Delivering for Best-in-Class Wholesaler-Distributors
July 6, 2020

For the last decade, labor & workplace issues have been in the forefront of the advocacy and litigation efforts of NAW, the Coalition for a Democratic Workplace (the business coalition which NAW helps manage) and many of our allies in the D.C. business community. This paper is a summary of the key issues in which we have been involved, with links to some of the many comments and amicus briefs that have been filed.

The Department of Labor (DOL):

During the eight years of the Obama Administration, DoL and the National Labor Relations Board were among the most aggressive federal agencies, successfully advancing a pro-labor agenda with often-publicly-stated anti-business bias.

The Trump Labor Department got off to a slow start, with Secretary Alex Acosta not taking office until April, 2017, the last of President Trump’s Cabinet members to be confirmed. In addition, key positions in the agency remained vacant for another year. During those many months, the Department was subject to vocal criticism from the business community for the slow pace at which they moved to implement policy initiatives.

Then, in July 2019, Secretary Acosta resigned amid long-festering controversy about his handling of the plea agreement in the 2008 Jeffrey Epstein sex trafficking prosecution. The President nominated Eugene Scalia (Justice Scalia’s son) to be the new Secretary, and he was confirmed on September 26th, 2019, bringing much-needed stability to the Department.

Despite the late start, slow pace and turmoil, the Department has undertaken some significant policy initiatives.

The Persuader rule: The Obama Administration DOL’s Persuader rule – which would have made it difficult for an employer to obtain advice and/or legal counsel during a union organizing campaign – was enjoined in late 2016 by a federal court in Texas. Several lawsuits were filed challenging the rule, including one by the Coalition for a Democratic Workplace (CDW).

In May 2017, the Trump DoL sent to the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) a new proposed rulemaking rescinding the Persuader rule. Under the standard process, OIRA reviews a new rule and, assuming they approve it, the regulating agency then publishes the proposed rule in the Federal Register and opens it up for public comment.

OMB/OIRA completed its review of the rescission rule on June 6, 2017, and on June 13th DoL’s Office of Labor-Management Standards issued a new notice of proposed rulemaking (NPRM). The public comment period on the rescission rule ended on August 11, 2017. NAW participated in this new rulemaking through the Coalition for a Democratic Workplace. Click here to read CDW’s comments.

A final rule rescinding Persuader was issued on July 17th, 2018.

The Joint Employer Standard: The Obama National Labor Relations Board radically changed the standard on what constituted a joint employer for purposes of labor union organization, reversing the long-held standard that an employer had to have direct control over the terms and conditions of employees to be considered a joint employer. The Obama Board changed that standard to one in which “indirect control” is sufficient for joint employer status (in which employees can be included in a collective bargaining unit without the consent of both employers, and both employers can be held liable for labor law violations).

Both the NLRB (see below) and DoL have taken actions to return to a reasonable joint employer standard. In April 2019 DoL published a Notice of Proposed Rulemaking (NPRM) that would establish specific factors to determine joint employer status. The employer would have to (1) have the direct power to hire and fire employees, (2) supervise and control work schedules, (3) determine rate and method of payment, and (4) maintain employee records.

On June 25th, 2019, NAW joined allies in the Coalition for a Democratic Workplace in filing comments in response to DoL’s rulemaking. In January 2020, the Department of Labor issued its final Joint Employer rule.

But the issue remains unsettled.  In February 2020, 18 state attorneys-general filed a lawsuit in the Southern District of New York asking the court to vacate the DOL rule.  DOL moved to have the case dismissed, but on June 1, 2020, the district court denied the motion, allowing the case to proceed.

The FLSA/Overtime Rule: During the last term of the Obama Administration, DoL promulgated a new rule making significant, and highly controversial, changes to the Executive, Administrative, Professional (EAP) exemptions – the so-called white-collar exemptions – from overtime under the Fair Labor Standards Act (FLSA). The Obama rule would have more than doubled the threshold salary for qualifying for exemption from $23,660 to $47,476, increased the “highly compensated employee” (HCE) salary from $100,000 to $134,004, and provided for automatic increases of those levels every three years without any rulemaking or public comment.

NAW joined as a plaintiff in a lawsuit challenging the 2016 rule in the U.S. District Court for the Eastern District of Texas. A group of State Attorneys General also filed a challenge, in the same court. In November 2016 the judge enjoined enforcement of the new rule (which was to have taken effect in December 2016), and in August 2017, the court granted summary judgment, invalidating the rule.

