Obama Board Reaffirms Successor’s Right to Set Initial Terms of Employment when Taking Over Unionized Operation

By  Gerald T. Hathaway or Shavaun Adams Taylor

Last week, the National Labor Relations Board issued a refreshingly employer-friendly decision which allowed a successor company to implement new pay terms without having to first bargain with the labor union. In Paragon Systems, Inc., 362 NLRB No. 182 (2015), a divided three-member Board panel held that the new guard service, Paragon Systems, Inc. (Paragon), had given sufficient notice to employees of a change in pay and therefore could assert its right to unilaterally set the initial terms and conditions of employment when it assumed a federal contract from the predecessor employer, MVM, whose work force was represented by The Federal Contract Guards of America International Union.

A Successor Can Make Unilateral Changes

In 2011, the Board reinstated the “successor bar” doctrine, where a union is presumed to retain its majority status when the employees it represents are hired to work for a successor employer. UGL UNICCO Service Co., 357 NLRB 76 (2011). This decision overturned MV Transportation, 337 NLRB 770 (2002) in which the Bush Board had refused to impose a successor bar in favor of the employees’ right to free choice of a union representative.

Paragon was deemed a successor because the majority of its work force was made up of former MVM guards. Paragon conceded that it was a successor and in fact, agreed to recognize and bargain with the union. However, without first consulting with the union, Paragon implemented employee pay terms that were different from what its predecessor had in place. Specifically, Paragon reduced the amount of paid “guard mount” time – time spent getting and returning weapons and ammunition – from 30 minutes to 10 minutes per day and discontinued paying for “guard mount” time on weekends.

The union filed an unfair labor practice charge against Paragon which was dismissed by the Administrative Law Judge.

On appeal, the union and the NLRB’s general counsel argued that Paragon as a successor violated Section 8(a)(5) and (1) when it unilaterally made changes to the pay terms. In analyzing the case, the Board stated that “a ‘successor’ employer under NLRB v. Burns International Security Services, 406 U.S. 272 (1972), and Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987), is free to set initial employment terms without first bargaining with an incumbent union, unless ‘it is perfectly clear that the new employer plans to retain all of the employees in the unit,’ in which case ‘it will be appropriate to have him initially consult with the employees’ bargaining representative before he fixes terms.’” Paragon Systems, Inc., 362 NLRB. No. 182, slip op. at p. 2 (quoting Burns at 294-295). The Board went on to state that “[o]nce a Burns successor has set initial terms and conditions of employment, however, a bargaining obligation attaches with respect to any subsequent changes to terms and conditions of employment.” Id. In other words, once the successor has established the initial terms, it cannot make any unilateral changes to employment terms without first bargaining with the union.

The Board held that it was undisputed that Paragon was a Burns successor and had properly implemented the initial terms and conditions of employment when it started operations. Accordingly, the Board held that Paragon did not violate the Act when it made unilateral changes to the pay terms that had been in place under the prior employer’s agreement.

Effective Notice to Employees Is Critical

The key issue in this decision was not whether the successor had the right to implement its initial terms and conditions upon becoming the new employer, but the sufficiency of the notice given to employees regarding the change in pay terms. The majority found that Paragon provided adequate notice to employees that there may be a change in such terms. Specifically, prior to taking over the contract, Paragon announced that it had the right to establish compensation, benefits and working conditions; its job applications specifically advised applicants that employees would have to conform to all Paragon policies and reiterated Paragon’s right to set compensation, benefits and other terms and conditions of employment; and Paragon specifically informed applicants that shift schedules would be set in accordance with the operational needs of the contract being serviced by Paragon.

Taken together, these statements were found by the Board to have made clear to employees that Paragon was not adopting MVM’s practice regarding paid guard mount time. Additionally, the implementation of these pay changes occurred on the first day that Paragon assumed operations. The Board majority concluded that the change in pay was within Paragon’s right to set initial terms and conditions of employment.

