NLRB Applied Wrong Test In Finding Benefit Discrimination to Violate the NLRA: Third Circuit

Practical Law Legal Update 3-611-2165 (Approx. 6 pages)

NLRB Applied Wrong Test In Finding Benefit Discrimination to Violate the NLRA: Third Circuit

by Practical Law Labor & Employment

Background

The employer operated a rehabilitation and nursing facility in New Jersey. In January 2012, a union filed a petition with the NLRB to unionize a portion of the employer's workers. Following an election in March in which the employees voted for the union, the employer filed objections, and the union filed a ULP charge alleging that the employer violated Section 8(a)(1) and (3) of the NLRA by:

Withholding benefits from election-eligible employees. Several days prior to the election, the employer announced improvements to its health plan applicable only to employees not eligible to vote in the upcoming election. When election-eligible employees questioned whether they would also be eligible for these benefits, the employer informed them that their benefits could not be negotiated at that time because "right now you are in a critical period with the Union."
Engaging in three coercive interrogations of election-eligible employees.
Creating an unlawful impression of surveillance.

An ALJ found that the employer committed ULPs on the first two allegations. On appeal, the NLRB ruled that the employer committed ULPs on all three allegations. The employer appealed to the Third Circuit.

Outcome

On the allegation that the employer's withholding of benefits to election-eligible employees violated the NLRA, the Third Circuit noted that:

Courts afford deference to the NLRB's interpretation of the NLRA as long as it is rational and consistent (NLRB v. Curtin Matheson Scientific, Inc., 494 U.S. 775 (1990)).
Employers commit a ULP in violation of the NLRA when they:
- "interfere with, restrain or coerce employees in the exercise of" their NLRA rights (29 U.S.C. § 158(a)(1)); and
- discriminate regarding employment terms and conditions "to encourage or discourage membership in any labor organization" (29 U.S.C. § 158(a)(3)).
Discrimination in violation of Section 8(a)(3) usually depends on whether the employer had an antiunion purpose or motive, but proof of such a motive is unnecessary when:
- the employer's conduct is "inherently destructive" of important employee rights; or
- the employer's conduct could have adversely affected employee rights to some extent, and the employer fails to establish that it was motivated by legitimate business objectives (Hudson Transit Lines, 429 F.2d 1223 (3d Cir. 1970)).

The Third Circuit found that the NLRB:

Failed to properly analyze the benefit withholding issue.
Applied an incorrect "but for" test asking whether the election-eligible employees would have received the improved health insurance benefits but for the union's presence.
Should have instead made findings on:
- the nature of the effect the employer's withholding of benefits had on the election-eligible employees; and
- the reason the employer treated the election-eligible employees differently.

The Third Circuit vacated the NLRB's decision on the benefit withholding issue, finding that:

Discrimination against employees in violation of Section 8(a)(3) depends on whether the employer's conduct:
- was inherently destructive of important employee rights; or
- fell short of being inherently destructive of important employee rights.
Conduct that is inherently destructive of important employee rights presumes the employer had an unlawful motive and thus violates Section 8(a)(3).
Conduct that is not inherently destructive of important employee rights places the burden on the employer to provide evidence that it had a legitimate and substantial business justification for its conduct.
If the employer meets its burden to show it had a legitimate business justification, a union or the NLRB must present "specific evidence" that the employer intended to discourage union membership (NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 33 (1967)).

The Third Circuit remanded the issue of the employer withholding benefits, directing the NLRB to apply the above test. The court affirmed the NLRB on the remainder of the union's alleged ULPs, finding that the employer violated Section 8(a)(1) by:

Coercively interrogating one of its employees about whether the employee:
- had signed a union card; and
- knew of any election-eligible employees who were involved in the union or who had passed out union cards. (Bourne v. NLRB, 332 F.2d 47 (2d Cir. 1964); Graham Architectural Prods. Corp. v. NLRB, 697 F.2d 534 (3d Cir. 1983)).
Creating an unlawful impression of surveillance with various statements made to employees showing the employer had sources of information about employees' union-related activities (Hanlon & Wilson Co. v. NLRB, 738 F.2d 606 (3d Cir. 1984)).

Practical Implications

The Third Circuit's decision in 800 River Road Operating Co. LLC lays out the test the NLRB should apply when addressing alleged violations of Section 8(a)(3). In light of that test, it is critical for employers to make sure there is proof of a legitimate business justification for any differential treatment among employees with respect to benefits or other terms and conditions of employment to establish that the employer was motivated by legitimate objectives rather than antiunion animus.

Update:

On April 26, 2018, the Board, on remand from the Third Circuit:

Affirmed the Board's prior finding that the employer violated Sections 8(a)(1) and 8(a)(3) of the NLRA when it withheld benefit improvements from those election-eligible employees while intending to grant improvements to other employees.
Accepted the Third Circuit's opinion as law of the case.
Applied the analytical framework established by the US Supreme Court to determine whether the employer was in violation of those provisions (Great Dane, 388 U.S. at 33-34).
Found that:
- the employer's activity constituted discriminatory conduct that could have adversely affected employee rights;
- it was undisputed that the employer would have extended the benefit improvements to the election-eligible employees if not for their protected activity;
- the foreseeable effect of the employer's conduct was to discourage the exercise of Section 7 rights by punishing employees for their union support and to warn them against jeopardizing their benefits by engaging in organizational activity; and
- the employer failed to carry the burden of showing (or even asserting) that its conduct was motivated by substantial and legitimate business objectives, so it was unnecessary to determine whether independent evidence of improper motivation existed in the record (see NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 380 (1967)).

(Woodcrest Health Care Ctr., 366 N.L.R.B. No. 70 (Apr. 26, 2018).)

Update: On August 6, 2019, the Third Circuit, on application for enforcement and cross-petition for review:

Held that the Board properly found the employer in violation of the FLSA.
Enforced the Board's order and denied the employer's petition for review.

( (3d Cir. Aug. 6, 2019).)

NLRB Applied Wrong Test In Finding Benefit Discrimination to Violate the NLRA: Third Circuit | Practical Law