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NLRB: Employer’s Side Letter Explaining NLRB Notice Breached Settlement Agreement and Warranted Default Judgment

One of the fundamental pillars of any remedy doled out by the NLRB is the agency’s  requirement that the employer (or union) post a “Notice to Employees,” a bright blue poster detailing the misdeeds of the charged party.  Such a Notice is required to be posted as a result of a finding of an unfair labor practice after trial; the Notice posting is also required through any Board settlement agreement. The content of the Notice always first sets forth employee rights (including the right to refrain from protected activity). After the employee rights comes the paragraphs explaining what the posting entity WILL or WILL NOT do, and explains any required affirmative actions such as the removal discipline or rescinding an unlawful rule.  The Notice itself says that it may not be defaced or altered in any way.

It is common in all sorts of litigation for a company to communicate about settlement of a dispute:  that it entered into a settlement “for the good of the business,”and often asserting that it  did “nothing wrong” and that there had been “no finding” of wrongdoing.  In other words, the company puts its spin on what happened so that it can (try) to control the narrative.

But what if an employer wants to put its spin communication right next to the NLRB’s Notice to Employees?  Board case law has long held that such side postings are improper if the communication “detracts” from the agency’s Notice.  If the employer is in noncompliance there most certainly will be some further litigation.  Does such an employer posting also constitute a breach of an NLRB settlement agreement? If so, does such a breach warrant the entry of a default judgment pursuant to the default provisions of the agreement?

In Outokumpo Stainless USA LLC, 365 NLRB No. 127 (September 7, 2017) the Board answered both questions in the affirmative.  All three members of the Board found that an employer’s side letter posted next to the agency’s Notice to Employees, constituted breach of an informal Board settlement agreement.  A two member Board majority also determined that such breach warranted a default judgment under the agency’s much debated default language.

Background

A union filed a petition seeking to represent a group of employees.  The campaign was hard fought.  Six days before the election the union filed unfair labor practice charges, which according to Board policy resulted in the election being blocked until the charges could be investigated and resolved.  There were many separate alleged violations of the Act including surveillance, impression of surveillance, threats, unlawful rules and the discipline of employees pursuant to overbroad rules.

The Parties Enter into an Informal Settlement Agreement

In order to resolve the charges short of litigation the parties agreed to a Board settlement agreement to remedy most of the allegations.  The employer agreed to rescind the discipline and the overbroad rules, and of course, the employer agreed to post a Notice to Employees at its facility and on its intranet.

The settlement agreement contained the (now standard) default language describing the consequences of noncompliance.  That default language, among other things, stated that “in the case of non-compliance with any of the terms of this Settlement Agreement by the Charged Party, and after 14 days notice from the Regional Director of the National Labor Relations Board of such non-compliance without remedy by the Charged Party, the Regional Director will issue a complaint that will include the allegations [that are subject of the agreement].”  The default language further provided that in the event of noncompliance the breaching party waived its right to file an answer and all allegations will be deemed admitted.  The Board then, “without necessity of trial or any other proceeding,” would find all allegations to be true and would provide an order and remedy for same.

The Employer Posts its Own Communication about the Charges Before Posting the Notice to Employees

The employer rescinded the rules and discipline.  The employer also posted the Notice to Employees on its intranet and on its bulletin board.  Before doing so, however, the employer emailed its employees and posted on its bulletin board a lengthy letter in response to the unfair labor practice allegations.  This letter stated the union filed the charges “just prior” to the election in order to prevent an election.  The letter blamed the union for preventing the employees from voting.  The letter stated the employer did nothing wrong and that the Board had not found that it violated any laws.  The letter stated the Board’s notice essentially was the complete remedy and that the employer was not required to pay any “fines, penalties, or monetary requirements.”

Region Tells Employer to Remove Letter, Employer Refuses

The Region notified the employer that its letter constituted noncompliance with the settlement agreement and instructed the employer to remove the letter and post the Notice to Employees for an additional 60 days.  The employer refused and the Region offered to “hold off” on the employer’s communication if the employer agreed to post the Board’s Notice for an additional 60 days.  Again, the employer refused.  The Region then notified the employer that its side letter constituted a breach of the settlement and issued a complaint alleging the employer violated Section 8(a)(1) of the Act in all the ways set forth in the original settlement agreement.

The employer filed an answer. The matter was submitted to an Administrative Law Judge who concluded that the employer’s letter breached the settlement agreement and that a default judgment was appropriate.  The employer appealed.

Board Holds Letter Constitutes a Breach of Settlement Agreement and Warrants A Default Judgment

The Board first addressed the issue of whether the employer’s letter constituted noncompliance with the agreement.  The Board held:

[Noncompliance occurs] where the communication attempts to ‘minimize the effect of the Board’s notice’ and ‘suggests to employees that the Board’s notice is being posted as a mere formality and that Respondent’s true sentiments are to be found in its own notice, not the Board’s.’  Bangor Plastics Inc., 156 NLRB 1165, 1167 (1966), enf. denied 392 F.2d 772 (6th Cir. 1967).  As discussed in more detail in the judge’s decision, the [employer’s] letter was strikingly similar to the letter distributed to employees in Gould, Inc., 260 NLRB 54 (1982).  In Gould as here, the letter stressed that the respondent had not been found guilty of any violation of the law.  260 NLRB at 57.  In Gould as here, the respondent falsely suggested that the posting of a notice was the only action it was required to undertake pursuant to the settlement agreement. Id.  In Gould, as here, the respondent additionally sought to minimize the effect of the notice by distributing its ‘spin’ on the notice before the notice itself was posted. Id. at 56-57; . . . Finally, in Gould as here, respondent used the letter to blame the union for election delays.