On March 22, 2019, the Trump Labor Department published a Notice of Proposed Rulemaking (NPRM), taking a very different approach to the issue. NAW and many of our allies in the business community filed comment letters on the new rule. On September 27, 2019, the Department released its final rule, which was widely viewed by the business community as much more reasonable than the Obama rule. Click here to read NAW’s most recent comment letter on this issue.

Some key provisions of the new rule, which took effect on January 1, 2020:

Standard salary level: Under the new final rule, the salary level below which an employee will be automatically nonexempt was raised to $684 per week/$35,568 per year (this is slightly higher than the $35,308 in the proposed rule).

Highly Compensated Employee Salary: In the NPRM, DoL proposed to increase the HCE salary from $100,000 to $147,414 – a dramatic increase. In the final rule, DoL changed the methodology for calculating the HCE salary, resulting in a salary of $107,432 – a much more measured increase.

Regional vs. national salary: As in the 2016 rule, DoL chose not to set regional salary levels, but to retain a single, national level.

Non-discretionary bonuses & incentive payments (including commissions): In the 2016 rule, DoL for the first time allowed these non-wage payments to count toward up to 10% of the minimum salary, provided that the payments were made quarterly or more frequently. In our comments to DoL’s new rulemaking we argued that these incentive payments should count toward meeting the salary threshold, but that the 10% limit on those payments was inadequate and did not take into consideration compensation practices in the sales workplace. We further argued that requiring the payments to be made quarterly did not take into account how commissions/bonuses are normally earned.

Disappointingly, while the new rule continues to allow commissions and bonuses to count, it keeps in place the 10% cap. The new rule does, however, allow the payments to be made annually, and allows a “catch-up payment” to be made within one pay-period (after 52 weeks) to allow the employer to make up for an unanticipated shortfall of up to 10% of the required salary level.

Duties test: The final rule makes no changes to the duties test(s).

Future updates to the salary levels: The 2016 final rule provided for automatic increases in the salary levels every three years without a notice-and-comment rulemaking. The current DoL final rule provided for NO automatic updates but “reaffirms [DoL’s] intent to update the standard salary level and HCE total annual compensation threshold more regularly in the future using notice-and-comment rulemaking.”

The National Labor Relations Board (NLRB or Board):

Like the Department of Labor, the NLRB got off to a slow start in the Trump Administration. The Board is a five-member independent agency on which there must be at least three seated members for them to conduct business. It wasn’t until April 2018, that a three-member majority and Trump-appointed General Counsel were fully in control of the Board.

The Republicans quickly began the process of reversing Obama-era rules and precedents. In addition to the Board actions, the new General Counsel aggressively and effectively joined the effort, issuing a memorandum that promised dramatic reversal of Obama-Board actions.

Specific actions of the Trump-appointed Board:

The “Ambush Election” Rule: The Board published a Request for Information (RFI) seeking comment on whether the Obama Board’s Representation Case Rule – appropriately called the Ambush Rule because it facilitated faster union certification elections and limited employer rights in the process – should be retained without changes, retained but modified, or rescinded. NAW joined allied associations in submitting comments on the RFI and joined an amicus brief on the issue in October 2018.  Click here to read our comments in response to the RFI and click here to read our amicus brief.

In August 2019, the Board published a Notice of Proposed Rulemaking (NPRM) proposing three changes to the representation election rules: one making it easier for employees to decertify a union by providing a 45-day window in which to petition for a decertification election; one changing the rule that allows a union to indefinitely block a certification election simply by filing an unfair labor practice charge against the employer; and the third dealing specifically with the construction industry. NAW has signed onto comments filed in response to this rulemaking.

The Board issued a final representation case rule in December 2019.  But the new rule was challenged in court by the AFL-CIO, and on May 30th the District Court for the District of Columbia struck down five aspects of the Board’s Ambush rule.  The Board has posted on its website a chart showing which provisions of its final rule are now in effect and which are not.  You can access that information here.

Joint Employer: Both DoL and the NLRB initiated rulemaking to reverse the Obama Board’s over-broad standard for what constitutes a joint employer for union organizing purposes. In May 2019 Board Chairman John Ring announced that the Board would propose a formal regulation to create a new Joint Employer standard. In June NAW and our allied organizations in the Coalition for a Democratic Workplace (CDW) submitted a petition to the Board urging them to proceed with the rulemaking. In September 2018 the Board published a formal NPRM on the Joint Employer Standard. In January 2019 CDW and dozens of our member associations filed comments with the Board on the NPRM, and in February filed rebuttal comments in response to comments filed by others opposing the proposed rule.  Click here to read our comment letter and click here to read our rebuttal comments.

