December 15, 2019

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In Adopting “Contract Coverage” Standard, NLRB Gives Employers Greater Flexibility to Act Unilaterally on Subjects Encompassed by Collective Bargaining Agreements

As summer turned to fall, the National Labor Relations Board (“NLRB” or the “Board”) issued a steady stream of decisions with significant and favorable implications for employers.  In the flurry of recent decisions, the Board addressed misclassification of workers as independent contractors, employers’ rights to control access to private property (Tobin Center for Performing ArtsUPMC, and Kroger Mid-Atlantic), the right to impose class action waivers in the wake of employment lawsuitswithdrawal of union recognition, the appropriate scope of bargaining units, and management’s right to make unilateral changes to terms and conditions of employment that are “covered by” a collective bargaining agreement (“CBA”).

The decision with possibly the most significant impact for employers with unionized workforces is MV Transportation, Inc., 368 NLRB No. 66 (September 10, 2019).  In MV Transportation, a 3-1 Board majority changed the longstanding legal standard applied in cases where employers make unilateral changes to the terms and conditions of employment for bargaining unit employees during the term of a CBA but without first providing the union with notice and an opportunity to bargain in each instance.  Under the National Labor Relations Act (“NLRA” or the “Act”) employers whose employees are represented by a union are required to bargain with that union over changes “to wages, hours, and other terms and conditions of employment” (commonly referred to as “mandatory subjects” of bargaining).  In the typical scenario, employers and unions hammer out a CBA aimed to address issues that may arise concerning mandatory subjects of bargaining over the term of the contract, usually including some sort of “management rights” provision, reserving to the employer the exclusive authority and discretion to take certain actions, provided they do not violate other provisions of the CBA.  Typical among these management-reserved rights is to implement and/or revise reasonable work rules and policies, for example.

As employers experienced with unionized workforces are all too aware, however, before the decision in MV Transportation the Board applied a “clear and unmistakable waiver” standard with respect to changes in mandatory subjects of bargaining.  Under that standard, absent a specific showing that a union had expressly waived its right to bargain over a particular policy or change in a mandatory subject, then implementing such a change without first giving the union a reasonable opportunity to bargain over the same would constitute an unlawful unilateral change under the NLRA.  This was so despite language in the parties’ CBA, whether found in the management rights provision or elsewhere, that generally gave the employer the right to implement or modify policies during the term of the CBA without further bargaining with the union.

Specifically, the old “clear and unmistakable waiver” standard required the parties to include language in a CBA that “unequivocally and specifically express[es] their mutual intention to permit unilateral action with respect to a particular employment term, notwithstanding the statutory duty to bargain that would otherwise apply.” Provena St. Joseph Medical Center, 350 NLRB 808, 811 (2007).  Application of the “clear and unmistakable waiver” standard proved problematic even for employers that bargained for broad contractual language intended to permit management to reserve to it certain flexibility and discretion to adjust terms and conditions of employment during the term of a CBA, such as through the adoption of common sense changes to safety rules or attendance policies.

Although the Board reaffirmed adherence to the “clear and unmistakable waiver” standard in 2007, both arbitrators and the courts, including the D.C. Circuit, have often applied a different, less-stringent “contract coverage” standard to allegations of unlawful unilateral change by employers.  Under the “contract coverage” standard, arbitrators and the courts examine whether an employer’s change falls within the scope of a CBA provision that grants the employer the right to act unilaterally in the future.  If so, then the change is found to be covered by the parties’ CBA and, therefore, does not constitute a unilateral change in violation of the Act.  The reasoning is that because the change is “covered by” and does not violate the parties’ CBA, then the change is not one about which the union did not have the opportunity to bargain, but, instead, it is a change about which the parties did bargain previously to agreement. That agreement was to allow management the discretion going forward to implement certain changes on subjects that are “covered by” the CBA–without engaging in further bargaining with the union.

As the Board majority noted in MV Transportation, the view of the D.C. Circuit favoring “contract coverage” over the “clear and unmistakable waiver” standard carried particular weight as the D.C. Circuit has plenary jurisdiction over all Board decisions. Indeed, the Board majority observed that it has even been sanctioned by the D.C. Circuit for failing to abide by the Circuit’s prior decisions in this regard. See Heartland Plymouth Court MI, LLC v. NLRB, 838 F.3d 16, 19-20 (D.C. Cir. 2016) (granting employer’s motion for attorneys’ fees). Accordingly, the Board majority in MV Transportation found that continued adherence to the “clear and unmistakable waiver” standard in unilateral change cases during a CBA had simply “become indefensible.” The Board majority also explained that adherence to the “clear and unmistakable waiver” standard had the undesirable effect of undermining the provisions of CBAs, which rendered less effective clauses such as management rights provisions that parties specifically negotiated into their labor agreements.

