5th Cir. Backs NLRB Ruling on Macy's Bargaining Unit

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By Lawrence E. Dubé

June 3 — The National Labor Relations Board's controversial Specialty Healthcare standard for determining appropriate units in representation elections survived a closely watched test in the U.S. Court of Appeals for the Fifth Circuit ( Macy's, Inc. v. NLRB, 2016 BL 175991, 5th Cir., No. 15-60022, 6/2/16 ).

The appeals court June 2 upheld the NLRB's certification of a unit of cosmetics and fragrances employees at a Massachusetts Macy's department store, rejecting the company's argument that the ruling departed from NLRB precedent and abused the board's discretion.

A number of business groups supported the retailer's challenge of the board action, but the Fifth Circuit became the fourth appeals court to enforce NLRB rulings based on the board's 2011 Specialty Healthcare decision.

Latest Round in Long Unit Battle

Since the board's announcement of its new Specialty Healthcare standard for bargaining unit determinations in 2011, employers and business organizations have criticized the ruling and predicted the decision would lead to a proliferation of small voting units and potentially a complicated array of bargaining units in a single business.

The board applied the new test to a union petition for an election at Macy's, and the much-watched case took four years to work its way to the appellate court.

Union attorney Alfred Gordon O'Connell of Pyle Rome Ehrenburg PC in Boston represented United Food and Commercial Workers Local 1445 in the litigation. He told Bloomberg BNA June 3 the union was very concerned about the case being heard in the Fifth Circuit, which he said has been “notoriously skeptical” about the NLRB's exercise of its discretion under the federal labor law.

Eleven major business groups and associations, including the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Retail Federation, joined in amicus briefs supporting Macy's, but the court upheld the NLRB's adoption of its Specialty Healthcare test.

With the court challenge resolved, Gordon O'Connell said, the union is “eager” to represent 41 cosmetics and fragrances employees at the company's Saugus, Mass., department store. The 10,000-member local union already represents Macy's employees in six units in Massachusetts and Rhode Island. He said the union is experienced in representing employees like the specialized workers at the Saugus store.

Local 1445 has represented cosmetics and fragrances employees in a separate bargaining unit for decades, the lawyer said. The union argued its ability to do so undermined Macy's argument that certifying a similar unit in Massachusetts would be harmful to the business.

Macy's counsel didn't respond to a June 3 request for comment or a company statement on the court decision.

Former NLRB Member Cites Risks to Bargaining

Marshall B. Babson, a former NLRB member who represents employers at Seyfarth Shaw, told Bloomberg BNA June 3 that the result in the Macy's case was disappointing, but the company faced “pretty tough sledding” in the appeals court.

Babson said the federal circuit courts have a tendency to defer to the board's expertise, especially on bargaining unit issues, which they consider the “daily business” of the agency.

Macy's made “all the right arguments” in the Fifth Circuit, Babson said, but getting the court to overrule the board was a tall order.

The lawyer said that even if the NLRB had the authority to adopt a new standard for bargaining unit determinations, he believes it was “really bad policy.”

The National Labor Relations Act was enacted with a purpose of encouraging collective bargaining, but Congress also intended the act to help maintain stability in bargaining relationships, Babson said.

Multiplying the bargaining units in a single business can lead to multiple bargaining processes and potentially multiple strikes with destabilizing effects on an employer, Babson said. “Maybe in the short term” a proliferation of units would help unions organize, but in the long term instability in labor relations will not serve employers or labor organizations, he said.

Specialty Healthcare Test Applied to Retail Unit

In Specialty Healthcare & Rehabilitation Center of Mobile , 357 N.L.R.B. No. 83, 191 LRRM 1137 (2011) ( 169 DLR AA-1, 8/31/11 ), the board held that it would find appropriate a unit sought by a petitioning union if employees in the proposed unit constitute a readily identifiable group sharing a community of interest.

Under the 2011 ruling, such a finding can be overcome only if the employer establishes that the proposed unit excludes other workers who share an “overwhelming community of interest” with the employees covered by the union's petition.

