The U.S Court of Appeals for the D.C. Circuit recently struck down the National Labor Relations Board’s August 2011 Notice Posting Rule, which would have required employers to conspicuously display a notice informing employees of their rights under the National Labor Relations Act (the “Act”). In National Association of Manufacturers, et al. v. NLRB, the court invalidated the rule because it found all three of the rule’s enforcement mechanisms unlawful. A majority of the court also found that the rule exceeded the Board’s rulemaking authority as delegated by Congress.

The Board’s challenged rule would have forced six million employers throughout the country to post the Board’s mandatory notice of employee rights to organize unions (and related topics), under threat of an unfair labor practice finding by the agency. Moreover, failure to post the required notice would have permitted the Board to extend the usual six-month statute of limitations period in unfair labor practice cases. The rule also permitted the Board to consider an employer’s refusal to post the notice as evidence of unlawful motive in unfair labor practice cases.

The court began its analysis by focusing on Section 8(c) of the National Labor Relations Act, which states: “The expressing of any views, argument, or opinion, or the dissemination thereof . . . shall not constitute or be evidence of an unfair labor practice” (with the exceptions of prohibited threats or promises). The court reasoned that 8(c) equally protects employers’ rights to speak or to choose not to disseminate views about unions in the workplace.

The court further rejected the Board’s argument that the mandatory notice poster was “government speech,” rather than employer speech. The court explained that the Board was free to post the messages contained in the poster on its own website, but could not compel employers to disseminate the Board’s message. Consequently, the court concluded that the Board’s rule violated Section 8(c) because it made an employer’s failure or refusal to post the Board’s notice an unfair labor practice, and because it treated such a failure or refusal as evidence of anti-union animus.

The court also rejected the rule’s provisions that would have tolled the Act’s six-month limitations period for filing unfair labor practice charges based on a failure to post the notice, if the charging employees were unaware of the posting requirement. The Board presented no evidence that Congress intended to allow the sort of tolling that the Board included in the rule. Moreover, the court explained, courts do not generally recognize lack of knowledge of the law as a basis for equitable tolling. For these reasons, the court held that the rule’s tolling provision was also unlawful.

Having found that each of the enforcement provisions underlying the rule were unlawful, the court held that the remaining provisions of the rule could not be severed or otherwise allowed to stay in effect. Two of the three judges on the court panel also declared that the Board lacked the authority under its general rulemaking power to promulgate a rule of this type, because it could not be shown to be “necessary” to enforcement of the Act.

Practical Impact on Employers

The court of appeals decision means that the NLRB’s Notice Posting Rule has no force or effect on employers. The decision should have nationwide impact, and no employer can now be required to post the NLRB’s notice. 

It should be noted that federal government contractors have since 2010 been required to post a very similar notice published by the U.S. Department of Labor. That requirement, which is limited to such federal contractors, remains in effect. Covered government contractors must still post those notices to their employees as a condition of performing government work, notwithstanding the new court decision.

It remains to be seen whether the Board will petition the U.S. Supreme Court to try to overturn the D.C. Circuit’s decision. Another appeals court, the Fourth Circuit, is also considering an appeal on the same issue. In light of the nationwide impact of the D.C. Circuit’s decision, however, there is some question as to whether the second case is moot.

Finally, it is worth noting that this court decision will not be affected by the pending question of whether the current members of the Board were improperly appointed through “recess” appointments. The court determined for purposes of this decision that the NLRB had a sufficient quorum of lawfully appointed members to issue the rule, but the court found that the rule itself was unlawful.

According to the NLRB’s announcement, an estimated 150 election petitions have already been filed under the new procedures. The announcement states that “Many of those petitions resulted in election agreements, while several have gone to hearing. All parties involved in the 150 cases will be contacted and given the opportunity to continue processing the case from its current posture rather than re-initiating the case under the prior procedure.”

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The amended language to the “showing of interest” provisions provide that a showing of interest of not less than 50% is required to support an “application requesting that an organization or individual be certified as the representative of any craft or class of employees.” The proposal notes that the changes make no mention of mergers. Under the NMB’s current merger policy, as stated in its representation manual, “[i]ncumbent organizations or individuals on the affected carrier(s) must submit evidence of representation or a showing of interest from at least thirty-five (35) percent of the employees in the craft or class.” Because the FAA Act changed the showing of interest threshold to 50%, the NMB is soliciting input “regarding the effect of the amendments on the Board’s policies and practices with respect to representation disputes in mergers.”

