Labor Management Relations

The U.S. Third Circuit Court of Appeals issued an opinion on October 13, 2017, that serves to remind employers of the need to pay employees when they take short work breaks during their workday.

In DOL v. Am. Future Sys., Inc. 2017 BL 367399, 3d Cir., No. 16-2685, the employer had a “flex time” policy under which it allowed employees to take breaks “at any time, for any reason, and for any duration.” The company tracked employee breaks by monitoring when they logged off their computers, which they were required to do when on a break, and they were only paid while logged-on to their computers. While on their breaks, employees were allowed to leave their work stations and to use the time for their own personal benefit.

The Department of Labor (“DOL”) argued that the employees should have been paid for their short breaks taken during the course of the day, and the trial court granted it summary judgment. Although the employer argued that employees were free to do what they wanted while on breaks, the DOL relied on the language in the regulations for the Fair Labor Standards Act (“FLSA”), which provide that rest periods up to 20 minutes should be compensable. The 3rd Circuit Court of Appeals gave “substantial deference” to the DOL since it is responsible for administering the FLSA, and it affirmed the granting of summary judgment for the DOL. The Court noted, however, that should employees abuse the “flex time” policy, such as by taking multiple breaks of 19 minutes in length, the employer could discipline the employees, but it nevertheless had to pay them for the break time.

This decision serves as a reminder to employers to pay employees for any breaks that are 20 minutes or less, regardless of whether the employees are free to use the time as they choose or to leave the employer’s facility. This is also a good time for employers to remember that any unpaid breaks, such as meal times, must not be interrupted by the employer or the entire meal period could become compensable.

In a win for organized labor, the National Labor Relations Board (“NLRB”) reinstated a union-friendly standard under which both temporary and permanent employees may collectively bargain as a single unit without employer consent. On July 11, 2016, the NLRB’s 3-1 decision in Miller & Anderson, Inc., 364 NLRB No. 39 (2016), made it easier to combine workers who are temporarily employed by a staffing agency’s client company with workers permanently employed by that client company to form a union.

Under the new standard, if a staffing agency and its client company are deemed to be joint employers of the temporary workers, the temporary workers may join forces with the client company’s permanent workers, provided that they satisfy the “community of interest” factors demonstrating that it is appropriate to treat them as a single unit. Some of the factors used to determine whether a proposed unit of workers share a community of interest are whether the employees are subject to the same working conditions, are subject to common supervision, and have similar wages and benefit packages.

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The Department of Labor (“DOL”) issued its Persuader Activity Advice Exemption Rule (“persuader rule”), which requires attorneys and consultants who communicate with employers regarding certain labor relation activities to file a report disclosing the terms of their arrangement, including payments. Since the persuader rule was issued in final form, multiple lawsuits have been filed by employers, attorney organizations, and states. On June 27, 2016, Judge Sam Cummings of the Northern District of Texas issued a preliminary injunction enjoining, on a national basis, the enforcement of the persuader rule. National Fed’n of Indep. Bus. v. Perez, Case No. 5:16-cv-00066-C (N.D. Tex. June 27, 2016).

The court made this decision based on five specific grounds: (1) the DOL lacks the statutory authority to enforce this version of the persuader rule; (2) the persuader rule is arbitrary, capricious, and an abuse of discretion; (3) the persuader rule violates the due process clause of the fifth amendment; (4) the persuader rule violates the Regulatory Flexibility Act (“RFA”); and (5) the persuader rule creates a substantial threat of irreparable harm. First, the DOL does not have the authority to enforce the terms of this persuader rule and, in fact, the rule conflicts with the plain language of the relevant statute, the Labor-Management Reporting and Disclosure Act of 1959. Second, the persuader rule does not explain the need to change the previous interpretation, it conflicts with state rules governing the practice of law, and it violates the first amendment by infringing on free speech, expression, and association rights. Third, the persuader rule is unconstitutionally vague and does not clearly define its prohibitions; instead it replaces a long-standing and bright-line rule with a rule that is ambiguous and impossible to apply. Fourth, the persuader rule violates the RFA. Although the DOL certified that the persuader rule would not have a significant economic impact on a substantial number of small entities so as to exempt it from the RFA, the DOL failed to provide a factual basis for the cost estimates. Finally, the persuader rule will conflict with attorney duties, reduce access to legal advice, reduce access to training sessions, and burden and chill the first amendment, all of which creates serious harm.

