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

Background

The Board, which decides cases involving union elections and unfair labor practices under the National Labor Relations Act (“Act”), has five members. The Act allows the Board to delegate any of its powers to three or more members, and provides that “three members of the Board, shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group” in the event of a delegation. The Act also says that a vacancy in the Board “shall not impair the right of the remaining members to exercise all the powers of the Board.”

In late 2007, the Board was down to four members, and the terms of two of those members were set to expire at year-end. In an effort to continue functioning, the Board delegated its powers to a three-member group, consisting of Members Liebman, Schaumber, and Kirsanow. Starting in January 2008, after Member Kirsanow’s term had expired, Members Liebman (a Democratic former union lawyer) and Schaumber (a Republican former management lawyer) continued to issue decisions on behalf of the Board, acting as a two-member quorum of that three-person group. With only two members, they issued decisions only where they agreed, and tabled controversial cases until the Board had at least one more member. The Board continued to operate that way for 27 months, issuing nearly 600 decisions during that time. At that point, President Obama made a recess appointment to the Board, and just this month, Congress approved two other members, bringing the Board back to its full five-member strength.
 

In New Process Steel, the two-member Board upheld a finding that the employer had committed unfair labor practices. The employer appealed to the U.S. Court of Appeals for the Seventh Circuit, arguing that a two-member Board had no authority to issue decisions. The court disagreed, holding that the two members who had decided the case constituted a valid quorum of a three-member group of the Board. The same day, however, the U.S. Court of Appeals for the D.C. Circuit reached the opposite conclusion in another case. Indeed, by the time the Supreme Court decided New Process Steel, the same issue had been raised in five cases before that Court and 69 cases before the Courts of Appeals.

The Court’s Decision

In a 5-4 decision, Justice Stevens, writing for the majority, held that two members could not act for the Board, even though the Board had delegated its authority to a three-person group. The Court held that the Act requires the Board’s powers to be vested in a group of at least three members at all times, noting that if Congress had meant to allow two members to act for the Board, it could have said so.

In dissent, Justice Kennedy argued that “[n]othing in the statute suggests that a delegation to a three-member group expires when one member’s seat becomes vacant,” seizing on the Act’s language that “[a] vacancy in the Board shall not impair the right of the remaining members to exercise all the powers of the Board.”

Impact of the Case

At the very least, the Court’s decision means that the Board must now issue new decisions in all 74 cases that were pending before the Supreme Court or federal courts of appeals in which the losing party challenged the authority of the Board to act with only two members. Because Members Liebman and Schaumber issued decisions only where they agreed, the Board, in the interest of stability, may resolve those cases by issuing new decisions that simply adopt the Board’s earlier reasoning. Still, with the Board now consisting of three Democrats and two Republicans, it is at least possible that the majority could use this as an opportunity to issue new opinions in some of those cases that favor labor over management.

Even more uncertain is what will happen to the 500 or so cases in which neither party challenged a ruling by the Board based on it having been decided by only two members, including many in which the parties have moved forward by treating the Board’s decision – now invalidated – as controlling. It is not clear whether the Board can or will issue a ruling adopting the two-member panel’s reasoning in some or all of those cases, or how it will treat a losing party in such a case that now seeks “another bite at the apple” in the hopes of reversing an unfavorable outcome. With an “Obama Board” in place that is expected to issue rulings that are less favorable to employers, unions that lost those cases may be particularly motivated to seek such reversals. Still, it seems reasonable to expect that the Board will be reluctant to engage in a wholesale reversal of those earlier decisions – not only because they were, by definition, not controversial, but also because parties have relied on the Board’s earlier decisions.

Finally, employers should keep in mind that the two-member Board could not and did not decide cases on which its members expected to disagree, creating an even larger backlog awaiting action by the full Board. With the Board now consisting of a Democratic, pro-union majority, it seems safe to say that most of those delayed decisions are likely to come down in favor of labor.

Employee Rights’ Notice

Federal contractors subject to the Order must post an “Employee Rights Notice,” which informs employees about their right to form, join, assist or support unions and bargain collectively with their employer; lists several examples of conduct by employers and unions that violates employees’ rights; and tells employees how to contact the NLRB to ask questions or file charges. Copies of the Notice are available for download at the DOL’s website. Employers must post the Notice exactly as issued by the DOL, meaning that it cannot be altered in size, color, or content. If a significant portion of a contractor’s workforce is not proficient in English, the contractor must provide the notice in the other language(s) that the employees speak. Translations of the Notice may be requested from the Division of Interpretations and Standards of DOL’s Office of Labor-Management Standards (OLMS).

