The Aftermath of Noel Canning —What Now? The Legal, Policy, and Practical Considerations of How Employers Should Procee

1. The Aftermath of Noel Canning—What Now? The Legal, Policy, and Practical Considerations of How Employers Should Proceed Before the NLRB April 24, 2013 Grady B. MurdockEric L . Barnum Deanna W. Dudley M. Carter DeLorme

2. Agenda • The Noel Canning Decision. • Other Pending Cases Raising the Recess Appointment Issue. • NLRB Actions/Decisions Implicated by the Noel Canning Decision. • NLRB Actions/Decisions Potentially Implicated by the Noel Canning Decision. • Options for Employers to Consider.

3. The NLRB Quorum Requirement The National Labor Relations Board cannot function without a quorum consisting of at least three members. • In New Process Steel, 130 S. Ct. 2365 (2010), the U.S. Supreme Court held that the Board requires a quorum of 3 lawfully seated members to conduct any official business. • Because the NLRB at the time had only two members, the Court held that its decisions could not be enforced.

4. Recess Appointments January 3, 2012 (or earlier): Member Becker’s recess appointment expires, leaving only two members, Brian Hayes and Mark Pearce. • The U.S. Senate does not go into recess. • In an effort to prevent recess appointments, the Senate decides to hold “pro forma” sessions every 3 days—a tactic used by Senate Majority Leader Harry Reid to block President George W. Bush recess appointments. January 4, 2012: Notwithstanding Senate sessions, President Obama makes recess appointments, announcing three new appointees to the NLRB. • Sharon Block • Terence Flynn • Richard Griffin NLRB Recess Appointments: • August 27, 2011: Wilma Liebman’s term expires, leaving the NLRB with only three members. • One of the three, Member Craig Becker, was given an intrasession recess appointment by President Obama in March 2010.

5. The Noel Canning Challenge • Noel Canning Corp. loses appeal before the NLRB regarding refusal-to-bargain allegations. • Noel Canning petitions for review in the D.C. Circuit, arguing that the NLRB lacks a quorum because the January 4, 2012 recess appointments were invalid.

6. The Recess Appointments Clause • “The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” Article II, Section 2, Clause 3

7. Noel Canning –Two Arguments • Narrow: There is no “recess” when the Senate holds sessions every 3 days. • Previously, no President ever tried to make recess appointments when Senate holds sessions every 3 days. • Broad: Original meaning of Recess Appointments Clause. • “Power to fill up all Vacancies that may happen during the Recess of the Senate.” • Limited to vacancies that arise during recess. • Limited to “the recess,” i.e., the single break at the end of the year.

8. The Noel Canning Decision: D.C. Circuit • Court of Appeals adopts broad originalist understanding of the Recess Appointments Clause. • Recess Appointments only valid if they occur: • During an “intersession” recess. • For vacancies that arise during the recess.

9. The Noel Canning Decision: Effects on NLRB • January 4, 2012 recess appointments invalidated: • Sharon Block • Richard Griffin • Terence Flynn • Based upon the same reasoning, the March 2010 recess appointment of Craig Becker is also likely invalid (not “intersession”). • Noel Canning decision is binding law within D.C. Circuit. • Deadline to file Petition for Rehearing En Banc – 45 Days (March 11, 2013). • Deadline to file Cert. Petition – 90 Days Following Conclusion of En Banc Activity. • Calls into question all actions, including expedited election rulemaking and cases, decided by the Board at least since August 27, 2011. • Board orders are not self-enforcing. • Any Board order can be appealed to the D.C. Circuit.

10. Pending Cases Raising the Recess Appointment Issue: D.C. Circuit D.C. Circuit (12 cases): • Sands Bethworks Gaming v. NLRB, 12-1240; • Milum Textile Services Co. v. NLRB, 12-1235, 12-1275; • Meredith Corp. v. NLRB, 12-1287; • Aerotek v. NLRB, 12-1271; • Kimberly Stewart v. NLRB, 12-1338; • Keck Hosp. of USC v. NLRB & Sodexo America v. NLRB, 12-1413, 12-1426; • Fresenius USA Manufacturing v. NLRB, 12-1387, 12-1415; • KAG West v. NLRB, 12-1391; • Vision of Elk River v. NLRB, 12-1403; • Spartan Mining Co. and Alpha Appalachia Holdings v. NLRB, 12-1400, 12-1401 & 12-1419; • The Finley Hospital v. NLRB 12-1421; • Fort Dearborn Co. v. NLRB, 12-1430.

