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NAW News

Legal Update

- April 2015

NLRB “Ambush Election” Rule Goes Into Effect April 14, 2015; NLRB Issues Guidance Memo

In December, 2014, the National Labor Relations Board issued a final rule that dramatically altered the Board’s longstanding union election procedures and deletes many of the options that businesses have relied on to protect employer rights and the rights of employees who do not support union representation. (79 Fed.Reg. 74307, Dec. 15, 2014). The rule goes into effect on April 14, 2015, and it significantly tilts NLRB elections in favor of unions.

The rule is being challenged in two lawsuits – but absent a court ruling to void the rule or delay its effective date, it will go into effect on April 14th.

On April 6, 2015, the general counsel for the National Labor Relations Board issued a new Memorandum No. GC 15-06 to provide agency guidance on complying with the new union election rule. The memo can be accessed at: http://www.nlrb.gov/reports-guidance/general-counsel-memos.

Background on the Rule

According to recent data, a union election typically occurs 38 days after the union files a petition with the NLRB, and more than 90 percent of elections occur within 56 days of petition filing. Under the new rule the time frame for businesses to hold union elections shrinks to as little as 14 days after the petition is filed.

According to the NLRB, the rule:

  • Provides for electronic filing and transmission of election petitions and other documents;
     
  • Ensures that employees, employers and unions receive timely information they need to understand and participate in the representation case process;
     
  • Eliminates or reduces unnecessary litigation, duplication and delay;
     
  • Adopts best practices and uniform procedures across regions;
     
  • Requires that additional contact information (employees’ personal telephone numbers and email addresses) be included in voter lists, to the extent that information is available to the employer, in order to enhance a fair and free exchange of ideas by permitting other parties to the election to communicate with voters about the election using modern technology; and
     
  • Allows parties to consolidate all election-related appeals to the Board into a single appeals process.

The rule makes changes to the union election procedures that are immense in scope, complex and, in effect, will generally reduce the time period before an election is held—and during which employees are allowed to exercise free choice about union representation, and employers are allowed to engage in protected speech to their employees about union representation. As the Board’s dissenting members stated, the rule “has become the Mount Everest of regulations: Massive in scale and unforgiving in its effect.” In addition to the pending court challenges, the rule will undoubtedly be challenged in court as applied to affected employers who file court appeals to post-election questions.


Costco Challenges a Supplier’s Unilateral Minimum Resale Price Policy

Under the federal and state antitrust laws, to what extent may a supplier dictate that a reseller not advertise or sell the supplier’s product below a minimum resale price? Two Fortune 50 companies are squaring off in California federal court to answer this question. (Costco Wholesale Corp. v. Johnson & Johnson Vision Care, Inc., U.S. District Court, Northern District of Cal.).

At issue is the “Unilateral Price Policy” implemented by Johnson & Johnson Vision Care for its branded contact lenses and enforced against contact lenses resellers – including Costco.

The Unilateral Price Policy (“UPP”) provides in part:

“The UPP establishes a minimum price below which no reseller can advertise or sell a particular product [branded contact lenses]. The intent of the policy is to reinvigorate the rich clinical dialogue that is so important to effective patient care, rather than focusing on cost.

“Under this policy, Johnson & Johnson Vision Care, Inc. (J&J) and its authorized distributors will cease to supply UPP products to any reseller who advertises or sells UPP products to patients at a price below the UPP price listed below.

“This policy is unilateral and does not represent an agreement between J&J and its authorized distributors or resellers. As such, this policy is non-negotiable and individual representatives are not authorized to alter, waive, modify or negotiate this policy. Resellers are free to advertise and sell any UPP product at a price of their own choosing, however, violations will result in loss of product supply.”

In a FAQ sheet on the UPP, the supplier elaborates on the reseller’s ability to advertise, or sell, below the UPP price:

“Q. Am I permitted to sell UPP products above or below the UPP price?

“A. You are free to sell product you have purchased at any price you choose. However, if you sell product below the UPP price, J&J and its authorized distributors will refuse to accept new orders from you. In addition, J&J will exercise its right to repurchase your current inventory of products subject to the UPP price. If you sell product at or above the UPP price, J&J does not consider this to be a violation of the UPP.”

The key legal issue in this case is whether there is an agreement between Costco, J&J and its authorized distributors that the products will not be advertised or sold below the minimum price (Costco’s theory); or whether J&J has simply announced a unilateral policy (i.e., no agreement) that it will not sell to any reseller who violates the supplier’s minimum price policy (J&J’s theory).

Costco argues there is an agreement with J&J that Costco will not advertise or sell the products below J&J’s minimum price, and claims this agreement violates the federal antitrust laws and several state antitrust laws (California, New York and Maryland are cited in the complaint).

J&J is expected to argue there is no such agreement; that it has unilaterally announced a non-negotiable resale price policy and will enforce it by refusing to do business with any reseller who violates the policy; and that this unilateral conduct does not violate any federal or state antitrust laws.

Background

In 2007, the U.S. Supreme Court overruled its own 1911 decision and held that a manufacturer does not necessarily violate the antitrust laws by establishing minimum resale price for its products with its dealers and enforcing the policy by terminating dealer or other reseller who sells below the minimum price. (Leegin Creative Products , Inc. v. PSKS, Inc. d/b/a Kay’s Kloset…Kay’s Shoes, Docket No. 06-480).

