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Employer Violated NLRA by Cancelling Medical Benefits for Striking Employees: NLRB
Practical Law Legal Update w-006-6213 (Approx. 5 pages)
Employer Violated NLRA by Cancelling Medical Benefits for Striking Employees: NLRB
by Practical Law Labor & Employment
| Published on 03 Mar 2017 • USA (National/Federal) |
In Hawaiian Telcom, Inc., the National Labor Relations Board (NLRB) held that an employer violated the National Labor Relations Act (NLRA) by cancelling accrued medical and dental health benefits for striking employees and unlawfully mailing Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) packets to striking employees.
On February 23, 2017, in Hawaiian Telcom, Inc., the panel (Board) heading the NLRB's judicial functions held, in a 2-1 decision, that an employer violated the NLRA by canceling accrued medical and dental health benefits for striking employees and by mailing Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) packets to striking employees. The dissent asserted, among other things, that the employees' medical and dental benefits were not accrued benefits on the day the strike began, and they expired with the agreement that created them. (365 N.L.R.B. No. 36 (Feb. 23, 2017).)
Background
Hawaiian Telcom, Inc. (Hawaiian), a communications company, was party to a collective bargaining agreement (CBA) the most recent of which was effective from September 13, 2008 through September 12, 2011. During negotiations for a successor agreement, the union and Hawaiian agreed to several extensions of the 2008 Agreement, which expired on October 24, 2011. On that same day, since there was no successor agreement in place, the union told Hawaiian that it was considering a work stoppage. In response, Hawaiian informed its medical and dental insurance providers that the union was planning a strike and that if that happened, Hawaiian would stop benefits for the active union employees.
On November 10, 2011, the union informed Hawaiian that a strike would begin that day at 10:30 a.m. and end on November 11 at 8:00 p.m. Hawaiian notified its insurance providers to cancel all benefits for striking employees immediately. Also, on November 10, Hawaiian prepared and mailed COBRA packets to the striking employees.
An administrative law judge (ALJ) issued a decision in favor of the union which found that the employer engaged in unfair labor practices (ULPs) in violation of Sections 8(a)(1), 8(a)(3), and 8(a)(5) of the NLRA when the employer cancelled accrued medical and dental health benefits for striking employees and then mailed them COBRA packets.
Hawaiian filed exceptions to the ALJ's decision.
Outcome
The Board Majority (Members Pearce and McFerran) upheld the ALJ's decision, holding that Hawaiian violated Sections 8(a)(1), (3), and (5) of the NLRA by:
- Cancelling accrued medical and dental health benefits for striking employees.
- Mailing COBRA packets to the striking employees.
The Board Majority noted that:
- Although an employer is not required to finance a strike against itself, employers may not deny accrued benefits from striking employees based on their participation in a strike. (Texaco, Inc., 285 N.L.R.B. 241 (1987)).
- Accrual of benefits is determined on a case-by-case basis.
- The expiration of the CBA is non-determinative because Board precedent establishes that the expiration of a CBA does not permit the employer to withhold an accrued benefit or make unilateral changes to the agreement (Gulf and Western Mfg. Co., 286 N.L.R.B. at 1124).
- In NLRB v. Great Dane Trailers, the US Supreme Court applied a burden-shifting test to determine if an employer's denial of employee's benefits was unlawful. Under the test, the General Counsel must show that:
- the benefit had accrued at the time it was denied; and
- the benefit was withheld because of the employees' participation in the strike.
- Once the General Counsel sustains the prima facie burden, under Great Dane, the burden then shifts to the employer to show proof of a legitimate and substantial business justification for canceling striking employees' benefits, which the employer can establish by showing that:
- a collective bargaining representative has "clearly" waived employees' statutory right to be free of such discrimination or coercion; or
- the employer relied upon a nondiscriminatory contract interpretation which establishes "a legitimate and substantial business justification."
(Texaco, Inc., 285 NLRB 241, 25-46 (1987).)
The Board concluded that the General Counsel proved that:
- The employees' medical and dental benefits were accrued, and the employer withheld those benefits because of employees' participation in a strike, because:
- according to the CBA's medical eligibility clause, all employees were entitled to medical benefits from the date of hire, and therefore the benefits accrued upon employment; and
- the employer acted because of the strike since the employer discontinued the dental and medical coverage for striking employees immediately after the strike began.
- The employer failed to prove a nondiscriminatory "legitimate and substantial business justification" for discontinuing the striking employees' benefits because:
- the employer provided no evidence of a waiver; and
- the employer's interpretation of the CBA was inaccurate and did not support the cancellation of the striking employee's medical and dental coverage.
- The employer unlawfully mailed COBRA notice packets to striking employees because:
- the striking employees were statutory employees even when on strike, and they should have been covered by the employer's insurance plans under the applicable CBA; and
- the COBRA notices "only served to remind employees of the unlawful discontinuation of benefits."
In dissent, Acting Chairman Miscimarra argued that, among other things:
- The right to strike does not include an entitlement to receive wages or benefits when employees have stopped working due to a strike, unless there are unusual circumstances, none of which were present in this case.
- The Board's decision alters Board precedent by finding that the medical and dental benefits had accrued to the striking employees, an interpretation that was inconsistent with the Employee Retirement Income Security Act (ERISA) and the contractual language in the CBA.
- The employees' medical and dental benefits were not accrued benefits on the day the strike began, and they expired with the agreement that created them.
- The Board created an open-ended obligation on employers to provide benefits for all employees who are not actually working for extended periods of time.
Practical Implications
The Board majority in Hawaiian insists that this decision does not impose an obligation on employers to continue health benefits in all strike cases. Rather, the majority contends that this is a limited obligation based on the language of the CBA in this case. Based on this decision, any employer deciding to cancel striking employees' medical benefits must ensure that this decision is based on a reasonable, non-discriminatory reading of the applicable CBA. If, under the CBA, employees’ eligibility for the benefits previously had accrued and was not dependent on their continued performance of work, an employer risks violating the NLRA by ceasing to provide these benefits to striking employees. Although the strike in Hawaiian was short (only two days), the dissent points out that this decision creates a potential obligation that is unlimited in duration.