About The Board And Recess Appointments

The Board consists of five Members, each appointed by the President and subject to Senate confirmation.  Historically, the President fills three of the five seats with members from his party, giving his party majority control. 

But since 2007, the appointment process has been broken.  In late 2007, the appointments of three Members expired, and political wrangling left those seats unfilled for 27 months.  The remaining two Members (one from each party) continued the Board’s business.  In 2010, however, the United States Supreme Court ruled in New Process Steel v. NLRB that the Board must have a quorum of 3 to take action, invalidating hundreds of decisions issued by the 2-Member Board.

Today's Decision

The problem, according to a decision issued by the D.C. Circuit today, Canning v. NLRB, is that the Senate was not in recess when those appointments were made, and the appointments were therefore “invalid from their inception.”  Today’s decision, unless reversed, invalidates another year’s worth of Board decisions, requiring the next Board (whenever it comes into being) to revisit and reissue another large set of decisions.  It of course also creates more uncertainty for employers trying to keep up with yet another potentially dramatic shift in interpretations of labor laws.

Importantly, it also prevents the current “Board” – comprised of 3 pro-labor Members, 2 of whom were invalidly given “Recess” appointments – from continuing to advance their decidedly pro-labor agenda, which we've blogged about recently here and here.  Until the President and Senate come together to fill the vacancies, or until the next valid Recess, the Board will consist of a single Member (Chairman Mark Gaston Pearce), who cannot take action.

The facts of the case are straightforward.  DR Horton, like many employers, required its employees to sign an arbitration agreement as a condition of employment.  The agreement required employees to arbitrate all claims arising out of their employment, and precluded arbitrators from issuing class or group relief.  As a result, employees were prevented from bringing class or collective actions in any forum.  Relying on this agreement, DR Horton refused to arbitrate a class action alleging that it had misclassified certain employees as exempt from the protections of the Fair Labor Standards Act (FLSA).

Not so fast, according to the NLRB.  Tracing federal labor law back to its origins, the NLRB found that the filing of a class action “to redress workplace wrongs or improve working conditions” is activity at “the core” of what Congress intended to protect when it enacted the National Labor Relations Act in 1935.  This intent, the NLRB reasoned, is reflected in Section 7 of the Act, which gives employees the right to engage in “concerted activities” for the purposes of “mutual aid or protection.”  Relying on Section 7, the NLRB found that Employers cannot compel their employees, as a condition of employment, to entirely waive the right to bring class or collective actions.

The NLRB’s ruling in DR Horton clashes with the U.S. Supreme Court’s recent decision in AT&T Mobility v. Concepcion, which held that arbitration clauses that waive the right to bring class claims entirely (in the commercial contract context) may be lawful and enforceable.  But unless and until the courts intervene to resolve this tension, requiring your employees to completely waive the right to bring employment-related class or collective actions - a common feature of arbitration agreements - is probably no longer permissible under federal labor law.

If You're Interested In Learning More, Sign Up For Our Webinar

Stoel Rives is hosting a webinar on January 11, 2012, to address employee arbitration agreements generally and the DR Horton decision in particular.  Click here if you're interested in learning more or attending.

The New Year:  Out With The Old Rules...

During union campaigns, the union and the employer may disagree (vigorously) about the proper size ("scope") of the proposed bargaining unit.  Such disputes can include whether certain employees are "supervisory" employees and thus ineligible to vote, or whether different classifications of employees share enough of a "community of interest" to be included in the same bargaining unit, and covered by the same contract.  How those disputes are resolved often determine the outcome of the election.  Under the existing (er, now old) election rules, employers had the opportunity to litigate these types of bargaining unit scope issues before the election. 

...In With The New

The NLRB's new rule essentially eliminates the employer's opportunity to litigate, prior to the election, any disputes over the scope of the bargaining unit proposed by the union.  Under the rule, such issues will ordinarily be addressed only after the election takes place.  Employers should be aware of how this "vote now, litigate later" rule could impact union elections. 

Shorter Election Campaigns: Under the old rules, litigating bargaining unit scope issues usually delayed the election, giving employers additional time to discuss the pros and cons of unions with its workers before the vote.  That additional campaign period is now lost, depriving employers of valuable time to counter an organizing campaign that may have started months before the union went to the NLRB seeking an election. 

Greater Difficulty in Challenging The Union's Proposed Unit: Although employers may technically be able to litigate unit scope and voter eligibility issues after the NLRB conducts the election, in those cases where the vote results in a "yes" vote for the union (which under the old rules happened more than 60% of the time), employers will be in the difficult position of having to contest threshold legal issues after the employees have already "won" the right to representation.  This procedure tilts the playing field in favor of unions. 

Considered in the context of the NLRB's August 2011 decision in Specialty Healthcare, this rule means that the petitioning union will get a quick election in the unit of employees it has chosen to organize.  Specialty Healthcare enables unions to organize small or "micro" units of employees (such as single classifications of employees or individual departments).  The Board held that for an employer to add excluded employees to the union's proposed unit, it must demonstrate that the excluded employees share an "overwhelming community of interest" with the employees the union seeks to represent.  In a dissenting opinion, NLRB Member Brian Hayes noted that this test makes it “virtually impossible” for the employer to prove the union's proposed unit is not proper.  To make matters worse, now the Employer will ordinarily have to make that argument after the union has already "won." 

Why Now?  Election Year Politics, That's Why.

That the NLRB issued these new rules now probably had less to do with the holiday spirit than with an election of a different sort--the 2012 U.S. Presidential election and the related gridlock in the U.S. Congress.  Up until last week, the Board had three members (out of a possible five) which, after the U.S. Supreme Court's 2010 decision in New Process Steel, is the minimum required for the NLRB to decide cases and issue regulations.  Last week was when President Obama's controversial recess appointment of Member Craig Becker ended.  The NLRB may have wanted to enact the new rules before it was reduced to two members again, as that may be the last opportunity in an election year for the Obama Administration to do something substantial for organized labor, an important constituency.  While nominations for the three NLRB Member vacancies are pending, the gridlocked Senate is not expected to act on those nominations any time soon.  While the President could make another recess appointment to ensure a functioning, three-member NLRB, that risks (further) alienating Senate Republicans, all 47 of whom recently signed a letter urging the President not to fill NLRB vacancies using recess appointments.  The next few weeks, before Congress reconvenes on January 23 from its holiday recess, could be very interesting for NLRB-watchers.  Stay tuned...

Update!

...well you didn't have to stay tuned for long!  President Obama has announced three recess appointments to the NLRB.  The appointees include two Democrats (Richard Griffin and Sharon Block) and one Republican (Terence Flynn), giving Democrats a 3-2 Board majority.  The President’s decision to bypass the Senate confirmation process quickly drew the ire of Senate Republicans, but the President chose that fight over the alternative of allowing the NLRB to go through a prolonged period in which it was unable to issue decisions or adopt regulations.  As a result of these appointments, we can expect more pro-labor decisions in 2012.