NLRB Overrules Four Key Cases to End 2017 with a Bang

By Rick Pins, Matt Tews and Carroll Bible

The National Labor Relations Board isn't waiting for the ball to drop in Times Square. It's ushering in a new era, now. The new and short-lived Republican-appointed majority wasted little time reversing the course the Board took during the Obama administration and, in a series of mid-December rulings, changed labor law in several crucial ways.

In 3-2 decisions issued on Thursday and Friday, December 14 and 15—just days before the Board returned to a 2-2 Republican/Democrat split—the Board overturned four of the most controversial decisions issued from 2004-2016. In just two days, the Board eviscerated Specialty Healthcare (micro-units), Lutheran Heritage Village (handbook review standard), Browning-Ferris (expanded joint-employer standard) and Dupont (unilateral changes). The pace at which the Board reversed these cases suggests that many other recent decisions may be on the chopping block once a Republican majority returns sometime in 2018.

Boeing Co.: The New Handbook Rule Test

By a 3-2 vote in Boeing Co., the Board overturned its 2004 Lutheran Heritage Village-Livonia decision which set the standard for determining the lawfulness of handbook policies. Under Lutheran Heritage, the Board had held that—while it did not explicitly restrict activity protected by Section 7—employer policies nonetheless violated the National Labor Relations Act (NLRA) if "(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights."

The first prong of this test required the Board to determine how an employee would "reasonably construe" handbook language. It led to numerous controversial (and, sometimes, seemingly contradictory) decisions based on very close parsing of handbook language. Under the "reasonably construe" rationale, the Board had found a broad range of seemingly innocuous, and common, handbook policies unlawful. From attendance, confidentiality, civility, conduct, discipline, media, social media, intellectual property, photography and recording, conflict of interest, to solicitation/distribution rules, it seemed almost any rule could be "reasonably construed" to violate the NLRA.

Boeing Co. does away with Lutheran Heritage, and in particular, the "reasonably construe" analysis. The Board discussed that Lutheran Heritage had prevented it "from giving meaningful consideration to the real world 'complexities' associated with many employment policies, work rules, and handbook provisions" and had led to the invalidation of many "common-sense rules."

Under Boeing Co., the Board will now review handbook rules by balancing "(1) the nature and extent of the potential impact on the NLRA and (2) legitimate justifications associated with the rule." Under this framework, the Board will analyze rules under three categories:

  • Category One: Lawful rules that do not prohibit or interfere with NLRA rights or whose potential adverse impact on NLRA rights is overweighed by legitimate justifications.
  • Category Two: Rules that are lawful in some cases based on "individualized scrutiny."
  • Category Three: Rules that are unlawful.

In short, under Boeing Co. employer rules will still be subject to challenge and may violate the NLRA, but employers will have the ability to lodge common-sense defenses to their legitimate rules.

Hy-Brand: A Return to a "Direct and Immediate" Standard for Joint Employers

In another 3-2 vote, the Board in Hy-Brand overruled its very controversial 2015 Browning-Ferris decision. Browning-Ferris had greatly relaxed the test for determining when two separate entities were joint employers under the NLRA. In Browning-Ferris, the Board upset decades of settled law by deciding that a joint-employer relationship could be found when an entity exercises "indirect control," "limited and routine" control or even held the reserved right to control essential employment terms and conditions. As "indirect control" is common in modern service agreements, the Browning-Ferris standard created the possibility of joint-employer liability for a large segment of the business community.

In its Hy-Brand decision, the Board described Browning-Ferris as "a distortion of common law," "contrary to the [NLRA]," and "ill-advised as a matter of policy." The Board explained that the application of the Browning-Ferris standard "would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations."

Hy-Brand returns to the previously settled rule: there must be "direct and immediate" control over essential terms and conditions to find a joint-employer relationship. No longer will the exercise of indirect control, exercise of control that is "limited and routine" or a reservation of the right to exercise control be sufficient for an entity to qualify as a joint-employer.

PCC Structurals: Decreasing the Risk of "Micro Units"

In yet another 3-2 decision, PCC Structurals, the Board majority (3-2) overruled its 2011 Specialty Healthcare decision, a key ruling in the area of union-organizing law. When unions attempt to organize a workplace, they have the first say when proposing who will be included and excluded from a bargaining unit. Prior to 2011, employers had the opportunity to show that the unit should be expanded to include other employees who shared similar characteristics (a "community of interest") with the grouping proposed by the union. The Specialty Healthcare decision changed that standard by requiring an employer to show an "overwhelming community of interest" in order to expand the union's proposed unit, making it much more likely that a union could target only a small grouping of employees within an employer's operation (creating so-called micro units).

In PCC Structurals, the Board returned to the traditional community of interest standard to determine whether employers can expand the size of bargaining units proposed by unions. This makes it far more likely that an employer will be able to succeed in expanding the unit beyond what the union proposed. This is often beneficial to employers who want to avoid setting different terms and conditions of employment for similar groups of employees.

Raytheon: Once Again Allowing Employers to Implement Consistent Changes

In a final 3-2 decision, the Board's Raytheon decision overturned its 2016 Dupont ruling that had limited the changes employers can implement in union workplaces without bargaining. Prior to Dupont, the Board had allowed employers to continue to make unilateral changes it had consistently made in the past without bargaining with the union. The most common example of such a change would be yearly changes to employee benefit plans. Dupont changed that settled law by requiring employers to negotiate over this type of change.

Raytheon returns to the prior law. In overruling Dupont, the Board reasoned that the Dupont decision "distort[ed] the long-understood common sense understanding of what constitutes a 'change,' and it contradict[ed] well established board and court precedent." The Board further reasoned that the Dupont standard conflicted with the Board's aim to "foster stable bargaining relationships." As a result, the Board retroactively restored decades-old precedent that allows businesses to change policies without a union's permission if the employer has previously taken similar actions.

Looking Forward

The rapid-fire nature of these watershed rulings was no doubt influenced by the impending end of Chairman Miscimarra's (R) term on the Board. Chairman Miscimarra's term ended on Saturday, December 16, and the Board is once again split 2-2 between Democrat and Republican appointees. While President Trump will undoubtedly fill the final seat, no one has yet been nominated and it may be some time before the seat is filled. So a similar pace of reversals is unlikely in the near future.

But when the seat is filled, we anticipate further shakeups to labor law. Cases ripe for potential reversal include Purple Communications (which allows employees to use an employer's email system for union organizing) and FedEx (which expands the test for determining who is an employee covered by the NLRA). Stay tuned.

For more information on these drastic changes or any other labor law issue, please contact Dominic Cecere, Joel Abrahamson, Rick Pins, Matt Tews, Nicole Faulkner, Bob Overman, Johnny Wang, Marc Goldstein or the Stinson Leonard Street contact with whom you regularly work.

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