07/02/2024: Two Supreme Court Decisions and Two Advice Memos
Loper Bright and Jarkesy mostly leave the NLRB unaffected.
SEC v. Jarkesy, 22-859 (Supreme Court)
This Supreme Court case revolves around the constitutionality of the Securities and Exchange Commission (SEC) adjudicating securities fraud claims in-house before an administrative law judge (ALJ), rather than in federal court with a jury trial. The Court focused on the Seventh Amendment right to a jury trial and the public rights exception to Article III jurisdiction.
Legal Analysis
Seventh Amendment Applicability: The Court found that the SEC's antifraud provisions, similar to common law fraud, are "legal in nature" and implicate the Seventh Amendment. This determination was primarily based on the SEC's use of civil penalties, a punitive remedy typically associated with courts of law, rather than “equitable remedies” designed to restore the status quo.
Public Rights Exception: The Court rejected the SEC's argument that the "public rights" exception applied. This exception allows Congress to assign certain matters to agencies for adjudication without a jury, even though such proceedings would otherwise require a jury trial.
The Court emphasized that the public rights exception applies to a narrow class of cases historically determined by the executive and legislative branches, such as revenue collection, customs enforcement, immigration, and administration of public lands.
The Court found that securities fraud claims do not fall within this historical category and therefore do not qualify for the public rights exception.
The Court relied heavily on Granfinanciera, S. A. v. Nordberg, 492 U.S. 33 (1989), which held that fraudulent conveyance claims, similar in nature to securities fraud, were not "closely intertwined" with the bankruptcy regime and therefore required a jury trial.
Applicability to the NLRB
For the most part, the NLRB orders “equitable” remedies, not “legal” remedies, and is therefore mostly unaffected by this decision. One notable exception may be the make-whole remedies under Thryv. Those remedies are arguably “legal remedies” and therefore, under Jarkesy, now require a jury trial.
Another possible exception are some of the remedies ordered against unions that violate the duty of fair representation or unions that cause discrimination against employees in violation of Section 8(b)(2) of the NLRA. The remedies ordered in cases like these are arguably “legal” remedies and therefore, under Jarkesy, now require a jury trial.
Loper Bright Enterprises v. Raimondo, 22-451 (Supreme Court)
This Supreme Court case concerns the validity of a rule promulgated by the National Marine Fisheries Service (NMFS) requiring Atlantic herring fishermen to pay for observers onboard their vessels. The case hinges on whether the Magnuson-Stevens Fishery Conservation and Management Act (MSA) authorizes this cost-shifting measure.
The lower courts, applying the Chevron doctrine, upheld the rule by deferring to the NMFS's interpretation that the MSA implicitly grants them the authority to require industry-funded observers.
The Supreme Court, in a 6-3 decision, overruled the Chevron deference doctrine, holding that it is incompatible with the Administrative Procedure Act (APA).
Legal Analysis
The Chevron deference standard was articulated as follows:
First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute . . . Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.
In this case, the court reverts back to Skidmore deference, which is articulated in Loper Bright as follows:
For those reasons, delegating ultimate interpretive authority to agencies is simply not necessary to ensure that the resolution of statutory ambiguities is well informed by subject matter expertise. The better presumption is therefore that Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the Executive Branch. And to the extent that Congress and the Executive Branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute.
So courts are now instructed to no longer give “deference” to agency interpretations of ambiguous statutes, but instead to give “respect” to agency interpretations of ambiguous statutes. Linguistically, “respect” is less strong than “deference” and so it is assumed that at least some rules will now be struck down under Loper Bright that would not have been struck down under Chevron, though it’s unclear how big that difference really will be.
Applicability to the NLRB
In my view, the NLRB has never really received much deference from the courts and its efforts at rulemaking are regularly dashed, despite Chevron. Just this year, a federal court blocked the implementation of the NLRB’s joint-employer rule, for example.
