NLRB Decisions Restrict Unionized Employers’ Ability to Act Unilaterally

In two companion decisions issued on August 30, 2023, the National Labor Relations Board (the Board) severely eroded unionized employers’ ability to unilaterally act in accordance with their past practice. The Board concluded in these cases that an employer will violate Section 8(a)(5) of the National Labor Relations Act (which requires the employer to bargain collectively with the union) if, during bargaining, its actions (1) involve a “large degree” of discretion, or (2) were premised on a right to act unilaterally provided for by a since-expired management-rights clause in a collective-bargaining agreement (CBA). The decisions overruled the Board’s 2017 holding in Raytheon Network Centric Systems, which afforded employers the ability to make unilateral changes impacting its unionized workforce during negotiations for a first CBA or during a contractual hiatus when no agreement is in effect.

Background. In the 2017 Raytheon decision, a Board majority addressed when a unionized employer may act unilaterally while no CBA is in effect – for example, during negotiations for a first contract or following the expiration of an agreement. There, the Board first held that an employer may unilaterally change employees’ terms and conditions of employment even if the decision includes the exercise of discretion, provided the change was “similar in kind and degree” to changes made in connection with the employer’s past practice. Second, Raytheon also stands for the proposition that a past practice developed pursuant to a bargained management-rights (or similar) clause permitting an employer’s discretionary unilateral action permits further unilateral action even following the expiration of the CBA containing the clause. Put simply, the decision permitted employers to act unilaterally in a way it had previously done so; that is, provided it was consistent with a past practice.

The Wendt Decision. In Wendt Corp., the Board overruled the first Raytheon case. The Board majority concluded the kind-and-degree standard is inconsistent with the Supreme Court’s 1962 holding in NLRB v. Katz, which the Board majority declared stood for the proposition that unilateral action violates the NLRA if it involves a “large measure” of discretion, even if such a change was part of a longstanding practice.

The Board reinforced that employers relying on established past practice for unilateral action must prove (1) the practice occurs with “regularity” and “frequency” such that employees can reasonably expect the practice to continue or reoccur on a “consistent” basis, and (2) that the established practice relied upon does not involve the exercise of significant managerial discretion. On the latter point, the Board will find unilateral change lawful only where it was “fixed by an established formula containing variables beyond the employer’s immediate influence… [and] resulted from nondiscretionary standards and guidelines.” The Board offered the example of where an employer maintains an 80/20 cost-sharing framework for health insurance, even if the employee’s total cost of health insurance increases.

In this case, the Board found that, notwithstanding previous layoffs, the employer’s temporary layoff of bargaining unit employees while negotiating a first contract was neither “regular” nor “frequent,” and involved significant management discretion. Thus, the Board held that the layoffs, which were imposed during negotiations for a first bargaining agreement, violated Section 8(a)(5) of the Act.

The Board also held that an employer may never rely on a past practice of making a unilateral change that pre-dates union representation of the employees. The Board majority opined that permitting an employer to continue to act unilaterally following recognition or certification of a union is “antithetical” to the NLRA and, if permitted, would tell employees “that choosing union representation changes nothing with respect to the employer’s ability to act unilaterally…”

The Tecnocap Decision. In Tecnocap LLC, the Board overruled a portion of Raytheon not addressed in Wendt. Specifically, the Board overruled Raytheon’s holding that a past practice developed under a bargained management-rights clause authorizing discretionary unilateral action is a term and condition of employment and therefore the past practice would survive the expiration of the CBA. Now, the employer’s ability to act unilaterally concerning such subjects will expire with the CBA, and the employer may not rely upon such previous unilateral action as a “past practice” permitting unilateral action after the CBA expires.

Here, the employer unilaterally imposed 11- and 12-hour shifts following expiration of the parties’ CBA. The expired CBA’s management-rights clause permitted the employer to unilaterally alter shift lengths, times, and days. However, the Board held that the employer did not have the right to unilaterally alter shift lengths following the expiration of the parties’ CBA that afforded such a right even when the employer had an established past practice of making such changes.

Employer Takeaways. These two decisions provide some guidance to employers:

• When determining whether it should act unilaterally pursuant to a past practice, an employer should soberly assess how “regular” and “frequent” the practice was engaged in by the employer. But even if the practice was regular and frequent, if it involves a “large degree” of discretion – rather than application of a formula or some other automatic trigger – the change will be unlawful if implemented during, for example, bargaining with a union for an initial contract.
• For newly-unionized employers, your past practices prior to becoming unionized are effectively irrelevant. Put simply, that type of past practice argument was confirmed to be foreclosed by the Wendt decision.
• Unionized employers with established bargaining relationships will not be able to rely upon past practice born out of a provision in a management-rights clause when the CBA expires – even if it is the type of change employees would reasonably expect to reoccur.

There can be no doubt that these decisions hamstring employers’ ability to unilaterally act concerning any subject for which it had a past practice if that practice involved the exercise of even a modicum of discretion. A bad week for employers at the Board just got much worse, particularly for unionized employers.