NLRB Lacks Authority to Award Union and Itself Litigation Expenses: DC Circuit | Practical Law

NLRB Lacks Authority to Award Union and Itself Litigation Expenses: DC Circuit | Practical Law

In HTH Corp. v. NLRB, the US Court of Appeals for the District of Columbia Circuit held that the National Labor Relations Board (NLRB) exceeded its authority when it required an employer to pay the litigation fees and expenses of the NLRB and a union, despite the employer's multiple egregious unfair labor practices (ULPs).

NLRB Lacks Authority to Award Union and Itself Litigation Expenses: DC Circuit

Practical Law Legal Update w-002-5175 (Approx. 8 pages)

NLRB Lacks Authority to Award Union and Itself Litigation Expenses: DC Circuit

by Practical Law Labor & Employment
Published on 31 May 2016 • USA (National/Federal)
In HTH Corp. v. NLRB, the US Court of Appeals for the District of Columbia Circuit held that the National Labor Relations Board (NLRB) exceeded its authority when it required an employer to pay the litigation fees and expenses of the NLRB and a union, despite the employer's multiple egregious unfair labor practices (ULPs).
On May 20, 2016, in HTH Corp. v. NLRB, the US Court of Appeals for the District of Columbia Circuit (DC Circuit) held that the NLRB exceeded its authority under the NLRA when it required an employer to pay the litigation fees and expenses of the NLRB and a union, despite the employer's multiple egregious unfair labor practices (ULPs). The DC Circuit also held that the NLRB was within its authority to order the employer to read an NLRB-drafted notice to employees because the NLRB also allowed the employer the option of having an NLRB agent read the notice. ( (May 20, 2016).)

Background

In 2005, the International Longshore and Warehouse Union, Local 142 was certified as the bargaining representative for a group of HTH employees at the Pacific Beach Hotel in Hawaii. Both before and after the certification, HTH engaged in numerous egregious ULPs. The union filed various ULP charges with the NLRB. Ultimately, the NLRB upheld an administrative law judge's (ALJ) decision that the Hotel committed multiple ULPs.
The NLRB approved standard remedies for HTH's ULPs, as well as enhanced remedies for HTH's extreme misconduct. In addition, the NLRB sua sponte ordered unprecedented enhanced remedies and enforcement measures, including:
  • Requiring HTH to pay:
    • the NLRB General Counsel's litigation fees and costs;
    • the union's litigation fees and costs;
    • the union's fees, expenses, and associated per diems for bargaining; and
    • the unspecified non-litigation and non-bargaining union fees and costs associated with HTH's ULPs, including its denial of union representatives' access to its premises.
  • Requiring HTH to have its Regional Vice-President (or alternatively an NLRB agent in the presence of HTH management) read an NLRB-drafted notice at a meeting with full employee attendance required. The notice was required to:
    • state that HTH violated the NLRA; and
    • assure employees in 15 specific ways that HTH would adhere to specified NLRA obligations, remedy specified NLRA breaches, and not violate the NLRA in specified ways.
  • Requiring HTH to:
    • post the notice, the NLRB's Decision and Order, and an Explanation of Rights in the hotel for a period of three consecutive years;
    • mail the notice, NLRB's Decision and Order, and an Explanation of Rights to the homes of supervisors, managers, and both past and present employees, within 14 days.
    • give the notice and the Explanation of Rights to new employees, supervisors, and managers for a period of three consecutive years.
    • publish the notice and Explanation of Rights in two local publications of "broad circulation and local appeal" twice a week for 8 weeks; and
    • allow a "duly-appointed Board agent" to enter the hotel for a period of three years to ensure compliance with the "posting, distribution mailing requirements."
(See HTH Corp., 361 N.L.R.B. No. 65, (Oct. 24, 2014); see Legal Update, NLRB Imposes Landmark Remedies for Employer's Egregious Unfair Labor Practices.)
HTH petitioned the DC Circuit for review of some of the unprecedented enhanced remedies the NLRB imposed. The NLRB cross-applied for enforcement of its order. Because HTH failed to file a motion for reconsideration with the NLRB, the DC Circuit had jurisdiction to address only whether the NLRB had authority to:
  • Order HTH to pay the NLRB General Counsel's and the union's litigation fees and expenses.
  • Mandate the notice-reading.

Outcome

The DC Circuit, in a unanimous ruling (with Judge Williams writing the main opinion and Circuit Judges Rogers and Henderson each issuing concurrences):
  • Granted HTH's petition for review of the NLRB's litigation expenses ruling and denied the NLRB's cross-application for enforcement of its litigation expenses ruling.
  • Granted the NLRB's cross-application for enforcement of the NLRB's notice-reading ruling and denied HTH's petition for review.
  • Declined to address some of HTH's challenges to the NLRB's decision because those challenges were not properly before the court under Section 10(e) of the NLRA (29 U.S.C. § 160(e)).
  • Held that the NLRB:
    • went beyond the authority granted to it under Section 10(c) of the NLRA to remedy ULPs when it required HTH to pay the NLRB's and the union's litigation fees and expenses; and
    • was within its authority to order HTH to read the notice to its employees because the NLRB gave HTH the option of having an NLRB agent read the notice.

