Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

This post was written by Daniel J. Moore and James A. Burns, Jr.

 On June 17, 2010, the U.S. Supreme Court held that the National Labor Relations Board (“NLRB” or “Board”) lacked the authority to issue any decisions during a 27-month period when it had only two members. New Process Steel, L.P. v. NLRB, No. 08-1457. The Court’s ruling effectively invalidates nearly 600 decisions issued by the two-member Board, leaving unclear how those cases will be resolved by a Board that is now back to a full five members, three of whom are generally expected to favor unions. A full copy of the Court’s decision is available here.

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Reed Smith is proud to have been named one of the top employment and labor firms in the United States by Legal 500, a leading legal industry publication. The firm was highly ranked for both Labor and Employment Litigation and Labor Management Relations. Legal 500 cited in particular Reed Smith’s national reputation for experience in the areas of wage and hour and employee benefits class action defense, as well as our strong reputation for advising employers on traditional labor-law matters in diverse industries on a multi-state, regional and national basis.

Chambers USA also ranked the firm’s labor and employment practice in Pennsylvania and California as being industry leaders. In addition, seven of our U.S. attorneys were highly ranked by Chambers USA for their practices.

To learn more about the firm’s Legal 500 rankings, please click here.

To learn more about the firm’s rankings, Chambers USA, rankings or the methodology behind the rankings, please click here.

For more information about Reed Smith's Labor and Employment practice, please contact Karl Fritton, Casey Ryan, Linda Husar, Jim Burns, or the Reed Smith attorney with whom you regularly work.

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This post was written by Daniel J. Moore, James A. Burns, Jr. and Joel S. Barras.

Just 10 days after taking office, President Obama signed Executive Order 13496, requiring all federal contractors and subcontractors to notify employees of their rights under the National Labor Relations Act (NLRA), including their right to join and support unions, and to include in every contract, subcontract, and purchase order, a pledge to honor the employee notice requirements. The U.S. Department of Labor (DOL) has now issued its final rule implementing the Executive Order, specifying how contractors and subcontractors must comply with those requirements, including a poster describing employees’ rights and how they can file claims with the National Labor Relations Board (NLRB), and the penalties employers will face if they fail to comply. The rule will take effect June 21, 2010.

Who Is Affected by Executive Order 13496?

Executive Order 13496 (“the Order”) affects contractors and subcontractors who contract or subcontract with a federal government agency and are covered under the NLRA. The Order does not apply to the federal government, state or local governments, labor unions, or employers who are covered by the Railway Labor Act. The Order also does not apply to prime contracts under the simplified acquisition threshold, currently set at $100,000, or subcontracts of $10,000 or less.

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This post was written by Bill Bevan, John DiNome and Joel Barras.

This past weekend, with the Easter Congressional recess just under way, President Barack Obama wasted no time in announcing the recess appointments of his two proposed Democratic nominees to serve as members on the National Labor Relations Board (NLRB). One appointment was Buffalo union-side attorney Mark Pearce; the other was the highly controversial Craig Becker from Washington, D.C., who is counsel to the AFL-CIO and the Service Employees International Union. President Obama decided not to install his Republican nominee, Brian Hayes, as a recess appointment to the NLRB. As a result of these recess appointments, Democrats now occupy three of the four filled seats on the NLRB, with Mr. Hayes awaiting Senate confirmation to occupy the remaining seat. Mr. Becker’s and Mr. Pearce’s appointments will last until the end of the next Congressional session, which coincides with the end of 2011. Notably, the terms of Republican Board Member Peter Schaumber and Republican NLRB General Counsel Ronald Meisburg expire in August 2010. The president, of course, could simply take his time filling Mr. Schaumber’s seat, leaving the Board at three Democratic Members, and let the general counsel’s side of the Agency be run by a career acting general counsel until his administration sees what the makeup of Congress looks like after the 2010 elections. Given Mr. Becker’s published works, which are explicitly pro-union, and his stated belief that the Act can be structurally reformed by Board decision-making and rule-making, it is expected that employers’ rights, particularly during union organizing campaigns, will be greatly diminished through future NLRB decisions. Indeed, Mr. Becker’s stated views in the past are that employers should essentially have no involvement in union organizing elections. As always, we will continue to monitor the NLRB docket and decisions to update you on any legal developments.

