Earlier this year, President Trump appointed (and the Senate confirmed) two new Republican members of the National Labor Relations Board (Board) - Marvin E. Kaplan and William J. Emanuel. Together with Republican Member Philip A. Miscimarra1, the new Board Members overruled four major decisions that had been issued by the prior Democrat-controlled Board. This advisory briefly summaries each of these decisions.
Board Overrules the Browning Ferris Joint Employer Test
In Hy-Brand Industrial Contractors, 365 NLRB No. 156 (December 14, 2017), the Board overruled the joint employer test it had adopted in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015).
In Browning Ferris, the Board held when determining whether two entities could be considered a joint employer, the test would consider whether share or co-determine the essential terms and conditions of employment for the same group of employees, but would focus on the putative joint employer’s right to control those employees, and not whether it actually exercised that right.
In Hy-Brand, the Board returned to the prior, more stringent test, which focused on whether the putative joint employer (1) actually exercised control over essential employment terms and conditions of the subject employees, and (2) did so directly and immediately. The Board reasoned that returning to this “exercised” and “direct” standard achieved the National Labor Relations Act’s goal of promoting stability and predictability in bargaining relationships.
The Hy-Brand decision significantly reduces the risk created by Browning-Ferris of a company unwittingly becoming a joint-employer when entering into many common business relationships, such as franchisor-franchisee, contractor-subcontractor, and lessor-lessee arrangements.
Board Overrules the Specialty Healthcare Micro Bargaining Unit Option
In PCC Structurals, Inc.,365 NLRB No. 160 (December 15, 2017), the Board overruled the micro bargaining unit test it had adopted in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934 (2011).
In Specialty Healthcare, the Board held that if a small group of employees constitute an appropriate bargaining unit, but the employer contends that additional employees should be part of the unit, the employer must prove that the additional employees share an overwhelming community of interest with the petitioned for group.
In PCC Structurals, the Board returned to the traditional community of interest test for all bargaining unit determinations. This test involves a consideration of whether:
the employees are organized into a separate department; have distinct skills and training; have distinct job functions and perform distinct work, including inquiry into the amount and type of job overlap between classifications; are functionally integrated with the Employer’s other employees; have frequent contact with other employees; interchanges with other employees; have distinct terms and conditions of employment; and are separately supervised.
The Board added that it will consider whether employees excluded from the petitioned-for unit “have meaningfully distinct interests in the context of collective bargaining that outweigh similarities with unit employees,” but will no longer require the employer to show that those employees share an overwhelming community of interest with the petitioned-for unit employees.
The PCC Structurals decision will help ensure that employers no longer face the risk of micro bargaining units.
Board Overrules the Lutheran Heritage Handbook Rule/Policy Test
In The Boeing Company, 365 NLRB No. 154 (December 14, 2017), the Board overruled the test it had adopted in Lutheran Heritage, 343 NLRB 646 (2004), for determining whether a handbook rule or policy interfered with the employees’ Section 7 rights.
In Lutheran Heritage, the Board held that, if a rule or policy did not expressly violate the employees’ Section 7 rights, the Board would consider whether “(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.”
Most of the cases applying the Lutheran Heritage approach focused on the first test, and the prior Board readily concluded that the mere maintenance of a facially neutral rule or policy that contained an ambiguity meant that employees would “reasonably construe” it in the most negative way. This, in turn, generally resulted in finding that the rule or policy violated Section 7 of the Act.
In The Boeing Company, Board rejected the Lutheran Heritage test and adopted a new one. Under the new test, the Board replaced the “reasonably construe” standard with a balancing test that will evaluate two things: (1) the nature and extent of the potential impact on protected Section 7 rights, and (2) legitimate justifications associated with the rule.
To provide greater clarity and certainty going forward, the Board delineated three categories of rules and policies under the new balancing test:
- Category 1 will include rules that the Board designates as lawful to maintain, either because (1) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of rights under the Act; or (2) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. Examples of Category 1 rules are the “no camera” requirements in this case, the “harmonious interactions and relationships rule that was at issue [in a hospital case], and other rules requiring employees to abide by basic standards of civility.2
- Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.
- Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by the business justification for the rule. An example of a Category 3 rule would be a rule prohibiting employees from discussing wages or benefits with one another.
In light of the Boeing Company decision, employers may want to reconsider any policies that they have either withdrawn or refrained from implementing out of a concern that they would run afoul of the now-defunct Lutheran Heritage “reasonably construe” standard.
Board Overrules the DuPont Post-Expiration Unilateral Change Test
In Raytheon Network Centric Systems, 365 NLRB No. 161 (December 15, 2017), the Board overruled the decision in E.I. DuPont de Nemours, 364 NLRB No. 113 (2016), which prohibited unilateral changes after a CBA expires regarding matters for which the CBA or a past practice had permitted the employer to act unilaterally.
In DuPont, the NLRB had ruled that, despite express permission in a CBA to make changes to a medical plan during the term of the CBA so long as the changes applied equally to non-union union employees, the employer could not make such changes once the CBA expired without first giving the union notice and an opportunity to bargain. The prior Board reasoned that the employer’s right to act unilaterally expired with the CBA.
In Raytheon Network, the NLRB overruled the DuPont approach. Instead, the NLRB adopted the following standard for post-expiration changes:
Henceforth, regardless of the circumstances under which a past practice developed – i.e., whether or not the past practice developed under a collective-bargaining agreement containing a management-rights clause authorizing unilateral employer action – an employer’s past practice constitutes a term or condition of employment that permits the employer to take actions unilaterally that do not materially vary in kind or degree from what has been customary in the past.
Thus, going forward, employers who have an established practice of making unilateral changes during the term of a CBA, may continue that practice after the CBA expires, so long as the changes remain consistent with the prior practice.
In sum, over the course of a few days, the newly constituted Board dramatically reshaped the landscape for employers and unions, largely returning them to standards that existed before the prior Board had changed them.
1 Member Miscimara’s Term ended on December 16, 2017.
2 The Board noted that while maintaining such rules will be lawful, applying them to punish employees who engage in conduct protected by Section 7 may violate the Act, depending on the circumstances.