This decision came just in time to avoid the persuader rule from becoming effective, as it was issued just days before the persuader rule was set to go in force on July 1, 2016. In light of this ruling, attorneys and advisors who provide unionization related advice to employers will not be required to report to the DOL, at least for now. This injunction prevents the DOL from enforcing the persuader rule unless the injunction is vacated in some way. If the injunction is vacated, employers and their advisors may eventually have to file reports, but the effective date of that requirement may be altered.

Earlier this spring, the Department of Labor issued final rules drastically changing more than fifty years of interpretation of the Labor Management Reporting and Disclosure Act of 1959, as amended. These new rules will require detailed disclosure of arrangements that employers have with attorneys and consultants for such things as advice on the content of communications with employees about unions; training of supervisors on how to talk to their employees about unions without violating the law; and even drafting handbooks and personnel manuals that contain statements that might cause employees to think they don’t need unions. The rules became effective officially at the end of April, but the date provided in the rules for enforcement is July 1.

Predictably, these rules have generated legal challenges, alleging that they violate fundamental First Amendment rights to communicate; impair the right to counsel; and exceed the authority of the DOL. In the meantime, the DOL has taken the position that the new rules will not apply to agreements entered into before July 1, or to activities after July 1 that result from agreements entered into before July 1. The following is from a filing by the DOL in one of the many pending cases:

On March 24, 2016, the Department of Labor’s (“the Department”) Office of Labor-Management Standards published a rule entitled “Interpretation of the ‘Advice’ Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act,” 81 Fed. Reg. 15924 (“the Rule”). While the effective date of the Rule is April 25, 2016, the rule is only applicable to arrangements and agreements made on or after July 1, 2016, and to payments made pursuant to arrangements and agreements entered into on or after July 1, 2016. 81 Fed Reg. 15924. The Rule revises the reporting requirements, and related record keeping requirements, for certain agreements and arrangements entered into between employers and labor relations consultants or other independent contractors, and payments made pursuant to those agreements and arrangements. The Department will not apply the Rule to arrangements or agreements entered into prior to July 1, 2016, or payments made pursuant to such arrangements or agreements. Consequently, under the Rule no employer, labor relations consultant, or other independent contractor will have to report or keep records on any activities engaged in prior to July 1 that are not presently subject to reporting, or file the new Forms LM-10 or LM-20 (revised pursuant to the Rule) for any purpose prior to July 1.

Accordingly, employers have a Limited Time Window of Opportunity to enter into agreements with their employment law advisors. If they enter into agreements on or before June 30, 2016, they will be spared the cost and trouble of these oppressive filing obligations, even if the services are performed far into the future. Most labor firms, including Frantz Ward, are prepared with drafts ready to turn around on short notice to protect clients in this way. Regardless of how the pending challenges to the new rules turn out, this opportunity to use the DOL’s own interpretation to avoid the worst effects of the rules should not be missed.

The Department of Labor’s Office of Labor Management Standards (“OLMS”) has released its long-anticipated revisions to its interpretation of the rules for the reporting of employer engagements with third parties to provide services designed to influence employees’ choices of collective bargaining representation. This is known as “persuader activity.” Employers who enter an agreement with an outside organization for persuader services must report the agreement on an official form, the LM-10 within 90 days of the end of the year. The outside organization must also file a report, the LM-20. These forms must be filed within 30 days of the making of the agreement. Then, after the end of each calendar year, the persuader must file an LM-21 form, which reports all of its labor-related activities (even non-persuader activity) for all employers.

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Does your company provide email access to its employees? Are there restrictions on how and when email may be used? These issues are addressed in the National Labor Relations Board’s (NLRB) December 11, 2014 decision in Purple Communications, Inc., which affects both non-union and union employers. In Purple Communications, the NLRB reversed its position and held that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems.” The employer can rebut this presumption by demonstrating that special circumstances necessitate a specific restriction to maintain production or discipline. Although this special circumstances justification could encompass a total ban on nonwork email use by employees, this would be a “rare case.”