Posting the Notice

The Notice must be posted conspicuously in the contractor’s or subcontractor’s facilities so it can be easily seen by employees. Indeed, the DOL’s rules require a copy of the Notice to be posted at each location where the employer posts other required employee notices, and at each part of the facility where any employee covered by the NLRA performs work related to the contract or subcontract, presumably meaning each office, production floor, warehouse, and so on. In addition, if a contractor or subcontractor customarily posts notices to its employees electronically, then the Notice must be posted electronically as well. The electronic posting requirement can be met by displaying the Notice prominently on the employer’s website or intranet (using the heading “Important Notice about Employee Rights to Organize and Bargain Collectively with Employers”), or by posting a link to the DOL’s website containing the full text of the Notice.

Employee Notice Clause

The DOL rule sets out four paragraphs that must be included in all non-exempt government contracts, subcontracts, and purchase orders entered into on or after June 21, 2010, although it may be cited by referring to 29 CFR Part 471, Appendix A to Subpart A.

Complaints, Enforcement and Penalties

Any employee of a covered contractor or subcontractor may file a complaint with the OLMS or DOL’s Office of Federal Contract Compliance Programs (OFCCP) that his or her employer has failed to post the Notice or failed to include the required notice clause in subcontracts or purchase orders. As might be expected, an employer is prohibited from retaliating against any employee for filing such a complaint.

Separately, the OFCCP may conduct compliance reviews to determine whether a contractor or subcontractor holding a covered contract is complying with Executive Order 13496 and the DOL rules. All federal contractor and subcontractors, therefore, should expect that any OFCCP compliance review will include such an evaluation, just as they now review compliance with affirmative action and Form I-9 rules.

Penalties for violating the Executive Order may include cancellation, suspension or termination of the contract or subcontract, or debarment of the employer from future federal contracts or subcontracts, at least until it has demonstrated full compliance with the Order and rule. Finally, employers should keep in mind that any substantive violations of the provisions of the Notice may amount to a violation of the NLRA, with its accompanying remedies.
 

DOL’s Proposed Rule

The DOL’s proposed rule outlines what the required notice must say, which contractors and subcontractors are covered, and the range of penalties that may be imposed on employers who fail to comply.

Proposed notice

Instead of merely quoting Sections 7 and 8 of the NLRA, which describe employees’ rights and unlawful employer and union conduct, the DOL’s proposed notice goes into some detail, “derived from [Board] or court decisions,” as to what those rights mean and what sort of activities are prohibited. For instance, in addition to telling employees that they may form, join or assist unions and bargain collectively for a contract with their employer, the notice informs employees that they have the right to “[d]iscuss your terms and conditions of employment with your co-workers or a union, join other workers in raising work-related complaints with your employer, government agencies, or members of the public… [and] take action with one or more co-workers to improve your working conditions, including attending rallies on non-work time, and leafleting on non-work time in non-work areas.” After briefly noting that employees also have the right to refrain from these activities, the proposed notice provides several specific examples of prohibited employer conduct, and only a brief general description of what unions cannot do, devoting about four times as much space to the former as the latter.

The proposed notice also tells employees that “[i]llegal conduct will not be permitted,” that the Board will “prosecute” those who violate the NLRA, and that employees have only six months to file a complaint. To facilitate that process, the proposed notice directs employees to the Board’s website address and toll-free phone number.

Who must post the notice

Broadly interpreting the Order, the DOL’s proposed rule would require the notice to be posted not only by federal contractors and first-tier subcontractors, but also by every subcontractor below that first tier. Although the Order exempts contracts below $100,000, because the DOL does not say that limit applies to subcontracts, it has proposed that all subcontracts be covered regardless of size, so long as they are “necessary to the performance of the prime contract.” Becoming a subcontractor to a government contractor or subcontractor, therefore, even for a small amount, will require posting the notice if the subcontract is viewed as “necessary” to the performance of the main federal contract.

Where and how the notice must be posted

The Order itself requires posting the notice “in conspicuous places in and about [the] plants and offices where employees covered by the [NLRA] engage in activities relating to the performance of the contract.” The DOL will supply copies of the required poster free of charge and make it available on its website. The proposed regulation says that if a contractor or subcontractor normally posts employee notices electronically, it must do the same with this notice by posting it on the employer’s intranet or external website, including a link to the Board’s website.

Enforcement

The proposed rule would allow employees to file complaints that an employer has failed to post the notice or include the required clause in its contracts with the DOL’s Office of Labor-Management Standards or its Office of Federal Contract Compliance Programs. If the DOL finds a violation, penalties can include cancellation, suspension, or termination of the contract or subcontract, or debarment of the employer from future federal contracts or subcontracts until it has complied with the Order.

How to Comment on the Proposed Rule

The DOL has invited comments on all parts of the proposed regulation, including the proposed notice and coverage of subcontractors. Comments may be sent to Denise M. Boucher, Director of the Office of Policy, Reports and Disclosure, Office of Labor-Management Standards, U.S. Department of Labor, 200 Constitution Avenue, N.W., Room N-5609, Washington, DC 20210, or electronically through the Federal eRulemaking Portal at www.regulations.gov. All comments must contain the identification number 1215-AB70, and be received by Sept. 2, 2009.