NLRB Erred When Invalidating Hiring Policy as Disfavoring Union Workers: First Circuit

Practical Law Legal Update w-005-5703 (Approx. 6 pages)

NLRB Erred When Invalidating Hiring Policy as Disfavoring Union Workers: First Circuit

by Practical Law Labor & Employment

Background

Southcoast Hospitals Group, Inc. was comprised of three hospitals, St. Luke's Hospital, Charlton Hospital, and Tobey Hospital. Only the Tobey employees were represented by a union. The union's 2011 collective bargaining agreement (CBA) contained provisions that barred Southcoast from considering any nonunion employees for a union position unless all union workers were unqualified for the union position.

In 1999, Southcoast developed a policy, H.R. 4.06, for filling nonunion vacancies. This policy, which separated internal applicants (nonunion employees and union members who belong to unions that do not favor union employees for their open positions) from external applicants (all other applicants), provided that internal applicants (first regular-status employees, and then temporary and per diem applicants) "will be given first consideration for job postings providing the regular status [and then temporary/per diem] employee's qualifications substantially equal the qualifications of external candidates." Southcoast was unable to consider external applicants until all qualified internal applicants were interviewed.

In practice, Southcoast posted job openings to everyone at once, but conducted three rounds of application screening, first for nonunion, regular applicants, then for union applicants with temporary and per diem applicants, then for all others.

In May 2011, a union worker employed by Tobey applied for a position at St. Luke's but did not receive the position based on Southcoast's adherence to H.R. 4.06, which required consideration of nonunion employees before considering union employees.

That employee complained to a union organizer who gathered several other unionized employees with similar experiences and filed an unfair labor practice (ULP) charge with the NLRB, alleging that H.R. 4.06 unlawfully discriminated against union members in violation of Section 8(a)(3) and 8(a)(1) of the NLRA. An NLRB administrative law judge (ALJ) sustained the charge and the NLRB affirmed the ALJ's ruling. The NLRB:

Determined the policy was invalid because it was not supported by a legitimate business justification.
Ordered Southcoast to rescind the policy.
(Southcoast Hosps. Group, Inc., 363 N.L.R.B. No. 9 (Sept. 16, 2015).)

Southcoast petitioned for review.

Outcome

The First Circuit vacated the NLRB's order and remanded the case for further proceedings.

The First Circuit noted that in NLRB v. Great Dane Trailers, Inc., the US Supreme Court:

Established a framework for analyzing union discrimination claims. In Great Dane, the Supreme Court held that:
- discrimination and discouragement of union membership were necessary but not sufficient to support a Section 8(a)(3) and 8(a)(1) claim; and
- a viable discrimination claim also required proof that the discriminatory conduct "was motivated by antiunion purpose."
Explained that there are exceptions to this rule:
- if an employer's conduct is inherently destructive of the union member's Section 7 rights and the employer cannot prove that its actions were justifiable as something other than they appear, a violation may be proven without evidence of improper motive;
- if business justification is proven, an inference of improper motive can still be drawn from the inherently destructive conduct and the NLRB can balance the invasion of employee rights and the business justification;
- if the harm to union member interest is "comparatively slight," an employer must provide evidence that its conduct serves a "legitimate and substantial" business interest;
- failure to provide this evidence will result in a finding of liability even without evidence of improper motive; and
- if the employer proves a satisfactory business justification, a violation cannot be established without proof of antiunion motivation.
(388 U.S. 26 (1967).)

The First Circuit noted that:

The NLRB's decision did not rule that H.R. 4.06 was:
- inherently destructive of the union members' Section 7 rights; or
- the product of antiunion bias.
The NLRB did not base its decision on or support it with substantial evidence when it:
- asserted solely that Southcoast failed to prove that the policy served a legitimate and substantial business interest;
- rejected Southcoast's argument that H.R. 4.06 created a "level-playing-field" for nonunion workers, and instead determined that the policy accomplished the opposite by disproportionately favoring nonunion employees over union employees without considering the full context of hiring policies throughout the employer; and
- noted that the union members had a more limited universe of job opportunities because the number of positions filled by H.R. 4.06 "pales in comparison" to the number of positions covered by the union hiring policy and H.R. 4.06 grants nonunion workers hiring preference for vacancies at St. Luke's and Charlton, while the union policy only grants union workers hiring preference for vacancies at Tobey.
NLRB Board Member Miscimarra, in his dissent, correctly noted that:
- the probability that a covered employee will get a job under either policy cannot be determined by considering the number of positions covered by the policy without also noting the number of employees covered by the policy; and
- since the ratio of covered positions to covered employees was virtually the same under the two policies, a nonunion employee was not necessarily more likely than a union employee to receive a job just because H.R. 4.06 covered more positions.
The NLRB presented no other explanation as to how union workers were disproportionately harmed by H.R. 4.06 just by the policy covering more positions than the union policy. Both policies created a hiring preference against the workers that it did not cover. The NLRB could not justify its conclusion that the policy disproportionately favored nonunion workers simply by observing that H.R. 4.06 covered more positions.
The NLRB again failed to recognize that more opportunity for the nonunion workers, by itself, was irrelevant "where the competitors for those opportunities are correspondingly aggregated." The NLRB erroneously concluded that:
- nonunion workers had a hiring preference at two facilities while union workers had a hiring preference at only one; and
- a single-facility preference would benefit union workers more than the dual-facility preference because it would reduce the number of applicants who receive preference over them for openings at St. Luke's and Charlton.
The NLRB should have recognized that while nonunion workers got preference at two different hospitals, they must also compete for open jobs with workers from two hospitals, and while union workers got preference at only one hospital, they must compete for open jobs with workers from only one hospital.
The NLRB failed to attempt to determine how Southcoast's judgment was affected by the aspects of the hiring policies that place union workers at an advantage, such as that:
- H.R. 4.06 allows Southcoast to select the best candidate for a vacant nonunion opening (even if nonunion employees were qualified), while the union policy required Southcoast to fill a vacant union position with the most senior qualified union applicant;
- Southcoast gives union members preferential treatment over nonemployee applicants for nonunion jobs, while not providing the same for nonunion employees; and
- H.R. 406 allows union members to surrender their hiring preference for union positions in exchange for treatment as regular-status internal applicants.
The NLRB asserted that:
- if an employer's discriminatory action is unnecessary to achieve its goal, then that action does not have legitimate and substantial business justification; and
- Southcoast could have instead limited nonunion workers to a single-facility hiring preference. The First Circuit rejected these assertions because the NLRB may not invalidate an employment policy that accomplishes a legitimate goal just because it prefers another way to do it (see NLRB v. Borden, Inc. (Borden I), 600 F.2d 313, 321 (1st Cir. 1979); NLRB v. Borden, Inc. (Borden II), 645 F.2d 87, 88 (1st Cir. 1981)).
Since Southcoast's nonunion policy was reasonably adapted to achieve its stated goal, the NLRB did not have the power to reject the policy just because it was not the same as the union policy or because there was another way to achieve the goal that would benefit union employees.

Practical Implications

In Southcoast, the First Circuit held that a hospital group's policy favoring nonunion employees was not discriminatory towards union employees who were covered by their own favorable policy. The First Circuit noted the errant analysis by the NLRB including its failure to consider or address legitimate and substantial business justification and evidence of neutral net effects of hiring preference policies. Employers should introduce evidence of the net effects of related policies so the NLRB and reviewing federal appeals courts have context for evaluating whether individual policies alleged to be discriminatory are unlawfully discriminatory under Great Dane. Here the NLRB used a myopic viewpoint to strike down a policy that had the net effect of leveling the playing field for hiring opportunities for union and nonunion workers across three facilities. The NLRB second-guessed the policy without observing the context of the policy. On remand the NLRB may reach a different conclusion in light of the recent appointment of Member Miscimarra, who dissented from the NLRB's decision in this case, to Chairman of the NLRB.

UPDATE: On October 6, 2017, in a supplemental decision and order, the NLRB reversed its original decision, vacating and dismissing the original decision and order. The NLRB found that:

The hospital group's policy favoring nonunion employees was not discriminatory towards union employees because the policy served the legitimate and substantial business justification of leveling the playing field between union and nonunion employees.
The General Counsel failed to make an affirmative showing that the employer's conduct was based on improper antiunion motivation.
(Southcoast Hospitals Group, Inc. v. NLRB, 365 N.L.R.B. No. 140 (Oct. 6, 2017).)

NLRB Erred When Invalidating Hiring Policy as Disfavoring Union Workers: First Circuit | Practical Law