Law360 (July 3, 2019, 1:11 PM EDT) — Three recent decisions arising under the National Labor Relations Act highlight that ambiguity and inattentiveness are the twin banes of labor and employment attorneys. In all three cases, the dispute arose because two personnel policies or approaches overlapped, opening the way for conflicting claims. As these cases demonstrate, letting the National Labor Relations Board decide, “who is on first” can have significant consequences and can trigger an onslaught of litigation. Unfortunately, instead of resolving the uncertainty, these three NLRB decisions merely pushed the dispute into another forum where additional litigation may occur to resolve the underlying issues.

Danger From Overlapping Policies

The first decision arose in a workforce with two different bargaining units.[1] The first unit had negotiated a workplace harassment policy that placed the responsibility of resolving workplace harassment complaints in the hands of a third party: an arbitrator who had the power to issue a binding decision.

While the policy provided only bargaining-unit employees could initiate harassment complaints, it allowed complaints against bargaining-unit employees, as well as employees outside the bargaining unit, and nonemployees. The second unit was subject to a nonharassment policy that created a committee of union and employer members who established rules governing unit-member conduct. During two rounds of contract negotiation, the second unit had rejected the employer’s proposal to incorporate third-party arbitration procedures similar to those the first union had in place.

The facts underlying the dispute arose when two employees, each a member of a different bargaining unit, got into an argument, and exchanged curse words and racial slurs. After the confrontation, one employee, who was a member of the arbitration-process unit, filed a harassment complaint in that process. The arbitrator concluded that the other employee, who was a member of the bargaining unit that had rejected arbitration, had violated the policy and ordered the employee suspended for 30 days. When the employer announced it was suspending that employee, his union filed a charge with the NLRB.

In a divided 2-1 decision, over a lengthy and rigorous dissent by member Marvin Kaplan, members Lauren McFerran and William Emanuel found the employer had violated its duty to bargain (imposed by Section 8(a)(5) of the NLRA) when it applied the arbitration harassment policy to the nonconsenting bargaining unit. The majority reasoned that the employee against whom the claim was brought was protected by his own unit’s policy, which stated that it was the exclusive remedy. Further, his unit had repeatedly and consistently rejected proposals to incorporate the arbitration procedure.

Because the employer could not have misunderstood the unit’s decision not to be bound by arbitration procedures, the board found that the employer unlawfully modified the labor agreement. Further, this unilateral change occurred without giving the unit an opportunity to bargain over significant changes to the disciplinary system — a substantial term and condition of employment. Accordingly, the NLRB held the employer unlawfully changed terms and conditions of the employment without prior notice and opportunity to bargain.
In dissent, Kaplan suggested the two policies could coexist. In his view, after the third party arbitration harassment process concluded, the second union could grieve the discipline as being improper using the grievance procedure in its collective bargaining agreement. Kaplan’s approach is not new. In fact, it is the approach adopted in W.R. Grace v. United Rubber Workers.[2] In that decision, the U.S. Supreme Court held the employer to its collective bargaining agreement, which required it to apply strict seniority when making layoff decisions, and to the terms of a voluntary consent decree, which required the use of racial preferences.

Intervention in Federal Lawsuits

The second decision involved the application of a mandatory statutory arbitration policy to a discharged and formerly union represented ex-employee’s lawsuit.[3] The NLRB’s decision in Anheuser Busch was triggered when the employer filed a motion in a federal district court seeking to compel the arbitration of the now ex-employee’s discrimination claim. This procedural posture is a reminder that employment lawyers need to be aware of labor laws. In Anheuser Busch, the NLRB, by a 2-1 majority, ruled the motion to compel arbitration did not violate the employer’s duty to bargain.

The dispute occurred after Anheuser Busch had adopted a mandatory arbitration policy that all job applicants were required to sign. However, the arbitration policy did not apply to union-represented employees. The former employee had applied for work, signed the arbitration policy and was hired into a union-represented position. Six years later, in March 2010, he was terminated. The union filed a contractual grievance claiming that the discharge was not issued fairly and impartially.

Ultimately, a “multi plant grievance committee” upheld the termination. Subsequently, the terminated employee filed a discrimination charge, and upon receipt of his notice of right to sue, filed a federal discrimination suit on April 3, 2012, whereupon the employer filed a motion to compel arbitration. The employee then filed an unfair labor practice charge with the NLRB claiming the attempt to apply the mandatory arbitration procedure to him violated the employer’s duty to bargain and requesting the NLRB order the employer to withdraw the motion to defer to arbitration.

In another 2-1 decision the NLRB majority concluded otherwise. In its view, it could not interfere with the pending court litigation as neither of the two exceptions to abstention which would have permitted its intervention in ongoing litigation identified by the Supreme Court in Bill Johnson’s Restaurants v. NLRB were applicable.[4]

Under Bill Johnson’s Restaurants, the NLRB may intervene in court litigation where the lawsuit is baseless and filed with a retaliatory purpose. Litigation that is not both baseless and retaliatory may violate the NLRA only if it falls within one of two exceptions: (1) a suit that is preempted by federal law, and (2) a suit that has an illegal objective. The general counsel argued that NLRB intervention was appropriate because the second exception applied: that is, the claim had an illegal objective. The majority rejected the illegal objective claim finding that a unilateral change was not the equivalent of an “illegal objective.” The dissent, McFerran, disagreed on this point.

