Labor & Employment Law Daily NLRB must explain why ‘clear and unmistakable waiver’ standard applied to unilateral contract terms
Thursday, May 31, 2018

NLRB must explain why ‘clear and unmistakable waiver’ standard applied to unilateral contract terms

By Lisa Milam, J.D.

In finding that a successor employer unlawfully laid off union workers without first notifying their union and providing it a chance to bargain over the terms and effects of the layoff, the NLRB did not sufficiently justify its use of the “clear and unmistakable waiver” standard in rejecting the company’s contention that a handbook provision reserving the employer’s right to “implement” layoffs relieved the employer of its statutory duty to engage in effects bargaining. Remanding the case for a second time—here, for further explanation of how the waiver standard could be applied where the union had no chance to bargain in the first place—the D.C. Circuit otherwise denied the employer’s petition for review of the Board’s order (Tramont Manufacturing, LLC v. NLRB, May 29, 2018, Tatel, D.).

The employer in this case was a Burns successor—a point of law established in an earlier go-round before the appeals court. It had laid off 12 employees without first notifying their union, or giving the union an opportunity to bargain over severance pay, preferential hiring, or other terms for the displaced bargaining unit members. Under Board precedent, the NLRA requires employers to engage in “effects” bargaining when carrying out a layoff of union-represented employees. In this case, though, a provision in the employee handbook expressly reserved the employer’s right to “implement” layoffs and to establish the procedures for doing so. It was settled at this point that the employer had lawfully adopted this provision as an initial term of employment when it hired the workers (and set initial terms and conditions rather than adopt the predecessor’s CBA). But the parties disputed whether this clause, which was silent as to the effects of implementing such a layoff, relieved the company of its duty to engage in effects bargaining.

Which standard applied? The ALJ in the underlying Board proceeding considered two distinct legal standards for resolving the issue. Under the “contract coverage” standard—adopted by the D.C. Circuit but “long eschewed” by the Board itself—an employer is not required to bargain over any subject covered by a CBA; the theory is that the CBA reflects the final outcome of give-and-take negotiations between employer and union and, as such, must be enforced “in a way that respects the bargain struck.” But the parties did not negotiate the handbook term at issue here, the ALJ reasoned, so this standard did not apply. Instead, the ALJ applied the “clear and unmistakable waiver” standard favored by the Board. Under this approach, an employer is relieved of its bargaining duty only when a union has made a “clear and unmistakable waiver” of its bargaining rights. Adopting this theory, and noting that the handbook provision at issue was silent as to what notice must be given to the union about layoffs and as to the effects of those layoffs, the ALJ held the provision did not relieve the employer of its bargaining obligation.

In its subsequent order on a previous remand from the D.C. Circuit, the NLRB found the handbook’s layoff provision offered no basis for the employer to avoid its statutory duty to engage in effects bargaining under either standard. There was no justification for applying the contract coverage standard, the Board agreed, since there was no negotiated contract here, only unilaterally imposed contract terms—and “no judicial authority for the proposition that [it] could apply” absent a bargained agreement. As for its own preferred “waiver” standard, again in accord with the ALJ, the Board found the handbook provision contained no clear and unmistakable waiver of the union’s bargaining rights.

Contract coverage standard did not apply. On appeal, the employer argued the Board erred by refusing to construe the layoff provision in the handbook as overriding the employer’s obligation to bargain over the effects of the layoff. First, it argued that the Board was required to apply the contract coverage standard and to find that the layoffs and the effects thereof were “already covered by” the contract (and as such, it had no duty to engage in effects bargaining). The appeals court rejected this initial line of attack, concluding the Board had acted within its “legitimate policy ambit” as the NLRA’s primary interpreter when it refused to apply the contract coverage standard.

The contract coverage standard is premised on the notion that once the parties have reached agreement on a CBA, the union has already exercised its bargaining right. However, “this rationale evaporates” when there is no bargained-for contract but rather, a unilaterally implemented contract provision to which the union never agreed, the appeals court reasoned. In such a case—a case such as this one—”it would be perfectly reasonable for the Board to decide as a policy matter to construe those terms under a standard other than the one that would apply to the terms of a bargained-for agreement,” the appeals court wrote.

No rationale for waiver standard. By that token, though, there was little justification for using the “clear and unmistakable waiver” approach in the context of a unilateral contract either, yet the Board adopted that standard here. “[W]e do not see how employment terms unilaterally imposed by an employer could ever effect a waiver of bargaining rights by the union,” the court said, and remanded seeking further explanation from the Board. “Whatever standard the Board decides should govern the question of how far a Burns successor’s initial employment terms displace the duty to bargain, framing that standard in terms of waiver is far from intuitive; at the very least, it is a choice that the Board must explain.”

The Board might well abandon the waiver standard in the unilateral contract context, the court said, and it could still exercise its discretion to find that “unilaterally imposed employment terms should be narrowly construed and that liability remains appropriate here.” If so, though, the Board had better gird itself for the employer’s argument that doing so would depart from Monterey Newspapers, Inc., a 2001 NLRB decision which held that the NLRA imposes few bargaining obligations on a Burns successor.

Remaining Board order enforced. The appeals court rejected the employer’s additional challenges to the Board’s underlying order, including its assertion that the union had failed to timely invoke its right to engage in effects bargaining by waiting more than a month to request it. But the union was presented “with a fait accompli” at that point, having not received notice of the layoffs until after they were implemented. Also rejected was the employer’s claim that the Board did not have authority to impose a more burdensome remedy than that issued in its prior vacated order, despite having reached the same underlying conclusion.

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