Change Underway in Labor Relations

It’s no secret that the current administration is a fan of big labor. Union leaders are top guests at the White House. The bailout of the automakers favored protecting unions over bondholders. Unions, specifically the Service Employees International Union (SEIU), are used as the foot soldiers to carry signs, march and canvass for a range of Obama policies. Therefore, it should be no surprise that this administration, through its appointments to the Department of Labor and the National Labor Relations Board, is actively encouraging a dramatic change in the regulatory environment in favor of union organizing.

As legislative initiatives, the tendency of the Obama administration has been to use back door routes such as federal agencies to see much of that policy implemented. For example, with the likely demise of cap-and-trade legislation, the USEPA is pushing to regulate carbon. There is little doubt that this will continue where labor is concerned.

To take a look at what lies ahead in this area, FON has consulted a top labor attorney with considerable experience in the industry. Steve Wheeless is a Steptoe & Johnson LLP partner based in the Phoenix office. Prior to joining the firm, Wheeless was an F-16 Instructor Pilot and a Diplomatic Exchange Officer to the Royal Danish Air Force.

Wheeless represents employers nationwide in all aspects of labor relations, including: union avoidance planning, training, and organizing campaigns; NLRB representation hearings and unfair labor practice proceedings; labor-related RICO actions; Collective bargaining, contract interpretation, and arbitrations.


 FON  There was a lot of talk about Card Check legislation a year ago with the Employee Free Choice Act. Card Check would have eliminated the secret ballot process in voting to unionize a business. It would also potentially open the process to greater union intimidation. What is the status on that legislation?


Wheeless: The Scott Brown election in Massachusetts was a game changer as it relates to one key component of the labor movement’s strategy for the first year of the Obama administration. The Senate Democrats lost their 60 vote majority that would allow them to overcome a filibuster; so the Employee Free Choice Act, if not completely dead, is certainly in a very long-term coma at the present time. But the labor advocates are not going to roll over and play dead, and they are going to concentrate on the Department of Labor and the National Labor Relations Board.


 FON What about the Interest Arbitration and Financial Penalties components of the Employee Free Choice Act?


Wheeless: Of the two, Financial Penalties remains in play, with some effort being possible to attach it to existing legislation. To date, if someone is charged with violating the National Labor Relations Act as it relates to unions or employee concerted activities the downside risk is in most cases a posting on a wall for 60 days saying, ‘We won’t do that again.” The labor movement has long argued that was not a sufficient deterrent and a large number of Senate Democrats agree along with some Republicans.

The Employee Free Choice Act was seeking a penalty up to $20,000 per unfairly labor practice. That would be a game changer in that it would attract plaintiff lawyers to labor law and create a ‘neutrality through fear” proposition, which is what the labor movement wants. (That increased risk) would silence employers when organizing occurs.  Don’t be surprised if Congress tries to attach a financial penalty provision to some other piece of legislation in the upcoming lame duck session.


 FON You noted the focus is now on pursuing labor goals in the regulatory realm. Will the current anti-union backlash building around the nation, primarily focused on government unions and contracts have any impact on the Obama administration’s efforts moving forward?


Wheeless: Anti-union sentiment in the public will have no impact on what happens at the DOL and NLRB in the near-term.


 FON  What is specifically happening at the DOL and NLRB?


Wheeless: Right now the labor moment is pursuing regulatory initiatives at the Department of Labor and the National Labor Relations Board.   At the DOL, Secretary of Labor Hilda Solis, former Congresswoman out of Southern California and a long-time union advocate ‘ very pro labor ‘ has done several things to advance the union agenda.

The first one is that Secretary Solis has shifted the Department of Labor away from counseling and support to enforcement, specifically in the wage and hour arena. She has hired 150 new auditors and devoted $32 million in new money to the Fair Labor Standards Act wage and hour audits. Earlier this year she received a $4 million consent decree from a fuel oil distributor in the Northeast and a $60,000 consent judgment covering 32 employees from a gasoline and convenience store operator in the same region. As you can imagine, unions use the DOL audits as a springboard to organize in such operations by stating that the union will ‘protect you” form these companies in the future.


 FON How can a company protect itself from coming out on the wrong side of an audit?


Wheeless: Companies should consider doing an internal audit of their pay practices to make sure they are not vulnerable. Employers that have auto-deduct meal period software can have a problem. It automatically deducts 30 minutes for a meal period, which is not on its face unlawful. But in practice it is almost always improperly applied and it is a magnet to the DOL.

Similarly, we’ve seen a lot of problems around what an employer should do if the meal period is interrupted. That is common in a retail environment, and under the Fair Labor Standards Act if you do not have 30 minutes free and clear any break has to be paid time. Another area is that many small- to medium-sized employers are not keeping adequate time records for the requisite three-year period, and if you don’t have the records or they do not capture all of the required data, the DOL presumes that you are not paying your employees properly.  

