November 12, 2018

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NLRB Finds Employer Effectively Repudiated Unlawful Handbook Rule…and RecusalGate Continues

The Board issued an interesting decision discussing an employer’s successful efforts to repudiate unlawful conduct, which we’ll get to in a minute.  In our last post, we discussed a simmering dispute over the circumstances which an NLRB member must recuse himself or herself.  This issue, we’ll call it Recusalgate,  has taken an interesting turn.  In ADI Worldlink, LLC, 367 NLRB No. 10 (October 2, 2018), the Board, as it often does, delegated the matter to a three member panel.  However, in a footnote, the Board noted that “Chairman Ring, who is recused, is a member of the panel but took no part in the consideration of this case on the merits.”  Member Emanuel also recused himself but took no part in the case.  This does beg an interesting question: if there are only four members on the NLRB at present time, and two have to recuse themselves, does the Board have a quorum to act?  This won’t be the end of this discussion.

Back to labor law.  In TBC Corporation and TBC Retail Group, Inc., 367 NLRB No. 18 (October 15, 2018), the Board (apparently without any recusals), issued a decision discussing the circumstances under which an employer that has violated the Act may successfully repudiate such conduct, effectively erasing the misdeed, as well as unfair labor practice liability.

Background

The employer operates a chain of automotive and tire retail stores.  The employer, as part of its handbook, issued a no-solicitation rule that, among other things, prohibited employees from soliciting “in our buildings, on our property, during work hours, unless that solicitation is approved in advance by” human resources.  This no-solicitation rule was overly broad, and therefore unlawful, because it prohibited solicitation on property “during work hours” which has been interpreted to include times which employees are not working, such as breaks and meal times.  The rule also was overbroad because it prohibited solicitation on “property” which includes non-work areas such as break rooms and employee parking lots.  Finally, the rule was unlawful because solicitation required prior approval of human resources.

The employer also maintained an arbitration clause, which required employees to waive the right to bring collective or class actions.

An employee filed a charge with the NLRB which alleged that the employer’s arbitration and no-solicitation policies were unlawful.

Employer Takes Steps to Repudiate Unlawful No-Solicitation Rule

Within a few weeks after the employee filed his unfair labor practice charge, and well before there was any official finding by the NLRB, the employer took steps to repudiate the no-solicitation rule.  It did so by distributing and posting a notice to employees at all its stores in several states which said:

FEDERAL LAW GIVES YOU THE RIGHT TO:
Form, join, or assist a union:
Choose representatives to bargain with us on your behalf:
Act together with other employees for your benefit and protection: and
Choose not to engage in any of these protected activities.

WE WILL NOT do anything that interferes with these rights.
Specifically:
WE WILL NOT promulgate or maintain Written Work rules prohibiting you from:
1) Soliciting in our buildings, on our property, or during work hours.  We will continue to have a work rule that prohibits you from soliciting during an employee’s working time or with another employee during that employee’s working time.  “Working time” does not include such time as breaks, lunch, or rest periods, or before and after work.

WE HAVE rescinded and given no effect to the rules described above.  WE HAVE posted the revised Written Work Rules in the Associate Handbook.  Also, Human Resources Policy 406 contains a more detailed description of the Company’s no-solicitation and no-distribution policy, and remains in effect.

Human resources managers of the employer confirmed that the notices had been posted in each of the retail stores.

ALJ Finds Repudiation Ineffective

The ALJ found that the employer’s attempted repudiation was ineffective for two reasons.  First, the Judge ruled that the employer “did not adequately explain the reasons” for replacing the unlawful rule with the new no-solicitation policy.  Second, the ALJ ruled that the employer “continued engaging in unfair labor practices after the repudiation” by its maintenance of the arbitration policy.

Board Reverses Unfair Labor Practice Findings and Dismisses Complaint

The Board concluded there was no violation and dismissed the complaint.  The Board first addressed the arbitration policy issue.  Consistent with the Supreme Court’s recent decision holding that arbitration provisions that prohibit class or collective actions are not in conflict with the NLRA, the Board dismissed that allegation.

Turning to the repudiation, the Board noted that the law in this area is well established.  Under the Board’s decision in Passavant Memorial Area Hospital, 237 NLRB 138 (1978), an employer may repudiate an unfair labor practice if it is “timely, unambiguous, specific in nature to the coercive conduct, and free from other proscribed illegal conduct.”  Applying this standard, the Board concluded the repudiation had been effective because it was timely (done within a month after the filing of the charge), and because the employer “posted notices that were functionally equivalent to the notices posted by” Respondents pursuant to formal unfair labor practice proceedings.  In other words, the employer’s notice essentially mirrored that of an official NLRB Notice to Employees by its reference of employee rights, and its specific highlight of what it would not do, and the actions it was taking (such as informing employees a new policy had been issued).  The Board found that there was no requirement that an employer “explain why they are repudiating an unlawful act” which was one basis for the ALJ’s ruling.

The Board found that the repudiation did not occur in the context of other unfair labor practices because the only other allegation concerned the arbitration clause, which was lawful.

Takeaways

This is an interesting case because it demonstrates effective repudiation.  The defense of repudiation has been tried many times in NLRB litigation only to fall short because it does not meet the specific criteria set forth in Passavant.

By copying the form and content of an NLRB Notice to Employees, the employer effectively did everything that would have resulted from a finding of an unfair labor practice charge.  Indeed, arguably, the only difference between the employer’s notice and the official Board Notice is the letterhead.  Many employers don’t like to post these kinds of notices, and some have even run afoul of the Act by posting their own explanation next to the official Board Notice, but this is a reminder that one can save the expense of litigation by clearly and effectively communicating that a rule (or act by the employer) is not condoned.

© 2018 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. He has devoted his practice almost exclusively to representing management in all aspects of traditional labor law matters throughout the U.S. 

Some highlights of his career include:

  • Successfully negotiated the first contract for a shipping agency during constant threat by union to shut down Port of Los Angeles

  • Successfully defended a major theme park when the NLRB sought bargaining order after the union...

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