A 2019 L&E Forecast for In-House Counsel, Part III: Section 7 and Joint Employment Issues on the Horizon

In 2019, employers can expect positive developments as the National Labor Relations Board (NLRB) addresses a number of significant issues under the National Labor Relations Act (NLRA). Most significantly, we will see the Board continue to reverse Obama-Board decisions that had dramatically expanded the number of companies that would be deemed joint employers and the nature and scope of what employee concerted activities are protected under Section 7 of the Act.

NLRA Section 7

Returning to the Act’s Purpose and the Historical Understanding of Its Protections: Epic Systems

Numerous Obama-Board decisions had expanded the historical understanding of what employee conduct is protected under the Act. In 2018, the Supreme Court of the United States concluded that the Act’s protections for concerted activities did not include the right of employees to pursue class action lawsuits in Epic Systems Corporation v. Lewis. The Court reversed the Obama Board’s decisions that concluded the Act’s protection of “other concerted activities” included employees’ right to file class action lawsuits despite agreements they made to arbitrate their employment disputes, and to do so in individual arbitrations with their employers rather than as a class. The primary technical bases for the Court’s decision were its conclusion that arbitration agreements, including class action waivers, are enforceable on their terms under the Federal Arbitration Act (FAA) and its finding that the NLRA’s protection of “other concerted activities” was not intended by Congress to limit the strong policy favoring the enforcement of arbitration agreements that it had articulated when adopting the FAA (long before it enacted the NLRA).

The decision provides significant practical benefits to employers by ensuring they can broadly use and enforce agreements that limit class actions—the most problematic and expensive type of employment lawsuits that confront most companies. A less immediate but still potentially significant benefit of the Court’s decision has gone largely unnoticed: in articulating the meaning of what the Court called Section 7’s “catchall” protection of “other concerted activities,” the Court provided employers with a meaningful statutory basis for challenging any future NLRB efforts to expansively define the types of employee activities protected by the Act. In particular, the Court opined that Section 7’s general “catchall” provision appeared after its enumeration of specific rights and that under general principles of statutory construction, when a general provision follows an enumeration of specific ones, the general term is understood to “embrace only objects similar in nature to those objects enumerated by the preceding specific words.”

Applying the Court’s analysis leads to the conclusion that Congress meant Section 7 to protect “other concerted activities” similar to those employees engage in when deciding about whether to elect unions as their bargaining agents to deal with their employers, not to protect an expansive and ever-growing number of employee activities unrelated to the Act’s fundamental purpose of encouraging collective bargaining and employee free choice regarding union representation.

How this aspect of the Court’s Epic Systems decision will play out is far from certain, but the Court’s implicit recognition that Section 7’s protection of “other concerted activities” is far more limited than the Obama Board held provides employers with a powerful weapon to challenge any future NLRB overreach when defining Section 7’s protections.

Applying a Rational Approach for Evaluating Employer Policies and Rules

The NLRB’s recent jurisprudence, like the Supreme Court’s limited view of Section 7’s protections as articulated in Epic Systems, reflects a far more narrow interpretation of Section 7’s protections than the Obama Board had created. The NLRB’s decision in The Boeing Company is a primary example. In The Boeing Company, the Board held that even the protections of Section 7 are not absolute and that, provided employers’ policies do not expressly violate Section 7, those policies will be legal even if they potentially restrict Section 7 activities when they are justified by legitimate business purposes.

Protecting Employer Property Rights

The NLRB is set to revisit and, in all likelihood, reverse the Obama Board’s decision in Purple Communications, Inc., which redefined the fundamental nature of property rights in the employment setting. Historically, the Board and courts had routinely enforced an employer’s right to control its property and limited the employer’s right to do so only when the employer exercised it in a way that discriminated against employees for engaging in activities protected by Section 7. For example, the Board had recognized employers’ right to have bulletin boards but prohibit employees from using them for non-work purposes, or to allow employees to use copy machines to do their jobs but prohibit them from using the machines for personal purposes, provided the employers did not discriminate against Section 7 activities when applying those rules.

Purple Communications changed that fundamental understanding of property rights by holding that the NLRA gives employees the right to use their employers’ email systems even if their employers had neutral rules prohibiting employees from using the email systems for personal purposes (absent “special circumstances,” which Purple Communications neither defined nor provided meaningful standards for employers to apply). Before Purple Communications, the Board recognized that employers had the right to allow employee use of email systems for certain types of personal purposes but not allow them to use email systems for all personal purposes, such as solicitation.

The Board is set to return to the historical protections of employer property rights and adopt a standard that ensures employees are not discriminated against for engaging in protected activities but that does not create a Section 7 right for employees to use employer property.

Joint Employment

The NLRB has proposed new rules to define, and limit by regulation, the definition of what entities can be deemed to be joint employers of another entity’s employees. Despite multiple political attempts to stop the Board’s efforts, most observers believe that the Board will adopt its proposed rule in 2019. Under that rule, only those employers that exercise actual and significant control over “substantial” terms and conditions of employment of another employer’s employees will be deemed a joint employer of those employees. Again, the proposed rule would return the NLRB to its historical roots—and even narrow the Board’s historical approach when defining joint employment.

The Department of Labor’s Stance on Joint Employment

The Department of Labor (DOL) is poised to join the NLRB in limiting the definition of “joint employment” through regulatory action by March of 2019. The agency’s Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions indicates that the DOL will issue a notice of proposed rulemaking to define and limit what entities will be deemed joint employers under the federal employment laws the DOL enforces and interprets, such as wage and hour laws under the Fair Labor Standards Act. While the agency seldom is able to meet all the goals it sets for itself in its regulatory agenda, limiting the definition of “joint employment” to entities that actually control the terms and conditions of another entity’s workers is a top priority for the DOL in 2019.