OMM Roundup on Recent Key NLRB Decisions

Over the past few months, the National Labor Relations Board (the “NLRB” or “Board”) has issued several rules and decisions that have reversed the prior Administration’s labor policies—the most recent being the new joint employer rule. These changes have expanded legal protections for workers and created newfound legal risk for employers. Employers should be aware of these key changes as they review and consider policy revisions and update management training going into the new year.  

• New Joint Employer Rule Broadening Joint Employment Definition. On October 26, 2023, the NLRB published a final rule addressing the standard for determining joint employer status under the National Labor Relations Act (the “NLRA” or the “Act”), which will apply to cases filed after the effective date of December 26, 2023. The final rule significantly broadens the definition of joint employment and rescinds and replaces the 2020 final rule promulgated by the Trump-era Board. The final rule reestablishes common-law agency principles and reverts back to the Obama-era joint employment standard, under which two or more entities may be considered joint employers of employees where each entity has an employment relationship with the employees and the entities share or codetermine one or more of the employees’ essential terms and conditions of employment.
  
  The joint employer analysis considers the alleged joint employers’ authority to control the essential terms and conditions of employment—without regard as to whether any such exercise of control is direct or indirect or whether such control is exercised or reserved. In contrast, the joint employer standard set forth in the 2020 rule set a higher threshold of “substantial direct and immediate control” over essential terms of conditions of employment, making it more difficult to establish a joint employer relationship. The final rule also takes a broad view of the “essential terms and conditions of employment” that the Board considers in its joint employer analysis. If an entity is deemed a joint employer based on its control over one or more essential terms and conditions of employment, the employer will be required to bargain over those particular essential terms and conditions, in addition to all other mandatory subjects of bargaining that it possesses or exercises the authority to control.
  
  On November 9, 2023, the US Chamber of Commerce (the “Chamber”) and a coalition of business groups filed a lawsuit challenging the joint employer rule on two grounds: (i) the NLRB lacks statutory authority to implement this rule, and (ii) the rule is arbitrary and capricious because businesses will be liable for workers they do not employ at workplaces they do not own or control. The Chamber more broadly expressed its concern that the Board has been overturning numerous precedents at the behest of labor unions.
  
  
  • Takeaway: Employers should carefully consider how this expanded joint employment definition may apply to them, as joint employer status can result in significant legal consequences. For example, a joint employer may be subject to joint and several liability for unfair labor practices committed by another employer under the Act and also may be required to bargain with a union over particular essential terms and conditions and other mandatory subjects of bargaining that the employer possesses or exercises the authority to control.
    
    Employers should also pay particular attention when drafting new contracts with businesses to avoid or limit joint employer liability under the expanded definition, for instance, by adding language to expressly disclaim any reserved authority over the terms and conditions of employment of another employer’s employees or require indemnification to limit liability for unfair labor practices. It is anticipated that the final rule will particularly impact franchise, employee staffing, and temporary agency businesses, but the Board has made clear that it will conduct a fact-specific analysis on a case-by-case basis, regardless of business model, to determine whether two or more employers meet the new joint employer standard. 
• Expansion of Section 7 Protections for Employee Advocacy on behalf of Non-Employees. On August 31, 2023, the Board issued a decision expanding the scope of activities protected by Section 7 of the Act to include employee efforts to advocate for those who do not meet the definition of “employee” under the Act. See American Federation for Children, Inc., 372 NLRB No. 137 (2023). This decision overturns the Board’s prior Trump-era decision holding that employee advocacy to assist non-employees was not protected activity under Section 7, unless the employees sought to further their own interests by soliciting support from or for the non-employees. See Amnesty International, 368 NLRB No. 112 (2019).
  
  In its recent decision, the Board held that the relevant question in determining whether employee advocacy for others is protected activity under the Act is not dependent on whether the individuals that the employees seek to advocate for are employees. Rather, the question is “simply whether in helping [non-employees], employees potentially aid and protect themselves, whether by directly improving their own terms and conditions of employment or by creating the possibility of future reciprocal support from others in their efforts to better working conditions.”
  
  
  • Takeaway: The impact of this decision is potentially far-reaching, and the ruling itself provides little guidance on the limits of what may constitute “mutual aid or protection” under the Act in this context. Given this uncertainty and possible legal risk, employers should be cautious in responding to employee advocacy efforts on behalf of non-employees, such as independent contractors, supervisors, interns, volunteers, and any other individual who may be excluded from the definition of employee under the Act. 
• New Standard on Employers’ Duty to Bargain. On August 30, 2023, the Board issued two decisions addressing employers’ statutory duty to bargain with unions before making changes in terms and conditions of work during initial collective bargaining negotiations and after the expiration of a labor contract. See Tecnocap LLC, 372 NLRB No. 136 (2023); Wendt Corp., 372 NLRB No. 135 (2023). The Board’s decisions overruled prior precedent, which provided employers with more flexibility to make unilateral changes during bargaining if based on past practice. See, e.g., Raytheon Network Centric Systems, 365 NLRB No. 161 (2017).
  
  In both decisions, the Board found that the past practice defense could not be reconciled with the Supreme Court’s controlling decision in NLRB v. Katz, 369 U.S. 736 (1962), which established that “the narrow past-practice defense to such unilateral action applies only when the employer proves its action is consistent with a longstanding past practice and is not informed by a large measure of discretion.” The Board held that an employer may not lawfully make discretionary unilateral changes in terms and conditions of employment on the basis that “the change is similar in kind and degree to the changes made in connection with the employer’s past practice of such changes.” Nor can an employer lawfully make such unilateral changes and rely on (i) a past practice before its employees were represented by a union, and thus before the employer had a statutory duty to bargain with the union, or (ii) a past practice developed under or pursuant to a collectively bargained management-rights clause authorizing discretionary unilateral employer action that has expired.
  
