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.

Preferential Treatment of Minority Workers Is Still Unlawful Workplace Discrimination

November 2014

By: James B. Sherman, Esq.

When people think of workplace discrimination, they imagine an employer that disfavors applicants or employees on the basis of any number of legally prohibited grounds – e.g. race, sex, color, creed, religion, age, disability, etc. However, a recent class action lawsuit brought against household retail giant Bed Bath & Beyond, goes against these conventional notions of discrimination. The complaint accuses Bed Bath & Beyond of giving preferential treatment to its warehouse workers who are young, male and Hispanic. While the lawsuit may ultimately be found by the court to be without merit, the theory on which the plaintiffs base their case holds lessons for employers.

Some may think that giving favored treatment to minorities, or to a particular minority, would not violate workplace discrimination laws but would actually promote the objective of eliminating discrimination against minorities. But favoring any group always has the side effect, whether or not intended, of disfavoring other groups. This point is easy to grasp in the case of younger employees being favored over older individuals. After all, other than in Minnesota (where younger individuals between the age of majority and 40 are equally protected from age discrimination as are persons 40 and older), the age discrimination laws are not aimed at protecting younger individuals. The same can be said of favoring males over females – it is clearly gender discrimination.

But in a case such as that against Bed Bath & Beyond where it is also alleged that Hispanics (a minority) are given preferential treatment over others, if the allegations are proven true, the side effect would be that all other races, genders, persons of other national origins, etc. would necessarily be disfavored or excluded in relation to Hispanics.

In the 1990s the infamous Daniel Lamp case involved the EEOC in Chicago, bringing a class action race discrimination lawsuit against a small manufacturer, whose workforce was comprised of roughly 98% minorities. The problem for the EEOC was that the vast “majority of the minority,” if you will, were Hispanic individuals whereas the demographics of the area leaned more toward an African American populous. At the time, the case of an employer being accused of discrimination when nearly all its employees were “minorities,” was so novel that it received national media coverage on 60 Minutes. All these many years later the Bed Bath & Beyond case seems no less novel, other than its allegation of gender and age bias.

Of course employers rarely go intentionally looking for such troubles when it comes to hiring, etc. However, if not careful they can wind up in the same pickle as Daniel Lamp and Bed Bath & Beyond. For example, imagine that you have two employees and one turns out to be a superstar while the other barely manages to keep from being fired for poor performance. When an opening occurs, if both employees recommend an interested relative or friend, common sense tells you that you prefer more employees who are like your superstar, not your dud. Just as NFL teams all started drafting offensive lineman who looked (and weighed) like the dominant Washington team, famous “hogs,” you look to replicate that superstar employee. This may be perfectly fine unless your ideal employee begins to come from the same age group, gender, race, nationality, etc.

In sum, preferring one group – even a minority group – amounts to unlawful discrimination because it necessarily excludes or disadvantages other, equally protected groups. While few would consciously give preferential treatment to any class of people due to age, race gender, etc., it can sneak up on the unwary.  It is much easier to follow the practice of not treating any class of individuals poorly, than it is not giving preferential treatment to those with whom your experiences have been favorable. The best practice, then, is always to pursue equal treatment.

Female Wal-Mart Employees Again Fail to Sustain Class Action

Undeterred by the 2011 ruling of the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes, another group of that same company’s employees tried bringing a similar class-action lawsuit, this time on behalf of a slightly narrower scope.  In Dukes the plaintiffs’ class-action lawsuit alleged company-wide sex discrimination on behalf of all female employees and former employees, nation-wide.  The Supreme Court in that case dismissed the class action on the grounds that the plaintiffs could not show sufficient “commonality” among such a diverse group of putative plaintiffs, especially where the challenged decisions involved distinct stores and managers.  The plaintiffs in Ladik v. Wal-Mart Stores, Inc., apparently tried to get around the problems encountered by the plaintiffs in Dukes by limiting the scope of their complaint to “Region 14,” which included all female Wal-Mart employees in Wisconsin, Illinois, Indiana and Michigan. Unfortunately for the plaintiffs and their counsel the Seventh Circuit Court of Appeals nixed their class action claims for the same reasons relied on in Dukes.  Although the plaintiffs in this case limited their geographic scope, the court held that they did not overcome any of the obstacles that prevented the plaintiffs in Dukes from proceeding as a class; they did not show that all of the proposed class members shared any common questions of law or fact.

As in Dukes, the plaintiffs in this case complained of a number of practices they claim resulted in lower rates of pay and promotion for female employees than for their male counterparts.  However, disparate results do not necessarily mean that there is a specific discriminatory policy that has negatively affected all of the potential class members.  Even if these women were all discriminated against because of their sex, the court determined that a class-action lawsuit was not the appropriate avenue for them to pursue their claims.