Also included in the president's announcement were two appointments to the Equal Employment Opportunity Commission (EEOC), Georgetown Law Professor Chai Feldblum and the former Assistant Secretary of Labor for Employment Standards under President George W. Bush, Victoria Lipnic.

To learn more about the appointments, please read the White House's press release.

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The U.S. Department of Labor (“DOL”) recently released its 2010 regulatory plan, which envisions a major change in how DOL interprets the Labor-Management Reporting and Disclosure Act of 1959 (“LMRDA”) as to when an employer must disclose its use of attorneys or consultants to help persuade employees not to unionize. In particular, DOL will be seeking to narrow a longstanding exemption that allows employers not to report having received “advice” from lawyers and consultants on union organizing.

LMRDA requires employers to file annual reports with DOL identifying every “agreement or arrangement with a labor relations consultant or other independent contractor or organization” pursuant to which such a third party: (1) engages in “activities where an object thereof, directly or indirectly, is to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising,” their right to unionize; or (2) supplies the employer with “information concerning the activities of employees or a labor organization in connection with a labor dispute involving such employer, except information for use solely in conjunction with an administrative or arbitral proceeding or a criminal or civil judicial proceeding.” 29 U.S.C. § 433(a). Employers must also report any payment made pursuant to such an arrangement. Id.   LMRDA imposes a similar reporting requirement on those who provide such services. 29 U.S.C. § 433(b). Willful violations of the law, as well as knowing material misstatements or omissions, are a crime. 29 U.S.C. § 439.

In a key exception, LMRDA does not require employers to report “services of [a] person by reason of his giving or agreeing to give advice to [an] employer” in the covered areas. 29 U.S.C. § 433(c). In the union organizing context, DOL has traditionally distinguished between “direct persuaders,” who communicate directly with employees on behalf of employers and are covered by the reporting requirements, and “advisors,” who have no direct contact with employees and are not covered. Until now, DOL has construed “advice” to include a consultant's review of and comments on persuasive materials prepared by the employer, as well as the consultant's preparation of materials for the employer to use that the employer is free to reject.

Moreover, under current regulations, reports need not be filed as to services that consist of “representing or agreeing to represent an employer before any court, administrative agency, or tribunal of arbitration,” or “engaging or agreeing to engage in collective bargaining on behalf of an employer … or the negotiation of an agreement or any question arising thereunder.” 29 C.F.R. § 406.5(b). Reports filed by attorneys need not include “information which was lawfully communicated to such attorney by any of his clients in the course of a legitimate attorney-client relationship.” 29 U.S.C. § 434 (emphasis added); see also 29 C.F.R. § 406.5(d). Neither the law nor the regulations mention communications by an attorney to a client, presumably because that falls within the more general “advice” exception.

In announcing DOL’s regulatory agenda for 2010, Labor Secretary Hilda Solis said that the agency will seek to expand the LMRDA reporting requirements by narrowing what DOL treats as exempt “advice.” Although DOL has not yet signaled what specific changes it may implement, one model may be regulations that the Clinton administration implemented in its final days. Under those rules, employers would have been required to disclose all persuasive scripts, letters, videotapes, or other materials that were prepared by attorneys or consultants if one goal of the materials was to persuade employees regarding their union rights – even if the attorney or consultant who prepared the materials had no direct contact with employees. The Bush administration quickly rescinded those rules, but Secretary Solis’s 2010 agenda suggests that DOL may be looking to adopt a similar approach.

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As we predicted in our September 14 piece on the Employee Free Choice Act (EFCA), organized labor’s increased pressure on Congress to pass such legislation is starting to bear fruit.  At this week’s AFL-CIO convention, Sen. Arlen Specter (D-Pa.), a leader in the Democrats’ effort to forge a bill that can withstand a Republican filibuster, announced the outlines of a compromise that he has been discussing with a small group of senators, which he predicted would become law before year-end.  Specter’s prediction echoes comments by Sen. Tom Harkin (D-Iowa), who said last week that there had been 60 votes to pass some compromise form of EFCA in July, and that the Senate could act on the bill later this year.

