Micro-unit of Macy's Cosmetics Employees is Appropriate under Specialty Healthcare: NLRB | Practical Law

Micro-unit of Macy's Cosmetics Employees is Appropriate under Specialty Healthcare: NLRB | Practical Law

In Macy's, Inc., the National Labor Relations Board (NLRB) affirmed the Regional Director's finding that under Specialty Healthcare, a petitioned-for unit consisting of 41 employees from the cosmetics and fragrances department of a Macy's department store in Saugus, Massachusetts was appropriate because it is comprised of a readily identifiable group of employees who share a community of interest. The NLRB held that Macy's, which was arguing that other store employees or at least other selling employees in the store should be in the unit, failed to show that those other employees share an overwhelming community of interest with the employees in the petitioned-for unit.

Micro-unit of Macy's Cosmetics Employees is Appropriate under Specialty Healthcare: NLRB

by Practical Law Labor & Employment
Published on 29 Jul 2014 • USA (National/Federal)
In Macy's, Inc., the National Labor Relations Board (NLRB) affirmed the Regional Director's finding that under Specialty Healthcare, a petitioned-for unit consisting of 41 employees from the cosmetics and fragrances department of a Macy's department store in Saugus, Massachusetts was appropriate because it is comprised of a readily identifiable group of employees who share a community of interest. The NLRB held that Macy's, which was arguing that other store employees or at least other selling employees in the store should be in the unit, failed to show that those other employees share an overwhelming community of interest with the employees in the petitioned-for unit.
On July 22, 2014, in Macy's, Inc. (Local 1445, United Food & Commercial Workers Union), the panel (Board) heading the NLRB's election and judicial functions in a 2-1 split decision affirmed an acting regional director's finding that under Specialty Healthcare & Rehabilitation Center of Mobile, 357 N.L.R.B. slip op. 83 (Aug. 26, 2011), a petitioned-for unit consisting of 41 employees in the cosmetics and fragrances departments of a Macy's department store in Saugus, Massachusetts, was appropriate because the petitioned-for unit was comprised of a readily identifiable group of employees who share a community of interest.
The majority also held that Macy's, which was arguing that other store employees or at least other selling employees in the store should be in the unit, failed to show that those other employees share an overwhelming community of interest with the employees in the petitioned-for unit.
(361 N.L.R.B. slip op. 4 (July 22, 2014).)

Background

Local 1445 of the United Food and Commercial Workers Union petitioned the NLRB for an election, seeking to represent a bargaining unit comprised of all 41 full-time, part-time and on-call employees employed in the cosmetics and fragrances department of Macy's in Saugus. Of the 41 employees, eight are counter managers, seven are on-call employees and the remaining employees are cosmetics or fragrances beauty advisors. There was no history of collective bargaining at the Saugus Macy's store.
On November 8, 2012, the Regional Rirector issued a Decision and Direction of Election in which he found that the petitioned-for departmental unit of cosmetics and fragrances employees was appropriate.
Applying Specialty Healthcare, the Regional Director found that the petitioned-for unit:
  • Is readily identifiable as a group.
  • Shares a community of interest because:
    • its employees work in one of two distinct areas of the store;
    • its employees work in one of two job classifications (beauty advisor and counter manager); and
    • cosmetics beauty advisors can substitute for one another.
  • Was not a "fractured" unit because it tracks a departmental line drawn by Macy's, and this departmental line was further reflected by differences between the employees in the petitioned-for unit and other sales employees.
The Regional Director then found that:
  • There are meaningful differences between the petitioned-for employees and other selling employees.
  • The petitioned-for employees are paid, hired and trained differently, use more client lists, are part of their own department and not functionally integrated with other sales employees, are subject to a different supervisory structure, have little contact or exchange with other selling employees and wear distinctive uniforms.
  • These differences distinguished this case from Wheeling Island Gaming, 355 N.L.R.B. 637 (2010), cited by Macy's.
  • Macy's did not established that they share an overwhelming community of interest.
  • Even before Specialty Healthcare the petitioned-for unit would have been appropriate.
  • Even if the collective bargaining history in other Macy's stores were relevant, it was ambiguous and nonbinding.
Macy's filed a timely request for review contending that the smallest appropriate unit must include all employees at the Saugus store or, in the alternative, all selling employees at the store. The union opposed that petition. On December 4, 2012, the Board granted Macy's request for review. Macy's, the union and several amici curiae filed briefs on review.
Macy's contended that the only appropriate unit would be a storewide unit, or else a unit of all selling employees, because:
  • The petitioned-for unit is not an appropriate bargaining unit, even under Specialty Healthcare because the employees in the petitioned-for unit:
    • are not "readily identifiable as a group"; and
    • do not share a community of interest.
  • Even if the petitioned-for employees are readily identifiable as a group and share a community of interest, they share an overwhelming community of interest with selling employees in other sales departments. If they stood alone, they would be a "fractured" unit.
  • Under Wheeling Island Gaming, the differences between the petitioned-for employees and other selling employees are too minor for the petitioned-for unit to be appropriate.
Separately, Macy's asserted that:
  • Under Board precedent concerning the retail industry:
    • a storewide unit is presumptively appropriate;
    • although the Board has deviated from this general presumption to occasionally approve of units of selling employees, it has never "approved a unit which departs from the storewide presumption as dramatically as the unit sought here"; and
    • by deviating from the storewide presumption, the Regional Director essentially allowed the extent of organization to control his decision, in violation of Section 9(c)(5) of the NLRA.
  • The Board should overrule Specialty Healthcare because applying it to the retail industry will:
    • allow "a proliferation of micro-units" based solely on the product sold by employees; and
    • lead to "competitive" bargaining among these micro-units in the same store, potentially leading to "chaos and disruption of business."
The union argued that the Regional Director's decision should be affirmed because:
  • The parties have treated cosmetics employees separately from other selling employees at other unionized stores.
  • The employees in the petitioned-for unit are:
    • readily identifiable as a group;
    • share a community of interest; and
    • share no "significant" community of interest with employees in other departments.
  • As the petitioned-for unit tracks an employer-created departmental line, finding it appropriate would not be out of step with pre-Specialty Healthcare cases involving retail department stores.
  • Decisions since Specialty Healthcare have followed the historic trend of Board decisions finding less than a wall-to-wall unit appropriate.
The amici curiae in this case argued that the Board should overrule Specialty Healthcare.