The Board received 29,000 comments on the proposed rule.  In February the Board issued its final Joint Employer rule, which took effect on April 27, 2020.

Specialty Healthcare: In a landmark decision in the Specialty Healthcare case, the Obama NLRB set a new standard for determining what constitutes an appropriate collective bargaining unit in a union organizing campaign. The Specialty decision, and numerous subsequent Obama Board decisions, enabled labor unions to create “micro-bargaining units” within a single workplace. For example, in one notable case the Board approved a bargaining unit consisting of just the fragrance and cosmetic employees at a Massachusetts Macy’s store. NAW, the Coalition for a Democratic Workplace and allied trade associations filed more than a dozen amicus briefs in micro-bargaining cases with the Obama Board.  Click here to access our amicus briefs in Specialty, Neiman Marcus, Nestle Dreyer, Huntingtin Ingalls, Macy’s, Constellation Brands, and Volkswagen.

In a case decision in December 2017, the new NLRB abandoned the “overwhelming community of interest” standard that the previous Board had set to enable the creation of micro-bargaining units. In a second case involving a micro-bargaining unit at a Boeing plant, NAW joined CDW and others in another amicus brief urging the Board to again reverse the Specialty standard. The Board did so, finding that the International Association of Machinists Union requested bargaining unit of 178 mechanics out of a workforce of 2700 was not appropriate. Click here to read our amicus brief in the Boeing case.

We expect other decisions of the Board will similarly establish a rational “community of interest” standard in determining appropriate bargaining units.

Employee access to employer email: In 2014, in the Purple Communications case, the Obama Board held that employees who have access to their employer’s email system, on off-duty time and for work-related purposes, have the right to use that employer’s email system for non-work-related purposes, including union organizing activity. On August 1, 2018 the Trump Board announced it was inviting briefs on whether they should adhere to, modify or overrule Purple. They also expanded the issue to evaluate policies governing employee use of other employer-owned computer systems. In October 2018, NAW joined an amicus brief in a new case, Caesar’s Entertainment, and on December 17, 2019, the Board ruled in Caesar’s, reversing the Purple decision and restoring employers rights to control their email systems.  Click here to read our amicus brief.

Employee Handbook Rules: The previous Board greatly increased the Board’s reach into even non-union workplaces by expansion of so-called “protected concerted activity,” holding employee handbook rules invalid if the rules could conceivably be interpreted by an employee as impacting his/her right to participate in collective bargaining activity. Using that overly-broad standard, the Board ruled a wide variety of common handbook rules illegal, including those dealing with:

  • Use of social media to criticize the company
  • Videotaping inside the company facilities
  • Confidentiality of internal worker investigations
  • Use of profanity or obscenity in the workplace
  • Disclosure of personal, private information about the company, co-workers, customers, etc.
  • Behavior involving threats, intimidation, and harassment
  • Communications that would damage the company or someone’s reputation

NAW/CDW filed numerous amicus briefs challenging the Board’s rulings in handbook rule cases.  Click here to read our amicus briefs in D.R. Horton, Banner Health, Fresenius USA Manufacturing, Whole Foods, and Epic Systems.

In December 2017, the new Board, in a case involving Boeing, established a more balanced – and employer friendly – test to determine if handbook rules violated employee rights under the National Labor Relations Act. In the Boeing case, the Board set three categories of employee handbook rules that will be used to judge the legality of rules in subsequent complaints. Under the Boeing decision, “Category 1 will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.” In June 2018 the General Counsel issued a comprehensive new guidance for Board decisions on employee handbook rules.

Of interest, on October 10, 2019, the NLRB ruled in favor of a wholesaler-distributor, LA Specialty Produce Company, in a case in which the Teamsters challenged two of the company’s rules. One of the challenged rules prohibited employee disclosure of confidential and proprietary company information, the other prohibited employees from speaking to the media on behalf of the company.

Not only did the Board rule the company’s rules lawful, they used this company’s rules to establish the legality of similarly-written rules: “Further, we now generally categorize rules that prohibit the disclosure of confidential and proprietary customer and vendor lists as Category 1(a) rules. . . Further, we designate rules that prohibit employees from speaking to the media on behalf of their employer as Boeing Category 1(a) rules.”