Comments on this proposal must be received by July 16, 2012 and identified by the agency name (NMB) and docket number (C-7034). Comments may be submitted electronically through the federal eRulemaking portal, through the agency’s web site, via email to: legal@nmb.gov (include docket number in subject line), or by fax to: (202) 692-5085. Alternatively, written comments may be sent by mail or hand delivery to: National Mediation Board, 1301 K Street, N.W., Ste. 250E, Washington, DC, 20005. In addition, the agency plans to hold a public hearing on these changes during the comment period.

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Two members of the Board participated in the decision to adopt the final rule, and two is simply not enough. Member Hayes cannot be counted toward the quorum merely because he held office, and his participation in earlier decisions relating to the drafting of the rule does not suffice. He need not necessarily have voted, but he had to at least show up. At the end of the day, while the Court’s decision may seem unduly technical, the quorum requirement, as the Supreme Court has made clear, is no trifle. Regardless of whether the final rule otherwise complies with the Constitution and the governing statute – let alone whether the amendments it contains are desirable from a policy perspective – the Board lacked the authority to issue it, and, therefore, it cannot stand.

For the time being, based upon the Court’s decision, it would appear that the new rules, which went into effect on April 30, 2012, will no longer apply to representation cases, and the Board will have to return to the previous system. That said, it is likely this decision will be appealed.

The Board may also opt to conduct another vote on the election rules with its current composition. Pursuit of this option, however, is no guarantee that the rules would pass judicial muster under New Process Steel. As we indicated in an earlier posting, there are significant questions surrounding the legal authority of President Obama to make the three “recess” appointments he made in January of this year. Therefore, any decision made by a Board consisting of those members is subject to being overturned because it lacks a quorum.

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In the latest case, Chamber of Commerce v. NLRB, (pdf) plaintiffs argued that the notice posting rule is unlawful because: (a) the Board lacked the authority to promulgate the rule; (b) the Board exceeded its authority by creating a new ULP and by authorizing tolling of the statutorily-mandated six-month statute of limitations for filing a ULP charge; and (c) the rule violates an employer’s free speech rights. In its decision, the U.S. District Court for the District of South Carolina determined that based on the plain language and structure of the NLRA, the Board lacked the authority to promulgate the rule in the first place. The court, therefore, did not reach the second two arguments questioning the rule’s legitimacy.

The court first explained that the plain language of Section 6 requires that rules issued by the Board be “necessary to carry out” other provisions of the Act. According to the court: 

Defendants argue that the rule is “necessary to carry out” Sections 1 and 7 of the Act, but confuse a “necessary” rule with one that is simply useful. It can be said that the notice-posting rule “aids” or “furthers” the aspirational goals of Section 1 by notifying employees of their rights under Section 7, but defendants have not shown that the rule is “necessary” to carry out any other provision of the Act.

The opinion states that nowhere does the NLRA require employers to post general notices of employee rights under the Act. In contrast, the opinion emphasizes, Congress has enacted or amended several other federal labor statutes “to expressly require employers to post notices of employees’ statutory rights.”

In addition to looking at the plain language of the NLRA, the court discussed the context of the law. According to the court, “it is clear from the structure of the Act that Congress intended the Board’s authority over employers to be triggered by an outside party’s filing of a representation petition or ULP charge.” The notice-posting rule, however, “proactively dictates employer conduct prior to the filing of any petition or charge, and such a rule is inconsistent with the Board’s reactive role under the Act.”

The court was similarly unpersuaded by the Board’s argument that it properly exercised its rulemaking authority by filling a statutory “gap” in the law. According to this theory, because the NLRA is silent with respect to notice posting, the court can consider factors other than the law’s plain language. The court found, however, that

Based on the statutory scheme, legislative history, history of evolving congressional regulation in the area, and a consideration of other federal labor statutes, the court finds that Congress did not intend to impose a notice-posting obligation on employers, nor did it explicitly or implicitly delegate authority to the Board to regulate employers in this manner.

This new decision has clearly dealt a set back to the NLRB in its efforts to require employers to post this notice. However, it is also unclear how employers should reconcile the two federal court decisions, since the decision out of the District of Columbia court upheld the Board’s authority to issue the rule. No doubt, this matter will ultimately be resolved in the appellate courts. There remains a lack of clarity about what an employer should do given the conflicting opinions. For the time being, it would appear that the April 30 deadline for posting is no longer effective, and, in at least one jurisdiction, if not everywhere, employers may not have to post. We would expect the NLRB to provide some guidance in connection with this decision in the coming weeks. We will continue to monitor this rapidly evolving situation and inform you of developments as we learn of them.

