NLRB Restores Ability Of ALJ’s To Accept Settlement Offers Over Objection of Charging Party and General Counsel- Overrules One Year Old Precedent
This December is no different. With Chairman Miscimarra’s term ending on December 16, a flurry of decisions issued. We saw the micro-unit, joint employer and past practice standards all fall unceremoniously. We also saw the standard for evaluating the lawfulness of employer handbook policies change. These are all major changes – even if in most cases they merely return to decades of previous law.
Oh yeah, and the Board also may be taking aim at the new election rules.
There are also other decisions issuing that are not as momentous but still deserve mention.
In a recent case, a sharply divided five member panel voted 3-2 to overturn a one year old precedent that took away power of Administrative Law Judges to accept settlement offers if the General Counsel and Charging Party objected. In UPMC, 365 NLRB No. 153 (December 11, 2017), the Board overruled its decision in United States Postal Service, 364 NLRB No. 116 (2016)(Postal Service).
In UPMC, the Board was confronted with a case involving 22 different unfair labor practice charges filed against a nursing home operator called Shadyside. The General Counsel also issued complaint against Shadyside’s parent, UPMC under the theory that UPMC was a “single employer” with Shadyside. UPMC denied that it was a single employer. Because the single employer issue would involve extensive litigation “possibly taking years to resolve” the Administrative Law Judge severed the single employer issue from the unfair labor practice proceedings. The trial against Shadyside went forward. After a trial that lasted 19 days, the ALJ issued a 120-page finding Shadyside had committed several unfair labor practices. As to UPMC, the Judge noted that “no evidence [was] presented . . .that UPMC independently committed any unfair labor practices.”
After the Administrative Law Judge’s Decision issued, and while the case over the unfair labor practices against Shadyside was on appeal, UPMC filed a Partial Motion to Dismiss in which it moved to dismiss the single employer allegation. In its motion, UPMC offered to “guarantee performance by . . Shadyside of any remedial aspects of the Administrative Law Judge’s Decision and Order [that] survive the exceptions and appeal process.” UPMC thus offered to settle the allegation by guaranteeing compliance with any remedy.
In granting this motion, the ALJ reiterated that no evidence was presented at trial that UPMC had committed any unfair labor practices and that, “[i]n my view, accepting UPMC’s offer to serve as guarantor . . is an appropriate way to resolve the single employer allegation.”
The General Counsel and Charging Party filed exceptions to the ALJ’s order.
NLRB Decides Postal Service Calling Into Question The UPMC Judge’s Decision To Accept The Offer To Settle
While the case was on appeal, a divided NLRB decided Postal Service in which it held that judges are no longer permitted to accept a respondent’s offered settlement terms over the objection of the General Counsel and the Charging Party or parties unless the offer constitutes “a full remedy of all of the violations alleged in the complaint.” Then Member Miscimarra dissented to this holding.
NLRB Reverses “Full Remedy” Standard as “ill-advised and counter-productive”
In reversing Postal Service, the Board reviewed the history of settlement practice at the NLRB and noted that the policy of the agency to encourage peaceful and non-litigious resolution of disputes which has “been pursued with great success.” In this regard, the majority noted that the Board “has balanced all factors and equities in light of the policies of the Act” and has “regularly approved settlement agreements that would provide less than would be awarded if the General Counsel were to prevail on every allegation of the complaint.” This longstanding approach, which found its roots in several decades of law, was confirmed 30 years ago in Independent Stave, 287 NLRB 740 (1987). In Independent Stave, the Board set forth a multi-factor approach to determine whether a settlement agreement was reasonable. In that case the Board emphasized that there should not be “too narrow a focus” on whether a settlement provided a full remedy” because of a faulty presumption that “the General Counsel would prevail on every allegation in the complaint.” Id. at 742. In other words, the risk of litigation, among other factors should be taken into consideration. The Board in Independent Stave identified the following factors that should go into reviewing whether a settlement would effectuate the purposes of the Act, including:
- Whether the charging part(ies), respondent(s) have agreed to be bound, and the position taken by the General Counsel regarding the settlement;
- Whether the settlement is reasonable in light of the nature of the violations alleged, the risks inherent in litigation, and the stage of the litigation;
- Whether there has been any fraud, coercion, duress by any of the parties in reaching the settlement; and
- Whether the respondent has engaged in a history of violations of the Act or has breached previous settlement agreements.
