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Legal Updates

New NLRB Majority Quickly Reverses Course On Obama-Era Holdings

During the eight years of the Obama Administration, employers became accustomed to unfavorable news from the National Labor Relations Board (“NLRB” or the “Board”). With a Democratic majority, the Board issued many groundbreaking decisions apparently aimed at tilting the labor-management balance of power in favor of unions.

Now that President Trump has reconstituted the Board with a Republican majority, that trend has quickly begun shifting in the opposite direction. Within the past few months, the NLRB has overturned a number of significant Obama-era rulings, relating to joint employment, the composition of proposed bargaining units, employee handbooks, and other important issues. In addition, the Board has signaled that it may revisit the new, union-friendly election rules it put into place in 2015.

Below we summarize some of the most significant developments in these areas.

Joint Employers

First, the Board recently issued a decision reversing its 2015 Browning-Ferris Industries of California, Inc. (“BFI”) decision, which had dramatically broadened the circumstances under which an employer could be found to be a “joint employer” of workers employed by another business. Specifically, in BFI, the Board ruled that if an employer merely has a right to control essential terms and conditions of employment for workers employed by another business, the employer may be considered a joint employer of those workers – regardless of whether the employer actually exercises any such control.

The BFI holding gave rise to great concern among employers, as it potentially encompassed a wide range of common business arrangements, such as employers’ relationships with franchisees and staffing companies, as well as commercial contracts between companies with specifications relating to employee performance. In these and many other circumstances, an employer potentially could be obligated to bargain with another company’s employees regarding the terms and conditions of their employment, despite its lack of any direct relationship with those employees. Similarly, an employer could potentially be found liable for unfair labor practices committed by another company over which the employer had no control.

To employers’ relief, in a December 2017 decision, HyBrand Industrial Contractors, Ltd., the Board overturned BFI, thereby returning to its prior, long-established joint-employer standard. Under the standard re-adopted in HyBrand, an employer must exercise actual control over workers’ terms and conditions of employment in order to be considered a joint employer.

Unfortunately for employers, in late February of this year, the Board subsequently withdrew the HyBrand decision, based on an internal NLRB report that concluded that Member William Emanuel should have recused himself from the case, due to the fact that his former law firm had represented one of the parties in the BFI case. For the moment, then, the BFI holding has been reinstated. Nonetheless, given the Board’s new Republican majority, it seems likely that BFI will once again be reversed when an appropriate case is brought before the agency.

“Micro” Bargaining Units

In another recent decision, PCC Structurals, Inc., the NLRB abrogated its 2011 Specialty Healthcare and Rehabilitation Center of Mobile decision, which made it much more difficult for an employer to challenge the composition of a union’s proposed bargaining unit – particularly, a narrow, or “micro,” bargaining unit. (Unions often attempt to organize smaller bargaining units when they believe that only a segment of the employees in a particular department or classification are likely to vote in favor of unionization.)

Under Specialty Healthcare, in order to challenge a proposed bargaining unit, an employer was required to show that workers excluded from the proposed unit shared “an overwhelming community of interest” with those falling within it. This stringent standard made it very difficult for employers to challenge the composition of unions’ proposed bargaining units. For instance, in a 2014 decision involving a Macy’s department store, the Board gave its imprimatur to a proposed bargaining unit comprising only cosmetics and fragrance employees.

With the PCC Structurals decision, however, the Board has reinstated its previous standard for evaluating the appropriateness of unions’ proposed bargaining units. Under this much more flexible standard, the Board will once again consider a number of factors, including the extent to which the employees at issue (i) are organized into a specific department, (ii) have distinct skills and training, (iii) have distinct job functions, (iv) are integrated functionally with other employees, (v) frequently have contact with other employees, (vi) frequently interchange with other employees, (vii) have terms and conditions of employment differing from those of other employees, and (viii) are supervised by different managers.

Thus, with the NLRB’s reversal of course in this area, employers should have substantially greater latitude to challenge the manner in which unions seek to define proposed bargaining units.

Employee Handbooks

The Board also recently issued a decision, The Boeing Co., that will come as welcome news to employers in their efforts to implement and maintain effective personnel policies.

Under the Obama Administration, the Board issued a multitude of decisions striking down previously uncontroversial personnel policies – often included in employee handbooks – on the basis that such policies might inhibit employees’ rights to engage in protected concerted activity (known as “Section 7 rights”). For instance, the Board frequently took fault with handbook policies requiring civility or respectful behavior in the workplace, prohibiting cameras or recording devices in workplaces, restricting social media postings by employees, and requiring that work-related information be kept confidential. Because employees enjoy Section 7 rights regardless of whether they are represented by a union, these rulings applied to unionized and non-unionized employees alike.

The Board’s holdings in this area stemmed from its extremely broad application of a 2004 decision, Lutheran Heritage Village-Livonia, in which the NLRB held that a work rule that is facially neutral (i.e., does not explicitly restrict employees’ Section 7 rights) may nonetheless be found unlawful if employees would reasonably construe the rule as restricting their Section 7 rights.

In its recent Boeing Co. decision, however, the Board repudiated Lutheran Heritage in favor of a much more employer-friendly standard. Now, instead of considering only whether a work rule could reasonably be construed as improperly limiting Section 7 rights – a conclusion that decisions by the Obama Board often appeared to strain to reach – the NLRB will also evaluate (i) the nature and extent of the rule’s potential impact on Section 7 rights, and (ii) any legitimate justifications underlying the rule.

This new standard should make it significantly more difficult for employees and unions to challenge facially neutral personnel policies. Indeed, the Board stated in its Boeing Co. decision that employer policies banning cameras in the workplace would henceforth be deemed per se lawful. (Obama-era Board decisions had sometimes taken fault with no-camera policies, on the basis that they might infringe upon employees’ rights to publicize demonstrations or other protected concerted activities.)

Election Rules

Finally, in December 2017, the Board formally invited comments from interested parties as to whether it should revise or rescind the changes in union election procedures that the Board instituted in 2015. Those changes have significantly sped up the pace of union elections, thereby curtailing employers’ ability to communicate their campaign messages to employees.

The Board’s deadline for submission of comments was initially set for February 12, 2018, and subsequently extended to March 19, 2018. While there is no certainty as to what will happen, it will not come as any surprise if the new Board majority ultimately decides to rescind, or at least substantially revise, the 2015 election rule changes.

Recommendations For Employers

We suggest that employers review, in consultation with labor counsel, these recent Board decisions and consider how their operations may be impacted. For instance, employers that have revised their employee handbook policies in recent years in response to unfavorable NLRB decisions may want to consider whether to revisit those changes, now that the new Board majority has signaled a very different approach in this area.

Employers would also be wise to closely monitor future Board decisions, as it is very likely that other notable Obama-era precedents will be similarly overturned.

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If you have any questions about these developments, please feel free to contact one of our experienced labor lawyers. We regularly assist employers with all types of union-related issues and would be pleased to help.