Employer's Withholding of Wage Increase From Union Employees was Discriminatorily Motivated: NLRB

Practical Law Legal Update 3-616-5371 (Approx. 5 pages)

Employer's Withholding of Wage Increase From Union Employees was Discriminatorily Motivated: NLRB

by Practical Law Labor & Employment

Background

In 2005, KAG-West LLC (KAG), a petroleum transport company that does not grant regular wage increases, raised the wages of its drivers by $3 per hour. In 2009, the company lowered wages for most employees and announced that no 2010 wage increases would be given. In February 2010, the union began organizing some of KAG's southern California drivers. On March 16, 2010, KAG's executive vice president e-mailed the company's business unit leader concerning the "situation" in southern California, stating that the CEO wanted to increase pay by late summer if the company was "on more solid footing."

In July 2010, the union filed a petition to represent a group of KAG employees, and after winning an election, was certified on August 25, 2010. In an August 24, 2010 memo, KAG announced an hourly wage increase for its unrepresented employees in a certain region. The announcement was posted or distributed in all nonunion locations in the region, as well as bargaining unit locations in southern California. No wage increase was announced or implemented for the newly union-represented employees.

The ALJ found that:

KAG violated Sections 8(a)(1) and 8(a)(3) when it discriminatorily denied wage increases to its represented employees.
KAG's withholding of wage increases to the represented employees was motivated by the employees' union activity (Wright Line, 251 N.L.R.B. 1083 (1980)).
The testimony of KAG's witnesses that the company's change in plans was due to an improved economic situation should be discredited.
Although under Shell Oil Co. an employer is not required to provide represented employees with the same wages and benefits as unrepresented employees, KAG acted with unlawful motive, making Shell Oil Co. inapplicable (77 N.L.R.B. 1306, 1310 (1948)).

Outcome

In a 2-1 decision, the Board majority (Chairman Pearce and Member Hirozawa) affirmed the ALJ's finding that KAG violated Sections 8(a)(1) and 8(a)(3) of the NLRA by discriminatorily withholding a wage increase from employees because they selected a union as a bargaining representative, while providing a wage increase to unrepresented employees.

The majority noted that the three elements of the Wright Line test are:

The employee engaged in protected activity.
The employer had knowledge of the protected activity.
The employer had animus toward the protected activity.

The majority found that the General Counsel met its initial burden because:

Union activity and employer knowledge were undisputed.
The record supported a finding of antiunion animus in KAG's actions because:
- the timing of KAG's actions strongly supported the finding that its actions were motivated by antiunion animus, particularly the March 16, 2010 e-mail linking the pay increase decision to employee sentiment about the union soon after the employees began organizing and the grant of a wage increase only to unrepresented employees shortly after the union election;
- KAG distributed the August 24, 2010 memo regarding the raise for unrepresented employees at the facilities where the unionized employees worked, but made no announcement regarding plans to bargain over potential increase for the unionized workers; and
- KAG's conduct and communication efforts with the southern California employees decreased substantially after the union election occurred.
KAG did not meet its rebuttal burden under Wright Line, as it provided no evidence to rebut the inference of discriminatory motive.

In dissent, Member Johnson noted that:

It is well established that employers may treat represented and nonrepresented employees differently when implementing new benefits, as long as the disparate treatment is not unlawfully motivated (Shell Oil Co.).
He would dismiss the complaint because the General Counsel failed to meet the initial Wright Line burden of showing that KAG had animus toward the employee's protected activity.
Timing can raise a suspicion of unlawful motivation, but, by itself, is insufficient to satisfy the General Counsel's burden of proof.
The majority was incorrect to base so much of its finding of antiunion animus on the timing of the August 24 letter. In the cases cited by the majority, the Board found animus based on timing, but only in addition to the employers' other unlawful conduct (in which KAG did not engage) (Masland Industries, 311 N.L.R.B. 184, 197 (1993); NLRB v. Rain-Ware, Inc., 732 F.2d 1349, 1354 (7th Cir. 1984)).
The timing of the March e-mail concerning future pay increases was driven not just by the employees' union campaign, but also by KAG's improved economic status and the prediction of improvements to come.
The theory that the timing of the pay adjustment for unrepresented employees was based on antiunion animus is hurt by the fact that the adjustment did not occur until:
- five months after the March 2010 e-mail was sent; and
- after the union election had already occurred.
The majority relied too heavily on the ALJ's credibility determinations, particularly the ALJ's rejection of witness testimony that delaying the pay increase until after the election was based on advice from counsel rather than antiunion animus.

Practical Implications

The Board found that the employer’s withholding of a wage increase for union employees was discriminatorily motivated by antiunion animus. Employers should pay close attention to the timing of their conduct in relation to protected union activity, given the degree of attention the majority gave to the timing of KAG's actions, particularly:

The March 16 e-mail sent soon after the employees began organizing.
The pay increase shortly after the union election.

In addition, employers must be able to show that their actions would have occurred even in the absence of union activity. The dissent noted that an employer may change its intentions concerning wages as the company's economic situation positively or negatively develops, and that the timing of an employer's conduct holds the most weight when tied to other allegedly unlawful behavior.

Employer's Withholding of Wage Increase From Union Employees was Discriminatorily Motivated: NLRB | Practical Law