The sole dissenting Board member argued not that the successor was prohibited from setting the initial terms and conditions of employment, but that the implementation of this change was unlawful because Paragon had not provided specific notice of the specific change. The dissent noted that none of Paragon’s prior statements and communications to employees specifically addressed paid guard mount time.

Moreover, noted the dissent, even if Paragon’s general statements regarding its right to establish compensation, benefits and other working conditions were broad enough to cover the guard mount pay, the fact that Paragon provided detailed information in the contingent offer letter regarding many of the changes in wages and benefits, but was silent regarding guard mount time, reasonably conveyed to employees that no change would be made to such pay.

Practical Takeaways

This decision is good news for potential buyers of businesses, and other employers who are deemed to be successor employers of unionized operations having union contracts, because it reaffirms a successor’s right to make unilateral changes to the initial terms and conditions of employment upon commencement of operations (so long it is not “perfectly clear” that the successor intends to follow the existing agreement – a doctrine beyond the scope of this alert, as the “perfectly clear” doctrine is anything but perfectly clear).

In order to make such changes lawfully, however, the successor must make certain to provide adequate notice about the changes to employees. Notice will be deemed adequate if the successor communicates that it has the right to establish wages, benefits, and working conditions and provides enough general detail about the terms that may be subject to change. A cautious employer should be as specific as it can be when setting initial terms and conditions.

What Are Your Company’s Wage & Hour Risks?

Wage & Hour class actions are being filed at a pace that dwarfs almost all other types of litigation. With a myriad of federal and state laws and regulation, employers not only need to take steps to minimize the risk of a suit, but also must be prepared to defend themselves. Launch the brief video below to hear how Labor and Employment Group partners Cheryl Orr and Stephanie Gournis are helping employers involved in employment class actions, as well as helping companies to minimize the risk of litigation.

 

Wage-and-Hour

 

No More No-Gossip Policies?

A National Labor Relations Board (NLRB) administrative law judge ruled recently that the “no-gossip” policy of Laurus Technical Institute, a for-profit technical school located in Georgia, broke federal law because it was overly broad, ambiguous and restricted employees from discussing or complaining about any terms and/or conditions of employment, even though nothing in Laurus’s policy directly addressed discussions about wages, hours or other employment terms and conditions.

Kate Gold, partner in the Los Angeles office, recently told Human Resource Executive Online during an interview on the topic of the Laurus decision and no-gossip policies for employers, “Though the NLRB has been focused on other policies that could violate an employee’s right to engage in protected concerted activity — such as social media or confidentiality policies — no-gossip policies can be especially problematic.”

Kate went on to say “I would not include it among the top 10 or even the top 20 essential policies an employer should include in a handbook or policy manual, such as an at-will, anti-harassment or reasonable accommodation policy. However, given the type of concern raised by a no-gossip policy, there could be other employer policies that are problematic for the same reasons. The issue raised by an overbroad no-gossip policy is whether it constitutes an unlawful restriction on an employee’s right to engage in protected concerted activity under Section 7 of the National Labor Relations Act.”

For the full text of the article click here.

President Obama Signs Two Executive Orders to Limit Workplace Discrimination

On April 8, 2014, at an event commemorating National Equal Pay Day (an annual public awareness event that aims to draw attention to the gender wage gap), President Obama signed two executive orders designed to limit workplace discrimination.  The first prohibits federal contractors from retaliating against workers who discuss their salaries with one another, while the second instructs the Department of Labor to establish new regulations requiring federal contractors to submit summary data on compensation paid to their employees, including breaking down the data by gender and race.

The protections offered by the anti-retaliation Order overlap with many already existing under state and federal law.  For example, the NLRA protects employees’ right to engage in “concerted activities” and thus already prohibits employer discipline against employees who discuss their wages.  Further, some state laws, such as California Labor Code §232, already preclude an employer from disciplining an employee who discloses the amount of his or her wages.  Nonetheless, the Order may add to these protections, such as by expanding them to management employees (who are not protected by the NLRA), and providing an alternative option for bringing retaliation claims (i.e., through the Office of Federal Contract Compliance Programs rather than the NLRB).