Independent Contractors: In August 2016 the Obama-era NLRB General Counsel, Richard Griffin, issued an “advice memorandum” in which he radically changed the interpretation of independent contractor status, and determined that an employer’s misclassification of workers as independent contractors violates the workers’ rights under the NLRA and constitutes an unfair labor practice.

In December 2017 and April 2018 CDW filed amicus briefs in a case, Velox Express, Inc., asking the Trump Board to reject the argument that misclassification of a worker as an independent contractor is, in and of itself, an unfair labor practice (ULP). In late August 2019, the Board ruled for the employer, stating that “An employer’s communication to its workers of its opinion that they are independent contractors does not, standing alone, violate the NLRA if that opinion turns out to be mistaken.”  Click here and click here to read our amicus briefs.

Other issues:

In addition to these and other specific Board actions, General Counsel Peter Robb issued a Memorandum on December 1st, 2017, in which he outlined other controversial decisions of the Obama-era Board, some of which have now been reversed by the Trump Board. In addition to the issues described above, GC Robb made note of:

  • Decisions requiring that employers provide access to work premises to off-duty employees;
  • Expansion of the range of permissible conduct by union representatives;
  • Requiring an employer to provide witness statements to unions; and
  • Requiring an employer to continue dues check-off after the expiration of a collective bargaining agreement.

We fully expected a continued effort by the NLRB to reverse Obama-Board pro-labor rules and decisions to restore balance to the Board policies.

Equal Employment Opportunity Commission (EEOC):

During the last year of the Obama Administration, the Equal Employment Opportunity Commission (EEOC) published a proposed change in the employment data employers would be required to collect and provide to the agency. Specifically, the new form would require employers to report not just the demographical data they have long been required to collect, they would also be required to report employee compensation in “pay bands” (by gender, race and ethnicity) as well as demographic job bands. The EEOC submitted the new rule to the Office of Management and Budget (OMB), and in September 2016, OMB authorized the EEOC to collect the new data.

In August 2017, in response to a petition filed by business groups, the Trump Administration OMB rescinded the previous approval of the “pay band” data collection and stayed collection of the data pending further review. A lawsuit was filed in November 2017 by the National Women’s Law Center (NWLC) and others, urging the court to overturn OMB’s revocation of its previous approval for the new data collection. On March 4, 2019, an Obama-appointed judge on the U.S. District Court for the District of Columbia granted summary judgment in favor of the NWLC, invalidated OMB’s rescission of its prior approval of the data collection and ordered the EEOC to collect compensation data by May 2019.

On April 25, 2019, the district court judge issued a new order extending the deadline for collection of the data to September 30th and requiring the EEOC to collect two years of data, from 2017 and 2018.

On May 3rd the Justice Department appealed the two rulings requiring the collection of the Component 2 data. Business groups filed an amicus brief in the case.

On September 12, the EEOC filed a notice in the Federal Register under the Paperwork Reduction Act that they would not collect the Component 2 data beyond the two years – 2017 and 2018 – ordered by the court. On November 12th, business groups filed comments on the notice.

And on September 27th, the EEOC filed a Status Report in the lawsuit stating that it will continue to accept Component 2 compensation data for 2017 and 2018 “until it reaches what the Court has determined to be the target response rate.” As of that date, the compliance rate was reported to be under 40% and the target compliance rate is 72.7%.

In February 2020, a federal judge ruled that the Commission had collected enough data to satisfy the court order, and based on its previous announcement, the EEOC will not be collecting data in the future.

This entire matter has been complicated by the fact that the EEOC did not have a quorum for months into the Trump Administration, making it impossible for the Trump-appointed commissioners to effectively engage on the issue. The Senate eventually confirmed a new EEOC Chair, Janet Dhillon, but her ability to act is hampered by the lack of a strong GOP majority on the Commission.

There are currently two vacancies on the EEOC, and a third seat will soon become vacant. There are nominees for all three of these seats, including the nominee for the GOP seat, Keith Sonderling, whose nomination was first made a year ago. All the nominees have now been reported out of the Senate Health, Education, Labor and Pensions Committee, but a vote on their confirmations has still not been scheduled. It is critically important these seats have confirmed commissioners soon so a pro-business majority controls the Commission going into 2021.