The Court ruled that a supplier’s “vertical agreements [with its resellers] establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed.” Thus, these agreements should no longer be per se (or automatically) unlawful, as previously ruled in the 1911 case. Rather, courts should apply the “rule of reason” standard to decide, on a case-by-case basis, whether a particular vertical price restraint violates federal antitrust law. It should be noted that federal antitrust law does not preempt state antitrust laws concerning the legality of vertical minimum resale price agreements. As stated above, Costco cites California, New York and Maryland laws as holding that these agreements are illegal per se. For an archived NAW advisory on the Leegin case, go to: http://www.naw.org/govrelations/advisory.php?articleid=490.

The Costco case was filed on March 2, 2015 and obviously is a long way from resolution of the legality of the supplier’s minimum pricing policy. This case does illustrate the continuing confusion and uncertainty that exists under antitrust laws as to whether—and to what extent—a supplier can dictate or influence a reseller’s pricing decisions.


Antitheft Security Screening for Warehouses Workers Not Compensable Time Under Federal Law

In a unanimous ruling, the U.S. Supreme Court has ruled that time spent by warehouse workers in line for and undergoing antitheft security checks is not compensable time (i.e., time for which wages are owing) under the Fair Labor Standards Act (Act). (Integrity Staffing Solutions, Inc. v. Busk, No. 13-433).

In this case Integrity Staffing Solutions, Inc. required its hourly warehouse workers, who retrieved products from warehouse shelves and packaged them for delivery to Amazon customers, to undergo a security screening before leaving the warehouse each day. Several former employees sued the company alleging that they were entitled to pay under the Act for the roughly 25 minutes each day that they spent waiting to undergo and undergoing those screenings. They also alleged that the company could have reduced that time significantly by adding screeners or staggering shift terminations and that the screenings were conducted to prevent employee theft and, thus, for the sole benefit of the employer and its customers.

The Supreme Court reversed the Ninth Circuit appeals court and held that time spent by employees waiting to undergo and undergoing security screenings is not compensable under the Act. What remains unclear is whether similar claims brought under state wage and hour laws will be resolved by state courts in the same manner.


NLRB Creates New Right for Employee Use of Company Email for Union Activity

The National Labor Relations Board has declared that employees with access to an employer’s email system in the course of their work must, in practically all cases, be allowed to use the employer’s email system during non-work time to engage in union organizing and otherwise communicate about wages, hours and other workplace issues. (Purple Communications Inc., decided Dec. 11, 2014). This decision applies to employers – whether or not the company has a unionized workforce. Any company with a “business use only” policy for its email system now is exposed to possible NLRB adversarial action for having such a restriction.

Email Use Policy

At issue was the Purple Communications email use policy that provided in part:

INTERNET, INTRANET, VOICEMAIL AND ELECTRONIC
 COMMUNICATION POLICY

Computers, laptops, internet access, voicemail, electronic mail (email), Blackberry, cellular telephones and/or other Company equipment is provided and maintained by [Company] to facilitate Company business. All information and messages stored, sent, and received on these systems are the sole and exclusive property of the Company, regardless of the author or recipient. All such equipment and access should be used for business purposes only.

In this case, the union attempting to organize Purple Communication’s workers charged that this policy was unlawful on its face because it prohibited employees from using the company’s email for union organizing communications to co-workers (e.g., sending union authorization cards, flyers, video clips, etc.) and discussing other workplace issues.

NLRB Ruling

On a 3-2 vote, the NLRB overruled its 2007 decision in the Register Guard case (which approved a company’s email policy with a business use only restriction), and declared:

“[W]e decide today that employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems.”

Describing its decision as “carefully limited,” the Board stated: (1) the decision only applies to employees who have already been granted access to the employer’s email system and, importantly, does not require employers to provide such access; (2) an employer may only justify a total ban on non-work use of email by proving in “the rare case” that “special circumstances” make the ban necessary to maintain production or discipline; (3) absent justification for a total ban, an employer may apply uniform and consistently enforced controls if they are proven necessary to maintain production and discipline; and (4) the decision does not address access to a company’s email system by non-employees nor address other types of electronic communications. Proving the existence of “special circumstances” will likely be a heavy burden for the employer.

Also discussed in the decision (although not an issue) is the employer’s monitoring of the electronic communications on its email system, which will be lawful according to the NLRB, so long as the employer “does nothing out of the ordinary,” such as increasing its monitoring during a union organizing drive or focusing its monitoring efforts on union or other protected employee activity. Finally, an employer may still notify employees that it monitors (or reserves the right to monitor) computer and email use for legitimate management reasons and that employees have no expectation of privacy in their use of the employer’s email system.

Conclusion

The NLRB’s Purple Communications ruling will likely be challenged in the federal appellate courts and perhaps the U.S. Supreme Court. Until modified or reversed by a court, the NLRB will enforce this rule in pending and future cases. Every employer with a policy on the use of its email system by authorized employees is well advised to have its professional advisors review the policy and consider changes as needed to conform to the NLRB’s latest fiat.