Litigation Fees and Expenses Award

The DC Circuit noted that:
  • It had jurisdiction over that challenge to the NLRB's authority because:
  • The NLRB cited its "inherent authority" as the basis for ordering HTH to pay litigation expenses. However, the NLRB, like any administrative agency, has no "inherent authority." Instead, the NLRB's authority is circumscribed by its enabling statute, the NLRA (see Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 374 (1986)).
  • Section 10(c) of the NLRA does not implicitly grant the NLRB authority to award litigation fees (29 U.S.C. § 160(c)).
  • The DC Circuit has held that:
  • The NLRB decided that notwithstanding the DC Circuit's holding in Unbelievable, Inc., the NLRB, like federal courts, has inherent authority "to control and maintain the integrity of its own proceedings" and to shift litigation expenses by applying the bad-faith exception to the American rule. However, the US Supreme Court has:
The DC Circuit rejected the NLRB's bases for awarding itself and the union their litigation expenses, holding that:
  • The NLRB erred in characterizing the litigation expenses award as a compensatory response to the HTH's bad faith. The award was punitive, and the NLRB's characterization of it as compensatory contradicts the "basic underpinning" of the American rule.
  • The award cannot be justified as a deterrent because the Supreme Court has similarly held awards for that purpose to be beyond the NLRB's authority (Republic Steel Corp. v. NLRB, 311 U.S. 7, 12 (1940)).

Notice-Reading

The DC Circuit noted that:
  • It has jurisdiction over HTH's challenge to the notice-reading remedy because:
    • HTH objected to the NLRB that the notice-reading remedy was extraordinary and unwarranted because there had been no showing that traditional remedies were insufficient to address its ULPs; and
    • that objection, however imprecise, implicated issues that showed it called for "special judicial concern" so that Section 10(e) did not bar the court from addressing the issue (Consol. Freightways v. NLRB, 669 F.2d 790, 794 (D.C. Cir. 1981)).
  • The DC Circuit has an evolving history on the notice-reading issue, including decisions:
    • overturning an NLRB order that an employer read a notice to employees while leaving the door open to such a remedy in situations involving an employer's "extreme" conduct (although noting that "forced public reading" was "incompatible with the democratic principles of the dignity of man") (International Union of Electrical, Radio & Machine Workers v. NLRB, 383 F.2d 230 (D.C. Cir. 1967) (IUE));
    • recognizing that notice-reading is sometimes necessary for management to reassure employees that unlawful practices will be ending but striking a portion of the NLRB's order specifying a named individual in management to read the NLRB's order to employees (Teamsters Local 115 v. NLRB, 640 F.2d 392 (DC Cir. 1981); and
    • taking it for granted that notice-reading was a legitimate remedy, stating that Teamsters Local 115 had "superseded" IUE (even though Teamsters Local 115 was not decided by an en banc panel), and approving a requirement that a particular individual, the employer's president, read the NLRB's mandated notice amid then-Judge Ruth Bader Ginsburg's dissent that the president be given the option of allowing a "responsible officer" to read the notice "on his behalf" (Conair Corp. v. NLRB, 721 F.2d 1355 (D.C. Cir. 1983)).
  • Allowing an employer the option of having an NLRB agent read the notice has been alternatively disapproved (in IUE) and enforced in the DC Circuit (Federated Logistics & Operations v. NLRB, 400 F.3d 920, 929-30 (D.C. Cir. 2005)).
  • The Second Circuit approved of the option of having an NLRB agent read the NLRB-mandated notice to employees as an alternative to a named executive reading the notice (NLRB v. S.E. Nichols, Inc., 862 F.2d 952 (2d Cir. 1988)).
The DC Circuit:
  • Approved of the Second Circuit's reasoning in S.E. Nichols, Inc. as:
    • eliminating the need for an employer to participate in the notice-reading process; and
    • ensuring that the NLRB's order is effectively communicated to employees.
    (862 F.2d 952.)
  • Upheld the notice-reading portion of the NLRB's order because it gave HTH the option of having the notice read by an NLRB employee.

Challenges Not Addressed

The DC Circuit did not address other extraordinary remedies ordered by the NLRB because they were not properly before the court under NLRA Section 10(e) (29 U.S.C. § 160(e)). Those remedies involved requiring HTH to:
  • Post the notice, the NLRB's Decision and Order, and an Explanation of Rights in the hotel for a period of three consecutive years.
  • Mail the notice, NLRB's Decision and Order, and an Explanation of Rights to the homes of supervisors, managers, and both past and present employees, within 14 days.
  • Provide the notice and the Explanation of Rights to new employees, supervisors, and managers for a period of three consecutive years.
  • Publish the notice and Explanation of Rights in two local publications twice a week for 8 weeks.
  • Allow an NLRB agent to enter the hotel for a period of three years to ensure compliance with the above posting, mailing, and distribution requirements.

Practical Implications

The DC Circuit's decision in HTH did not review most of the extraordinary remedies ordered by the NLRB. The court enforced the NLRB's notice-reading order and that remains a viable remedy for the NLRB in situations involving egregious ULPs.
Even in those circumstances, the NLRB cannot shift the NLRB's and union's litigation fees and expenses onto a violating employer. The NLRB's 2011 decision in Camelot Terrace, which ordered an employer to cover union litigation fees and expenses, does not appear to be on solid footing, at least under the DC Circuit's analysis.