In MV Transportation, the Board applied the contract coverage standard to find that the employer had not violated the Act when it implemented five policies affecting bargaining unit employees’ terms and conditions of employment without first bargaining with the union to impasse.  Specifically, the Board majority found the implemented policies at issue were covered by the “Management Rights” and “Discipline and Discharge Procedures” provisions in the parties’ CBA, which reserved to the employer the right “to adopt and enforce reasonable work rules” and “issue, amend and revise policies, rules, and regulations” without first having to bargain with the union to impasse or agreement.

The Board’s embrace of the contract coverage standard provides employers with greater flexibility to take action under such reservation of rights language, and not just in future contract negotiations. Significantly, the Board found “it appropriate to apply the contract coverage test retroactively,” which breathes new life into the language of existing management rights clauses in CBAs. Now, it will be incumbent on the unions to try and negotiate this sort of reservation of rights language out of CBAs.  Before the Board’s decision in MV Transportation, unions were less concerned about including such general reservation of rights language in CBAs. Under the “clear and unmistakable waiver” standard, the effect of such language was severely limited by the ability to file an unfair labor practice charge claiming that any implementation prior to agreement or impasse constituted an unlawful unilateral change.  That is no longer the case under MV Transportation, and employers no longer have to be committed to litigate such cases to the D.C. Circuit to prevail on the issue.

Henceforth, and retroactively, in unilateral change cases occurring during the term of a CBA, the NLRB will first seek to “give effect to the plain meaning of the relevant contractual language” by examining whether the parties’ CBA can be said to cover the employer’s disputed act.  If so, then there will not be a violation of the Act. Unions may, of course, still challenge such actions through the grievance and arbitration procedure to seek a final ruling on whether the employer or union’s interpretation of the applicable CBA language is correct, but the slanted field of the “clear and unmistakable waiver” standard in NLRB litigation will only come into play if and when the NLRB determines that an employer action is not “covered by” the parties’ CBA.

The MV Transportation decision underscores the imperative of negotiating (and taking advantage of) robust management rights provisions and other contractual language that provides greater flexibility for employers to exercise discretion and make reasonable adjustments to employees’ terms and conditions of employment over the life of a CBA. As Member McFerran, the Board’s current lone Democratic member, noted in her dissenting opinion: “The implication of the majority’s new standard is clear: If a management-rights provision in a collective-bargaining agreement is sufficiently general, it will permit an employer to act unilaterally with respect to any specific term or condition of employment that plausibly fits within the general subject matters of the provision.”  Whether Member McFerran’s prediction that the Board’s decision MV Transportation will ultimately lead to a destabilizing of collective bargaining remains to be seen.  What is clear, however, is that negotiating and preserving broad management rights provisions has moved to center stage. Particularly for employers seeking to preserve flexibility and exercise discretion in taking actions deemed good for the business without having to first bargain with a union to impasse or agreement, or potentially spend years litigating the issue through the NLRB and up to the courts of appeal.

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About this Author

Corey Argust, employment lawyer, Epstein Becker
Associate

COREY P. ARGUST is an Associate in the Employment, Labor & Workforce Management practice, in the New York office of Epstein Becker Green. He provides strategic advice to, and litigates on behalf of, employers.

Mr. Argust’s experience includes:

  • Advising on compliance with the requirements of the NLRA, FMLA, ADA, ADEA, FLSA, WARN Act, OSHA, Title VII, and federal and state wage and hour laws
  • Counseling clients on all aspects of employee hiring, termination, promotion, and reductions in force
  • Preparing employee handbooks, management...
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Mike Ferrell Employment Lawyer Epstein Becker Green
Associate

MICHAEL (“MIKE”) S. FERRELL is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Chicago office of Epstein Becker Green. Mr. Ferrell provides clients with skilled, practical counseling on labor and employment matters to achieve their business and litigation objectives. And he helps clients identify risks in the context of business decisions in order to minimize unnecessary exposure and be in the best position for a successful outcome in the event of litigation or a labor dispute. His practice extends nationwide and includes employers...

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