11. Pending Cases Raising the Recess Appointment Issue: Other Circuits Third Circuit: NLRB v. New Vista Nursing, 11-3440, 12-1027 & 12-1936; NLRB v. New Vista Nursing & Rehabilitation Center, 12-3524; 1621 Route 22 West Operating v. NLRB, 12-3768. Seventh Circuit: Richards v. NLRB, 12-1973; John Lugo v. NLRB, 12-1984; FTS Int’l Proppants v. NLRB, 12-3322; Big Ridge v. NLRB, 12-3120. Ninth Circuit: DirecTV v. NLRB, 12-71297, 12-1514 & 12-72526. Fourth Circuit: NLRB v. Enterprise Leasing Co. SE, LLC, 12-1514; Nestle Dreyer’s Ice Cream Co. v. NLRB, 12-1684; Huntington Ingalls Inc. v. NLRB, 12-2000; Coastal Sunbelt Produce v. NLRB, 12-2254. Eleventh Circuit: NLRB v. Gaylord Chemical Co., 12-15404.

12. NLRB Decisions: August 28, 2011 to January 31, 2013 Time PeriodNLRB MembersPublishedUnpublished 8/28/11-1/3/12 P/H/B 110 153 1/9/12-7/24/12 P/H/F/G/B 86 234 7/25/12-12/16/12 P/H/G/B 124 208 12/17/12-1/28/12 P/G/B 10 42 Totals 330 637 NLRB Members P- Mark Pearce; Senate Confirmed 6/22/10, sworn in 4/7/10 H- Brian Hayes; Senate Confirmed 6/22/10, sworn in 6/29/10; term ended 12/16/12 B- Sharon Block; Recess Appointment, sworn in 1/9/12 G- Richard Griffin; Recess Appointment, sworn in 1/9/12 F- Terrence Flynn; Recess Appointment, sworn in 1/9/12; resigned 7/24/12 B- Craig Becker; Recess Appointment, sworn in 4/5/10; recess ended 1/3/12 with adjournment of 112th Congress, 2d Session

13. NLRB Actions/Decisions Implicated by the Noel Canning Decision January 4, 2012 to the Present

14. Decisions Overruling NLRB Precedent • In WKYC-TV, 359 NLRB No. 30 (Dec. 12, 2012), the Board eschewed 50 years of precedent by overruling its decision in Bethlehem Steel, 136 NLRB 1500 (1962). • Board majority held that an employer's obligation to check off union dues continues after expiration of a collective bargaining agreement containing such a provision. • Pearce, Griffin and Block made up the majority, with Hayes dissenting in part. • In Piedmont Gardens, 359 NLRB No. 46 (Dec. 15, 2012) and Hawaii Tribune-Herald, 359 NLRB No. 39 (Dec. 14, 2012), the Board reversed the rule established in Anheuser-Busch, 237 NLRB 982 (1978) privileging employers to withhold confidential witness statements obtained by an employer during an internal investigation. • The majority in both cases was made up of Pearce, Hayes and Griffin. • Hayes dissented in Piedmont, and did not participate in Hawaii Tribune. • In IronTiger Logistics, 359 NLRB No.13 (Oct. 23, 2012), the Board held, contrary to previous precedent, that the employer was required to respond in a timely fashion to the union's request for information, even when such information may have been irrelevant. • Pearce and Block made up the majority, with Hayes dissenting. • An appeal is currently pending before the D.C. Circuit.