The handbook provisions at issue in Purple Communications prohibited employees from using company email to engage “in activities on behalf of organizations or persons with no professional or business affiliation with the company” or to send “uninvited email of a personal nature.” In reaching their decision, the NLRB reasoned that the ability of employees to communicate in the workplace is central to exercising their rights under the National Labor Relations Act, especially during an initial organizing campaign. Due to significant changes in technology, email is a critical means of communication which now serves as “the natural gathering place pervasively used for employee-to-employee conversations.”

This decision means that employees who have access to company email may use that email system during nonworking time in order to actively campaign on behalf of a union that is attempting to organize the company, even if such a position is contrary to the position of the company. The decision, however, does not require employers to provide email access to employees where employers have otherwise chosen not to grant any email access at all. Similarly, the decision does not require the company to provide access to the email system to third parties like a union. The decision also does not prevent employers from continuing to monitor employee use of company computer and email systems for legitimate management reasons. The NLRB specifically limited this decision to email without addressing other forms of electronic communications.

Employers who are concerned about running afoul of the Purple Communications decision should review their handbooks and any policies addressing employee use of company email systems. Employers should also review those classifications of employees to which they provide email access.

This post was coauthored by Inna Shelley.

The National Labor Relations Board decision in the Specialty Healthcare case has continued paving the way for the certification of increasingly fragmented micro bargaining units. On May 4th, the director of NLRB Region 2 approved a collective bargaining unit of full-time and part-time salespersons in the women’s shoe departments on the 2nd (Designer Shoes) and 5th (Contemporary Shoes) floors of a Bergdorf Goodman department store. The approved unit would likely consist of less than 12% of the store’s sales associates and an even lesser percentage of the store’s non-supervisory workers. The full text of this Neiman Marcus Group decision is available here.

Neiman Marcus Group continues the recent Board trend of allowing fragmented micro-units. Such units allow unions to gain a foothold by organizing only an increasingly small subset of employees. Unions no longer have to expend resources to organize the bulk of an employer’s workforce as long as they can identify any group of employees who share an alleged “community of interest” under the traditional criteria. This analysis is often quite subjective and considers whether employees (1) are organized into separate departments (2) have distinct skills and training (3) have distinct job functions or whether there is job overlap (4) are functionally integrated with other employees (5) have frequent contact with other employees (6) interchange with other employees, and (7) have distinct terms and conditions of employment.

Under Specialty Healthcare, if a unit is found appropriate under the above standard, it will be recognized even though a larger unit would be even more appropriate. To successfully challenge a smaller unit, the employer must demonstrate that employees in a petitioned-for, smaller unit share an “overwhelming community of interest” with other employees in a larger unit.

In approving a unit of women’s shoe sales associates on two store floors, Neiman Marcus Group emphasized that salespersons in the shoe departments were paid on a different wage scale than salespersons in other departments. It also distinguished the sale of shoes from that of other merchandise, claiming that shoe salespersons needed different skills and training and that many of them had significant prior experience selling shoes before their hire. Shoe salespersons also made minimal sales of other merchandise and transfers of salespersons from other departments to shoes were uncommon.

It did not matter that sales employees across all departments were subject to the same personnel policies, including health benefits, vacation and holiday policies, evaluations, probation, or use of a common cafeteria. Interestingly, the regional director concluded that salespersons of men’s shoes should not be in the unit because men’s shoes were sold in the men’s section of the department store located across the street and there was allegedly little association between the men’s and women’s shoe salespersons despite access to a common cafeteria.

The decision also analyzed Specialty Healthcare’s Footnote 29, which stated that Specialty Healthcare was not meant to disturb special industry presumptions and occupational rules. There is, of course, a longstanding presumption in the retail industry that the appropriate unit is store-wide. While recognizing that industry presumptions must still be followed after Specialty Healthcare, the regional director rejected the retail industry presumption. Instead, the director relied upon isolated retail cases, including those with stipulated units and those finding that appropriate units consisted of all salespersons, as opposed to only those who sell particular merchandise. Thus, as long as an exception allowing a smaller unit can be identified in a particular industry, even via voluntary approval, employers may not be able to successfully rely on long-established industry practice to challenge a proposed fragmented unit.

