NLRB Gone Wild: Redefining Joint Employers, Confidentiality of Investigations, and Arbitration Agreements with Class Action Waivers

November 2015

The NLRB has been making headlines time and again for its radical departures from years of precedent, impacting unionized and non-union employers alike, from expanding the definition of who will be considered a “joint employer” to limiting employers’ ability to keep their investigations confidential, to preventing employers from entering into arbitration agreements with their employees that require settling disputes individually. The following are just some of the recent drastic actions taken by the NLRB and what they mean for employers.  

NLRB Expands Definition of “Joint Employer”: In a departure from its own decades-old precedent, the NLRB has redefined—with a much broader definition—who will be considered a “joint employer.” Under this new standard, it is sufficient that the employer has the right to control the terms and conditions of employment, even if the employer does not actually exercise that right. Further, this control can be exercised indirectly, such as through an intermediary. The Board’s newly articulated definition leaves its judges wide latitude to determine whether two business entities are “joint employers” based on theoretical hypotheses of potential control, rather than any demonstrated control as was required under past precedent.

What does this mean for employers? No doubt more employers will be considered as joint employers for purposes of collective bargaining, joint liability for unfair labor practices and breaches of collective bargaining agreements, and economic pressure, such as strikes, pickets, and boycotts.

NLRB Inhibits Employers’ Ability to Keep Investigations Confidential: In two separate decisions, the NLRB eroded the ability of employers to keep internal investigations of employee conduct, etc. confidential. In one decision, the NLRB reversed its long-standing precedent that an employer usually needn’t oblige a request that it share witness statements with a union representative. The new standard now, is that witness statements must be provided to a union upon request, unless the employer can demonstrate “a legitimate and substantial confidentiality interest” by showing that the “witness[es] need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is need to prevent a cover up.” Even where an employer meets this high burden the NLRB will weigh the employer’s confidentiality interest against the union’s need for the information.

In the second, related decision the NLRB held that a general policy in an employee handbook or work rule requiring confidentiality in investigations, violates employees’ “Section 7 rights” to “engage in . . . concerted activities for the purpose of . . . mutual aid or protection . . . .” Specifically implicated in this case is the right of employees to discuss potential discipline among themselves and/or with a union or other representative. Under the new rule an employer may not maintain a broad policy, but may require confidentiality only on a case-by-case basis where it can show that “corruption of its investigation would likely occur without confidentiality.” Examples cited in the Board’s decision include circumstances where “witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, [or] there is a need to prevent a cover up.”

NLRB Continues to Invalidate Arbitral Class Action Waivers: The NLRB has continued to apply its controversial holding that arbitration agreements that waive the right to engage in class actions are illegal and unenforceable under the National Labor Relations Act. The Board’s rather questionable rationale, which thankfully has yet to be adopted by any court on appeal, essentially treats the right of employees to bring class-action lawsuits the same as the right to join together in a strike. In other words, suing is just another form of “concerted activity” protected by federal labor law.

The growing number of employers using arbitration agreements that require employees to pursue grievances individually and therefore prohibit class grievances, now face the NLRB declaring their agreements unlawful. The issue seems destined for ultimate determination by the U.S. Supreme Court.

For assistance with these or other NLRB issues, contact Jim Sherman (jasherman@wesselssherman.com)  in our Minneapolis office at (952) 756-1700.