The effects of the Order requiring the collection of compensation data will be unclear until the regulations themselves are formulated.  Based on the Order’s mandate to “avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data” and to develop regulations that “minimize, to the extent possible, the burden on Federal contractors and subcontractors,” it is possible that the federal government will require that the data be submitted along with a federal contractors’ annual EEO-1 Report.

The President’s signing of these Orders appears to tie into the White House’s previously announced plans to accelerate change in areas it believes are within the authority of the Executive Branch, without the need for legislation.  Indeed, the Orders’ provisions mirror parts of the Paycheck Fairness Act (“PFA”), a proposed piece of legislation that would add procedural protections to the EPA and the FLSA to address male–female income disparity.  (The PFA came up for a vote in the U.S. Senate on April 9, 2014, where it was blocked by a Republican filibuster).  Similarly, in February 2014, President Obama issued an Order raising the minimum wage for federal contractors, at a time when Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) were urging a bill to raise the federal minimum wage to $10.10 per hour and index it to inflation.  Then, in March 2014, President Obama directed the Labor Department to revamp regulations governing which types of employees business may classify as overtime-exempt “executives” or “professionals.”  With regard to the Order requiring the collection of compensation data, the OFCCP has been working internally on releasing a proposed compensation data collection tool for the past three years.  See http://www.dol.gov/ofccp/Presentation/Compensation_Data_Collection_Tool.htm (publicizing the OFCCP’s August 10, 2011 Advance Notice of Proposed Rulemaking regarding a new compensation data collection tool).

The high profile nature of the Orders provides yet another impetus for employers to evaluate their existing policies, and plan for the future.

Are College Football Players on Scholarships “Employees?” An NLRB Regional Director Says “Yes”

By: Mark D. Nelson

On March 26, 2014, the National Labor Relations Board’s Regional Director (RD) in Chicago ruled that Northwestern University’s football players who receive scholarships are “employees” under the National Labor Relations Act and have the right to form a union.   The potential implications of this ruling are significant.  If the decision is not overturned by the National Labor Relations Board (NLRB) or a federal court, every private college and university in the country that has scholarship athletes could face the unionization of athletes in sports that generate significant revenue.  Public universities could also be affected under state labor laws.

The RD found that the university, through the football program, exerts significant control over the football players.  During the six-week training camp immediately before the season, athletes are given daily itineraries that dictate football-related activities for that day.  During training camp, the players spend between 50 and 60 hours every week engaged in football-related activities.  In season, the players spend between 40 and 50 hours per week in practice, travel and playing games.  The coaching staff sets all of the details for away games and the activities of the players throughout the trip.  During the off season, players are expected to spend 12 to 25 hours of work on football activities.  In addition, the players must follow rules set by the coaching staff, including regulations concerning personal conduct, alcohol and tobacco use, and internet conduct and protocol.

The economics of college football played a large part in the RD’s decision.  From 2003-2012, the football program generated almost $235 million in revenue for the university through ticket sales, TV deals, merchandise and licensing agreements.  For their football services, the players receive tuition, fees, books, and room and board for up to five years.  These benefits have a monetary value up to $76,000 per year and $380,000 over five years.  The players do not receive a paycheck, but the RD found that the players “nevertheless receive a substantial economic benefit for playing football.”  Another significant fact was that each season the players had to sign a “tender” for their scholarships, which the RD determined to be “an employment contract.”  According to the RD, “it is clear that the scholarships that players receive are in exchange for the athletic services being performed” since the scholarships are tied to the players’ athletic performance; the scholarships can be revoked if players quit the team or violate team rules.  On the other hand, the RD found that walk-on players were not employees because they do not receive scholarships or any other economic benefit from the school.

