On September 15, 2008, the Seventh Circuit Court of Appeals held that an employer did not violate the National Labor Relations Act (NLRA) by refusing to reinstate economic strikers because the employer had replaced the striking employees with permanent replacement workers. The court reasoned that the replacement workers were permanent, even though they had signed forms stating that they could be fired "at-will."

On March 20, 2002 – following failed negotiations for an initial collective bargaining agreement – 53 of the 75 employees from the company began an economic strike. Shortly thereafter, the company hired replacement workers. Each replacement worker signed a form stating that the individual (1) accepted employment as a permanent replacement worker, (2) could quit or be terminated at any time, with or without cause, and (3) could be terminated as a result of a strike settlement agreement with the union or order of the National Labor Relations Board (NLRB).

On July 31, 2002, the union made an unconditional offer to return to work on behalf of the striking employees. On the same day, the company sent the union a letter explaining that it had a full complement of employees, including permanent replacements, but that the strikers would be placed on a preferential recall list.  

The union filed an unfair labor charge alleging that the company violated sections 8(a)(1) and (3) of the NLRA when it refused to reinstate economic strikers after the union's unconditional offer to return to work. An economic striker who unconditionally offers to return to work is entitled to immediate reinstatement unless an employer can show a legitimate and substantial business justification for refusing such reinstatement (e.g., hiring permanent replacement workers as a means of continuing business operations).  

The dispute focused on the significance of the fact that the replacement workers could be terminated "at will." The union argued that to be considered permanent, the employer must offer the replacement worker a binding contract of term employment under state law. The NLRB disagreed and ruled in favor of the company. The NLRB reasoned that the "at-will" employment status of the replacement workers did not preclude an employer's otherwise valid showing that it had permanently replaced the striking employees.  

On appeal, the Seventh Circuit affirmed the NLRB's decision. First, the court observed that the NLRB has never required employers to offer a binding contract of term employment under state law to render a replacement worker permanent. Second, the court determined that the company's offer of permanent "at-will" employment was not illusory because it did not allow the company to keep "all of its options open" in a way that would allow it to illegally manipulate or otherwise violate federal labor law.

The Seventh Circuit's decision is important for employers because it confirms that an employer need not offer a binding contract of term employment under state law to render an employee a permanent replacement worker. To the contrary, a worker can achieve permanent replacement status if the employer's intent in that regard is clearly communicated, even if the worker's employment is "at-will" and can be terminated at any time, or is subject to other conditions, such as a settlement agreement with the union or an order from the NLRB requiring the employer to reinstate strikers.