15. Decisions on Novel Issues In United Nurses and Allied Professionals, 359 NLRB No. 42 (Dec. 14, 2012), the Board adopted new rules relating to employee union objectors. • The Board held that lobbying expenses are chargeable to objectors if they are relevant to bargaining, contract administration, or grievance adjustment. • The Board further held that a union is not required to provide objecting employees with a copy of the auditor’s verification letter in order to satisfy notice obligations to objectors. In Latino Express, Inc., 359 NLRB No. 44 (Dec. 18, 2012), the Board revised rules on backpay remedies by (1) requiring submission of documentation to the SSA so that backpay will be allocated to the appropriate calendar quarters, and (2) reimbursing a discriminatee for any additional Federal and State income taxes owed as a result of receiving a lump-sum award covering more than one year. The Board invoked its broad discretionary remedial powers under 10(c) of the Act. In Alan Ritchey, Inc., 359 NLRB No. 40 (Dec. 14, 2012), the Board held that employers must give notice and offer to bargain before enforcing discretionary discipline on its union represented employees. Because such discipline is a mandatory subject of bargaining, the employer could not unilaterally implement it prior to bargaining with a newly elected union. In Chicago Mathematics & Science Academy, 359 NLRB No. 41 (Dec. 14, 2012), the Board concluded that a nonprofit public charter school was not a government entity exempt from NLRA Section (2)(2)’s definition of “employer.” Thus, the Board concluded there was no reason to decline jurisdiction over the case.

16. Social Media In Hispanics United of Buffalo, 359 NLRB No. 37 (Dec. 14, 2012), the NLRB held that an employer unlawfully terminated five employees for posting comments on Facebook in response to a co-worker’s criticism of their job performance where such posts were both concerted activity and related to terms and conditions of employment. • In DirectTV U.S. DirecTV Holdings, 359 NLRB No. 54 (Jan. 25, 2013) and Costco, 358 NLRB No. 106 (Sept. 7, 2012) the Board addressed social media policies, both in non-union settings, which prohibited certain types of electronic communications, reasoning that employees could reasonably construe the policies to prohibit discussion involving protected activity. In Knauz BMW, 358 NLRB No. 164 (Sept. 28, 2012), the Board held that: An offensive picture posted by a lone employee on Facebook did not constitute protected activity. Courtesy provision in an employee handbook violated the NLRA because employees would construe the policy to prohibit discussion about work conditions.

17. Employment Policies &Work Rules In Costco Wholesale Corp., 358 NLRB No. 106 (Aug. 27, 2012), FlexFrac Logistics, LLC, 358 NLRB No. 127 (Sept. 11, 2012), and DirectTV U.S. DirecTV Holdings, 359 NLRB No. 54 (Jan. 25, 2013), the NLRB held that certain confidentiality provisions were unlawful based upon the fact that employees would understand the provisions to restrict discussion of their wages and other conditions of employment. An appeal is pending in the D.C. Circuit in Costco, and in the 5th Circuit in FlexFrac. • In Heartland Catfish Co., 358 NLRB No. 125 (Sept. 11, 2012) and Ambassador Services, Inc., 358 NLRB No. 130 (Sept. 14, 2012), the Board invalidated work rules prohibiting employees from walking off the job without permission because rules would be construed as prohibiting Section 7 activity such as a strike. An appeal is pending before the 11th Circuit in Ambassador Services. • In Sodexo America, LLC, 358 NLRB No. 79 (July 3, 2012) and J.W. Marriott Los Angeles, 359 NLRB No. 8 (Sept. 28, 2012), the Board further restricted an employer’s ability to implement and enforce off-duty access policies. • An appeal in Sodexo is currently pending before the D.C. Circuit, which held the case in abeyance on January 25, 2013.

18. Unilateral Changes: Wages and Benefits In Finley Hospital, 359 NLRB No. 9 (Sept. 28, 2012), pet. for review filed, 12-1421 (D.C. Cir. Oct. 19, 2012) and KAG-West, LLC, 358 NLRB No. 161 (Sept. 28, 2012), pet. for review filed, 12-1391 (D.C. Cir. Oct. 5, 2012), the Board restricted an employers’ rights change employees’ wages, even where no collective bargaining agreement is currently in effect. • The Board in Finley prohibited changes even where the CBA provisions providing for annual increases explicitly limited them to the contract term. • Appeals are pending before the D.C. Circuit in both cases. • In Cofire Paving Corp., 359 NLRB No. 10 (Sept. 28, 2012) and Des Moines Cold Storage, Inc., 358 NLRB No. 58 (June 15, 2012), the Board restricted an employers’ right to make unilateral modifications to employee benefit programs during and after contract expiration. • An appeal is currently pending before the 2nd Circuit.

