Employer lacked sound basis under CBA to deny severance pay after Air Force contract ended
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Tuesday, March 29, 2016

Employer lacked sound basis under CBA to deny severance pay after Air Force contract ended

By Ronald Miller, J.D. After first finding that the NLRB did not err in asserting jurisdiction over NLRA claims filed by two unions, the Eighth Circuit enforced a Board order requiring an employer to make severance and accrued vacation payments to former employees. The appeals court concluded that the Board did not err in finding that the employer lacked a sound arguable basis for denying severance payments to the employees, making its refusal to do so a violation of the Act. The court remanded the action to the Board for the limited purpose of recalculating severance pay and vacation pay. All other aspects of the Board’s order were enforced (Hallmark-Phoenix 3, LLC v. NLRB, March 24, 2016, Jolly, E.). Severance pay dispute. The employer was a government contractor providing vehicle maintenance services at two Air Force bases in Florida. Its employees were represented by two different unions. The employer entered into collective bargaining agreements with each union. The two CBAs were similar and provided that any employee with more than six months of service credit was entitled to severance pay when involuntarily laid off. However, the employer’s severance obligation was limited if the employee accepted employment with a successor employer. Employees also enjoyed paid vacation and were to be compensated for accrued, unused vacation time upon discharge. Finally, both CBAs required an upward adjustment in pay for certain “lead” employees. After the employer lost its government contracts (the Air Force decided to go in-house with the contracted work), disputes arose regarding severance pay, accrued vacation pay, and other related matters under the CBAs. NLRB recourse sought. Instead of seeking arbitration under the respective CBAs, the unions filed unfair labor charges under the NLRA, charging the employer with bad-faith bargaining by unilaterally modifying the terms of the CBAs. The NLRB ruled largely in favor of the unions, finding that the employer acted unlawfully when it refused to make the disputed payments under the relevant CBAs; included waiver language on employees’ final paychecks without consulting with the unions; and refused to withhold and remit union dues from union members’ final checks. The employer sought review of the Board’s order requiring that it make severance and accrued vacation payments to the former employees. The Broad filed a cross-application for enforcement. NLRB jurisdiction. The Eighth Circuit had to first determine whether the NLRB properly heard this dispute. The employer argued that the Board lacked jurisdiction over the dispute because it was essentially “a contract interpretation matter,” not the subject of an unfair labor practice under the NLRA. However, the appeals court pointed out that the Board has the authority to resolve contractual disputes, including those involving the terms of a CBA, whenever the dispute is necessary to the disposition of an unfair labor practice claim under the NLRA. The failure to abide by the terms of the CBAs may, under certain circumstances, constitute a unilateral contract modification under Section 8(d) of the Act, which, in turn, is an “unfair labor practice” under Sec. 8(a). Moreover, the appeals court rejected the employer’s contention that the Board abused its discretion in refusing to defer to arbitration procedures established under the CBAs. Here, the Board declined to defer to arbitration because the employer was not willing to allow an arbitrator to address the merits of the unions’ NLRA claims. The employer refused to waive timeliness issues regarding the unions’ grievances. Accordingly, the Board did not err in asserting jurisdiction over the unions’ NLRA claims. “Sound arguable basis.” The appeals court next turned to whether the NLRB erred in finding that the employer committed unfair labor practices. Specifically, the Board concluded that the employer made unlawful unilateral modifications to the CBAs. When assessing an unfair labor practice charge based on a unilateral CBA modification, the Board applies the “sound arguable basis” standard. Here, it determined that the employer lacked a sound arguable basis for refusing to make the severance payments, and that its refusal thus constituted a unilateral contract modification under Section 8(d). The Board further found that the employer lacked a sound arguable basis for refusing to pay accrued vacation time, including a $1.50 per hour “lead pay” wage differential for those workers designated as “lead employees.” “Laid off” or “terminated”? The employer first argued that the employees were not entitled to severance pay because they were “terminated,” not “laid off.” The CBAs did not define the term “laid off.” However, the employer argued that a “layoff” is inherently temporary, but its employees have permanently lost their jobs due to insourcing, and so were “terminated” instead. The Board did not err in finding that the purported distinction between “laid off” and “terminated” employees lacked a sound arguable basis. In its common usage, the term “layoff” is interchangeable with “termination,” as both can be used to refer to the permanent loss of employment, and there was no language in the CBAs that supplanted the terms’ common and overlapping definitions. Not a “work stoppage.” The employer also argued that certain employees were not entitled to severance pay since they lost their jobs because of a “strike or work stoppage resulting in the inability to maintain normal operations.” However, as the Board rightly found, the employer lacked a sound arguable basis for its contention that the Air Force’s cancellation of the contract was a “work stoppage.” In the context of both federal labor law and common usage, “strike” and “work stoppage” mainly refer to an employee-initiated halt of normal business activity. The CBA provided no basis for expanding the definition of “work stoppage” to include the loss of a contract. Employer conduct. Finally, the reasonableness of the employer’s severance-related arguments was called into question by its own actions. Prior to a hearing before the ALJ, the employer accepted funds from the Air Force to pay its former employees’ severance. It received those funds only after unconditionally stating to the Air Force that, under the terms of the CBAs, the company was required to make the contested severance payments. The employer’s inconsistent interpretations of the CBAs’ severance provisions was further reason for finding that it lacked a sound arguable basis for denying severance payments to its employees.

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