Neiman Marcus Group also affirms that in the post Specialty Healthcare world, it is now increasingly difficult for employers to challenge a proposed micro-unit by claiming that there is an “overwhelming community of interest” with a larger employee group. Such an “overwhelming community of interest” exists only where almost every community of interest factor overlaps almost completely. Any perceived difference in job functions or other terms or conditions of employment may justify a bargaining unit of a small employee group.

As a result, employers may find themselves under the obligation to engage in collective bargaining with a multitude of splintered employee groups, in spite of vastly overlapping interests that do not quite rise to “overwhelming” by the Board’s assessment. Cases like Neiman Marcus Group demonstrate that when the Board said in Specialty Healthcare that its decision did not presage any major changes, it wasn’t quite telling the truth, the whole truth and nothing but the truth.

The United States District Court for the District of Columbia ruled that the NLRB’s new rules on extremely fast union elections had not been properly issued, due to lack of a quorum. While Member Brian Hayes participated in earlier portions of the rulemaking process, he did not participate in the final deliberations or vote upon the rule itself.  With only two other members of the Board in office at the time, that meant only two members acted.  Since a quorum for the Board to conduct business is three members, U.S. District Judge James Boasberg found the rule invalid.  He did not reach the other arguments raised by the plaintiffs in the case (the U. S. Chamber of Commerce and the Coalition for a Democratic Workplace).  In light of the nature of the ruling, the Board can elect to appeal, or it can take action upon the rulemaking record with a quorum, which it now can muster (at least assuming that the recess appointments made by President Obama are found to be valid.)  The order of Judge Boasberg is below.


The rule recently promulgated by the National Labor Relations Board requiring employers to post on bulletin boards and on their websites notices of employee rights partially survived a court challenge.  The U.S. District Court in Washington, DC permitted the Board to require the posters, but vacated the portions of the rule creating a new unfair labor practice of failure to post the notice and providing that the statute of limitations for filing unfair labor practice charges is extended if the employer did not properly post the notice.NLRB-Notice-Posting-Decision 03-02-2012.pdf  In the words of Judge Amy Berman Jackson:

The Court holds that the NLRA granted the Board broad rulemaking authority to implement the provisions of the Act, and that the Board did not exceed its statutory authority in promulgating Subpart A of the challenged rule – the notice posting provision. But it also holds that the provision of Subpart B that deems a failure to post to be an unfair labor practice, and the provision that tolls the statute of limitations in unfair labor practice actions against employers who have failed to post, do violate the NLRA and are invalid as a matter of law.

The decision is subject to appeal, of course, and the likelihood is that both sides will appeal certain aspects of the decision.  At this point, it does appear that employers will be required to comply with the basic posting requirement as of April 30, 2012.  It is not clear that there will be any effective penalty for failing to do so, however.

Earlier today the White House announced recess appointments to the Consumer Financial Protection Bureau and the National Labor Relations Board. The appointments were asserted to be recess appointments despite the fact that the Senate has not technically been in recess under the historical understanding of that term.  Indeed, Congress has gone out of its way to avoid being in recess specifically to prevent recess appointments being made. 

While the specific individuals appointed have not been objected to (and, in the case of two of the Board nominees, have not even been considered by any of the Senate Committees since their nominations were only recently announced), the positions must be filled for the agency to operate with full effectiveness.  Rich Cordray, a friend of mine and fellow Michigan State alum, is a very qualified person.  However, the Republicans do not want anyone to serve as Director of the CFPB because they oppose the broad, unchecked power of that agency.  As to the NLRB, without at least three members, the Board cannot take any official action. Since its recent actions have been opposed by most Republicans, they would prefer it be dormant.  It is certain that there will be challenges to this unprecedented assumption of appointment power by President Obama.  How soon the challenges will be resolved remains to be seen.  It is also certain that 2012 will continue to feature more fireworks.