Pair of Board Decisions Significantly Limit Employers’ Power to Act Unilaterally and Past Practice Defense

On August 30, 2023, the National Labor Relations Board (the “Board”) released a pair of decisions: Wendt Corporation, 372 NLRB No. 135 (2023) and Tecnocap, LLC, 372NLRB No. 136 (2023), overruling different aspects of the 2017 decision in Raytheon Network Centric Systems, 365 NLRB No. 61 (2017).[1] According to the Board, it reaffirmed and preserved the long-standing principles of the defense of past practice that employers have utilized to escape a finding of a violation of 8(a)(5) of the National Labor Relations Act (the “Act”) when they have implemented unilateral changes to the terms and conditions of employment for employees who are represented by a union.

Raytheon Decision

In Raytheon, the Board held that prior to the execution of an initial contract of a newly-represented workforce or during the contractual hiatus period after a contract had expired, employers could make discretionary unilateral changes to terms and conditions of employment, provided that such changes were consistent with past practice.

The Board also found that an employer could unilaterally act after the expiration of a collective bargaining agreement if the employer relied on a past practice that was developed under a management rights clause in the agreement.

Wendt and Tecnocap

The Board in both Wendt and Tecnocap, overruled the test that was articulated in Raytheon that an employer may lawfully make unilateral changes in terms and conditions of employment, including those that are informed by discretion, so long as the changes are “similar in kind and degree” to the changes made in connection with the employer’s past practice. Further, the Board overruled Raytheon to the extent that it was interpreted to allow an employer to rely on a past practice that either occurred before employee organizing or was based on a management rights clause that was contained in an expired collective bargaining agreement.

In Wendt, the employer tried to utilize its past practice of layoffs before its employees organized to justify a set of layoffs following union certification and during bargaining for its initial agreement with the Union. In finding that this reliance on a past practice was impermissible, the Board held that unilateral changes can only be made when both “the employer has shown the conduct is consistent with a longstanding past practice and is not informed by a large measure of discretion” – undoing the Board’s acceptance of employer unilateral “discretionary” changes in Raytheon. The Board also held that an employer may not defend a unilateral change in terms and conditions of employment that would otherwise violate Section 8(a)(5) of the Act by citing a past practice of such a change made before an employer had a statutory duty to bargain with the union.

In Tecnocap, the employer attempted to justify changes to the length of employee shifts during negotiations for a successor agreement by relying on its past practice of altering employees schedules pursuant to the management rights clause that existed in the previous collective bargaining agreement that had since expired. In rejecting this argument, the Board held that a past practice that existed pursuant to a right granted in a management rights clause does not survive expiration of the agreement containing such clause. 

Unilateral Changes Moving Forward

In the Wendt and Tecnocap decisions, the Board emphasized that a change that involves a large degree of managerial discretion cannot be justified based on a past practice argument. As a result of these decisions, it appears that, going forward, if an employer contemplates a unilateral change that involves discretion, the Board may take the position that the employer must bargain with the union concerning such anticipated change. The Board did not, however, articulate a test for determining what causes a change to have an appropriate amount of discretion versus a change that requires a large amount of discretion for which there is an obligation to bargain.

Another important point taken from the decisions is the Board’s focus on the collective bargaining processes and that an employer must refrain from unilateral changes during bargaining and cannot implement changes until the parties reach impasse on an entire agreement. The Board points out that it is not simply enough for an employer to offer to bargain over a change with a union and then ultimately unilaterally implement the change once the parties reach impasse on that subject, as such a change during collective bargaining would frustrate the point of the collective bargaining process and encourages piecemeal bargaining, which is disfavored under the Act. This is consistent with the overall message the current Board appears to be sending with these decisions that unilateral changes during collective bargaining obstruct the entire process and are rarely justified.

Member Kaplan Concurs and Dissents

Member Kaplan concurred with the Board’s ultimate decision in Wendt, insofar as he agreed that the unilateral change the employer made was inconsistent with its “long-standing practice.” However, he disagreed with the Board majority’s decision to overrule Raytheon in Wendt, as it went beyond the Board’s scope in that case.

Kaplan dissented in Tecnocap, stating that the Supreme Court could not have intended to implement an “impossibly restrictive” past-practice standard that will always make an employer’s unilateral action unlawful when it involves any amount of discretion.

Key Takeaways

Employers should be aware of the Board’s overruling of Raytheon especially if they have made unilateral decisions based on the kind and degree test articulated in that 2017 decision. The Board in Wendt rejected the employer’s due process argument that it relied on Raytheon which was valid Board law when determining whether to proceed with the layoffs. Both decisions apply retroactively as the Board determined that its decisions were not departures from preexisting law, but rather a restoration of long-established law and, according to the Board, would not work a manifest injustice. 

Moving forward, the leeway provided to employers under Raytheon regarding making unilateral changes consistent with past practice prior to execution of a contract or during a hiatus period has been eliminated by these decisions.

Under Tecnocap, the waiver of the right to bargain over subjects set forth in a management rights clause expire along with the collective bargaining agreement. Per the decision in Tecnocap, if employers are able to negotiate a favorable management rights clause in their agreements, they should consider including language that the clause survives expiration until a successor agreement is entered into. Alternatively, upon the approach of an expiration date of an agreement, employers should consider agreeing to extensions of the expired agreements that contain language that the extension extends the agreement in full.

Arguably, many decisions necessary to run a business involve a large amount of managerial discretion, and may be prohibited by the Board’s new standard. Thus, an employer concerned about the implications of a unilateral change should contact experienced labor counsel regarding what steps should be taken to minimized risk.

FOOTNOTES

[1] It is important to note that the Board also overruled the following decisions as well: The Atlantic Group, Inc., 371 NLRB No. 119 (2022) and Mike-Sell’s Potato Chip Co., 368 NLRB No. 145 (2019) were overruled to the extent that the decisions applied the kind and degree test from Raytheon; and Shell Oil, 149 NLRB 283 (1964); Westinghouse Electric Corp., 150 NLRB 1574 (1965);and Courier Journal Cases, 342 NLRB 1093 (2004) (Courier I) and 342 NLRB 1148 (2004) (Courier II) and Capital Ford, 343 NLRB 1058 (2004) were overruled to the extent they are construed as privileging unilateral action informed by a large measure of discretion.

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