In this issue:

Nonunion Employers Ignore the National Labor Relations Act at Their Peril: An Update

New Employment Lawyers in San Francisco
Judith Droz Keyes and Tim J. Emert join MoFo

Duffield Overturned! Title VII Claims Can Be Arbitrated

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Nonunion Employers Ignore the National Labor Relations Act at Their Peril: An Update

By Timothy F. Ryan

In the private sector, organized labor represents less than 10% of the workforce. Most employers have little actual contact with unions and can expect that to continue. On the other hand, the National Labor Relations Board's jurisdiction covers all employers, including non-union ones. Recently, the Board has taken a more activist approach to covering the activities of non-union employers even when those activities are totally unrelated to any union activity or actual union interest in organizing a particular employer. This Commentary updates the law in two areas we have focused on in the past: the entitlement of a non-union employee to have a co-worker present during an investigatory interview and the potential status of employee committees as employer-dominated "labor organizations."

NLRB Rules Unique Employee Committee Program Is Lawful

Since the NLRB's Electromation decision in 1992, non-union companies have struggled to find ways to utilize employee committees and work teams to improve their work environments without running afoul of the National Labor Relations Act's prohibition against employer-dominated labor organizations. As discussed in the Employment Law Commentary, April 1999 issue, the National Labor Relations Board ("NLRB" or the "Board") has halted numerous attempts by companies to establish employee committees that evaluate and make recommendations to management about issues such as employee evaluations, merit raises, scheduling, and benefits. Such committees have been found to be illegal substitutes for collective bargaining through traditional union representation.

Recently, however, one company's unique employee committee program passed muster. In Crown Cork & Seal Co., Inc., 334 NLRB No. 92 (2001), the Board ruled that an employee committee that is delegated management authority to operate the company within certain parameters does not violate federal labor laws. This Commentary discusses the Crown Cork decision and its impact.

The NLRA's Prohibition of Employer-Dominated Labor Organizations

Section 8(a)(2) of the National Labor Relations Act ("NLRA" or the "Act") provides that it is an unfair labor practice for an employer to dominate or support any labor organization. This law was enacted in 1935 to combat "in-house" unions which flourished in the 1920s and early 1930s and often prevented the formation of true labor organizations. Although the status of unions has changed dramatically since the 1930s, this provision of the law remains in effect.

In determining whether an employee committee violates this provision, the Board conducts a two-part analysis. First, it must determine whether or not the committee is a "labor organization" as defined in Section 2(5) of the Act. Under this broad definition, a committee is a labor organization if (1) employees participate, (2) the organization exists, at least in part, for the purposes of "dealing with the employer," and (3) these dealings concern grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.

If the committee is not deemed a labor organization, the allegation of an unfair labor practice will be dismissed. However, if the committee is deemed a labor organization, the second inquiry is whether the company has "dominated or interfered with the formation or administration of the committee." If so, the company will be in violation of the Act.

In its rulings, the Board has found employee committees to be labor organizations when they "dealt with" the company by drafting proposals that were submitted to management for its acceptance or rejection. In Electromation Inc., 309 NLRB 990 (1992), the company established action committees comprised of employees and management representatives, which discussed various issues such as absenteeism and pay progression. Committee members proposed new policies regarding these issues, but the management representatives retained final authority with respect to any recommendations. In EFCO Corp., 327 NLRB No. 71 (1998), the company established a benefits committee, safety committee, and employee policy review committee to evaluate the company's policies and make recommendations to management for improvement. In both of these decisions, the Board found these committees to be labor organizations because they acted in a representational capacity and dealt with the employer regarding basic terms of employment. One exception was an employee committee that simply screened worker suggestions and passed them to management without formulating or presenting particular proposals. This committee was deemed permissible because it did not act in a representational capacity.

Crown Cork's Unique Employee Committee Management System

Crown Cork & Seal Company operates an aluminum can manufacturing plant in Sugar Land, Texas. The plant uses a system of employee management called "Socio-Tech System." Under this system, all employees are assigned to serve on numerous teams, committees, and boards. Each committee is delegated substantial authority to operate the plant within certain parameters. This system is a significant variation on the traditional plant organization structure where authority is delegated to descending levels of managers who make decisions on an individual basis.