A two member Board majority (Pearce and McFerran) next found that the employer’s noncompliance warranted a default judgment.  The Board noted the employer’s letter violated the settlement agreement in “two ways.”  First, the mere posting of such a letter detracted from the Notice and has long been held to constitute noncompliance.  Second,  “insofar as the settlement specifically required the Respondent to post the parties’ agreed-upon notice, that provision must be construed (particularly in light of Board law) as requiring the posting of that notice and nothing that detracts from that notice.”  The Board noted that the employer’s side letter was not an “element” of the parties’ settlement but was a “unilateral act that tended to frustrate performance of their settlement agreement.” The Board majority addressed due process concerns raised by the dissent noting that, “[i]n agreeing to [the default] provision, the Respondent accepted the possibility that the Board would find noncompliance sufficient to trigger the default provisions.”

The Board majority proceeded to strike the employer’s answer to the complaint except where it had to do with noncompliance, which according to the default language was the only issue that could be contested.  By issuing a default judgment the Board found that the employer had committed multiple unfair labor practices as alleged in the complaint.  The Board then amended the remedy to specifically include language prohibiting the posting of any “letters or notices to employees that modify, alter, or undermine the effectiveness of the official notices.”

Dissent Finds Fault in Default

Chairman Miscimarra agreed that the employer’s action breached the settlement agreement which the Regional Director could then withdraw.  The Chairman, however, took issue with whether the Board can or should issue a default judgment.  Miscimarra noted that prior to the Board majority’s decision “the Board has never held that a side letter warrants entry of a default judgment, which precludes the [employer] from raising any defenses against the Union’s unfair labor practice allegations.”  The Chairman raised a number of reasons as to why default should not issue.  These included constitutional due process concerns about finding an unfair labor practice without allowing the employer to defend itself..  The Chairman also raised the fact that it was not at all clear to him that the default language clearly and unmistakably waived the employer’s right to raise a defense especially considering the Board majority wrote into the agreement a duty to not post a side notice.  Finally, as the Chairman explained what he viewed as a “profound” problem with the Board majority’s ruling:

it prevents the Board itself from deciding the merits of the unfair labor practice allegations.  At this time, the Board does not have a record upon which it may decide the allegations on their merits.  The Charging Party alleged that the Respondent committed various unfair labor practices.  The Respondent’s side notice alleged that the Charging Party’s true purpose in filing the charges was not to seek redress  but to ‘block’ the election.  By entering default judgment rather than proceeding to a hearing, my colleagues preclude a determination of whether the Charging Party’s allegations have merit.

Takeaways

This case illustrates a few important points about NLRB practice and procedure.  First, although the Board majority noted that the employer “agreed” to the default language, the fact is that the General Counsel rarely allows alteration to the boilerplate language in its settlement agreement.  So, a party that wants to resolve an unfair labor practice charge in the vast majority of cases must sign a an agreement containing the default language.  This often will be the only way to settle the matter.  There rarely is much (or any) true negotiation over the point.  Unless and until the Board changes its position on the default language, the employer should carefully consider whether compliance involves elements that could be subject to dispute because such disputes could result in a default.  While many Board agents claim that the default language has “never” or “rarely” been invoked, one can see from this case that the General Counsel will not hesitate to invoke the default language to deprive the employer of an opportunity to raise defenses.  In  cases where compliance could be contested it may be better to litigate.

Second, if the employer believes the best course of action is to enter into the settlement agreement containing default language it has to be careful in its dealings with the agency in the event there are issues with compliance.  From the Board’s recitation it certainly sounds as though the Region was trying hard to avoid default in this case and its efforts were rebuffed. While the employer stated it wanted to get to an election its actions actually were preventing it because there was no way the Board was going to hold an election while remedial issues were pending.  Regardless of whether the charges are blocking an election, now employers must worry that any notice of noncompliance could result in a default judgment.

Finally, as Chairman Miscimarra noted, the employer merely was stating its view that the union had deliberately blocked the election.  As anyone who has experienced the NLRB election process knows, the union has almost complete unilateral power to block an election if it doesn’t believe the vote is going to go its way.  Sometimes the charges have merit and sometimes they do not.  Employers have to be very careful in shifting the blame for an action (even if it may be true) to the union especially if the Board is involved through the filing of unfair labor practice charges.

© 2017 Proskauer Rose LLP.

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About this Author

Mark Theodore, Employment Attorney, Proskauer Rose
Partner

Mark Theodore is a Partner in the Labor & Employment Law Department in the Los Angeles office. He has devoted his practice almost exclusively to representing management in all aspects of traditional labor law matters throughout the U.S. 

310.284.5640