Outcome

The Board majority (Chairman Pearce and Members Schiffer and Member Hirozawa, with Member Hirozawa concurring and writing separately) affirmed the Regional Director's finding that under Specialty Healthcare, the petitioned-for unit is appropriate because:
  • The petitioned-for unit consists of a readily identifiable group of employees who share a community of interest.
  • Macy's has not met its burden of demonstrating that the other selling and nonselling employees it sought to include in the petitioned-for unit share an overwhelming community of interest with the petitioned-for employees.
The Board found that the cosmetics and fragrances employees are a readily identifiable group and share a community of interest because:
  • The employees in the petitioned-for unit all perform the function of selling cosmetics and fragrances at the Saugus store. They are readily identifiable based on classifications and that function (Northrop Grumman Shipbuilding, Inc., 357 N.L.R.B. slip op. 163, at 3 (Dec. 30, 2011)).
  • The petitioned-for unit is coextensive with a departmental line that Macy's drew.
  • The petitioned-for unit is a primary selling department, not a sub-department within a primary selling department.
  • Under Specialty Healthcare, the petitioned-for employees also share a community of interest, as they all:
    • work in the same selling department;
    • perform their functions in two connected, defined work areas;
    • are directly supervised by the same manager;
    • perform work with a shared purpose and functional integration;
    • have limited regular contact with other employees; and
    • receive the same benefits and salary on a base-plus-commission basis and are subject to the same policies.
  • Although the cosmetics and fragrances department is split between two floors, the two areas that house the department are connected by a bank of escalators. A petitioned-for unit is not rendered inappropriate simply because the petitioned-for employees work on different floors of the same facility (D.V. Displays Corp., 134 N.L.R.B. 568, 569 (1961)).
  • Although on-call employees earn a slightly smaller commission than beauty advisors and counter managers, minor differences in compensation among petitioned-for employees do not render a petitioned-for unit inappropriate (Hotel Service Group, 328 N.L.R.B. 116 (1999)).
Other employees, in particular other selling employees, do not share an overwhelming community of interest with cosmetics and fragrances employees because:
  • Macy's distinguished the employees in the petitioned-for unit from other selling employees, for example by:
  • The record does not support a finding that there was regular or significant contact between the petitioned-for employees and other selling employees.
  • The record does not show significant interchange between the petitioned-for employees and other selling employees. Nine permanent transfers over a two-year period do not establish significant interchange, particularly in this relatively large unit of 41 employees. All but one of those transfers were into the petitioned-for unit, and the sole transfer out was to a supervisory position. Temporary interchange is infrequent, limited and one-way, for example:
    • cosmetics and fragrances employees are never asked to sell in other departments;
    • other selling employees are never asked to sell in the cosmetics and fragrances department;
    • there is no indication that the employees in the petitioned-for unit assist other departments with inventory;
    • there is no evidence that other selling employees assist the cosmetics and fragrances department employees with inventory; and
    • other selling employees might be expected to assist customers at a temporarily unattended cosmetics or fragrances counter, but this occurs no more than sporadically.
  • Macy's failed to show that the employees in the petitioned-for unit and all other selling employees are functionally integrated. The case that Macy's relied on, Wheeling Island Gaming, was inapposite. There, the Board found significant functional integration between poker dealers and other table games dealers because they were "integral elements of the Employer's gaming operation," as reflected in common second-level supervision (355 N.L.R.B. 637, 642 (2010)). However, the significance of functional integration is reduced where, as here, there is limited interaction between the employees in the petitioned-for unit and those that the employer seeks to add. The Board has emphasized this point in two recent cases applying Specialty Healthcare:
Finally, in response to the dissent, the majority attempted to harmonize Specialty Healthcare with the Board's retail industry precedent favoring storewide or so called "wall-to-wall" bargaining units. The majority noted that:
  • The line of precedent setting out unit determination considerations specific to the retail industry remain relevant and complement the Specialty Healthcare analysis.
  • The Board has referred to a "presumptively appropriate" storewide unit when a petitioner seeks a unit limited to only certain employees at a retail department store (see for example, Sears, Roebuck & Co., 184 N.L.R.B. 343, 346 (1970); G. Fox & Co., 155 N.L.R.B. 1080, 1081 (1965)). However, the Board has made clear that if there ever was a presumption that "only a unit of all employees" is appropriate, it is "no longer applicable to department stores." (Saks Fifth Avenue, 247 N.L.R.B. 1047, 1051 (1980).)
  • The modern trend among Board decisions from the retail industry has been to weaken the presumption that store-wide units are appropriate.
  • Applying Specialty Healthcare to this petitioned-for unit is not, as Macy's argues, directly contrary or otherwise inconsistent with current retail industry precedent. Both the modern retail industry and Specialty Healthcare standards are concerned with ensuring that employees in the petitioned-for unit:
    • are separately identifiable;
    • share a community of interest; and
    • are also sufficiently distinct from other employees.
Member Miscimarra dissented, arguing that:
  • The facts establish that a petitioned-for bargaining unit limited to department store salespeople who sell cosmetics and fragrances is not appropriate under any standard.
  • This case illustrates the frailties of the Specialty Healthcare standard regarding what constitutes an appropriate bargaining unit.
  • The outcome of this case departs from the Board's long-held retail industry standards that ostensibly were left undisturbed by Specialty Healthcare.
  • Specialty Healthcare affords too much deference to the petitioned-for unit in derogation of the mandatory role that Congress requires the Board to play when making bargaining-unit determinations.
  • Macy's, like other retailers, operates a store that involves an array of products and brands and salespeople. The record reveals that all salespeople storewide have the same or similar:
    • working conditions;
    • employment policies;
    • job responsibilities;
    • performance criteria;
    • benefit plans; and
    • commission and compensation arrangements.
  • To the extent that cosmetics and fragrances salespeople are dissimilar from other salespeople in the same store, there are comparable dissimilarities among and between subsets of the cosmetics and fragrances employees themselves.
  • If a unit limited to cosmetics and fragrances salespeople is deemed appropriate, additional separate bargaining units for other segments of sales personnel at the same store are more likely to form. The resulting multiplicity of bargaining relationships would create even more complexity that would be at odds with Macy's overriding business objective to attract and retain customers.
  • The smallest potential appropriate unit would consist of all salespeople storewide. Anything else is inconsistent with the Board's traditional standards governing retail operations.
  • The Specialty Healthcare standard, as applied in the instant case, highlights important shortcomings that render Specialty Healthcare inappropriate and contrary to the NLRA.