The district court had stayed its ruling on the motion to compel while the NLRB considered this issue. The majority closed its opinion by noting it was in no way suggesting how the court should rule. Consequently, the employer is back in court to continue litigating a discharge that occurred on May 3, 2010.

No Signed Agreement Proves Costly

In the third decision, Cetta v. NLRB,[5] the D.C. Circuit enforced the NLRB’s decision in a striker replacements case, Michael Cetta Inc. d/b/a Sparks Restaurant.[6] In Cetta, the court faulted an employer for not obtaining striker replacements’ signatures on their offer letters. The case is a vivid reminder of the value of documents and suggests the trend toward paperless or a policy-free human resources regimen is a fraught one.

In December 2014, 36 waiters and bartenders at Spark’s Restaurant went on strike against their employer. After nine days, the strikers abandoned the strike and made an unconditional offer to return to work. The employer refused their offer to return to work claiming that it had lawfully hired “permanent replacements” to fill the striking employees positions. Under long-standing NLRB precedent, economic strikers must be reinstated when their replacements are temporary, however they do not have to be reinstated immediately when permanent replacements have been hired.

The NLRB rejected the employer’s “permanent replacement” rational using an objective evidence standard. In order to show that it lawfully hired permanent replacements, the employer must show that there was a mutual understanding between the employer and the replacements that their employment was permanent.

The NLRB found that because the offer letters given to the replacement employees were unsigned, they did not demonstrate that the replacement workers considered themselves permanent replacements. No replacement workers testified. Consequently, under well-established precedent the employer was obligated to discharge the replacement workers and return the strikers to their former positions. Because it had failed to do so, the employer committed an unfair labor practice and was ordered to discharge the replacements, reinstate the strikers and pay them back pay for the period (now totaling over five years) they had been out of work.

In Belknap v. Hale,[7] the Supreme Court held that an employer could avoid breach of contract suits brought by replacement workers discharged as part of a strike settlement or by order of a court or arbitrator. The court held that employers could avoid these suits if they obtained the replacement workers’ signatures on documentation acknowledging that discharge could occur as part of a strike settlement. In light of the D.C. Circuit’s opinion in Cetta, a Belknap letter serves a significant additional role — it is objective evidence the strike replacements are permanent.

If history is any indicator, the discharged replacement workers will now sue their former employer claiming their terminations were a breach of their contracts of employment and that they were permanent replacements.

Courts and the board apply the rules pertinent to strike situations with rigorous exactitude. Employers facing strike situations by union represented or unrepresented employees would be well served to dot their i’s and cross their t’s.

Cautions for Employers

Employers should avoid overlapping or inconsistent policies or arrangements. Where there is overlap, there is the potential for conflicting claims and these situations are riddled with potential hurdles. As the adage goes, anything that can go wrong will: A litigant will discover and leverage the overlap at the worst possible time.

Employers and their employment counsel should keep the National Labor Relations Act in mind even if their workforces are nonunion. It was only a few years ago that then-NLRB General Counsel Richard Griffin caused a stir by rewriting employee handbooks. The expiration of his term does not mean non-union employers can ignore the NLRA; the NLRA has a myriad of applications to even nonunion workers.

Finally, employers should be mindful of the serial litigation, which can result if policies are not thoughtfully formulated and implemented.

In Pacific Maritime Association, the employer went through the third-party harassment process and a NLRB trial and appeal. The NLRB’s decision leaves open the possibility that the employer may have a second arbitration proceeding or a suit to confirm an award. The decision also points to the undesirability of micro units. In Anheuser Busch, the employer went through a grievance process, an agency investigation, an NLRB trial and appeal, and is in the midst of a federal lawsuit.

The employer in Spark’s Restaurant has endured a strike, an NLRB trial and appeal, and a court of appeals decision. Depending on the applicable statute of limitation, it may still face a state court wrongful discharge claim from the replacement workers.

All three May decisions were presaged by decisions issued by the Supreme Court in 1983. This underscores the premium of consulting experienced labor counsel.


The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc. or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Pacific Maritime Associates, 367 NLRB No. 121 (2019).

[2] W.R. Grace v. United Rubber Workers461 U.S. 757 (1983).

[3] Anheuser-Busch, 267 NLRB No. 132 (2019).

[4] Bill Johnson’s Restaurants v. NLRB, 461 U.S. 731 (1983)

[5] Cetta v. NLRB, No. 18-1165 (D.C. Cir. May 20, 2019)

[6] Michael Cetta, Inc. d/b/a Sparks Restaurant, 366 NLRB No. 97 (2018).

[7] Belknap v. Hale, 463 U.S. 491 (1983).

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