The NLRB held that the grouping of employees sought by the union at the Macy's store was an appropriate unit under the NLRA (361 N.L.R.B. No. 4, 200 LRRM 1081 (2014); 141 DLR A-1, 7/23/14), and the union was certified as the employees' bargaining agent after they voted for union representation.

Macy's argued the certification was improper and refused to recognize or bargain with the union. The NLRB issued an unfair labor practice decision and order (361 N.L.R.B. No. 163, 202 LRRM 1257 (2015)), and the company sought review in the Fifth Circuit under Section 10(f) of the NLRA, which allows an employer to challenge an NLRB unfair labor practice order in any judicial circuit where the employer does business.

Court Not Persuaded by Warnings of ‘Havoc.'

Macy's argued that all of the selling employees constituted a “homogenous work force” and that the board erred in separating the cosmetics and fragrances workers from other employees.

Judge James L. Dennis wrote for the appeals court that the company's argument ignored or contradicted the NLRB's findings that the employees in question had “distinct interests” that they did not share with other workers.

The retailer argued that certifying departmental units rather than a storewide one would “wreak havoc in the retail industry.” But the Fifth Circuit said the employer “does not cite to any controlling authority for the proposition that the effect on an employer's business is a factor to be considered in unit determinations.”

Dennis wrote that “the Board's history of approving multiple units in the retail and other industries suggests that neither workers nor businesses will suffer grave consequences as a result of the Board's order.”

Fifth Circuit Joins Three Others Backing NLRB Test

The Fifth Circuit said Macy's failed to carry its burden under Specialty Healthcare of showing that employees excluded from Local 1445's election petition shared an “overwhelming community of interest” with the cosmetics and fragrances employees, and the appeals court declined the retailer's bid to overrule the NLRB precedent.

Macy's argued that Specialty Healthcare is inconsistent with the NLRB's long-standing unit precedents and created a new test that impermissibly gives controlling effect to the extent of union organization, in violation of Section 9(c)(5) of the NLRA.

But Dennis said similar arguments were considered and rejected by the Fourth, Sixth, and Eighth circuits.

In Kindred Nursing Centers East LLC v. NLRB, 727 F.3d 552, 196 LRRM 2545 (6th Cir. 2013) (158 DLR AA-1, 8/15/13), the Sixth Circuit enforced an NLRB order based on the certification issued in Specialty Healthcare.

The Eighth Circuit upheld the NLRB's reliance on Specialty Healthcare in FedEx Freight, Inc. v. NLRB, 816 F.3d 515, 205 LRRM 3475 (8th Cir. 2016) (44 DLR AA-1, 3/7/16), as did the Fourth Circuit in Nestle Dreyer's Ice Cream Co. v. NLRB, 2016 BL 131875, 206 LRRM 3089 (4th Cir. 2016) (80 DLR A-8, 4/26/16), finding the board “reasonably explained” its reasoning in adopting its overwhelming community of interest test.

Dennis said the Fifth Circuit agreed with the other circuits that the board's 2011 decision was a permissible “clarification” of NLRB precedent rather than an improper overhaul of the board's jurisprudence.

The court also rejected Macy's argument under Section 9(c)(5) of the NLRA. Citing Nestle Dreyer's, Dennis said the board doesn't run afoul of the statutory provision where it “rigorously” weighs the community-of-interest factors used in its traditional unit analysis.

Stating “[t]hat is precisely what the Board did in the instant case,” the Fifth Circuit said the board's Specialty Healthcare “test and its application do not violate Section 9(c).”

Rejecting the employer's remaining objections and granting the board's request for enforcement of its order, the court said Macy's “failed to demonstrate that the Board abused its discretion in articulating and applying the overwhelming community of interest test.”

Judges Fortunato P. Benavides and Gregg Jeffrey Costa joined in the opinion.

Shay Dvoretsky of Jones Day in Washington argued the case for Macy's Inc. Alfred Gordon O'Connell of Pyle Rome Ehrenburg PC in Boston argued for United Food and Commercial Workers Local 1445. NLRB attorney Gregory P. Lauro in Washington argued for the board.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

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