October 1, 2019

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Legal Alert: Employer Win: National Labor Relations Board Adopts Contract Coverage Standard for Determining Whether an Employer May Take Unilateral Action

By Holly J. Stewart, Attorney at Ryley Carlock & Applewhite

On September 10, 2019, the National Labor Relations Board (the “Board”) adopted the “contract coverage” standard for determining whether a unionized employer’s unilateral change in a term or condition of employment is a violation of the National Labor Relations Act (the “Act”). See MV Transportation, Inc., 368 NLRB No. 66 (2019). This decision overruled 70 years of Board precedent, which required collective bargaining agreements to clearly and specifically show the union waived its right to bargain over a changed employment term. The employer in this landmark case was represented by Ryley Carlock & Applewhite Shareholder, Kerry Martin.

Under the contract coverage standard, where an employer is defending against a unilateral-change allegation by asserting that contractual language privileged it to make the disputed change, the Board will assess the merits of this defense by first undertaking a limited review of whether the parties’ collective bargaining agreement covers the disputed unilateral change. The Board stated that it will give effect to the “plain meaning of the relevant contractual language, applying ordinary principles of contract interpretation;” and, if the alleged disputed change “falls within the compass or scope of the contractual language,” the Board will find the employer had the right to act unilaterally. Id. at *11. Therefore, the Board will no longer require that the agreement “specifically mention, refer to or address the employer decision at issue.” Id. Where the Board finds that this limited review of the parties’ contractual language does not cover a disputed unilateral change, the Board will next consider whether the union clearly and unmistakably waived its right to bargain over the change. Under this more expansive analysis, the Board will consider the parties’ bargaining history, past practice, and relevant contractual language to determine whether the union waived its right to bargain regarding the disputed change. Thus, the clear and unmistakable waiver test is still relevant as a potential second-line defense to employers’ unilateral action.

In MV Transportation, the Board emphasized that its decision does not remove any meaningful limits on unilateral employer action. Instead, the Board reasoned that the contract coverage test “rightly gives effect to the limits—or absence of limits—upon which the parties have themselves agreed.” Id. at *10.  Indeed, a number of circuit courts applying the contract coverage standard have rejected employers’ defenses on this basis because the literal and plain language of the agreements at issue did not support the employers’ unilateral changes. The Board also clarified that the contract coverage standard will apply retroactively to all pending cases before the Board in whatever stage.

The Board’s adoption of the contract coverage standard is likely to prompt companies to propose broad and generalized management-rights provisions, as opposed to specific and detailed management-rights provisions that were favored under prior Board law. Unions will undoubtedly push back against contract proposals that essentially waive the employer’s duty to bargain over changes to terms and conditions of employment during the term of a collective bargaining agreement.

The Amalgamated Transit Union Local 1637 has filed a Petition for Review of the Board’s decision in MV Transportation with the Ninth Circuit Court of Appeals. Additionally, due to the fact that Board members are appointed by the President and the tendency of Board decisions to reflect the partisan views of the executive, how long this standard endures may depend on the outcome of the 2020 Presidential election. One thing is for certain, this decision puts the spotlight on the terms negotiated by parties in their collective bargaining agreements.

About the Author:
Holly Stewart assists with a variety of employment and labor relations matters, including drafting pleadings in wage and hour claims, legal memoranda concerning state and federal anti-discrimination and disability statutes, and employer leave policies that comply with Arizona earned paid sick time law, the Family and Medical Leave Act, and federal law concerning employers’ workplace rules. Holly can be reached at 602.440.4861 and hjstewart@rcalaw.com.