Another problem, particularly with small- to medium-sized employers, is the classification of the first level supervisor. For example, an assistant manager might be classified as exempt, but might not actually qualify as exempt under the Fair Labor Standards Act definition for exempt. So under the employer’s rules they do not qualify for overtime when they should and then you have a two- to three-year look back, which can cost the employer real money. There are probably a half a dozen additional issue we see routinely in our audits.


 FON How are these audits triggered?


Often it is a union that will call the DOL and say, ‘We have heard over at XYZ Company they are misclassifying their assistant managers.” Then the DOL contacts the HR manager and you are off and running. The DOL also actually has a gasoline industry initiative to specifically focus on this industry.


 FON We’ve touched a bit on the National Labor Relations Board ‘ what are some of the specific concerns there?


Wheeless: The NLRB has jurisdiction over all private employers in America with two or more employees with certain exceptions such as agriculture and some seasonal employers. This board is now made up of three former union lawyers ‘ Wilma Liebman (Bricklayers and Teamsters); Craig Becker (AFL-CIO and SEIU); and Mark Pearce (Teacher’s Union). The lone Republican Brian Hayes will always be out-voted, so we now have three former union lawyers creating and establishing labor law in America. They have already taken action in several arenas to institute pro-labor policies. Both are small potatoes, but indicative of what is to come.

NLRB intends to change a decades-long practice of charging simple interest on back pay awards. Say someone gets fired for a reason subsequently found to be unlawful and is ordered reinstated. The ‘make whole” remedy generally includes back pay; that will now include compounding vs. simple interest, and the debate now is if it should be daily, weekly, monthly or some other period. If you think about $10,000 with compounded weekly interest, that has the effect of a punitive financial penalty.

The other thing they have signaled is that they are going to require notices of unfair labor practices to be distributed not by a poster next to the time clock for 60 days, but by e-mail to every employee. There is a lot of propaganda value with that personal message to each employee saying, ‘We broke the law;” that enhances the union’s ability to say, ‘See, we told you these are bad people you need us to protect you from.”


 FON What are the big things on the horizon?


Wheeless: There are maybe 20 things we expect from the board, but there are probably five significant ones.

Right now from the time you get the unionizing petition to the actual election is usually six to nine weeks by rule. NLRB is expected to change that, so you will have elections in seven to 21 days. From the perspective of someone who has been involved in scores of union election campaigns, I can tell you that if an employer has not communicated with its employees about union representation issues previously and then it is presented with a petition for an election only a week or two later, the likelihood of the employer winning that election is much, much lower.

Another big one is that we expect changes in the voting procedure. Currently, if a union wants an election the election is held on the employer’s property during working hours. We expect that to be changed to electronic or mail in ballots which allows a union organizer to be sitting in the employee’s living room next to the laptop or with a ballot helping them ‘do the right thing” as they are voting.

Similarly, there is even a possibility that the NLRB could institute Card Check on its own. The board has stated it would never do that, but up until 1973 employers had to recognize unions based upon Card Check unless there was a question of representation ‘ i.e. the cards were forged or there were bribes, etc. But in 1973 the board announced secret ballots as the preferred method and the board could change that back.

Another significant issue would be equal access. Currently, an employer can hold educational meetings with employees during work time and it can require them to participate and listen and hopefully learn about the impact of unions not just on the employee, but on the employer and on competitiveness, etc. The unions want equal access so we may get a ruling or decision or regulation that says if an employer is going to hold those captive audience meetings you have to give a union equal, paid work time access on your property.

Finally, the NLRB has before it two petitions from unions to make rules that would change the labor landscape more dramatically than even Card Check or Interest Arbitration.  It is something called ‘minority bargaining.”  That is where a union can demand recognition from and bargaining with an employer for only a minority of employees in a given unit.  Think about that!  Under minority bargaining, a union does not have to get majority support to get recognition.  So any small group of disgruntled employees could bring in a union.  Think that sounds crazy?  Well, minority bargaining was well recognized and used often early in the labor movement, but fell out of favor as unions sought to control and increase market share through majority representation where ‘ by law ‘ the union gets to represent everyone in the unit.  However, with unions struggling to regain membership and clout, at least 13 unions have asked the NLRB to affirm via regulation that minority bargaining is acceptable and recognized.  If you need something to keep you up at night, the prospect for minority bargaining will do it.


FON Does the size of the business make a difference?


Wheeless: It’s not the size of the employer; it’s the type of industry. Unions are actively targeting very small employers first because it’s easy. It’s easier to organize five employees than 1,500. And smaller companies have fewer resources to defend themselves from union encroachment. Once they get a foot in the door with five employees, it’s easier to organize the rest of the company. Once they get a single store, it’s easier to organize the chain. And once they get a foot in the door in one industry in one geographic region ‘ say one convenience store ‘ that specific union can claim that as their territory. They fight that out at the AFL-CIO and then they get some exclusivity to employer for some period of time, say five years, to organize as much as they can.


FON: How can industry companies prepare to face a union challenge?


Wheeless: There are a number of best practices that I recommend. The most important is that the executive team must get knowledgeable and involved and authorize a union-free strategy. The second most important step is to focus on supervisors. The No. 1 reason employees join unions in America is because they dislike or fear the supervisor. So you have to invest in targeted, concentrated leadership workshops that teach specific skills and change attitudes and behavior, not a 30 minute presentation on being nice.