19. Other Decisions In Coca Cola Puerto Rico Bottlers, 358 NLRB No. 129 (Sept. 18, 2012), the Board held that employees who stopped working for two hours were engaged in a protected strike and could not be disciplined by the employer. Strikes • In Dresser-Rand Co., 358 NLRB No. 97 (Aug. 6 2012), the Board determined that unfair labor practices committed after a lockout could be used to retroactively support the inference that union animus motivated the lockout. An appeal is currently pending before the 5th Circuit. Lockouts • In J.A. Croson Co., 359 NLRB No. 2 (Sept. 28, 2012) and Federal Security, Inc., 359 NLRB No. 1 (Sept. 28, 2012), the Board held that preempted state court lawsuits violated employees’ Section 7 rights.Under these recent decisions, employers’ lawsuits can constitute unfair labor practices even if they are not objectively baseless. Retaliatory Lawsuits • In Banner Estrella Medical Center, 358 NLRB No. 93 (July 30, 2012) and Fresenius USA MFG., Inc., 358 NLRB No. 138 (Sept. 19, 2012), the Board restricted the ability of employers to comply with federal laws requiring employers to investigate allegations of workplace harassment. Appeals are pending before the D.C. Circuit in both cases. Investigations

20. NLRB Actions/Decisions Potentially Implicated by the Noel Canning Decision August 27, 2011 to January 4, 2012

21. NLRB’s Final Rule on Representation Case Procedures • On December 16, 2011, the NLRB adopted its final rule on representation case procedures. • The Chamber argued that Hayes did not participate in the decision, leaving only Members Pearce and Becker to issue the final rule. • In Chamber of Commerce v. NLRB, Case No. 12-5250, the District Court for the District of Columbia agreed that, because Hayes was absent Dec. 16, 2011 when the final rule was approved, the Board did not have a quorum. • The Board appealed to the D.C. Circuit, where briefing was completed January 16, 2013. • On January 30, 2013, the Chamber of Commerce filed a Rule 28(j) letter with the Court, asserting that the Noel Canning decision provides an additional reason that the Board lacked a quorum when issuing the final rule. • The Chamber argued that under Noel Canning, Member Becker’s recess appointment on March 27, 2010 was unconstitutional for the same reasons set forth in that decision.

22. Arbitration and Class Action Waivers • In D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012), the Board addressed whether employers could require employees, as a condition of employment, to sign an arbitration agreement preventing them from filing joint, class or collective claims. • This decision is currently on appeal to the 5th Circuit. • On January 29, 2013, D.R. Horton filed a 28(j) letter with the Fifth Circuit, arguing that the appointment of NLRB member Craig Becker was also invalid under the Noel Canning decision. As such, D.R. Horton argued that the Board had only two properly appointed members and no quorum to act. • As a countermeasure against class action employment litigation, many employers have implemented compulsory arbitration procedures with class action waivers. • The U.S. Supreme Court recently held that such arbitration agreements were valid and enforceable under Federal law. SeeAT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011). • Notwithstanding the Supreme Court’s approval, the Board held that employers cannot require that employees, as a condition of employment, sign an arbitration agreement that prevents them from filing joint, class or collective claims against the employer.

23. Picketing • In Venetian Casino Resort, LLC, 357 NLRB No. 147 (Dec. 21, 2011), the Board held that the employer violated the NLRA when it called law enforcement in response to picketing. This constituted an unfair labor practice. In M.S. Management Associates, Inc., 357 NLRB No. 157 (Dec. 30, 2011), the Board addressed the rights of employees to access employers’ premises for purposes of picketing and other forms of protest, holding that the employer violated the NLRA by prohibiting maintenance contractor employees from distributing handbills on employer property. M.S. Management Associates, Inc.

24. Bargaining Units and Supervisors In DTG Operations, Inc., 357 NLRB No. 175 (Dec. 30, 2011), Odwalla, Inc., 357 NLRB No. 132 (Dec. 9, 2011), and Northrop Grumman Shipbuilding, Inc., 357 NLRB No. 163 (Dec. 30, 2011), the Board addressed the issue of how to apply the standard set forth in Specialty Healthcare, 357 NLRB No. 83 (2011), where the Board overturned decades of precedent by allowing employees to form several smaller bargaining units at any single facility. In these cases, the Board expanded Specialty Healthcare’s “overwhelming community of interests” test to other industries. • In Entergy Mississippi, Inc., 357 NLRB No. 178 (Dec. 30, 2011) and DirecTV, 357 NLRB No. 149 (Dec. 22, 2011), the Board addressed the definition of “supervisor” under the Act. • Both cases held that the employees in question were not supervisors. • In Entergy, the employees were included in the bargaining unit. • In DirecTV, the employee’s pro-union activity in the pre-election period did not constitute objectionable conduct.

