The PJ Tatler

Obama’s Labor Board – A Federal Agency With No Clothes

The child in Hans Christian Anderson’s popular fable blurted out what everyone else in the kingdom knew but was afraid to say: “The emperor has no clothes.” In two friend-of-the-court briefs recently filed in the Sixth Circuit Court of Appeals, the Retail Leaders Industry Association (RILA) and the Coalition for a Democratic Workforce (CDW) persuasively demonstrate that the National Labor Relations Board (NLRB or Board) has no clothes – and it has no place to hide. It’s most far-reaching and controversial decision, Specialty Healthcare, which enabled the formation of micro-unions, is so riddled with holes that it is unlikely to survive appellate court review. The NLRB decided the issue exactly as the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) requested.

When it passed the National Labor Relations Act (NLRA or Act), Congress contemplated broad-based bargaining, units as large as all the employer’s employees. That’s why pre-Obama administration Board law required that any petitioned-for unit of employees be “sufficiently distinct” to warrant separate group identity. Specialty Healthcare, or the micro-union decision, eliminated this requirement. It held that the union can represent any “readily identifiable group” of employees distinguished by as little as the merchandise they sell or the casino table game they play. To get a larger unit the employer must present “overwhelming” evidence in support of it. And to avoid any confusion that the era of broad-based bargaining is over, the NLRB declared that no unit is “inappropriate simply because it is small.”

The briefs describe at least five major problems with the Board’s decision in Specialty Healthcare or the micro-union decision: (1) it rests on a single fundamentally flawed circuit court decision; (2) it fails to identify any reason to justify such a radical change in the law; (3) it undermines the stated policy goals of Congress; (4) it circumvents the democratic process of rule-making; and (5) it will have a devastating impact on American businesses.

The analysis in the Specialty Healthcare or micro-union decision rests almost entirely on a single 2008 D.C. Circuit Court decision that misread long-standing Board precedent. The circuit court concluded that the NLRB’s “consistent analytic” framework for making unit determinations was an overwhelming community of interest standard – the standard the Board adopted in Specialty Healthcare. RILA’s brief analyzes the court’s decision and why it was so wrong. Simply put, the circuit court misread two NLRB decisions. In one decision, it was not the Board, as the court said, that used an overwhelming community of interest standard. It was the employer who argued for one, and the NLRB expressly rejected the employer’s argument. In the other decision, the Board adopted a regional director’s decision that used an overwhelming evidence standard in an entirely different factual context.

The RILA and CDW briefs point out that the NLRB gave no reason for its sudden adoption of such a radically different standard for unit determinations. Mimicking the AFL-CIO’s brief, the Obama Board used the D.C. Circuit Court decision as cover for the new standard claiming it was simply “clarifying” existing NLRB law. That is unlikely to pass muster with the Sixth Circuit, which will require the Board to give a reasoned explanation for reversing 70 years of carefully developed precedent. It will be interesting to see how the NLRB justifies what the dissenting member correctly described as just the “most glaring example of changing Board law for the purely ideological purpose of reversing the decades old decline in union density in the private American work force.”

The Specialty Healthcare or micro-union decision is in direct opposition to Congressional policy on the right of employees to remain union-free. In its decision, the Board harkened back to the un-amended Act of 1935 and declared that the right to self-organize was the “first and central right” set forth. But as CDW points out, the law was amended 12 years later to expressly acknowledge and protect employees’ equal and parallel right to oppose unionization. This 1947 amendment firmly established the principle of workplace democracy as the cornerstone of U.S. labor law. It requires that the Board be neutral on the question of unionization; it must give no greater protection to the right to organize than it does to the right to oppose the union and remain union-free.

RILA explains how Specialty Healthcare or micro-union decision also defeats another fundamental principle of U.S. labor law – majority control. Under the NLRA, if more than 50% of employees in a unit vote in favor of labor, the union becomes the exclusive bargaining representative of all the unit employees – even those who opposed it. But to what group of employees does the majority rule apply – any tiny subset of employees that the union can convince to support it? Decidedly not; too small a unit defeats the practical significance of majority rule and deprives employees who oppose unionization of a meaningful voice on this issue.

One of RILA’s many compelling arguments is that “the Act specifically prohibits what Specialty Healthcare establishes as a rule.” The NLRA prohibits the Board from making a union’s extent of organizing a controlling factor in unit determinations. The NLRB’s new standard violates this prohibition by presuming as appropriate any readily identifiable group of employees that labor petitions to represent – which in all but the rarest of cases will be the employees the union has organized. The Board then insulates that petitioned-for group from challenge by establishing an “overwhelming” evidence barrier the employer must meet for a larger unit.

CDW accurately argues that the NLRB abused its discretion by using adjudication, not rulemaking, to adopt a radically new standard for unit determinations applicable to all industries. Rule-making is an open, transparent, and inclusive process that provides notice and an opportunity for all affected parties to comment. Thereafter, once a rule is finalized, it can be challenged in court by any person aggrieved by it. Adjudication, on the other hand, is far narrower in scope; it is used to resolve a particular dispute between parties. Although third parties may seek to intervene in the action, their right to intervene is limited by agency and court rules.

CDW cites several circuit court decisions that found an agency abused its discretion by doing exactly what the Board did in Specialty Healthcare or micro-union decision – using adjudication to announce a fundamental change in the law that was made applicable to all persons subject to its jurisdiction.

RILA devotes the concluding portion of its brief to the devastating impact that Specialty Healthcare or micro-union decision will have on the retail industry. Instead of a few large units, as was the tradition for decades, retail stores could have a multiplicity of small units – as many as one unit for each department in the store. And large department stores can have as many as 130 departments. This multiplicity of “siloed micro-units” will deprive employees, employers, and their customers of the benefits of an integrated workforce that is capable of performing a variety of tasks in different departments and settings. As a result of union work rules, a sales associate in the men’s suit department may be unable to sell the same customer a tie to match.

This multiplicity of small or mini units represented by a variety of different unions will exacerbate workplace tensions. Employers’ labor relations costs will increase enormously and as RILA warns, “[j]uggling the administrative tasks associated with multiple bargaining agreements could overwhelm businesses.”

A few weeks ago, the U.S. Senate Committee on Appropriations narrowly defeated (15 to 15) a bill introduced by Senator Lindsey Graham to rein in the NLRB and deny it the funds necessary to enforce the Specialty Healthcare or micro-union decision. The Sixth Circuit now has the opportunity to enforce the policy imperatives set forth in U.S. labor law and protect the workplace from piecemeal and forced unionization that will destroy productivity and job creation. RILA and CDW have given the court ample reasons for doing so.