Sen. Specter said that he and his colleagues had reached a “consensus” on three “core principles:”

• No card check, but speedier elections and union access.  Any revised version of EFCA would not include the widely attacked “card check” provision found in the current version of EFCA, under which employees could find themselves represented by a union without any vote.  Saying that no bill that did away with secret ballot elections could be passed, Specter described the proposed compromise as requiring such elections to take place promptly after a petition for certification was filed with the National Labor Relations Board (rather than the current approach, which allows elections to take place as late as six weeks later), and giving unions a right to enter the workplace to campaign.  Specter did not specify how long the shortened election period would be, or give any details about how and when unions could visit employees at work.
• Mandatory “baseball style” arbitration.  The bill would retain the binding interest arbitration found in the current version of EFCA, so that if an employer and union failed to reach agreement on a first contract within so many days following the election, federal arbitrators could step in and impose an agreement on the parties dictating employees’ wages, benefits, hours, layoff procedures, and so on.  To address concerns that this approach would give parties an incentive to make unreasonable proposals, Sen. Specter said the bill would require the arbitrators to adopt the last best offer of one party or the other, so-called “baseball style” arbitration.  He said no decision had yet been reached on how long the parties would have to sign a contract before they would be forced into arbitration.  The current version of EFCA allows 120 days.
• Treble back pay.  The bill would include significantly increased penalties like those found in the current version of EFCA, under which employers who discharge employees because they join or support a union would face treble back pay.

Shortly after Sen. Specter announced this framework, however, labor officials said they had not agreed to it.  Incoming AFL-CIO president Richard Trumka said “card check” remained in play, and the AFL-CIO’s director of governmental affairs said the labor federation had not agreed to any compromise.  Business leaders were equally dismissive, describing Specter’s approach as permitting “ambush elections,” contracts imposed by a “government-appointed bureaucrat,” and acting as a smokescreen for a last-minute return of card check.

All sides agree that any revision of EFCA cannot and will not move forward until the Democrats have 60 votes, which will depend on when Massachusetts selects a replacement for the late Sen. Ted Kennedy.  Although the special election to replace Kennedy will not take place until January, the Massachusetts legislature is considering a bill that would give the Democratic governor authority to name an interim replacement, meaning that a new Democrat could join the Senate within the next few weeks.

We will continue to keep a close eye on EFCA so that our clients can be fully prepared for whatever bill may emerge.

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While many suspected that the Employee Free Choice Act (“EFCA”) might become law within the first 100 days of the new Administration, that has not come to pass. Indeed, with the focus in Congress on the recession and the Administration’s push for healthcare reform, EFCA seems to have been all but forgotten. Like the disappearing canine in the old childhood song that we all remember, “Oh Where, Oh Where Has My Little Dog Gone,” EFCA seems to be lost in the Congressional agenda. 

But has it been forgotten? As we headed into Labor Day, EFCA emerged in the news. Although Senate Majority Leader Harry Reid (D-Nev.) announced last week that EFCA was unlikely to be considered until some time next year because Congress had “too many other things on [its] plate,”¹ staunch supporters of the bill within organized labor beg to differ. Indeed, Andy Stern, president of the Service Employees International Union, was quoted in The New York Times as saying that he not only expected to see EFCA pass, but that it would still include “card-check” — the provision, widely attacked by Republicans and the business community — that would mandate union representation on employees without any secret ballot election in which employees could vote.² While EFCA may be on the back burner, for now it is unlikely that labor will let it remain there for long. 

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This post was written by David Weissman, Cindy Schmitt Minniti, and Daniel Schleifstein.

The New York Legislature recently passed a new law that requires greater communication and transparency from employers in the hiring and firing process. Employers who fail to comply risk incurring penalties and unwanted scrutiny of labor and employment policies and practices. The Labor & Employment team at Reed Smith is here to help employers comply with this new statute and avoid undesirable consequences.

