2 NLRB Rulings On Unilateral Changes Are Bad News For Cos.

Wendt and another decision issued the same day, Tecnocap LLC,[3] are notable because they narrowly constrain the past-practice defense and make relying on it legally fraught for employers.

This article traces how we got here and offers suggestions for how employers should proceed going forward.

How We Got Here

The National Labor Relations Act requires unionized employers to bargain over wages, hours and other terms and conditions of employment.

In other words, those employers may not change mandatory bargaining subjects without first alerting the union and giving it an opportunity to negotiate.

Before the NLRB issued its 2016 decision in E.I. DuPont de Nemours & Co.,[4] employers generally understood that notice and bargaining were not required if the employers' challenged action comported with their established past practice.

The reason? By continuing a past practice, the employers were not changing employment terms and conditions. So, bargaining was unnecessary.

DuPont significantly broadened what constituted a change that required notice and the opportunity to bargain.

Under that decision, no matter how firmly entrenched a past practice might be, repeating it was a change that required bargaining if the management-rights clause or other contract provision authorizing the action had expired or if the employer's action involved discretion.

That more stringent standard increased leverage for unions during collective bargaining.

With it, they could slow negotiations to forestall employers from making critical workplace changes, such as across-the-board wage and health and welfare plan revisions, even if the workers reasonably anticipated, based on prior employer conduct, and desired them.

In Raytheon, decided the year after the board decided DuPont, the board overruled DuPont as "fundamentally flawed," "inconsistent" with the NLRA and at odds with the "long-understood, commonsense understanding of what constitutes a 'change.'"

DuPont, the Raytheon board declared, made no sense.

"When changing existing law, the Board should first endeavor to do no harm: we should be vigilant to avoid doing violence to undisputed, decades-old principles that are clear, widely understood, and easy to apply." In DuPont, the majority ignored this advice by taking a well-known term that ... most people understand — the word change — and instead of simply comparing what the employer did now to what it did in the past, set forth a standard under which the Board would have been required to embark on a detailed examination of past contracts going back years, perhaps decades, to determine what contracts were in effect at what times, what employer actions occurred when, whether past actions were taken pursuant to a management-rights clause or other contractual waiver language, and possibly whether the past actions predated the earliest contract.

According to Raytheon, the past-practice analysis is straightforward: Employers must provide notice and the opportunity to bargain before they change employment terms and conditions.

Bargaining is not required if no change has occurred. And, if an employer's unilateral conduct doesn't materially differ from what it has done in the past, there has been no change, and the employer's unilateral actions don't violate the NLRA.

The Raytheon standard returned bargaining leverage to employers.

It allowed them, pending negotiations for a new or follow-on contract, to implement changes consistent with past practice, forcing unions to make concessions at the bargaining table or resort to economic measures if the unions wished to undo them.

The Wendt and Tecnocap Rulings

Two months ago, the NLRB reversed course again.

In Wendt, the board held that allowing employers to justify unilateral changes as a past practice generally is inconsistent with precedent and to the NLRA's policy favoring collective bargaining.

Thus, the board announced yet another new standard. The past-practice defense applies only if the employer proves that its challenged action satisfies two conditions.

First, the employer's conduct must be consistent with a practice that occurred with such regularity and frequency that employees could reasonably expect the practice to continue or reoccur on a regular and consistent basis.

According to the board, "[t]he paradigmatic showing of regularity and frequency sufficient to establish the past-practice defense is an annually recurring event over a significant period of years."

An event need not occur annually to satisfy the regularity and frequency requirements. But, the further the event strays from annualized or similarly recurring, the less likely it is that the board will conclude it meets those tests.

Also, the challenged action must not be informed by a large measure of discretion.

What is key here is whether the unilateral change is fixed by an established formula containing variables beyond the employer's immediate influence and results from nondiscretionary standards and guidelines. Think annual fixed-percentage, profit-sharing bonuses.

The new standard, according to Wendt, is a heavy one that the board will narrowly construe.

Wendt also reaffirmed a principle that wasn't at issue in Raytheon: An employer may never defend a unilateral change based on a past practice developed before the affected employees chose a collective bargaining representative.

For nearly 50 years, the Board consistently has held that an employer's preunion past practice of making unilateral changes cannot privilege the employer to continue to make such changes after employees have chosen a union to represent them in collective bargaining with the employer. 

Permitting the employer to act unilaterally in those circumstances is antithetical to Section 8(a)(5), which imposes on employers the duty to bargain with the representatives of their employees, and to the policies of the Act, which aims to "encourag[e] the practice and procedure of collective bargaining."

In Tecnocap, the board overruled an aspect of Raytheon that Wendt didn't address.

Tecnocap held, contrary to Raytheon, that an employer may never justify unilateral changes based on a past practice predicated on an expired management-rights or other contract clause that authorizes the employer to act unilaterally.

The board explained that the former rule harmed collective bargaining by forcing unions to bargain to regain employment terms lost to post-expiration unilateral changes and discouraging unions from agreeing to management-rights clauses in the first place.

What This Means for Employers

Wendt and Tecnocap are bad news for employers.

• They shift bargaining leverage to unions that, by slowing negotiations, can forestall employers from making critical workplace changes, even if employees reasonably anticipated, based on prior employer conduct, and desired them.
• They preclude employers from relying on past practices that involved a large measure of discretion, weren't sufficiently regular and frequent, were predicated on an expired collective bargaining agreement, or were implemented before their employees unionized.
• Additionally, those decisions apply retroactively. Thus, employers that have relied on Raytheon may be hauled before the board and evaluated under a much less forgiving standard.

In short, this is a fraught area through which employers should tread carefully. There are, however, some steps that employers should consider going forward.

Employers negotiating their first contract with a newly recognized union should maintain the status quo.

Any material changes those employers implement, absent the union's consent or an overall good faith bargaining impasse, will expose them to an unfair labor practice charge that likely will be difficult to defend.

While a union contract is in place, employers should make no unilateral changes based on past practice unless the practice is formulaic, like a fixed-percentage profit-sharing bonus, and the employer has followed it for years.

During the hiatus between contracts, employers should make no unilateral changes predicated upon expired contract provisions that authorized the employer to act unilaterally.

Also, during collective bargaining, employers should press for waivers to act unilaterally that survive the contract's expiration.

To prevent unions from using the negotiations to forestall wage and benefit enhancements for the broader workforce, employers should consider negotiating separate wage and benefit packages for the bargaining unit.

This article was originally published on Law360. (Subscription required)
 

[1] Wendt Corporation, 372 NLRB No. 135 (2023).

[2] Raytheon Network Centric Systems, 365 NLRB No. 161 (2017).

[3] Tecnocap, LLC, 372 NLRB No. 136 (2023).

[4] E.I. DuPont de Nemours, 364 NLRB No. 113 (2016).