Supervisors have to understand what is at stake for them and what works when it comes to creating and maintaining employee loyalty. Loyal employees do not turn to unions. I have distilled those concepts into a seven-step program that is a full-day workshop I call Seven Key Skills To Create And Maintain Employee Loyalty.  Ultimately loyal employees make the supervisors look good, and if they see what’s in it for them, they get very energized.

The third best practice, and its one most employers choke on, is that you have to talk to your employees about union issues in orientation and on a recurring basis. This is basically an inoculation program. It’s a short program ‘ 20 minutes ‘ to set the stage that we have a game changing situation with labor advocates running the DOL and NLRB. We have to tell employees what that means. We are going to have significantly increased union organizing attempts and that they might be the target. What does it mean to them and the employer should a union gain representational right, and what is the employer’s position?

Almost every executive I talk to turns white when I bring up talking to employees about unions, but silence equals acceptance of unions for the employee. And a Gallup poll conducted in late 2009 found that the more employees know about union and labor issues, the less they are interested in unions. Information is power for both the employer and the employee.

Step number four is that you have to put in place a lawful defensive strategy to limit and control union communications with your employees. This is through a series of what most people would call HR policies, such as property access and trespassing rules; solicitation and distribution of literature rules; electronic communications systems rules;  bulletin boards; audio visual recordings; dress codes, online social networking ‘ which is critically important today.

All of those procedures have to be in place before union organizing starts because it is unlawful to put them in place once a union shows up.  You also have to have a quick response plan in place ‘ I call it the Five-Day Response Plan for Union Organizing ‘ because that first week is critical and especially so if we go to the shorter election cycle. It’s basically a three-binder set ‘ a battle plan ‘ you pull off the shelf and start running down the check lists.  We have to remember that running a response to a union organizing campaign is both practical and legal.   We have to win hearts and minds very quickly, but we have to do it lawfully, and there are too many legal rules to count that govern what you can and can’t do in an organizing campaign.  Advance preparation is the key.


FON: I imagine you have to be careful in what and how you communicate to your employees.


Wheeless: I can’t overstate the importance of doing this lawfully. It would be very easy to say, ‘Look, if a union gets in here, you’re all fired, and I’ll shut this place down.” That would be persuasive. But it wouldn’t do an awful lot for employee loyalty, and it would be unlawful, and it would get you in real trouble. Having done this hundreds of times I can tell you that there is a very powerful, persuasive, and lawful message that employers can give to their employees.


FON: What are other best practices in this area?


Wheeless: If the access and response plan are the defensive component of a union resistant strategy, then effective employee engagement is the offensive component. In addition to the supervisor workshops I mentioned earlier, you have to be sure you are paying competitive wages and benefits. Conduct annual surveys and if you are not competitive, get competitive quickly even if it takes a few dollars off of the profit margin. Union organizing never starts with money, but it quickly becomes about the money. And if you are competitive, publicize it to your employees, ‘See, we’re in the top 25 percentile for the industry.”

Draft and disseminate a third-party representation philosophy statement in your handbook and your break room. Something like, ‘Our company believes we work best when we work directly with each other to solve problems, concerns and issues.”  Employers also need to do a much, much better job communicating about change. A failure to communicate change leads to the employee upset with the change, upset with the supervisor and upset with the company. That is the second most common reason employees turn to unions.

You also need a time-specific, procedure-specific open door policy with an established follow-up process for any open door concerns brought to a supervisor’s attention. And you need a manager’s ’rounding” policy where managers are required to ask employees on a regular basis, ‘What can I do for you?” and ‘Do you need anything from me?” There is a legal aspect to that as well, since if you have been soliciting and remedying grievances before organizing, you can continue it during the union organizing drive. You can’t otherwise. Then, creating and implementing employee communications committees ‘ safety, quality, customer relations ‘ allows employees to brainstorm with management about how to improve the company. These are so effective they can quickly become unlawful if they are not structured correctly to prevent them from becoming an in-house sweetheart union.

Also, provide refresher supervisor training every six months and select supervisors that reflect the demographics of the workforce and who have people as well as job skills. Make sure their loyalty is to the company in their transition from employee to supervisor and evaluate and compensate them on the union avoidance component. Allow your employees to evaluate their supervisors on a regular schedule through 360 degree evaluations or anonymous grassroots surveys or interviews.


FON Can employers give input to these regulatory bodies?


Wheeless: As participants in a democratic form of government, we have to speak. The U.S. Chamber of Commerce is taking the lead on responding to these regulatory initiatives. In addition you should contact the DOL and NLRB ‘ they have websites where you can send e-mails ‘ and you should contact your federal representatives and senators. The basic message should be that an employer has a right and an obligation to be sure that it has an educated workforce when it comes to labor issues. And employees have a right to a majority vote on any representation issues in their unit.  Any initiative from the DOL or NLRB that interferes or undermines those rights takes away basic free speech and free choice rights.


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