  
  • Takeaway: With these new decisions, employers with expired collective bargaining agreements should be aware that unilateral changes, or standard operational changes, such as schedule changes or wage increases, could lead to a failure to bargain violation. With the Board’s restrictions on the use of the past practice defense, employers should carefully consider any unilateral changes relating to workplace terms and conditions during contract negotiations or following the expiration of a contract and determine whether the employer may defend the change on the basis that it is consistent with a long-standing practice and does not require significant discretion.
• New Test for Protected Concerted Activity. On August 25, 2023, the Board reinstated the “totality of the circumstances” test in determining whether individual employee action constitutes protected concerted activity under the NLRA. See Miller Plastic Products, Inc., 372 NLRB No. 134 (2023). This fact-based, holistic test to assess whether individual employee action has “some linkage to group action” was established in Meyers Industries, 281 NLRB 882 (1986). In that case, the Board found that under the non-exhaustive definition of “concerted,” whether an employee engaged in protected concerted activity “call[s] for careful scrutiny of record evidence on a case-by-case basis,” which is “based on the totality of the record evidence.” The Board’s recent decision overruled the five-factor test that had previously been applied during the Trump-era Board, in which it established the specific circumstances where a complaint made by an individual employee was to be considered protected concerted activity. See Alstate Maintenance, 367 NLRB No. 68 (2019). The Board found the prior five-factor test “captur[ed] some examples of concerted activity,” but was ultimately “far too restrictive to delineate the boundaries of concerted conduct.”
  
  
  • Takeaway: With the reversion to the totality of the circumstances test, employers should be prepared for the Board to perform a thorough factual review to determine whether there is any evidence that employee conduct should be deemed protected concerted activity under the NLRA. This test broadens protections for employees and will likely result in more employee conduct, including questions and remarks, being deemed protected concerted activity under the NLRA, even where the employee does not intend to induce concerted activity. Employers should carefully and thoroughly review all facts related to employment decisions that could involve protected concerted activity under this broader test. 
• Final Rule on Representation-Case Procedures. On August 24, 2023, the NLRB adopted a final rule on representation-case procedures, which will go into effect for any representation petition filed after December 26, 2023. The rule in large part rescinds the 2019 amendments to these procedures and reverts to the procedures in effect in 2014. Among the key changes to the representation process is the shift back to a shorter time period between when a petition is filed and the election—known as the “ambush” election rule. In addition, pre-election hearings will now be scheduled eight calendar days from the service of the Notice of Hearing, as compared to 14 days under the 2019 Rule, and Regional Directors no longer have discretion to postpone pre-election hearings for an unlimited amount of time for good cause as permitted under the 2019 Rule. Instead, the rule limits postponement to two business days. The rule also shortens the timeframe for employers to comply with other requirements, such as the time to file a Statement of Position and post the Notice of Petition for Election. 
  
  
  • Takeaway: Although the rule may be subject to legal challenges because the Board did not seek public comment before adopting it, employers should be ready to act promptly upon any representation petitions received after December 26, 2023. The reversion to “ambush” elections will allow unions to more quickly obtain elections and reduce the time employers have to respond. Therefore, employers should be aware of these new procedures and timelines and be prepared to quickly respond to signs of employee organizing efforts, requests for recognition, or an election petition. As part of those efforts, employers should consider educating supervisors and staff on the new procedures and expedited timelines to avoid missing deadlines or waiving defenses and consider proactively preparing for campaigns to best respond to petitions, such as analyzing possible bargaining units and exclusions. 
• Non-Competes in Violation of the NLRA. On May 30, 2023, Board General Counsel Jennifer Abruzzo issued a Memorandum to all Regional Directors, Officers-in-Charge, and Resident Officers, stating that the “proffer, maintenance, and enforcement” of non-compete agreements in employment contracts and severance agreements violate the NLRA, “[e]xcept in limited circumstances.” General Counsel Abruzzo explained that non-compete agreements are “overbroad” to the extent they “reasonably tend to chill employees in the exercise of Section 7 rights,” including when the “provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work.”
  
  General Counsel Abruzzo concluded that non-compete provisions that reasonably tend to chill employees from engaging in Section 7 activity violate Section 8(a)(1), “unless the provision is narrowly tailored to special circumstances justifying the infringement on employee rights.” General Counsel Abruzzo reasoned that “a desire to avoid competition from a former employee is not a legitimate business interest that could support a special circumstances defense,” but “employers’ legitimate business interest in protecting proprietary or trade secret information can be addressed by narrowly tailored workplace agreements that protect those interests.” General Counsel Abruzzo further provided that some non-compete agreements may not violate the NLRA if, for example, the “provisions [] clearly restrict only individuals’ managerial or ownership interests in a competing business, or true independent-contractor relationships.”
  
  
  • Takeaway: The General Counsel’s Memorandum does not apply to agreements with statutory supervisors and managerial employees, nor does it apply to independent contractors or business entities, so employers should focus their review on non-compete agreements for non-supervisory employees and determine whether there are legitimate business justifications for those agreements. Employers should also ensure that all non-compete agreements for non-supervisory employees, not just post-employment restrictions, are narrowly tailored to serve their legitimate business interests. It is unclear from the Memorandum how violations may be prosecuted, and the Memorandum is not binding law, but employers should consider taking action now with respect to non-supervisory non-compete agreements to best position themselves against any future unfair labor practice charges. 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Kimberly F. Williams, an O’Melveny partner licensed to practice law in Texas, Sloane Ackerman, an O’Melveny counsel licensed to practice law in New York, and Andrea Orr, an O’Melveny associate licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted. 

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