25. Election Procedures and Election Interference In 2 Sisters Food Group, Inc., 357 NLRB No. 168 (Dec. 29, 2011), the Board addressed whether re-run elections held on an employer’s premises were improper.Although the Board did not announce a per se rule requiring re-run elections to be held offsite, the Board remanded the case to the Regional Director to re-consider the union’s objection under four factors: (1) the union’s objection to having the election rerun on the employer’s premises against the employer’s request it be held on site; (2) the employer’s alleged unlawful conduct; (3) the advantage the employer would enjoy from having the election held on premises it owns or controls; and (4) potential alternative sites. • In Newburg Eggs, Inc., 357 NLRB No. 171 (Dec. 31, 2011), the Board held an employer violated the Act by announcing prior to the election the hiring of a bilingual human resources manager to improve workplace communication, reasoning that employees could reasonably construe the comments as an announcement of improved working conditions. • In Ridgewood Country Club, 357 NLRB No. 181 (Jan. 3, 2012), the Board set aside an election where the employer timely filed the Exelsior list with the Region, but the Region failed to provide the list in a timely fashion. The Board reasoned that the union was entitled to a presumption of prejudice.

26. Going Forward…. • Under Noel Canning, all Board actions and decisions since August 27, 2011 are called into question. • The logical implication of the case is that no order issued since that date can be enforced until a quorum is restored through lawful appointments. • NLRB announced that the Agency will continue to operate with recess appointees Griffin and Block, and Chairman Pearce. • Noel Canning decision is binding law in the D.C. Circuit unless overturned. • Board orders are not self-enforcing. • Any Board order can be appealed in the D.C. Circuit. • NLRB can file petition for enforcement in other circuits. • All petitions for review of NLRB orders should be expeditiously filed in the D.C. Circuit, unless good reason to bring elsewhere. • In cases pending in other circuits, where the recess appointment issue has not been decided, and a case raising such issue is procedurally ahead of your case, consider requesting that court hold your case in abeyance, including the briefing schedule.

27. Additional Circuit Court Considerations • In any Board-related matter pending in any circuit court of appeals, consider raising the issue of the lack of a Board quorum. • If briefing has already been completed, and even if oral argument has been held, consider filing a 28(j) letter arguing that the Board order was issued without a proper quorum. • As the D.C. Circuit held in Noel Canning, parties should be able to raise this issue in court even if you did not raise it before the Board.

28. Administrative Proceedings • In any matter pending at the administrative level, consider raising the issue of the lack of a Board quorum: • Petitions • Unfair labor practice charges • Complaints • Subpoenas, if issued by Block/Griffin • If initial answer already filed, consider filing an amended or supplemental answer. • On any appeal from an adverse decision of an Administrative Law Judge or Regional Director, consider raising the issue of the lack of a Board quorum. • If initial briefing has already been completed, consider raising the matter in a supplemental pleading -- this issue should not be time-barred, because it raises a jurisdictional defect in the proceeding.

29. Other Administrative Issues • Consider challenging actions and decisions of Regional Directors who were appointed by Boards that lacked a proper quorum (18 out of 28 Regional Directors may be subject to such a challenge). • Consider challenging delegations by a Board that lacked proper quorum to its Acting General Counsel, especially with respect to 10(j) injunction matters. • Consider challenging any type of Board action taken prior to August 27, 2011 where the Board, at the time such action was taken, lacked the required quorum.

30. Thank you & Questions? Grady B. Murdock Littler Mendelson – Chicago 312-795-3233 gmurdock@littler.com Eric L. Barnum Schiff Hardin – Atlanta 404-437-7013 ebarnum@schiffhardin.com Deanna W. Dudley Kaiser Permanente – Oakland (510) 267-4280 Deanna.W.Dudley@kp.org M. Carter DeLorme Jones Day - Washington 202-879-4643 cdelorme@jonesday.com