your organization should be considering in light of them, please contact one of our experienced labor attorneys.