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Controversial National Labor Relations Board regulations that will dramatically change union representation election procedures are slated to take effect on April 30, 2012. In anticipation of this event, Board regional offices have been stepping up their internal training efforts and preparing outreach programs to explain the new regulations to the public.

About two weeks prior to the rule’s effective date, the Board’s General Counsel (GC) is expected to post on the NLRB’s website a GC Memorandum, PowerPoint presentation, and video explaining the new regulations. The GC memorandum is expected to explain in more detail which contested issues will result in an evidentiary hearing on the record and which issues will be deferred until after an election. Generally, it is anticipated that issues pertaining to the scope and composition of the proposed bargaining unit generally will result in a hearing, while those pertaining to eligibility that do not affect a significant percentage of the bargaining unit will not. In the latter instances, the hearing officers will defer these issues until after the election. As it stands, which issues will warrant an evidentiary hearing and which will not remain somewhat unclear.

At this point, the General Counsel has not announced its goal regarding the median length of time that will elapse under the new rules from the date of the filing of a petition to the actual election. Currently, the medium timeframe is 38 days. Some have opined that, under the new regulations, this timeframe will be between 17 and 24 days, although others have suggested that the length of time could be even shorter. Under the new regulations, hearings will be scheduled within 5 working days from the date of service, which will be counted from the day the Regional office mails the petition.

As for the Excelsior list, some have speculated that the General Counsel will consider allowing unions to waive the 10-day period for reviewing the list, which could result in even quicker elections.

As the effective date for the new regulations approaches, more information about how the regulations’ provisions will actually be enforced will be made available. In addition, some Regional NLRB Offices are planning local meetings and trainings to discuss the new regulations.

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In December 2011, the National Labor Relations Board issued a final rule that will radically change representation election procedures. Among other changes, the rule will:

The final rule did not include other significant changes initially proposed by the Board in June 2011 that would expedite union elections and impose procedural requirements. The initial proposal contained additional amendments, such as requiring that a pre-election hearing be held within seven days after filing the petition and mandating that employers provide the union with a preliminary voter list before the pre-election hearing and with a final voter list within two days after the election is scheduled. The slightly scaled back version of the rule was approved by Chairman Pearce and then-Member Craig Becker before it was believed that the Board would be left with only two sitting members and lose its quorum in 2012.

The first week in January, however, President Obama sat three new members to the 5-member panel via recess appointment, a move that was met with challenge and controversy. Despite the legislative and judicial challenges to this move, Chairman Pearce seems to be emboldened by the recess appointments, suggesting that the remaining portions of the proposed election rule changes are coming. The NLRB’s regulatory agenda notes that the Board is “continuing to deliberate on the rest of the proposed amendments and expects to address them in a subsequent final rule.”

The release date for a final rule incorporating the omitted representation election proposals remains “to be determined.”

This challenge to the three new recess appointments was added to an existing consolidated lawsuit opposing the NLRB’s notice posting rule filed by, among other entities, the NRTW, Coalition for a Democratic Workplace (CDW), and the National Federation of Independent Business (NFIB). This new rule mandates that as of April 30, 2012, private sector employers subject to the National Labor Relations Act (NLRA) post a notice informing employees of their rights under the NLRA in a "conspicuous place" readily seen by employees and penalizes employers for non-compliance. According to the NRTW’s motion and memorandum in support, (pdf) because the recess appointments are not Constitutionally legitimate, the NLRB lacks the quorum needed to implement and enforce the notice posting rule.

In our judgment, the text of the Constitution and precedent and practice thereunder support the conclusion that the convening of periodic pro forma sessions in which no business is to be conducted does not have the legal effect of interrupting an intrasession recess otherwise long enough to qualify as a “Recess of the Senate” under the Recess Appointments Clause. In this context, the President therefore has discretion to conclude that the Senate is unavailable to perform its advise-and-consent function and to exercise his power to make recess appointments.

In its motion, the NRTW vehemently disagrees with the Attorney General’s position, finding it “contrary to the Constitutional power vested in the Senate to ‘determine the Rules of its Proceedings.’” In addition, the NRTW claims that “by declaring the Senate sessions to be ineffective to prevent a recess,” the DOJ’s position “causes the Senate to be in violation of the Constitutional requirement that neither House shall adjourn without the consent of the other for more than three days,” as well as runs contrary to long-standing practice.