Pursuant to McKinney’s Labor Law § 195, New York employers must now provide any new employee hired on or after October 26, 2009, with information on the following subjects:

• Rate of Pay: Employers must provide the employee with the employee’s regular hourly rate of pay, overtime rate of pay (if applicable), and regular payday at the time the employee is hired.
• Written Acknowledgement: Employers must obtain written acknowledgment of the rates of pay and the regular payday from each employee at the time the employee is hired. The form and content will be provided by the Commissioner of Labor at a later date.
• Payday Changes: Employers must notify employees of any change in paydays before the change.
• Wage Statement: Employers must provide each employee with every payment of wages, listing gross wages, deductions and net wages, and must, at the employee’s request, explain how the wages were computed.
• Recordkeeping Requirements: Employers must establish, maintain and preserve records showing the hours worked, gross wages, deductions, and net wages for each employee, for not less than three years.
• Time-Off Policies: Employers must notify employees in writing or by publicly posting the employer’s policy on sick leave, vacation, personal leave, holidays and hours.
• Termination: Employers must notify any employee terminated from employment – in writing – of the exact date of termination, as well as the exact date of cancellation of employee benefits connected with the termination. Notice must be provided within five working days of the actual date of termination. Failure to notify an employee of cancellation of accident or health insurance subjects an employer to penalties, including a fine of up to $5,000 paid to the Commissioner of the New York State Department of Labor, as well as potential liability in a civil action brought by the employee in which damages may include reimbursement for medical expenses that were not covered by the insurer because of the termination of the employee without notice.

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Just 10 days after taking office, President Obama signed Executive Order 13496, requiring all federal contractors and subcontractors to notify employees of their rights under the National Labor Relations Act (NLRA), including their right to join and support unions. On Aug. 3, 2009, the U.S. Department of Labor (DOL) issued a proposed regulation specifying how contractors and subcontractors must comply with that Order, including a poster describing employees’ rights, and how they can file claims with the National Labor Relations Board (Board). Parties wishing to comment on the proposed rule must do so by Sept. 2.

Executive Order 13496

Citing the government’s need to deal with “contractors whose work will not be interrupted by labor unrest,” and a belief that industrial peace is best achieved when employees are “well informed of their rights,” Executive Order 13496 requires most federal departments and agencies to include in virtually all government contracts, provisions that require the contractor to post a notice for employees describing their rights under the NLRA, to follow all DOL rules relating to the Order, and to be subject to penalties for noncompliance that can include debarment from future contracts. The Order exempts two types of contracts: collective bargaining agreements, and contracts for purchases under the “simplified acquisition threshold” of $100,000. The Order also requires contractors to include such provisions in every subcontract they enter into in connection with the government contract. The Order directs the DOL to issue regulations implementing its requirements, and they will take effect when those regulations become final.

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This post was written by David L. Weissman and Joel S. Barras.

New York Governor David Paterson issued an order on April 24, 2009, making it easier for labor unions to organize employees for agencies and public authorities that provide financial aid to projects that will entail the construction of a hotel or convention center. The directive requires the operators of new construction projects that receive state aid, including loans, tax incentives or long-term leases from state agencies or public authorities, to obtain Labor Peace Agreement (“LPA”) with unions seeking to organize their workers. These LPA must also be included in any contract between the project operators and any subcontractors that work on the project. 

Under these mandated agreements, employees would be prohibited from striking, boycotting or engaging in other actions that would disrupt business or deprive the state of revenues. While the directive’s language appears to favor employers, unions will enjoy unprecedented leverage to gain concessions from companies in exchange for entering into LPA. For example, unions will likely demand right-to-organize agreements, including “card-check” rights that allow a union to be recognized as soon as a majority of workers sign authorization cards.

For purposes of the governor’s directive, covered hotel and convention center projects include those in which New York state, or an agency with at least one member appointed by the governor, owns title to part of the facility or has entered into a 40-year or longer lease to occupy a portion of the new facility. The directive also applies to construction projects that receive financing from the state or state agency, including direct financial subsidies, loans or loan guarantees, credit enhancements, or other similar aid. 

The directive includes two limited exceptions. First, a state agency may decide not to include the LPA if the agency determines that such a requirement will not further the state’s proprietary interest prior to the issuance of the initial request for proposal. Second, the agreement would not be required if the financial assistance at issue is provided pursuant to a specific statute or regulation that prevents the conditioning of such assistance on an LPA. Any company preparing to undertake a construction project in New York should be aware of this pending order, and make sure to consider a union workforce when budgeting for the project.