Starbucks Corporation, JD(SF)-18-24, 31-CA-299074 (ALJ Decision)
This decision by Administrative Law Judge Gerald Michael Etchingham addresses allegations that Starbucks violated the National Labor Relations Act in response to union organizing efforts at its Barstow, California stores. The key findings and legal analysis are:
Starbucks violated Section 8(a)(1) by implementing, maintaining and threatening to discipline employees under its "Marking and Calling Customer Orders" rule. Applying Stericycle, Inc., 372 NLRB No. 113 (2023), the ALJ found the rule had a reasonable tendency to chill employees' Section 7 rights and Starbucks failed to show it advanced a legitimate business interest.
Starbucks violated Section 8(a)(1) by maintaining overly broad Social Media policies. Applying Stericycle, the ALJ found these rules could reasonably be interpreted to restrict protected activities.
Starbucks did not violate Section 8(a)(1) or (3) by issuing employee Travis Hiett a final written warning for crude and inappropriate postings on a Discord server he created. Specifically, Hiett made what appeared to be a joke about OnlyFans on a Discord server that included 30 to 40 Starbucks employees, including at least a couple of employees below the age of 18. Applying a "totality of the circumstances" test from Richmond District Neighborhood Center, 361 NLRB 833 (2014), the ALJ found Hiett's conduct lost the Act's protection due to its egregious nature, particularly given the involvement of teenage and minor employees.
Key cases
Stericycle, Inc., 372 NLRB No. 113 (2023) - Established a new test for analyzing workplace rules that potentially interfere with employees' Section 7 rights.
Richmond District Neighborhood Center, 361 NLRB 833 (2014) - Applied a "totality of the circumstances" test to determine if social media conduct loses NLRA protection.
RUSH Construction, 12-CA-317256 (Advice Memo)
This advice memo from the General Counsel of the National Labor Relations Board (NLRB) concerns a non-compete agreement contained within a Shareholder Agreement of RUSH Construction, Inc. The memo concludes that the non-compete agreement, as applied in this case, does not violate the National Labor Relations Act (NLRA) and thus the NLRB Region should dismiss the allegation.
The memo focuses on the potential chilling effect of non-compete agreements on employee rights under Section 7 of the NLRA, as outlined in General Counsel Memorandum 23-08 (GC 23-08). GC 23-08 expresses concern about non-compete agreements that are used by employers to "obtain or keep their jobs, or as part of severance agreements" (GC 23-08 at 1). Such agreements are treated as "work rules" that can infringe on employees' Section 7 rights.
The memo distinguishes the current case from the concerns raised in GC 23-08 based on the following facts:
Voluntary Shareholder Program: The employee was not required to become a shareholder to maintain employment, and the program was not part of their compensation package. Participation was voluntary.
Lack of Coercion: There is no evidence that the Employer encouraged all eligible employees to participate in the shareholder program, and at least one individual chose to sell their shares back to the Employer.
CPC Parts Delivery, 31-CA-310487 (Advice Memo)
This memo addresses the Employer's complaints to the NLRB about Union counsel's communication with employees in the petitioned-for unit. The General Counsel advises the Region to dismiss the charge, concluding that the Employer's actions do not constitute a violation of Section 8(a)(1) of the National Labor Relations Act (NLRA).
Legal Analysis:
The memo focuses on whether the Employer's actions, including a motion to postpone the pre-election hearing and ethics complaints to the Inspector General and the Division of Operations Management, interfered with the employees' Section 7 rights to communicate with Union counsel. The memo addresses this question using the following legal arguments:
No Interference with Employee Rights: The memo argues that the Employer's actions did not actually interfere with the employees' ability to communicate with Union counsel. While the Employer filed a motion to postpone the hearing and made ethics complaints, these actions occurred after Union counsel had already met with the employees, and the hearing ultimately proceeded without any significant delay.
No Chilling Effect on Employee Testimony: There is no evidence to suggest that the Employer's actions chilled or coerced the testimony of any employee. The Regional Director denied the motion to postpone, and the Associate General Counsel found no misconduct under Section 102.177.
Importance of Agency Procedures: The memo highlights that finding a Section 8(a)(1) violation for resorting to Agency procedures for misconduct allegations would significantly hamper the Office of the Inspector General and the Division of Operations Management's ability to fulfill their mandates.