Practical Implications

When the Board issued Specialty Healthcare, employers fearing the proliferation of micro-units hoped that the Board majority meant it when it said that the decision was not intended to disturb rules developed by the Board regarding particular industries. This decision makes it clear that, regardless of the Board's intentions, Specialty Healthcare eviscerates or will soon eviscerate long-standing unit determination presumptions.
Unions will likely be encouraged by this decision to organize small bargaining units, getting footholds in large organizations. They will likely hope to leverage employers' concerns and fears about managing multitudes of collective bargaining relationships and CBAs with small bargaining units for:
  • Voluntary recognition of the union as the representative of other employees without election proceedings.
  • Concessions in bargaining to avoid whipsaw strikes.
Employers in the retail industry that want to avoid micro-units despite Specialty Healthcare may consider:
  • Cross-training employees to work in each of the store's departments.
  • Permitting sales employees to cross-sell in different departments.
  • Permitting and encouraging employees to:
    • assist in inventory and other tasks across departments;
    • interact with employees in other departments;
    • transfer between departments
  • Consolidating second-level management of employees from multiple departments.
  • Reducing the number of walls that physically separate employees from each other based on the classifications of products they tend to sell.
Employers in all industries should understand from this decision and other Specialty Healthcare progeny, that:
  • It will be difficult to challenge the appropriateness of a small bargaining unit that a union seeks to represent.
  • The current Board majority considers all of its bargaining-unit determination precedents mere preludes to the Specialty Healthcare standard.
Update: On June 2, 2016, in Macy's, Inc. v. NLRB, the US Court of Appeals for the Fifth Circuit granted the Board's cross-application for enforcement and denied Macy's petition for review, holding that the Board reasonably concluded the unit of cosmetics and fragrances employees at the Saugus store was appropriate because Macy's failed:
  • To establish that the unit is clearly not appropriate.
  • To demonstrate that the Board abused its discretion by articulating and applying the overwhelming community of interest test.
( (5th Cir. June 2, 2016)).