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May 20 — The National Labor Relations Board had the authority to order a variety of remedies for serious unfair labor practices, but it couldn't order a Hawaii hotel to reimburse the NLRB and a labor union for the litigation expenses they incurred in a board proceeding, the U.S. Court of Appeals for the District of Columbia Circuit held.
The NLRB held in 2014 that the employer's “egregious and pervasive” unfair labor practices required extraordinary remedies, but Steven W. Suflas, managing partner in the Denver office of Ballard Spahr LLP, said it was “not surprising” that the board's awarding of attorneys' fees “didn't fly in the D.C. Circuit.”
Writing for the court May 20, Judge Stephen F. Williams said that HTH Corp., which operates the Pacific Beach Hotel, has a long history of violating the National Labor Relations Act. Ordering a live reading of a remedial notice to employees was reasonable, Williams said, noting the company was given “the option of punting the task to a Board employee.”
However, the court said, the NLRB doesn't have the “inherent authority” that courts do to control behavior in litigation proceedings, and the NLRA didn't authorize the board to order that HTH pay attorneys' fees as a remedy for bad-faith conduct.
The National Labor Relations Board held in 2014 that a Hawaiian hotel operator's unfair labor practices and its defiance of NLRB and court orders required a series of extraordinary remedies, including an order that HTH Corp. and related entities reimburse the NLRB and a labor union for litigation expenses, and a mandate that the employer post and read a remedial NLRB notice to employees, or allow an NLRB employee to read the document (361 N.L.R.B. No. 65, 201 LRRM 1457 (2014); 208 DLR A-1, 10/28/14).
The company petitioned for review in the D.C. Circuit. HTH didn't dispute the board's finding that it had committed severe and pervasive unfair labor practices, but it challenged the board's selection of remedies.
Williams said the employer failed to preserve several issues for appellate court review, but the court considered its arguments that the board improperly ordered a reading of its remedial notice to employees and exceeded its authority in ordering the company to pay attorneys' fees to the NLRB general counsel and International Longshore and Warehouse Union Local 142 for costs they incurred during prolonged litigation over the company's unfair labor practices.
The court said the NLRB has recognized that punitive or vindictive measures, including a forced reading of an NLRB notice, may be improper and unenforceable under the NLRA. Williams said “it is foreign to our system to force named individuals to speak prescribed words to attain rehabilitation or to enlighten an assembled audience.”
However, the court said it didn't have to consider that issue because the NLRB gave HTH the option of having the notice read to its workers by an NLRB employee.
Noting that this option allowed the employer to avoid any personal humiliation of an individual representative, Williams said the board's remedial order was within its discretion.
However, the court disagreed with the NLRB's award of attorneys' fees.
Williams said the NLRB acknowledged that in Unbelievable, Inc. v. NLRB, 118 F.3d 795, 155 LRRM 2833 (D.C. Cir. 1997), the appeals court rejected the board's argument that Section 10(c) of the NLRA gives the agency authority to order attorneys' fees payments.
However, in ordering HTH to pay fees, the board claimed that, as does a federal court, it has “inherent authority to control and maintain the integrity of its own proceedings through an application of the bad-faith exception to the American Rule” that normally provides for litigants to pay their own attorneys' fees.
Williams said the board was mistaken. “As a creature of statute,” the court wrote, “the Board has only those powers conferred on it by Congress.”
In contrast to a federal court, Williams said, “[t]he Board may apply the bad-faith exception to the American rule only if some provision or provisions of the Act explicitly or implicitly grant it power to do so.”
Williams said the U.S. Supreme Court has considered the bad-faith exception to the usual rule against attorneys' fees awards to be a punitive measure like a fine for civil contempt, but “nothing in § 10(c) grants the Board punitive powers.”
Without deciding whether any other statutory provision might support a fee award, the appeals court said the NLRB wasn't entitled to enforcement of the fee order against HTH.
Suflas, who represents management at Ballard Spahr, said the NLRB has been trying to enhance its remedial powers in recent years by adopting measures that would have been authorized if the proposed Employee Free Choice Act had been enacted into law.
The lawyer said he wasn't surprised that the NLRB ran into a wall in the appeals court. Suflas said that of all the federal circuits, the D.C. Circuit “looks most carefully” at the board's claims of statutory power.
Suflas said the board apparently looked at the inherent authority of courts to award fees and concluded that its “power should be no less,” but the appeals court wasn't persuaded.
Regina E. Faul, a partner at Phillips Nizer LLP in New York where she represents employers, said the court reached the right decision on the board's remedial order.
Noting that the board has been able to address serious unfair labor practices by using other remedies, Faul said the D.C. Circuit decision showed the fee award against HTH exceeded the authority Congress gave the agency.
An employee at Longshore and Warehouse Local 142's Oahu, Hawaii, office told Bloomberg BNA May 20 that union representatives weren't available to comment on the ruling.
Judges Karen LeCraft Henderson and Judith W. Rogers concurred in the judgment.
Richard M. Rand of Marr, Jones & Wang LLLP in Honolulu argued for HTH Corp. NLRB attorney Barbara A. Sheehy in Washington argued for the board.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/HTH_Corporation_et_al_v_NLRB_Docket_No_1401222_DC_Cir_Nov_03_2014.
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