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Federal Court Overturns NLRB, Says Jimmy John’s Employees’ Disloyal Conduct Not Protected

In a closely-watched case, on July 3, 2017, the U.S. Court of Appeals for the Eighth Circuit refused to enforce a National Labor Relations Board (“NLRB” or “Board”) decision in which the Board found MikLin Enterprises, Inc. (“MikLin”), owner of 10 Jimmy John’s franchises in the Minneapolis, Minnesota area, violated the National Labor Relations Act (“NLRA” or “the Act”) when it disciplined employees for engaging in a public protest against MikLin’s sick leave policy during a labor organizing campaign.  In doing so, the Eighth Circuit found that the employees’ public attacks – which included distributing flyers implying that Jimmy John’s sandwiches could be tainted by sick employees – were so disloyal, materially false, and misleading that they lost the protection provided by Section 7 of the NLRA, which shields employees who engage in concerted activities for mutual aid or protection from adverse employment actions.  For this reason, the Eighth Circuit held that MikLin’s discipline of these employees for their public sick leave crusade did not violate the Act.  The decision is noteworthy due in part to the Eighth Circuit’s less-than deferential treatment of the Board’s decision, and its recognition that employees’ rights under the NLRA to protest the terms and conditions of their employment are not entirely unfettered.

The case, MikLin Enterprises, Inc. v. NLRB, originated from a labor dispute between union organizers, employees, and the employer over MikLin’s sick leave policy, and arose during a union organizing campaign.  To protest the Company’s sick leave policy, the pro-union MikLin employees hung posters complaining about the Company’s sick leave policies in public places and distributed them, along with press releases and “open letters,” to local media outlets.  Some of the posters stated that MikLin workers reported to work with the flu, strep throat, and colds because: “SHOOT, WE CAN’T EVEN CALL IN SICK.”  The posters implied that these sick workers infected the food they prepared for customers.  The documentation provided to the media also stated that the Company violated health codes on a daily basis, and “shoved [customers] to the bottom of the well of importance.”  As part of its response to this attack, MikLin’s owners fired six employees who coordinated the posters and media push, and issued written warnings to other employees who assisted.  The union challenged MikLin’s actions, and ultimately, the NLRB found that MikLin’s discipline and termination of employees involved in the sick leave attacks violated Section 8(a)(1) of the Act by interfering with the employees’ rights to protected concerted activity, as well as discriminated against the employees in violation of Section 8(a)(3) for engaging in concerted activity.  MikLin appealed the Board’s decision to the Eighth Circuit, and the NLRB cross-petitioned for enforcement of its Order.  Initially, a panel of Eighth Circuit judges agreed to enforce the entire NLRB Order.  MikLin petitioned for re-hearing en banc (hearing by the entire Eighth Circuit court), and the Court granted MikLin’s re-hearing request.

Although several of MikLin’s employment actions in response to union activity were at issue in the initial complaint filed by the union, the public sick leave attacks were the focus of the Eighth Circuit’s en banc opinion.   In coming to its conclusion that MikLin violated the Act, the NLRB had analyzed whether the employees’ public sick leave communications, which might otherwise be protected under Section 7 because they were connected to a labor dispute, were so disloyal that they lost Section 7 protection.  In its analysis, the NLRB referenced the disloyalty test articulated by the United States Supreme Court in NLRB v. Local Union No. 1229, IBEW, commonly referred to as the “Jefferson Standard” case.  The NLRB posited that the disloyalty test not only requires proof that the employees’ actions were “so disloyal, reckless or maliciously untrue,” but also that their actions “evidence a malicious motive.”  Over a dissent, the Eighth Circuit en banc majority stated that a “malicious motive” was not required to determine whether MikLin’s employees’ actions were so disloyal as to lose protection under Section 7.  They explained that the test instead focuses on an objective standard of whether the “employees’ public communications reasonably targeted the employer’s labor practices, or indefensibly disparaged the quality of the employer’s product or services.”  Citing Jefferson Standard, the majority held that employees indeed disparaged MikLin when they used a “sharp, public disparaging attack upon the quality of the product in a manner reasonably calculated to harm company reputation and its income.”

In finding the employees’ sick leave posters and media contacts were sufficiently disloyal as to lose protection under the Act, the Court noted that the employees’ selected communications “were sure to harm MikLin’s reputation and reduce its income” because the attacks directly targeted MikLin’s product – its sandwiches.  The Court also found that the damage done would “not easily dissipate” after the labor dispute was over.  The Court went on to state that the damage to the Company was exactly the type of harm that employees are expected to protect their employers from, and that Section 7 rights do not disturb an employer’s right to expect loyalty from employees and their continued efforts in support of the business.  Going further than the NLRB’s analysis of MikLin’s employees’ conduct, the Court also found that the employees’ allegations that MikLin workers were not allowed to call in sick, and that MikLin had daily health code violations were “materially false and misleading,” which removed the statements from protection under the Act.  Thus, the Court found that although the employees’ sick leave communications were connected to a concerted effort to improve the terms and conditions of their employment, the “indefensible” nature of their communication removed them from protection under the Act and provided “cause” for MikLin to discharge the responsible employees.

This case was closely watched, as it was viewed as an illustration of how the NLRB had become out of touch with reality, and how it exalted workers’ rights over of the rights of employers to run their business, rather than seeking to find a proper balance between those equally legitimate interests.  It is hoped that with the impending shift in the makeup of the NLRB – see our post here – decisions such as its now-overruled ruling in MikLin will be a thing of the past, and instead, in their place will be decisions that properly weight the rights, interests, and concerns of not just employees and unions, but also employers.

© Copyright 2017 Squire Patton Boggs (US) LLP

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About this Author

Daniel B. Pasternak, Squire Patton Boggs, Phoenix, Labor Litigation Layer
Partner

Dan Pasternak focuses his practice on litigating labor and employment claims, representing management in traditional labor relations matters, and working with employers to develop and enforce business-sensible policies and practices to effectively manage their human resources.

Dan represents employers before federal and state courts and administrative agencies, and in arbitration and mediation proceedings, in employment matters arising under the array of federal and state employment laws, including discrimination, harassment, retaliation,...

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