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The Supreme Court has ruled that employees represented by a union cannot sue for age discrimination when their union and employer have agreed that any such claims should go to arbitration rather than court. In a 5-4 split, the Court held that so long as the collective bargaining agreement (“CBA”) between an employer and a union “clearly and unmistakably” includes discrimination claims among those disputes that must be arbitrated, union members subject to the CBA must pursue such claims before an arbitrator rather than a judge or jury. 14 Penn Plaza LLC v. Pyett, No. 07-581 (Apr. 1, 2009).

Background

The CBA in this case prohibited discrimination based on “race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law,” including claims made under several federal laws listed by name, among them the Age Discrimination in Employment Act (“ADEA”). The contract said all such claims were subject to the CBA’s grievance and arbitration procedures “as the sole and exclusive remedy for violations.”

After the employer reassigned several union employees to other positions, they asked their union to file a grievance claiming that the reassignments violated that clause by discriminating against them because of their age, as well as running afoul of seniority and overtime provisions in the CBA. The union did so, but withdrew the age discrimination portion of the grievance before the arbitration was complete. The employees then filed an ADEA claim in federal court, but their employer moved to dismiss the suit based on the CBA provision requiring such claims to be arbitrated. The lower courts sided with the employees, holding that under a 1974 Supreme Court case, Alexander v. Gardner-Denver Co., a CBA could not effectively waive employees’ right to bring statutory discrimination claims in court. Although the lower courts recognized that the Supreme Court had since enforced an agreement to arbitrate ADEA claims in Gilmer v. Interstate/Johnson Lane Corp.(1991), they distinguished that case on the grounds that it had involved an individual agreement by an employee rather than a collective agreement by a union.

The Supreme Court’s Decision

The Supreme Court reversed the lower courts, holding that a CBA provision that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law. It first held that an employer and the union representing its employees are free to negotiate whatever lawful terms they believe appropriate to govern the employees’ terms and conditions of employment, and that under federal labor law such agreements should generally be upheld. The Court found that, as it had held in Gilmer, nothing in the ADEA precluded the arbitration of age discrimination claims so long as the relevant agreement clearly requires employees to arbitrate rather than litigate.

The Court rejected the employees’ argument that agreements to arbitrate statutory claims are suspect when found in CBAs instead of individual employee contracts, finding that the ADEA makes no such distinction. The Court distinguished its decision in Gardner-Denver as involving a CBA that covered only contractual disputes, not statutory claims. Here, where the CBA expressly covered statutory claims, and in light of Gilmer and other more recent cases favoring arbitration of such claims, the Court held that Gardner-Denver did not affect its conclusion.

The Court also dismissed the concern that a union and its members might have a conflict of interest over the union’s decision whether or not to pursue arbitration of a discrimination claim on behalf of certain employees. Writing for the majority, Justice Thomas said that the ADEA did not reflect any such concern, and that it was best left to Congress to decide how to resolve any such possible conflict. The Court also noted that if employees believed their union had improperly refused to pursue a discrimination claim in arbitration, they could always sue the union for breaching its duty to fairly represent all of its members or for itself having violated the ADEA. Finally, the Court held that it would not decide whether a CBA provision that allowed a union to block any arbitration of discrimination claims by refusing to act on the employees’ behalf amounted to an unenforceable waiver of the employees’ substantive rights. The Court noted that the parties disagreed over whether the union, after it stopped pursuing the age discrimination claim in arbitration, had offered to allow the employees to do so themselves, and that the parties had not briefed that issue.

Practical Effects

This decision gives employers the opportunity to avoid lawsuits and jury trials in discrimination cases by including provisions in their CBAs like that upheld by the Court, just as many employers have done through arbitration agreements with individual non-union employees since Gilmer was decided. But the decision leaves open many important questions that may limit its scope:

• Many if not most CBAs allow only the union, not individual employees, to invoke the grievance and arbitration procedure. In such cases, if a union decided not to take a discrimination claim to arbitration, it seems likely that the courts would allow the employees to pursue their claims in court lest they be left with no way to enforce their rights.

• Unions may be reluctant to add language to their CBAs like that in Pyett, fearing that if they do so, and then fail to pursue a discrimination claim through arbitration, the employee may sue the union for violating its duty of fair representation or discriminating against the employee.