Crown Cork has four production teams, each of which is composed of a member of management and thirty-two production and maintenance employees. Acting by consensus, these teams make and implement decisions regarding a variety of workplace issues such as "production, quality, training, attendance, safety, maintenance, and discipline short of suspension or discharge." The teams can stop production lines without management approval and stop delivery of cans that do not meet quality standards. They also decide which workers should receive training, whether to grant a team member's request for time off, and whether an absence is excused or unexcused.

Crown Cork also has established three committees one administrative level above the production team: the Organizational Review Board, the Advancement Certification Board, and the Safety Committee. Each of these committees has about twelve members, including two members from each of the four production teams and some members of management. These committees monitor plant policies and suggest modifications, recommend pay increases, and consider the best methods to ensure a safe workplace. These committees make recommendations to management, but the plant manager testified that he could not recall a single instance when a committee suggestion had been overruled.

Nevertheless, the committees must operate within established parameters, and one of the roles of management is to ensure that the committees do not exceed their delegated authority. For example, one of the committees recommended a layoff procedure that contained a provision for seniority. Management returned the matter to the committee with the comment that they did not have seniority at the plant.

The Crown Cork Decision

The Board found that Crown Cork's seven committees are not labor organizations under the Act. Rather than "dealing with" management by making proposals that were accepted or rejected, Crown Cork's committees "are management" because they perform essentially managerial functions within their delegated spheres of authority. Crown Cork delegated to the committees the authority to operate the plant within certain parameters. This authority "is comparable to that of the front-line supervisor in the traditional plant setting."

The Board rejected the argument that "dealing" must necessarily occur when the committee's recommendations are passed to management because the committee's authority was not final and absolute. The Board compared the committee's authority to that of a supervisor in a conventional plant, whose managerial recommendation is also typically subject to review by a higher level of authority. The Board reasoned: "Higher-management review of a recommendation made by lower management cannot be equated to the ‘dealing' between an employer and a representative of its employees contemplated by the statute." Because the plant manager rarely overturned decisions made by the committees, "it cannot be doubted that each committee exercises as a group authority that in the traditional plant setting would be considered to be supervisory."

Impact of Crown Cork

The Crown Cork decision illustrates how an employer might operate an employee committee without running afoul of federal labor laws. Employers that wish to implement a "Socio-Tech System" similar to Crown Cork should take caution to:

• Narrowly define the committee's subject matter, areas of authority, and goals.
• Authorize the committee to perform managerial functions.
• Be prepared to accept the committee's decisions and recommendations with only occasional and very limited overruling.
• Avoid implementing such a program when faced with an active unionizing drive.

This unique system, however, is probably suitable for only a small fraction of employers. Few companies, we suspect, may be willing to give rank-and-file employees the kind of managerial authority given in Crown Cork. Accordingly, while hailed as a welcome change from the chain of decisions commencing with Electromation, its true impact may be only as a stepping-stone to a wholesale review of this area of the law by new Board members.

Justices Let Stand NLRB Decision That Non-Union Employees Are Entitled To Have A Co-Worker Present During An Investigative Interview

The U.S. Supreme Court has let stand an appeals court decision affirming the National Labor Relations Board's ruling that non-union employees are entitled to have a co-worker present during an investigative interview which the employee reasonably believes may result in disciplinary action. Epilepsy Foundation of Northeast Ohio v. NLRB, 2002 U.S. LEXIS 4231 (2002).

As discussed in the Employment Law Commentary, August 2000 issue, the Board held that a non-union employee has a statutory right to have a co-worker present at an investigative meeting. Epilepsy Foundation of Northeast Ohio, 331 NLRB No. 92 (2000). This statutory right is based on Section 7 of the Act, which states that "[e]mployees shall have the right … to engage in … concerted activities for the purpose of … mutual aid or protection." The U.S. Supreme Court had previously interpreted this section to establish that a unionized employee was entitled to have a union representative present during an investigative meeting. NLRB v. Weingarten, 420 U.S. 251 (1975). These rights are known as "Weingarten Rights." The Board's Epilepsy Foundation decision extended Weingarten Rights to employees not represented by a union. The Board reasoned that requests to have a co-worker present at an investigative interview implicate the right of employees to act together for their mutual aid or protection regardless of the non-union status of an employee.