Northwestern can appeal this decision to the NLRB in Washington D.C. and the legal battle could go on for several years.  In the meantime, the RD will schedule an election for the scholarship football players to vote on being represented by the College Athletes Players Association (CAPA).

Among the several questions/issues raised by this decision are:

Would scholarship athletes in sports that generate little or no revenue be considered employees?

As employees, are the football players entitled to minimum wage and overtime pay?

Are they covered by the Occupational Safety and Health Act and other employment-related laws?

Will this decision impact college graduate assistants, who are not employees under current NLRB law?

This unprecedented ruling is consistent with other recent Labor Board decisions establishing new law or reversing long-standing decisions, which make the National Labor Relations Act more favorable to labor unions.  This agenda is unlikely to change in the near future.

Firing Employees Who Don’t Get Flu Shots: What Risks Do Hospitals Face?

By: Mark D. Nelson

As hospitals continue to see an onslaught of flu patients, they also face challenges to flu vaccination policies designed to reduce the spread of flu to patients and fellow employees.  Hospitals are understandably concerned with protecting patients, visitors and employees from contracting the flu and the potentially serious consequences to the health of elderly and infant patients.  However, protecting patients against flu can create legal liability when employees are disciplined, discharged or suffer other adverse action because they do not get a flu shot.

Employment Considerations for Flu Vaccination Policies—The National Labor Relations Act

What limitations exist on a hospital’s ability to create and implement a flu/other vaccination policy?  Under the National Labor Relations Act, a flu vaccination policy is a mandatory subject of bargaining.  This means that unionized hospitals cannot unilaterally implement such a policy without first giving the union notice of the intended policy and bargain over the policy if the union requests to do so.

A hospital does not have to bargain if the union has “clearly and unmistakably” waived its right to bargain over the issue.  A waiver is typically found in the “Management Rights” clause, which was the case in a recent National Labor Relations Board (NLRB; the Board) decision, Virginia Mason Medical Center, 358 NLRB No. 64 (2012), where the Board found a clear and unmistakable waiver in the Management Rights clause.  That clause stated, in relevant part, that the Medical Center has the right to “operate and manage the Hospital, including but not limited to the right to require standards of performance and…to direct the nurses…to determine the materials and equipment to be used; to implement improved operational methods and procedures…to discipline, demote or discharge nurses for just cause…and to promulgate rules, regulations and personnel policies….”

The Union representing the Medical Center’s registered nurses filed an unfair labor practice charge with the Board and a hearing was held before an NLRB Administrative Law Judge (ALJ).  The ALJ ruled, and the Board agreed, that the Management Rights clause did not specifically mention wearing facemasks (which the flu policy required in certain areas for non-immunized nurses), but it did “specifically allow the Hospital to unilaterally ‘direct the nurses’ and ‘determine the materials and equipment to be used’ [as well as] implement improved operational methods and procedure.’”  The ALJ noted that the Hospital had several infection control policies that required nurses to wear masks under various circumstances, and found that requiring non-immunized nurses to wear masks was within the Hospital’s authority to “determine the materials and equipment to be used [and] implement improved operational methods and procedures.”

With properly crafted language in a Management Rights clause or elsewhere in a collective bargaining agreement, a unionized hospital has the right to unilaterally implement a new flu vaccination policy or modify an existing policy.

Employment Considerations for Flu Vaccination Policies—Disability and Religious Discrimination

Hospitals, of course, have reached different decisions on how to balance the interests of patients and employees. As such, policies vary in the flexibility given to employees regarding non-vaccination and the resulting consequences:

    • Vaccination encouraged but not mandated
    • Vaccination mandated with exemptions for medical contraindication, religious beliefs (discipline/other adverse consequences for non-exempted employees)
    • Vaccination mandated and masking required for medical contraindication, religious beliefs (discipline/other adverse consequences for failure to be vaccinated or wear mask, as applicable)
    • Vaccination required (discipline/other adverse consequences for non-compliance)

Flu vaccination policies also differ regarding applicability.  Some policies apply only to employees who come into direct contact with patients.  At the other end of the continuum, the policy applies to all employees, independent contractors, students, interns, vendors and others who provide services inside the hospital.