• Congress may accept the Court’s invitation to address the issue. The Arbitration Fairness Act of 2009 (H.R. 1020), recently introduced in the House of Representatives, would ban all predispute agreements that require arbitrating any employment dispute, thus overturning Gilmer. Although the current version of the bill exempts CBAs from its scope, that provision will surely be revised to ensure that Pyett is reversed as well. If Congress passes such legislation, Pyett may prove to be a Pyrrhic victory for employers.

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This post was written by William Bevan III and James A. Burns, Jr.

Seeking to impose dramatic changes in how employers are unionized and who writes an employer’s first contract with a union, Democrats in the House and Senate yesterday re-introduced the Employee Free Choice Act (“EFCA”). The bill (H.R. 1409, S. 560) is identical to legislation that passed the House in 2007 as H.R. 800.

EFCA would make three radical changes to the National Labor Relations Act:

• First, the bill would permit unions to obtain certification through a mandatory card check reviewed by Regional Offices of the National Labor Relations Board (“NLRB” or “Board”), rather than through a secret ballot election held and closely monitored by the Board. Predictably, the proposed legislation would not allow employees seeking decertification of a union to use such card check procedures; employees who wished to oust a union would instead be required to vote in an election.
• Second, EFCA would allow an arbitration panel to write the first labor contract between an employer and a union where the parties themselves cannot do so. In particular, if the parties had not reached agreement on their own within 90 days, either side could ask the Federal Mediation and Conciliation Service to mediate the contract and, if no contract was in effect 30 days later, an arbitration panel would step in and write the contract for the parties. Any such contract would remain in effect for two years.
• Third, the bill would change the procedures and penalties for alleged violations arising out of union organizing campaigns. NLRB Regional Directors, acting at their own discretion, would be allowed to seek injunctive relief against employers for such alleged violations. The Board would be required to assess both back pay and double liquidated damages on employers who discharge employees during an organizing campaign. The Board would also have authority to assess a civil penalty of up to $20,000 per violation of Section 8(a)(1) or (3) of the Act that substantially interferes with the union organizational process during the period of organizing and, after certification or recognition of a union, until a first contract is signed.

Like its predecessor, EFCA requires that the Board certify a union once it finds that most of an employer’s employees in a unit appropriate for collective bargaining have signed valid authorization cards designating a particular union as their representative. In other words, if a union submitted cards to the Board signed by 50 percent plus one of the employees in an appropriate bargaining unit, the Board would be required to certify the union as the representative of all employees in that unit without holding any secret ballot election. The proposed legislation, like the prior bill, is silent on what sort of authorization cards would be valid, and directs the Board to develop language for such cards and procedures for determining their validity without setting any deadline for the Board to do so. The current House version of EFCA also does not indicate how traditional representation issues involving the scope and composition of bargaining units will be determined. Under current NLRB procedures, these issues are determined by means of a representation case hearing that results in a written decision by a Regional Director, which is subject to review by the NLRB.

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In perhaps no U.S. presidential election in recent memory has the outcome been more important to a change in our basic labor law, the National Labor Relations Act (“NLRA” or “Act”). Predictions are that if Sen. Obama is elected President and the Democrats take control of Congress, the crown jewel in labor’s legislative agenda, the Employee Free Choice Act, which passed the House last year but fell short in the Senate,¹ could become the law of the land.²

The Employee Free Choice Act (“EFCA”), as passed by the U.S. House of Representatives, has three major features that make sweeping changes in the current provisions of the NLRA. First, the Act will permit unions to obtain certification through a mandatory card check conducted by Regional Offices of the National Labor Relations Board (“NLRB” or “Board”). Second, EFCA will impose first contracts through interest arbitration where the parties are unable to agree on the terms of such agreements. Third, EFCA will amend certain provisions of the Act to permit NLRB Regional Directors, acting at their own discretion, to seek injunctive relief against employers for alleged violations arising out of union organizing campaigns. The Board will be required to assess both back pay and double liquidated damages on employers who discharge employees during an organizing campaign. In addition, the Board will have authority to assess a civil penalty of up to $20,000 per violation of Section 8(a)(1) or (3) of the Act that substantially interferes with the union organizational process during the period of organizing and, after certification or recognition of a union, until a first contract is entered into. Each of these changes and its significance is examined below.

