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NLRB Upholds Employer’s Bargaining And Demotions Post-Impasse As Lawful

In its January 31, 2020 decision in Phillips 66, 369 NLRB No. 13 (January 31, 2020) the Board reversed a number of findings of unfair labor practices found by an Administrative Law Judge related to the employer’s conduct during organizing and subsequent bargaining.

Background

In November 2011, the union filed a petition to represent the five health and safety specialists (HSS Specialists) working at the employer’s Santa Maria, California oil and gas refinery.  During emergencies, the HSS Specialists served as “incident commanders,” temporarily assuming control over facility operations and coordinating a response.  The employer asserted that these emergency duties made the HSS Specialists statutory supervisors and opposed the union’s petition.

Four days before the union election, management explained to the HSS Specialists that they would lose their supervisory duties, which could result in shortened work schedules and adjusted overtime, if they joined the union.  One day before the election, management explained that they would work toward “mending fences” with the HSS Specialists if they voted against the union.

The union unanimously won the election, and the parties executed a side letter agreement that specified the HSS Specialists’ hourly wage, maintained the health and safety focus of their classification, and clarified that the employer would not lay off anyone if the HSS Specialist positions were eliminated.  During the next seven months, the parties bargained over the terms of an initial collective bargaining agreement, with each strictly adhering to their core positions throughout their negotiations.  The employer took the position that it had to demote the HSS Specialists because their incident commander duties made them supervisors who could not form unions.  The union generally bargained to preserve the status quo.

The parties compromised on some secondary issues, but by November the employer presented the union with its “Final Company Proposal.”  The employer maintained that there was leeway for negotiation if the union agreed that only two of the HSS Specialists would be transferred to new health and safety coordinator positions (with fewer job duties, different work schedules, and lower wages).  The union representative responded, “Don’t hold your breath.”  On month later, the employer declared impasse, implemented the terms of its final offer, and transferred all of the HSS Specialists to health and safety coordinator or operator positions.

The union filed charges.

Board’s Main Findings

  • Employer’s Offer To Mend Fences Was Not An Unlawful Promise Of Benefits

The Administrative Law Judge ruled that the employer’s statement to employees that it would “mend fences” if they voted against the union constituted an unlawful promise of benefits in violation of Section 8(a)(1) of the Act.  On appeal the Board disagreed.  The Board concluded that management’s suggestion that it would work toward “mending fences” with the HSS specialists in exchange for their “no” votes was not an unlawful promise of benefits designed to influence the election because it was not specific enough.  The Board ruled this was permissible union campaign propaganda because it did not specifically refer to terms or conditions of employment.

  • Employer Did Not Engage In Bad Faith Bargaining

The Administrative Law Judge (“ALJ”) concluded that the employer bargained in bad faith in violation of Section 8(a)(5) because: (i) it knew or should have known that its bargaining proposal to transfer HSS specialists to different positions was not based upon legitimate business justifications; and (ii) its proposals were a close-minded extension of its threat four days before the election that HSS Specialists would lose their jobs or that their wages, hours and working conditions would change if they voted for the union.

The Board disagreed, overruling the ALJ’s finding.  The Board held that the ALJ erroneously focused on only a portion of the parties’ bargaining.  The Board held that the correct standard for evaluating good faith bargaining is to consider the totality of the conduct.  In this case, the Board concluded the parties both bargained hard and the employer could not be found to have negotiated in bad faith by “merely h[olding] firmly to their respective proposals.”

First, the Board emphasized that its place was not “to decide the good or bad faith of the parties based on the correctness or incorrectness of the reasons they put forward in support of their bargaining positions.”  Accordingly, it was not unlawful for the employer to remain unmoving on its central position because it reasonably believed that it put forward a fair proposal.  The employer did not need an ironclad business justification for its position in order to bargain in good faith.

Second, the Board held that the judge’s limited view of the employer’s proposals as being linked to unlawful pre-election threats failed to take into account the company’s overall conduct, its attempts to reach agreement and its flexible conduct during collective bargaining.  “By finding evidence of bad faith in the similarity between [the employer’s] proposals and its earlier unlawful threat, the judge effectively barred [the employer] from advancing any proposals related to removal of incident commander duties from the HSS specialists, at least where such proposals would adversely affect the HSS specialists’ wages, hours, and job duties.”  In reviewing relevant case law, the Board noted that this is exactly the kind of substantive judgment that the Board cannot pass concerning an employer’s bargaining proposals.  Ultimately, the employer did not want to assign incident commander duties to union members, and the other changes that the employer proposed were logically related to its proposal to remove those duties from the HSS Specialists.

The Board specified that in the 11 bargaining sessions that employer and the union participated in from May to November 2012, both parties “engaged in hard but lawful bargaining over the key issues.”  Significantly, the employer’s conduct was “not that of an employer intent on frustrating the possibility of reaching agreement” but showed that the employer was “lawfully adamant regarding its core positions while demonstrating its willingness to compromise where it could do so without abandoning those positions.”

  • Employer’s Declaration of Impasse Was Lawful

The ALJ determined that the employer’s declaration of impasse was unlawful because of the employer’s bad faith bargaining.  The Board held that since it had determined the employer’s bargaining was lawful, the impasse was as well.  In this regard, the parties understood that they were at an impasse after bargaining on numerous occasions without budging on key issues.  An issue of critical importance to both parties was HSS Specialist staffing and the consequences of removing the incident commander function from HSS Specialists.  The parties’ willingness to move on issues of secondary importance did not change their stances on these key points.  After considering the parties’ bargaining history, their good faith, the length of negotiations, the importance of the disputed issues and the parties’ understanding of the negotiations, the Board found that the employer lawfully declared impasse and implemented its final offer.

Takeaways

All decisions coming out from the Board are made by the remaining three members, Chairman Ring and Members Emanuel and Kaplan.  Decisions like these are not surprising, or far-reaching, but they do illustrate how rulings can differ widely based on the time of issuance.  The three issues discussed in this blogpost probably would have had a different outcome three years ago.  It is not wholly partisan, however.  This Board spends a significant amount of time evaluating existing precedent to support its position.  Here, the Board upheld longstanding Supreme Court precedent by refusing to sit in judgment of the substantive terms of the parties’ collective bargaining agreement and by considering the totality of the negotiations in finding that the employer bargained in good faith.

In addition, this case presents a rare situation where a final offer was actually implemented.  The parties bargained only 11 times before reaching impasse, but the impasse was acceptable because the bargaining proposals were lawful and made in good faith.

© 2020 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...

310-284-5640
Rachel Therese Labor and Employment Lawyer Proskauer Law Firm
Associate

Rachel Gulotta is an associate in the Labor & Employment Department.

She earned her  B.A. in French and history from Davidson College and her J.D. from Tulane Law School. During law school, she was moot court chief justice, a member of the Willem C. Vis International Commercial Arbitration moot court team, and president of the Civil Law Society. Additionally, she clerked with Magistrate Judge Joseph C. Wilkinson, Jr. in the United States District Court for Eastern District of Louisiana for one year after law school. 

504-310-4089