In a statement, NRTW President Mark Mix said: "Now Obama's executive abuse jeopardizes the constitutional balance our country holds very dear, all in the name of paying back his Big Labor benefactors."

During a January 12 White House press briefing, Press Secretary Jay Carney asserted that the DOJ’s position was conveyed to the President before he made the recess appointments, and that the Administration “believe[s] our legal argument is very strong, will absolutely pass muster.”

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In last year’s New Process Steel opinion, the Supreme Court held that the National Labor Relations Act requires that the Board operate with at least three members in order to exercise its full authority. When Member Craig Becker’s term expires this week, the Board will be left with Chairman Mark Gaston Pearce (D) and Member Brian Hayes (R), assuming the Senate does not confirm additional members and the President is unable to make any recess appointments by that time.

§ 102.182 Representation Cases Should Be Processed to Certification

During any period when the Board lacks a quorum, the second proviso of § 102.67(b) regarding the automatic impounding of ballots shall be suspended. To the extent practicable, all representation cases should continue to be processed and the appropriate certification should be issued by the Regional Director notwithstanding the pendency of a request for review, subject to revision or revocation by the Board pursuant to a request for review filed in accordance with this subpart.

The full practical implications of this change remain unclear. Regional Directors will be able to avoid impounding ballots in every election where a request for review has been filed during the period of time that the Board lacks a quorum. As such, during this period, the Regional Directors will be able to count the ballots and certify the results of an election even though a request for review of the election results may be pending. In light of the unresolved issues involving the impact of Specialty Healthcare on representation cases, this may be a significant development.

Earlier this month, the Board issued a separate rule outlining special procedures governing the filing of certain motions and appeals in the event the Board loses its quorum. The more recent revision is an addendum to the prior rule.

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The consolidated lawsuit brought by the National Association of Manufacturers (NAM) and the National Right to Work Legal Defense and Education Fund Inc. (NRTW) alleges that the agency overstepped its statutory authority and ignored congressional intent in promulgating the rule. In a press release, NAM reports that at the December 19 hearing Judge Berman Jackson “acknowledged the complexities of the issues presented in the case and again encouraged the Board attorneys to discuss delaying implementation of the rule until the court has reached an opinion.” A similar lawsuit contesting the NLRB rule has been filed by the U.S. Chamber of Commerce and the South Carolina Chamber of Commerce.

Several bills also have been introduced to rescind this posting rule, although to date, none have advanced.

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In addition, any administrate and procedural motions ordinarily referred to the Office of the Executive Secretary for decision by the Board prior to the filing of a request for review will instead be referred to the Executive Secretary for ruling.

In each instance, normal time limits will apply, and the parties will retain the right to a full Board review by filing a request for review or exceptions to the rulings/orders. Once the Board achieves the necessary quorum, it will be able to consider the cases on their merits.

The changes offered by the Board here reflect what appears to be an attempt to continue limited operations once it consists of only two members. Even so, under such circumstances, it is likely that the execution of many of the Board’s customary functions such as those referred to in the rule will be deferred until it has returned to a quorum.

In an unprecedented development, and by a 2-1 vote, the National Labor Relations Board on November 30, 2011, approved a resolution to prepare a final rule adopting a subset of the controversial election rule amendments the Board published for comment in June 2011. The two-member majority was made up of Chairman Mark Pearce and Member Craig Becker, both of whom come from union backgrounds. The Board's lone Republican, Member Brian Hayes, voted against the resolution, criticizing the proposed amendments and the process by which they had been vetted as fundamentally flawed.

What makes this development unprecedented, and radical in the eyes of many, is that it defies a decades-old practice of the Board, regardless of the political party in the majority.  Continue reading about this development here.

In the event the Board is left operating with less than a three-member quorum, the Order grants the GC authority over appointments and other personnel decisions with respect to Regional and Subregional Directors and officers and over the establishment of Regional and Subregional offices. In addition, the Order grants the Chairman and the GC the joint authority to make decisions concerning the apportionment and allocation of funds and the establishment of personnel ceilings within the Agency and delegates to the Chief Administrative Law Judge authority over appointments and other personnel decisions concerning any Administrative Law Judge. The Order makes each delegation of authority subject to the right of any sitting Board Member to request full-Board consideration of any particular decision.

