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NLRB Rings in New Year with Impactful Case Law and New Rules Employers Need to Know

January 9, 2023

NLRB Rings in New Year with Impactful Case Law and New Rules Employers Need to Know

January 9, 2023

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Sanctioning the unionization of micro-units creates a number of hurdles for employers. 

In what has become a yearly tradition, the National Labor Relations Board published a string of precedent-shifting cases at the end of the year. These cases represent the steady march of the current Democrat-majority Board’s efforts to reverse Trump-era policies and enact President Biden’s pro-union agenda. By making it easier for unions to organize an employer’s workforce through “micro-units,” increasing penalties for violations of the National Labor Relations Act (NLRA), and allowing expanded access for unions to private company property, the stakes are higher than ever for employers.

Another Tool for Unions: Permitting Micro-Units Under American Steel

Last year, as reported in a previous Alert, the Board signaled its intent to enact a heightened standard for employers who contend that a petitioned-for unit of employees is inappropriate because it excludes certain other employees. On December 14, 2022, the Board published its decision in American Steel and again formally enacted a standard that puts the burden on the employer to prove that a proposed unit is inappropriately narrow.

Organizing small subgroups of employees (i.e., micro-units) is a strategy that unions utilize to get their foot in the door. For example, if a union is looking to organize a department store, it would be easier to start with a subset of employees (who see each other and work together regularly) than to organize the entire store all at once.

Historically, unions who have utilized this tactic have run into issues with showing that the unit is appropriate. Under long-standing Board precedent, for a unit to be appropriate, it must be homogenous, identifiable and sufficiently distinct. A union arbitrarily carving out a unit of employees insufficiently distinct from other employees with whom they share a community of interest was grounds for challenging an election petition.

In 2011, the Obama Board significantly weakened an employer’s ability to challenge the appropriateness of a micro-unit. In Specialty Healthcare, it held that if the unit of employees was readily identifiable and shared an internal community of interest, it was presumptively appropriate. An employer contending that a unit inappropriately excludes other employees had the burden of showing that the other employees shared an overwhelming community of interest with the petitioned-for unit. At its core, this gave unions the green light to gerrymander employees as an organizing tactic.

The Republican-controlled Trump Board overturned Specialty Healthcare and returned to the standard that had been in effect for decades. However, that brief period of respite is now over for employers, and micro-units are back on the table. In American Steel, the Board has returned to a standard that places a high burden on an employer to show that a micro-unit is inappropriate because it excludes other employees.

What This Means for Employers

Sanctioning the unionization of micro-units creates a number of hurdles for employers. To start, it makes employers more vulnerable to unionization. Under the NLRA, a bargaining unit can be as small as two employees. All a union needs to do is find one small subdepartment vulnerable to organizing and petition for an election to begin a potential domino effect of unionization within a company. Allowing unions to organize micro-units also increases the chance that an employer could have groups of employees organized by different unions, which complicates employee relations and increases legal costs.

Employers, even those in industries that are not typically unionized, may want to consider implementing strategies and training now to get ahead of this reinstated tactic. In the first half of 2022, union election petitions were up 58 percent. Bolstered by a progressive wave of pro-union rhetoric and policies, unions are currently emboldened. At the same time, social media has made it easier than ever for unions to conduct covert organizing drives, which catch employers off guard.

There are strategies that employers can apply to reduce risk of unionization. As the saying goes, the best defense is a good offense, and that is certainly the case when it comes to remaining union-free.

Board Expands Damage Award Categories in Thryv

On December 13, 2022, the Board expanded the types of damages it may award an aggrieved party in an unfair labor practice charge. In Thryv, the Board held that, moving forward, in cases where the Board awards “make-whole relief,” the award will automatically include compensation for “all direct or foreseeable pecuniary harms.” This means that an employer found to have committed an unfair labor practice could be on the hook for extensive consequential damages, such as an employee’s out-of-pocket medical expenses or credit card debt, if such damages were a foreseeable harm as determined by the Board.

This decision significantly alters the way the Board calculates alleged damages and will affect both compensatory damage awards and settlement negotiations. Historically, the Board has sought to make an aggrieved party whole, typically by seeking back pay and reinstatement. With this new directive, the Board now has the ability to seek a higher monetary award for an alleged unfair labor practice. The Board will also be able to use the potential existence of “direct or foreseeable pecuniary harms” as leverage when negotiating settlements on behalf of an aggrieved party. Going forward, employers will very likely end up paying more to resolve unfair labor practice charges if the complainant has alleged financial damages. Of course, the Board’s decision here is subject to challenge on the ground that these remedies go beyond the make-whole relief authorized by the NLRA.

What This Means for Employers

This decision gives the Board a broader set of tools to enforce the NLRA in cases where it determines an unfair labor practice has taken place and compensatory damages are appropriate. With the recent infusion of funding for the 2023 fiscal year (which included a $25 million increase to the Board’s budget), the Board will also have additional resources to investigate and prosecute alleged violations of the NLRA.

All employers, whether union or nonunion, need to be aware of the expansion of the types of damages that the Board will seek in a case that it deems meritorious because there is greater potential exposure. The stakes are higher now for NLRA violations, even if inadvertent, and the Board will likely seek to actively wield this newfound authority.

