Is the NLRB’s Obsession with “Default Language” in Informal Settlement Agreements Waning?

The 2011 decision of the former Acting General Counsel of the National Labor Relations Board (NLRB)  to mandate inclusion of “default language” in every informal unfair labor practice settlement agreement (General Counsel Memo 11-04, January 12, 2011) placed employers and their counsel in an untenable position: go to hearing on garden variety unfair labor practice (ULP) charges or accept the ambiguous and potentially onerous consequences spelled out in the “Performance” section of the Board’s form settlement agreement, which accompanies the settlement notice posting. The uncertainty created by the “default language” initiative compels savvy labor counsel to think outside the box to protect and balance clients’ short and long term interests.

Among the consequences of agreeing to the default provision is the possibility that the entire settlement will be revoked by the Board in the event future ULP charges are found after investigation to have arguable merit. Critically, NLRB Regional Directors determine whether post settlement charges are meritorious. In such cases the Board, at a minimum, is entitled to enter a default against the employer on the settled allegations. A default results in an unreviewable finding that the employer committed the violations contained in the settlement agreement.

Compounding the problem for employers is the fact that the Board’s boilerplate default language fails to contain any specific limitation on the length of time within which a default can be triggered by subsequent allegations. A ULP charge filed seven or more months after the effective date of a settlement can at least theoretically result in the imposition of a default. Equally problematic is that a default can be based upon future charges arising out of alleged violations of the obligations contained in the NLRB’s notice posting. Open ended statements in a notice stating that the employer “WILL NOT do anything to prevent employees from exercising their Section 7 Rights” sets up a potential default for any minor alleged violation of worker rights.

In many cases, and particularly if more ULP charges are expected (for example in a hotly-contested representation campaign), employers accepting default language in an informal ULP settlement may very well end up in a less advantageous position than would result after an adverse determination by the Board following a full hearing. Not surprisingly, the Board’s hyper-aggressive enforcement posture has made it more difficult to settle charges that in the past were routinely resolved, such as simple alleged violations of section 8(a)(1) of the National Labor Relations Act.

Many employers faced with this dilemma have determined that the best course of action is to defend the merits of the charge at an administrative law judge hearing. Although more costly and time consuming than a quick settlement, hearings can often be completed in one or two days, much like a typical labor arbitration. More importantly, win or lose, the employer will not be bound to any default language or subject to the uncertainty of a subsequent determination by NLRB regional personnel in a future case. This approach sends the message that the employer will not be a punching bag for frivolous charges. But plainly, there is no denying that the Board’s obsession with default language increases the cost of doing business and creates the potential for unintended consequences resulting from post-settlement ULP charges.

There are signs, however, that the Board may be rethinking the desirability of mandating default language in every informal ULP settlement. In a recent case handled by Ogletree Deakins, we reached an informal settlement containing a non-admissions clause that did not include default language. The case involved straightforward alleged violations of section 8(a)(1) of the Act. There was no history of ULPs at the facility and no reason to conclude there would be any future ULPs.

The successful resolution of the case resulted first from the client’s strong belief that it had done nothing wrong and confidence in our ability to defend the allegations. The refusal to accept the default language caught the attention of an experienced administrative law judge (ALJ) during a pre-hearing telephone conference. The ALJ helped persuade the counsel for the general counsel to seek approval from Washington, D.C. to remove the onerous language from the settlement. We also inquired at that time whether the ALJ would consider taking the settlement at the hearing over the objection of the counsel for the general counsel. Fortunately, the case resolved well prior to the hearing, avoiding needless litigation over a matter that truly deserved to be settled.

The Board’s “new normal” challenges labor practitioners to protect clients’ interests in an exceedingly tumultuous regulatory environment. Experienced counsel must be vigilant to develop and implement creative, cost-effective approaches to ULP cases that add value to the attorney-client relationship, even if that means pushing back against seemingly wooden enforcement initiatives.