You can see a previous discussion of the application of these factors here.
The Board then concluded that the majority panel in Postal Service had adopted an “ill-advised standard less likely to effectuate the purposes and policies of the Act than the Board’s balancing of factors set forth in Independent Stave.”
The Board majority listed the following reasons for its decision to return to the previous standard:
First, “it advances the purposes and policies of the Act to permit judges to accept settlement terms proffered by the respondent –even though the General Counsel and charging party or parties object to those terms–if the judge determines the settlement is reasonable under Independent Stave, a determination that is subject to review by the Board.”
Second, “the Board’s acceptance of reasonable settlement terms may well be in the best interest of the parties who object to a consent settlement agreement, especially where those parties are unreasonably discounting the risks associated with litigation.” The Board majority here noted that the Independent Stavehighlighted some of some of the vagaries of litigation:
witnesses may be unavailable or uncooperative; procedural delays may occur; the issues may be coplex or novel; supporting documentation may have been destroyed or lost; and credibility resolutions may have to be made by the administrative law judge. By operating on a rigid requirement that the settlement must mirror a full remedy we would be ignoring the realities of litigation.
Independent Stave, 287 NLRB at 742-43.
Third, “by refusing to approve less-than-full-remedy consent settlements that are nevertheless reasonable, the majority opinion in Postal Service tied the hands not only of administrative judges but also of the Board itself.” The Board saw this as taking away its power to determine the reasonableness of settlements.
Fourth, “reasonable settlement terms reached at an early stage–even if the terms are less than complete–will often leave parties in a better position than would result from a Board adjudication, considering the substantial burdens and time involved in Board proceedings.” This is a critical standard, especially given the fact that in Board litigation the “substantial burdens” fall mostly on respondents who have to comply with discovery obligations while the General Counsel has no such parallel obligation.
Fifth, Postal Service rested on a faulty premise that it was returning to a previous standard of law.
Applying Independent Stave, Board Majority Finds UPMC’s Offer To Guarantee Reasonable
After reversing Postal Service, the Board concluded its application should be retroactive.
The Board then applied the factors found in Independent Stave to find UPMC’s offer to guarantee the remedy of the unfair labor practices reasonable, and therefore, acceptable. While the General Counsel and Charging Party refused to be bound by the offer, this was “important” weighing against settlement but not determinative. Factors “3 and 4 favor approval” because there are no allegations of fraud and no evidence UPMC had ever previously violated the Act or breached a settlement agreement. As to the “reasonableness” of the offer (factor 2) the Board found it was the “most important ” consideration and that this factor weighed in favor of reasonableness because “when a parent company is found to be a single employer with its subsidiary, the parent company is liable for the subsidiary’s unfair labor practices to the same extent as the subsidiary.” The Board noted that the General Counsel sought to hold UPMC responsible through the single employer allegation and by guaranteeing the remedy of any unfair labor practice findings of Shadyside, UPMC was giving a remedy “as effective as” a finding of single employer status. The Board adopted the ALJ’s approval of the offer.
Takeaways -Settlement Just Became, Well, More Reasonable and Easier
The major result of UPMC, of course, is that it restores the ability of a respondent to offer a settlement to the ALJ which can be accepted over the objection of the General Counsel. Under Postal Service, the Charging Party and General Counsel had a veto power over any settlement that didn’t cover 100% of the allegations. Such power is unreasonable in litigation where settlement is only possible when there is some compromise.
The whole reason a respondent might offer a settlement directly to the judge is because the General Counsel and/or charging party might be acting too rigid when it comes to resolution of a case. Experienced Board practitioners know full well that there are situations where a complaint is filed involving situations where the charging party might never approve of a settlement due to the nature of the parties’ relationship. It is thus a good outlet to be able to offer to resolve the case and have it accepted after evaluation of the reasonableness of the offer by the judge.
If you are considering making a settlement, make sure to go through the Independent Stave factors in any argument made to a judge.
The standard in Postal Service which required that a settlement fully remedy all allegations in a complaint probably acted to inhibit settlement leading to more litigation. Postal Service only survived one year and so it is unlikely to have had too much of an impact.
Of course, most cases are settled directly with the General Counsel and Independent Stave still applies. It remains to be seen what the new General Counsel’s posture is on settlement.