04/02/2024: High Interest Rates Increase NLRB Penalties

High interest rates are arguably good for labor law compliance.

1. Board's Interest Rate Remains at 8 Percent for the Third Quarter, Fiscal Year 2024, OM 24-05 (OM Memo). Every quarter, the NLRB releases a memo detailing what interest rate will be applied to monetary remedies. Since Oct 1, 2023, the interest rate has been 8 percent.

2. John Gore Theatrical Group, Inc., 02-CA-286802 (Board Appellate Brief). The Board found that the employer violated Section 8(a)(5) when it refused to provide information requested by the union about the employer’s business relationships and investments. The union requested the information because it was trying to determine whether the employer was diverting production funds in violation of the collective bargaining agreement. The employer has appealed this decision to the Second Circuit, arguing that it had a legitimate and substantial confidentiality interest that outweighed the union's need for the information. This brief defends the Board’s decision.

3. Walgreens Company, 19-RC-337826 (Regional Election Decision). In this case, the union, UFCW, petitioned for a unit of pharmacy workers at a Walgreens. The same day that they filed the petition, Walgreens terminated its sole pharmacist, forcing the pharmacy to close indefinitely under Oregon state law. Under Board law, election petitions are dismissed when cessation of the employer's operations is imminent and certain but not when there is merely uncertainty about the employer’s future operations. This case does not fit well into either category because Walgreens apparently claims that it will reopen the pharmacy at some future date. The Regional Director ended up applying NP Texas LLC, a case where the petitioned-for unit was indefinitely laid off due to COVID-19, to dismiss the petition on the basis that any prediction of when eligible voters may exist again in the petitioned-for unit would be "unduly speculative.” The termination of the sole pharmacist is the subject of a separate unfair labor practice charge.

The interest rate that the NLRB applies to monetary remedies like backpay is copied from the interest rate the IRS applies to back taxes. That interest rate is determined ultimately by Federal Reserve policy that aims to manage macroeconomic conditions. When we think about the Fed’s interest-rate policy, we generally think about what effect it may have on inflation and employment. But, because so many things are pegged to interest rates directly or indirectly, the Fed’s interest-rate policy has a lot of oddball impacts that nobody really talks about.

The current NLRB interest rate of 8 percent is the highest rate since before 2009. For much of the time after the Great Recession and then again during the COVID recession, the NLRB’s interest rate was sitting at 3 percent. These extra five percentage points make it costlier to do things like illegally fire workers or file illegal lawsuits against them, especially if you refuse to comply with the law until after the quite long unfair labor practice process is complete. Whether these steeper penalties actually alter anyone’s behavior, I don’t know.