Union and non-union hospitals should consider the potential for discrimination claims based on a flu vaccination policy that requires any group of employees to get a flu shot or face adverse consequences (such as discharge) if they fail to do so for any reason.  The Equal Employment Opportunity Commission (EEOC) would likely find such a policy to be unlawful.  The EEOC has taken the position in its “Pandemic Preparedness in the Workplace and the Americans with Disabilities Act” guidance that

“[a]n employee may be entitled to an exemption from a mandatory vaccination requirement based on an ADA disability that prevents him from taking the influenza vaccine. This would be a reasonable accommodation barring undue hardship (significant difficulty or expense). Similarly, under Title VII of the Civil Rights Act of 1964, once an employer receives notice that an employee’s sincerely held religious belief, practice, or observance prevents him from taking the influenza vaccine, the employer must provide a reasonable accommodation unless it would pose an undue hardship as defined by Title VII (“more than de minimis cost” to the operation of the employer’s business, which is a lower standard than under the ADA).”

http://www.eeoc.gov/facts/pandemic_flu.html– 48k – 2009-10-21

A federal district court in Ohio refused to dismiss a complaint by a registered nurse alleging religious discrimination because she was fired for refusing to comply with the hospital’s mandatory flu vaccination policy.  Chenzira v. Cincinnati Children’s Medical Center, S.D. Ohio, No. 1:11-cv-00917 (12/27/12).   The employee’s refusal was based on her “religious beliefs” in veganism. The court rejected the hospital’s argument that her veganism was merely a “social philosophy or dietary preference.”  According to the court, it was plausible the employee could show that she held her belief in veganism with the same sincerity as traditional religious beliefs.  However, this case is far from over.  The court noted that its ruling on the motion to dismiss “in no way addresses what it anticipates as the hospital’s justification for its termination of the employee — the safety of patients at Children’s Hospital.”

Not all refusals to get a flu shot are based on medical or religious reasons.  A hospital in northern Indiana fired seven employees who refused to get flu shots.  One oncology nurse who was fired said it was “a personal thing.”  The nurse said she gets other vaccinations but it should be her choice whether she gets the flu vaccine.  She said she opposes “the injustice of being forced to put something in [her] body.”  Absent a violation of applicable state law, it is doubtful this employee would have a claim against the hospital for her termination.

Considerations in Creating a Flu Vaccination Policy

Current CDC guidelines do not require hospitals to mandate flu vaccination in any form; the CDC recommends active encouragement of employees to get a flu shot.  However, some hospitals believe it is appropriate to do more to try to protect vulnerable patients from catching the flu in the hospital and then suffering severe health consequences.  These hospitals mandate that at least some groups of employees must be vaccinated.  ”

Terminating or taking other adverse action against an employee who cannot get the vaccine because of a disability (as defined in the Americans with Disabilities Act and/or applicable state law) exposes a hospital to meaningful risk of a discrimination lawsuit.  The same is true for employees who raise a “religious objection.”

Hospitals should evaluate such refusals on a case-by-case basis and explore possible reasonable accommodations of the employees’ refusal to get vaccinated, and the policy should so inform employees. Possible reasonable accommodations could be exempting the employee from the policy entirely, transferring the employee to another position temporarily (until the flu threat ends as determined by local health officials) or permitting the employee to wear a mask when in proximity to patients and coworkers.  From my perspective as a former hospital board chairman, this approach presents a balancing of the hospital’s interest in protecting patients from flu exposure while protecting the legal rights of certain employees who decline to get vaccinated.  In the final analysis, many hospitals believe that risk of harm to patients may trump an individual’s right to refuse when flu epidemics are declared.

Editor’s Note: See our coverage on this topic for non-health care employers here.