No Precedent for Finding a Violation: There is no precedent for finding a motion to postpone an R-case hearing to violate Section 8(a)(1), and the memo argues that the NLRB is a self-contained administrative agency with its own procedures for addressing such complaints.
Range Generation Next, LLC, 12-UC-303278 (Regional Election Decision)
This decision by NLRB Regional Director David Cohen dismisses a unit clarification petition filed by IBEW Local 2088 seeking to accrete approximately 19 system administrators into an existing bargaining unit of technicians at Range Generation Next, LLC. Under the Board’s accretion doctrine, workers can sometimes be added to an existing bargaining unit without an election or showing of majority support provided those workers have recently undergone a substantial change in their job duties that would place them in the existing unit and those employees share an overwhelming community of interest with the existing unit.
The Regional Director found insufficient evidence of recent substantial change to the system administrator classification and that they did not share an overwhelming community of interest with the technicians. Key factors against accretion included separate supervision, lack of interchange, different skills/education, and historical exclusion from the unit.
The decision also found insufficient evidence to determine if system administrators were professional employees under Section 2(12) of the Act, which would have precluded their inclusion without an election.
Key cases:
Bethlehem Steel Corp., 329 NLRB 243 (1999) - Established that unit clarification is inappropriate for historically excluded classifications without recent substantial change.
Safeway Stores, 256 NLRB 918 (1981) - Set forth the standard for valid accretions.
Frontier Telephone of Rochester, Inc., 344 NLRB 1270 (2005) - Emphasized importance of interchange and supervision in accretion cases.
Leedom v. Kyne, 358 U.S. 184 (1958): Professional employees cannot be included in a unit with nonprofessionals unless they vote in favor of inclusion
Akima Global Services, 12-RC-341538 (Regional Election Decision)
This NLRB Regional Election Decision concerns a representation petition filed by Federal Contractors United of Puerto Rico (FCUPR) seeking to represent a unit of detention officers employed by Akima Global Services, LLC at U.S. Immigration and Customs Enforcement facilities in Puerto Rico. This unit is currently represented by an incumbent union, Union de Profesionales de la Seguridad Privada de Puerto Rico, which intervened in the case seeking to prevent FCUPR from representing the unit.
The incumbent union challenged FCUPR’s status as a labor organization. But the Regional Director found that FCUPR is a statutory labor organization based on its president's testimony that it was formed to represent guard employees in collective bargaining with the employer regarding working conditions, grievances, and labor disputes.
The incumbent union also argued that FCUPR was barred from seeking to represent the unit by the successor bar doctrine. The successor bar doctrine applies when a successor employer continues the predecessor's business operations, a majority of the successor's employees were employed by the predecessor, and the successor has abided by its legal obligation to recognize the incumbent union. According to this doctrine, the incumbent union must be provided a reasonable bargaining period of 6 months to 1 year to bargain an initial contract.
The Regional Director found that the successor bar doctrine did not apply. Akima Global Services, LLC had entered into a "Bridge Agreement" with the incumbent union that adopted the terms of the collective bargaining agreement between the incumbent union and the predecessor employer, MVM, Inc. This agreement was considered the "first contract" between Akima and the incumbent union, meaning that the successor bargaining period had already completed. The incumbent union could have conceivably argued that the existence of this agreement meant there is a contract bar preventing FCUPR from seeking to represent the unit. But it did not do so.
Underwater Mechanix Services, LLC, 12-RC-339854 (Regional Election Decision)
This decision by NLRB Regional Director David Cohen directs an election for a unit of divers and dive supervisors employed by Underwater Mechanix Services, LLC in Jacksonville, Florida. The key legal analysis includes:
The Regional Director found that the petitioner, Deep6 Divers Union Corp, is a labor organization under Section 2(5) of the NLRA.
The RD rejected the employer's claim that dive supervisors are statutory supervisors under Section 2(11) of the NLRA, finding insufficient evidence they possess any of the supervisory indicia with independent judgment.
The RD found the petitioned-for unit of divers and dive supervisors appropriate, applying the community of interest test from American Steel Construction, Inc., 372 NLRB No. 23 (2022).
The RD directed a manual election rather than mail ballot.