The latest order comes on the eve of the Board’s November 30 open meeting to discuss and vote on the controversial changes to union representation election procedures.  Member Hayes has been vocal in his objection to both the significant proposed changes to the election rules and his colleagues’ efforts to finalize these amendments before Member Becker’s term expires at the end of the year. In a letter (pdf) to Chairman of the House Committee on Education and Workforce Rep. John Kline (R-MN), Hayes claimed, among other things, that the expedited rule approval process has deprived him “of any meaningful opportunity to consider the majority position,” and contravenes “long-standing Board tradition and the Board’s own internal operating rules.” According to Hayes, Becker and Pearce “have made it unequivocally clear that they intend to publish a final rule before the expiration of Member Becker’s appointment without regard to Board tradition or rule.”

Pearce quickly shot back at Hayes’ letter, claiming (pdf) that Hayes has failed to adequately participate in the rule deliberations, and decrying Hayes’s alleged threat to resign in protest.

For months, there have been rumors about interest groups urging Hayes to resign in order to prevent the Board from pursuing its regulatory agenda and issuing decisions that have overturned past precedent. In response to these rumors, on November 23, 2011, Rep. George Miller (D-CA), ranking member of the House Committee on Education and the Workforce, sent a letter (pdf) to Hayes with an attached document request for all information “regarding any requests, recommendations, or demands that [Hayes] or [his] office [has] received calling upon [Hayes] to resign from, obstruct, or otherwise incapacitate the National Labor Relations Board . . . as well as any offers or discussions regarding future employment.” In this letter, Miller acknowledges that if Hayes resigns “before the President can appoint, or the Senate can confirm, a Member to the Board to replace” Hayes, he would “effectively shut down the Board’s ultimate decision-making authority.”

This blog will continue to monitor these rapidly-evolving Board developments.

According to the Board, it has received more than 65,000 written comments on the proposed rule. The agency also conducted a 2-day hearing in July to gather public input. Taking these comments into consideration, and “in light of the possibility that the Board will lose a quorum at the end of the current congressional session,” Board Chairman Mark Pearce “will propose issuing a final rule limited to several provisions designed to reduce unnecessary litigation.” Given the current makeup of the Board, approval of the Chairman’s proposal is a foregone conclusion, with member Brian Hayes (R) sure to object. Following the vote, the Board will “proceed to draft a final rule limited to those proposals, and defer the remainder of the proposed rule for further consideration.”

would contravene long-standing Board tradition and the Board’s own internal operating rules. These rules and traditions have been established to protect the legitimacy of the Board. They cannot, in my view, simply be cast aside in pursuit of a singular policy agenda without doing irreparable harm to the Board’s legitimacy.

In addition, Hayes claims that Pearce and Becker “have made it unequivocally clear that they intend to publish a final rule before the expiration of Member Becker’s appointment without regard to Board tradition or rule,” and are already drafting a final rule with responses to comments filed without his input.

Moreover, Hayes asserted that his colleagues presented him with a take-it-or-leave-it “compromise proposal” on November 15, with a deadline of November 18 to accept. Hayes claims that such a proposal would have bound him:

to an unprecedented “emergency” revision of the ordinary internal rules for processing all pending cases from now until the end of Member Becker’s term. In effect, the “emergency” procedures would deprive me of any meaningful opportunity to consider the majority position, much less prepare a response, in any number of cases. This process, or, more accurately, lack of process, is so diametrically at odds with traditional decisional processes of the Board that it quite frankly defies description.

Hayes also stated that he suspects the final rule will resemble the proposed rule.

The Board vote will be conducted at the NLRB’s headquarters in Washington DC and will be open to the public, although members of the public will not be entitled to participate in the discussion. Requests to attend should be sent to publicmeeting@nlrb.gov with the following text in the subject line: REQUEST TO ATTEND PUBLIC MEETING REGARDING RIN 3142-AA08. The meeting will also be available via webcast from the Board’s website.

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The final rule therefore revises section 31.205-21 of the Federal Acquisition Regulations (FAR) to read as follows:

31.205-21 Labor relations costs.

(a) Costs incurred in maintaining satisfactory relations between the contractor and its employees (other than those made unallowable in paragraph (b) of this section), including costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable.

(b) As required by Executive Order 13494, Economy in Government Contracting, costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing are unallowable. Examples of unallowable costs under this paragraph include, but are not limited to, the costs of—

(1) Preparing and distributing materials;

(2) Hiring or consulting legal counsel or consultants;

(3) Meetings (including paying the salaries of the attendees at meetings held for this purpose); and

(4) Planning or conducting activities by managers, supervisors, or union representatives during work hours.

The changes made by the rule apply to contracts resulting from solicitations issued on or after the rule’s November 2, 2011 effective date.

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