US: Overlapping Policies Prove Costly To Employers

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.

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.

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.