The U.S. Court of Appeals for the D.C. Circuit affirmed the Board's decision in Epilepsy Foundation of Northeast Ohio v. NLRB, 268 F.3d 1095 (D.C. Cir. 2001). The court found that the Board's determination that a non-union employee's request for a co-worker's presence at an investigative interview is concerted action for mutual aid and protection was reasonable. The court reasoned: "[E]ven non-union employees may have a shared interest in preventing the imposition of unjust punishment, and an employee's assertion of Weingarten invokes this shared interest." The court rejected the petitioner's argument that an extension of Weingarten Rights to non-union workers would force employers to "deal with" the equivalent of a labor organization contrary to the exclusivity principle in Section 9(a) of the Act. The court reasoned that an employer is not required to "bargain collectively" with the Weingarten representative, and may freely forgo the investigative interview altogether. The court reversed, however, the Board's retroactive application of the new rule.

On June 10, 2002, the U.S. Supreme Court let stand the D.C. Circuit's decision by denying certiorari. Epilepsy Foundation of Northeast Ohio v. NLRB, 2002 U.S. LEXIS 4231 (2002). President George W. Bush's new Board may seek to change the underlying Board decision; indeed, several labor law observers believe that the Epilepsy Foundation decision tops the list of rulings that the new Board is likely to reverse.

In the meantime, all non-union employers should take steps to ensure that the individuals responsible for reviewing disciplinary and termination decisions are aware of the following:

• No Duty to Inform Employees of Their Rights. Employers have no obligation to inform employees of their Weingarten Rights, or to offer representation during an investigative interview.
• Employee's Request. Employees may request having a co-worker present during an investigative interview, or request that they not meet with their supervisor alone.
• Employer's Options. Following such a request, an employer may allow co-worker representation and proceed with the interview, or deny the request and dispense with the interview. If the meeting does not take place, it is advisable that the employer document and obtain the employee's written acknowledgment that the employer offered to meet with the employee and that the employee refused to do so without a representative present.
• Notice of Interview. If the employer decides to proceed with the interview, the employer should either (1) give advance notice of the interview to permit off-hours consultation, or (2) allow the employee to meet with the co-worker during working hours. The co-worker is not entitled to pay, however, for the time spent meeting with the employee or participating in the interview.
• Employee's Representative. An employee is entitled to have a co-worker present, but is not entitled to have non-employee representatives, such as a family member or an attorney, attend the interview. Further, the employer is not required to postpone the interview if the employee selects a co-worker who is not available.
• During the Interview. The employee's representative is permitted to ask questions and participate in the discussion. However, the representative is prohibited from interfering with the interview process. If the representative obstructs the interview, the employer may terminate the meeting and proceed with the investigation and/or disciplinary action without further input from the employee.

Employers should also take steps to ensure that no negative employment action is taken against any employee due to the exercise of these rights.

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New Employment Lawyers in San Francisco

We are pleased to announce two additions to our labor and employment department in California: Judith Droz Keyes as a partner and Tim J. Emert as of counsel, both of whom will work from our San Francisco office.

Judy Keyes has practiced labor and employment law in California for twenty-seven years. She brings extensive experience in counseling clients through difficult and sensitive human resource issues, training managers and supervisors in their responsibilities as employer-agents, and representing clients before virtually all of the California and federal labor agencies as well as in negotiations, mediation, arbitration, and court. Judy is currently representing clients in wage/hour class actions and unfair competition cases in Superior Courts of the Bay Area and Los Angeles.

Judy is a Fellow in the College of Labor and Employment Lawyers, and is listed as one of the "Best Lawyers in America" in the publication of Naifeh and Smith. She was a lawyer representative to the Ninth Circuit Judicial Conference from 1997 to 2000, having been appointed to that position by the judges of the U.S. District Court for the Northern District of California. She currently serves as an evaluator and mediator of employment cases for the Northern District and is also a member of the Board of Directors of the Oakland Private Industry Council. Last year, she was nominated by one of her clients and recognized by an international research and consulting firm (BTI Consulting Group) as one of seventy-eight lawyers worldwide delivering superior client service.

Judy was chair of the Labor and Employment Law Section of the Bar Association of San Francisco from 1998 to 2000, and remains a member of that Section's executive committee. She was president of the Alameda County Bar Association in 1997 and is a member of the American Bar Association's Labor and Employment Law Section International Committee, the Association for Conflict Resolution, and the Mediation Society.