The Board is also applying the decision retroactively, so employers who are currently defending unfair labor practice allegations may need to reassess potential exposure to take into account what the Board may now consider compensable “foreseeable harm.” Additionally, this new Board directive may complicate and/or delay ongoing settlement negotiations in unfair labor practice cases.

Property Owners Lose Authority to Prohibit a Contractor’s Off-Duty Employees from Trespassing

Rounding out the year, on December 16, 2022, the Board issued its decision in Bexar County II and returned to its prior standard providing a more expansive right to off-duty contractors to access public areas of property not owned by their employer for the purpose of engaging in protected union activity.

Consistent with its efforts to reverse Trump-era precedent and reinterpret the NLRA to intensely expand employees’ Section 7 rights, the Board overturned its own precedent adopted in Bexar County I, 368 NLRB No. 46 (2019) and returned to the test laid out more than a decade ago under the Obama-era Board in New York, New York Hotel & Casino, 356 NLRB 907 (2011). Under the reinstated standard, property owners are prohibited from excluding off-duty contract workers seeking to engage in Section 7 activity who regularly work on the property from publicly accessible areas, unless the activity “significantly interferes with the use of the property or where exclusion is justified by another legitimate business reason, including, but not limited to, the need to maintain production and discipline.” 

The Previous Framework in Bexar County I

The underlying case precipitating the Board’s recent reversal involved a group of third-party contractor musicians that sought to distribute leaflets on publicly accessible areas of the Tobin Center for the Performing Arts, where the San Antonio Symphony, Ballet San Antonio and Opera San Antonio perform. The symphony leases performance space from the Tobin Center and the leaflets related to a labor dispute over the ballet’s choice to use recorded music instead of a live orchestra. The use of recorded music denied the symphony employees the opportunity to work at the performance by playing the score. Management for the Tobin Center prohibited the leaflet distributing activity anywhere on its property, including the sidewalks, and forced the symphony employees to relocate across the street onto a public sidewalk where there were fewer patrons.

In Bexar County I, the Trump-era Board ruled that a property owner may restrict off-duty employees of an on-site contractor from accessing the property to engage in Section 7 activity unless (1) the off-duty contractor employees “regularly” and “exclusively” work on the property and (2) the property owner cannot show that the off-duty contractor employees do not have one or more reasonable, nontrespassory alternative means to communicate their message. This decision favored the rights of private property owners and allowed wide latitude to restrict nonemployees, including contractor employees, from engaging in Section 7 activity.

In Bexar County II, the Board, on remand from the D.C. Circuit Court, agreed with the court’s conclusion that the Bexar County I standard was inconsistent and arbitrary in how it was applied to the symphony employees, determining that the standard undermined contractor employees’ Section 7 rights. Rather than modify the pro-property-owner access standard, the Board abandoned it and returned to the test enunciated in New York, New York, under which a property owner can restrict from its property off-duty contractor employees who regularly work on the property only where the property owner is able to demonstrate that the contractor employees’ Section 7 activity significantly interferes with the use of the property or where prohibition is justified by another legitimate business reason, including, but not limited to, the need to maintain production and discipline. According to the Board, only these limited circumstances warrant restricting the Section 7 rights of off-duty contractor employees in publicly accessible areas. Applying this standard, the Board prioritized the symphony workers’ Section 7 rights over the owner’s property rights and concluded that the respondent violated the NLRA by banning the symphony workers from leafletting on its property.

In an attempt to compensate for infringing on property owners’ rights, the Board noted in its decision that a property owner could control access to and use of its property through contractual terms with on-site contractors and exercise its legitimate managerial interests in preventing improper interference with the use of its property.

The Board’s decision in Bexar II also applies retroactively to all pending cases. 

What This Means for Employers

The Bexar County II decision greatly expands off-duty contractor employees’ ability to engage in union organizing and other Section 7 activity at their worksites, despite the fact that their employer does not own the property. Going forward, property owners have the burden of demonstrating that off-duty contractor employees’ conduct “significantly interferes” with the use of the property, or that legitimate business reasons support the exclusion. As a result, property owners and/or employers should review their agreements with contractors to ensure there are clearly defined parameters regarding who is responsible for preventing disruptions at the property owner’s/employer’s location. Property owners and/or employers should also seek the advice of experienced labor counsel before directing or instructing contractors’ employees to avoid creating a joint-employer relationship.

About Duane Morris

Those interested in learning more about how the National Labor Relations Board is implementing its union-friendly agenda may attend an upcoming, complimentary two-part seminar. Duane Morris attorney Peter Hurtgen, previous chairman of the Board and director of the Federal Mediation and Conciliation Service, along with six of Duane Morris’ Employment Law and Management Labor Relations attorneys, will share insights into the current Board and its recent and anticipated decisions.

The first session, on January 12, 2023, will focus on strategies for employers who wish to remain union-free. In the second session, on February 16, 2023, the presenters will identify best practices for employers with unionized workforces and discuss the most recent developments in Board law that affect unionized workplaces.

For More Information

If you have any questions about this Alert, please contact Eve I. Klein, James R. Redeker, Adam Keating, Elizabeth Mincer, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.