Key Cases
East Dayton Tool & Die Company, 194 NLRB 266 (1971) - Held that an incipient union formed to represent employees is a statutory labor organization under Section 2(5).
Oakwood Healthcare, Inc., 348 NLRB 686 (2006) - Clarified the test for determining supervisory status under Section 2(11) of the NLRA.
Airco, Inc., 273 NLRB 348 (1984) - Established a presumption that plant-wide units are appropriate, with the burden on the employer to show otherwise.
San Diego Gas & Electric, 325 NLRB 1143 (1998) - Set forth factors for Regional Directors to consider in determining whether to conduct a mail ballot election.
New York Ice Cream Inc., 04-RD-334350 (Regional Election Decision)
This regional election decision concerns a decertification petition filed by Kale Mulugeta, seeking to remove UNITE HERE Local 274 as the bargaining representative for a unit of employees at New York Ice Cream Inc. The Union opposes the petition, arguing Mulugeta is ineligible to vote due to her supervisory/managerial status, or her lack of a bargaining unit position. The Union also seeks to exclude three other employees, Jasim Uddin, Ali Jahed, and Mohammed Ahamed, from the unit based on similar arguments.
Findings and Decision:
Mulugeta, Uddin, Jahed, and Ahamed are not Supervisors: The Regional Director found insufficient evidence to support the Union's argument that these employees meet the definition of "supervisor" under Section 2(11). Specifically, the record lacked evidence of their authority to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, discipline, or adjust grievances.
Mulugeta, Uddin, Jahed, and Ahamed are not Managerial Employees: The Union failed to meet its burden of proof in establishing that these employees were managerial. The Union relied primarily on job titles and access to the POS system, which are not sufficient to demonstrate actual authority to formulate and effectuate employer policy.
Mulugeta is not a Confidential Employee: The Union argued that Mulugeta was confidential because she acted as Henderson's personal assistant and had access to confidential information related to labor relations. However, the evidence did not establish that Mulugeta was entrusted with labor relations decisions or information before it was communicated to the employees or the Union.
Mulugeta is not an Agent of the Employer: While Mulugeta served as a translator for Ethiopian employees, the record lacked evidence showing that employees reasonably believed she spoke for and acted on behalf of management. She did not regularly communicate management directives or act as a conduit for production priorities.
Hearing Officer's Rulings are Affirmed: The Regional Director upheld the Hearing Officer's decision to exclude the complete set of video files without audio and deny the Union's request for a continuance. She found that the video evidence without audio did not establish that Mulugeta was a confidential employee, and the Union acknowledged that further review of the videos would not change the content.
Mulugeta is a Bargaining Unit Employee: The Union argued that Mulugeta should be excluded from the unit because she was not a "true working" shift lead, but the Regional Director found insufficient evidence to support this claim. The video evidence and witness testimony indicated that she was performing shift lead duties, even if those duties were not identical to those performed by other shift leads.
Key Legal Principles Applied:
Supervisory Status under Section 2(11) of the NLRA: The Board applies a strict interpretation of "supervisor" under the Act, requiring the individual to possess authority in at least one of the listed supervisory functions, exercised independently and in the interest of the employer (Oakwood Healthcare, Inc., 348 NLRB 686 (2006)).
Managerial Employees: Though not expressly excluded by the Act, employees with "formulate and effectuate high-level employer policies" or "discretion in their jobs independent of the employer’s established policy" are considered managerial and excluded from bargaining units (Republican Co., 361 NLRB 93 (2014)).
Confidential Employees: Employees are deemed confidential under two tests: (1) they assist individuals formulating and effectuating management policies in labor relations (B.F. Goodrich Co., 115 NLRB 722 (1956)) or (2) they have regular access to information concerning anticipated changes resulting from collective bargaining negotiations (Pullman Standard Division of Pullman, Inc. 214 NLRB 762 (1974)).
Apparent Authority/Agency: The Board examines whether a third party (employee) would reasonably believe an individual is acting as an agent for the employer, based on the principal's manifestation to the third party and the employee's perception of the individual's authority (New England Confectionery Co., 356 NLRB 432 (2010)).