Judy received a B.S. with Distinction from Pennsylvania State University in 1966, an M.A. from the University of Missouri in 1970, and a J.D. from the University of California — Berkeley (Boalt Hall) in 1975. At Boalt, in addition to being class president and a member of the California Law Review, she was admitted to the Order of the Coif honor society. Before beginning private practice in 1976, Judy was a field attorney at the National Labor Relations Board in San Francisco.

Tim Emert comes to MoFo with nearly twenty years of labor and employment experience, with an emphasis on issues and disputes involving labor unions. Before law school, Tim was a welder for many years and served as president of a steelworkers' local union. In his first few years as an attorney, he represented unions and individual employees. For the past seventeen years, his practice has been devoted exclusively to representing employers. He has successfully negotiated hundreds of union contracts in a variety of industries, including construction, hospitals and healthcare, motion pictures and entertainment, trucking and warehousing, building operation and maintenance, transportation, and manufacturing. Recently, he negotiated several complex labor union agreements for organizations in the process of merging. He represents employers before the National Labor Relations Board both in representation cases and in unfair labor practice trials. He has handled over one hundred labor arbitrations and routinely guides employers through grievance processing.

Tim is also experienced in defending employment discrimination and wrongful termination lawsuits and has achieved successful jury verdicts in several jurisdictions throughout California. He enjoys working with employers to avoid litigation by crafting effective policies and providing practical advice to resolve the problems that inevitably arise in the workplace. He frequently speaks to legal and business groups on avoiding and defending employment discrimination litigation.

Tim is a member of the Board of Directors of the California Society for Healthcare Attorneys and serves on the Board of Editors for the California Health Law News. He is a member of the Industrial Relations Research Association and the American Bar Association's Labor and Employment Law Section Committee on Federal Labor Standards Legislation.

Tim grew up in Los Angeles and, after a tour of duty in the Army Signal Corps in Southeast Asia, received his undergraduate degree from the University of Wisconsin, Madison, in 1974. In 1983, after earning an M.S. in Industrial Psychology from San Francisco State University, he graduated from Hastings College of the Law.

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Duffield Overturned! Title VII Claims Can Be Arbitrated

On September 3, 2002, the Ninth Circuit Court of Appeals issued a decision holding that an employer may require employees to sign agreements to arbitrate Title VII claims as a condition of employment. EEOC v. Luce, Forward, Hamilton & Scripps, 02 C.D.O.S. 8033. Four years earlier, a three-judge panel of the same court held that an employer could not enforce a provision requiring mandatory arbitration of a Title VII claim. Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998). Declaring that the Supreme Court decision in Circuit City Stores v. Adams, 532 U.S. 105 (2001), implicitly overruled Duffield, the Ninth Circuit expressly held "we reach the inevitable conclusion that Duffield no longer remains good law." As long as the arbitration agreements comply with traditional principles of contract law, an employer may require an employee to execute the agreement and may enforce the compulsory arbitration provisions, even in discrimination claims brought under Title VII. (In California, the traditional principles of contract law supporting a mandatory arbitration agreement were set forth in Armendariz v. Foundation Health Psychcare Services, 6 P.3d 669 (Cal. 2000).)

The plaintiff in Luce, Forward refused to sign an arbitration agreement as a condition of obtaining employment with the firm. The district court held that Duffield required it to issue an injunction prohibiting the law firm from requiring employees to arbitrate Title VII claims. As noted in prior issues of the Employment Law Commentary discussing the decision (see May 1998, August 1998, and January 2001), the holding in Duffield was repudiated by all other circuits considering the issue, as well as by the Supreme Courts of California and Nevada. In the face of this overwhelming contrary authority, the Luce, Forward court observed that "Duffield, like Bikini Atoll, now sits ignominiously alone awaiting remediation. That remediation can occur, however, only if a decision of the Supreme Court permits us to question Duffield." The Supreme Court decision in Circuit City provided the opportunity, holding that the Federal Arbitration Act covers employment contracts and that an employee does not forgo substantive statutory rights by agreeing to submit a dispute to arbitral rather than judicial resolution. Following the judicial trend to enforce properly drafted compulsory arbitration agreements for employment discrimination disputes, the Ninth Circuit now is consistent with the rest of the nation on this issue.

However, the court noted that although an employee may be required to sign an agreement to arbitrate Title VII claims rather than file a civil lawsuit, the agreement does not prevent the employee from filing a complaint with the EEOC. The EEOC is not a party to the agreement and "remains free to seek appropriate victim-specific relief in any suitable forum."