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This post was written by John A. DiNome and Daniel J. Moore.

In a 7–2 decision, the U.S. Supreme Court held that California’s Assembly Bill 1889 (“AB 1889” or the “Act”) is preempted by the National Labor Relations Act (“NLRA”). Chamber of Commerce v. Brown, 554 U.S. ___ (2008). The decision represents a significant victory for employers and maintains the current federal policy favoring free debate between employers and employees on unionization. 

Background — On September 28, 2000, California enacted AB 1889, known as the union “neutrality law.” AB 1889 forbids private employers who receive either state grants or more than $10,000 in state funds during a calendar year from using such funds to “to assist, promote, or deter union organizing.” Although termed the “neutrality law,” AB 1889 benefited employees because few, if any, employers would dedicate funds to encourage its employees to unionize. AB 1889 requires employers to maintain strict accounting records demonstrating a complete separation of state funds. The penalties for violating AB 1889 are severe—employers found in violation of AB 1889 are subject to treble damages, attorneys’ fees, and costs. 

The U.S. Chamber of Commerce, along with a group of employers and business associations, filed a lawsuit challenging the Act. In 2002, a federal district court held that the Act was preempted by the NLRA and therefore unenforceable. The U.S. Court of Appeals for the Ninth Circuit struggled with the case. In two separate decisions, a three-judge panel affirmed the district court’s decision. However, in 2006, the full Ninth Circuit vacated the earlier panel decisions, and ruled that the Act was not preempted by the NLRA. Chamber of Commerce v. Lockyer, 463 F.3d 1076 (9th Cir. 2006) (en banc). 

The Decision — In reversing the Ninth Circuit, the Supreme Court relied on a doctrine known as Machinists preemption, which forbids states to regulate conduct that Congress intended to be unregulated and left to the free play of economic forces. The Court found that both the text and the history of the NLRA demonstrated a congressional policy “favoring uninhibited, robust, and wide-open debate in labor disputes.” The NLRA protects an employee’s right not only to unionize, but also to refuse to join a union, which implies an underlying right to receive information opposing unionization. Accordingly, AB 1889, which embodied California’s judgment that partisan employer speech necessarily interferes with an employee’s choice about whether to join a labor union, violated Congress’s policy in favor of free debate. 

Practical Impact — AB 1889, and similar statutes, threatened to seriously undermine the speech rights of employers related to union organizing campaigns. The potential costs of litigation, plus the threat of severe penalties gave employees tremendous leverage to halt employer campaigns in opposition to labor organizing activities. The Supreme Court’s decision preserves the federal policy in favor of free debate on unionization. It also maintains a consistent policy throughout the nation, thereby avoiding a patchwork approach to employer speech varying from state to state.

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This post was written by Sherri A. Affrunti and Meghan O. Offer.

The New Jersey Department of Labor and Workforce Development has now published the form mandated to be used by New Jersey employers to provide notice of mass layoffs or the transfer or termination of operations under the Millville Dallas Airmotive Plant Job Loss Notification Act (“Millville Dallas Act” or state “Baby WARN”). An interactive copy of the form is attached, along with the Department’s Summary of the Law.

Employers who have been in operation three years or longer and who have at least 100 or more full-time employees are required to use the form to provide a minimum of 60 days’ advance notice of plant closings or mass layoffs to: (a) all affected employees and their collective bargaining unit representatives (if any); (b) the Commissioner of Labor and Workforce Development; and (c) the chief elected official of the municipality where the business is located.

Employers must insert the following information into the form:

• The number of employees whose employment will be terminated
• The date(s) each employee termination will occur
• The reasons for the mass layoff or transfer or termination of operations
• A list of all available employment opportunities, including the pay, benefits, location, and other terms and conditions of such alternate employment
• A summary of employee rights with respect to the payment of wages, severance, pension, and other benefits in connection with the termination, including rights based on an existing collective bargaining agreement or other existing employer policy

Employers who fail to timely provide notice face substantial penalties, including mandatory severance to each affected employee equal to one full week of pay for each full year of employment, in addition to the payment of other available severance benefits.

Use the following link for an interactive copy of the Millville Dallas Form.

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