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NLRB's Finding of Unlawful Retaliatory Lawsuit Lacked Substantial Evidence: Sixth Circuit
Practical Law Legal Update 1-547-8166 (Approx. 4 pages)
NLRB's Finding of Unlawful Retaliatory Lawsuit Lacked Substantial Evidence: Sixth Circuit
by Practical Law Labor & Employment
| Published on 05 Nov 2013 • USA (National/Federal) |
In NLRB v. Allied Mechanical Services, Inc., the US Court of Appeals for the Sixth Circuit denied enforcement of a National Labor Relations Board (NLRB) order, holding that substantial evidence did not support the NLRB's conclusion that an employer committed an unfair labor practice (ULP) by filing a baseless retaliatory lawsuit against several unions.
In an October 30, 2013 opinion in NLRB v. Allied Mechanical Services, Inc., the US Court of Appeals for the Sixth Circuit refused to enforce an NLRB order, holding that substantial evidence did not support the NLRB's conclusion that the employer committed an unfair labor practice (ULP) by filing a baseless and retaliatory lawsuit against several unions.
Background
In Allied Mechanical Services, Inc. the panel which heads the NLRB's judicial functions (Board) affirmed in a 2-1 decision (Member Hayes dissenting) that an employer's lawsuit against unions was a ULP because it met both parts of the Bill Johnson's Restaurants, Inc. v. NLRB test, as refined by BE&K Construction Co. v. NLRB and other cases (see Legal Update, NLRB Sets Factors to Assess Employer Motive for Lawsuits Alleged to Interfere with Protected Rights). The Board held that the employer lacked a reasonable basis for its lawsuit and had retaliated against the unions for engaging in activities protected by Section 7 of the NLRA. The NLRB petitioned for enforcement and the employer cross-petitioned for review of the Board's order in the Sixth Circuit.
Outcome
In a 2-1 opinion, the Sixth Circuit rejected the Board's decision for lack of substantial evidence, denied enforcement of the Board's order and granted the employer's cross-petition for review. The majority held that the employer's lawsuit, although unsuccessful, was not so objectively and subjectively baseless as to warrant a ULP finding.
The majority:
- Declined to defer to the Board's factual findings and conclusions about the scope of the employer's First Amendment right to petition courts in this case. The majority reviewed the record de novo, reasoning that the case centered on issues on which the court had more expertise, specifically:
- the employer's likelihood of success in federal court;
- the objective merit of the employer's claim in federal court; and
- the employer's First Amendment right to bring suit.
- Noted that the employer had reason to believe some of its claims could succeed on their merits, including its claim of an illegal secondary boycott. A US district court narrowly construed prohibited secondary activity aimed at coercing a party to cease "doing business" when it dismissed the employer's secondary boycott claim.
- Found that although there was evidence of the employer's ill will for the unions, there was no evidence that the employer brought its unsuccessful lawsuit solely to impose litigation costs on the unions in retaliation for their exercise of Section 7 rights under the NLRA.
The dissenting Sixth Circuit judge (Daughtrey) objected to the majority's lack of deference to the Board and strongly disagreed that the employer reasonably believed any of the claims had merit. The dissent also pointed to evidence of the employer's retaliatory motive, including testimony indicating threats of retaliation and other anti-union efforts targeting protected activity.
Practical Implications
The Sixth Circuit's decision does not disturb the Board's analysis of ULPs arising from retaliatory lawsuits. However, the decision effectively instructs:
- The NLRB's General Counsel to offer more evidence to fit in the Board's analytical framework.
- The NLRB administrative law judges (ALJs) to develop a more fulsome record regarding allegedly retaliatory lawsuits.
- The Board to remand ALJ decisions about allegedly retaliatory lawsuits where the factual record does not address necessary factors for concluding that lawsuits are purely retaliatory.
In light of the Sixth Circuit's decision, employers should expect the Board to continue to apply the analysis it developed in Allied Mechanical, but require ALJs to make more comprehensive factual findings about retaliatory intent before affirming the ALJs' recommended decisions and orders.