NLRB Splits on Permanent Replacements Rule

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By Jay-Anne B. Casuga

June 1 — A California continuing care facility violated federal labor law when it hired permanent replacements for striking workers to allegedly punish the union and its members and avoid future strikes, the National Labor Relations Board held 2-1 ( Am. Baptist Homes of the West , 2016 BL 171734, 364 N.L.R.B. No. 13, 5/31/16 ).

“In this unprecedented decision, two members of the NLRB have cast aside 68 years of unbroken precedent that had held that the hiring of permanent replacements for striking employees is a legitimate economic weapon that employers may use, regardless of motive, once a union deploys its weapon to strike,” David Durham with DLA Piper in San Francisco told Bloomberg BNA June 1.

He represented American Baptist Homes of the West, which does business as Piedmont Gardens.

Members of Service Employees International Union, United Healthcare Workers-West had gone on strike in August 2010 over collective bargaining disputes. They eventually made an unconditional offer to return to work, but Piedmont Gardens already had permanently replaced the striking employees and refused to reinstate them.

Reversing an administrative law judge's ruling, Members Mark Gaston Pearce and Kent Y. Hirozawa found that the company hired the replacements for “independent unlawful purposes,” including punishing striking workers in retaliation for engaging in activity protected by the National Labor Relations Act.

Dissenting, Member Philip A. Miscimarra said board precedent requires the purported independent unlawful purpose to be extrinsic to the parties' bargaining relationship or unrelated to the strike.

Attorney: Decision May Shift Balance of Power

Durham said the board's decision makes it “hard to envision any situation where an employer can safely decide to deploy permanent replacements.”

The split ruling also has the potential to “seriously shift the balance of power envisioned by Congress when they passed the National Labor Relations Act in the first place,” he said.

“Without the realistic threat of permanent replacements, we can expect unions to push for greater concessions in bargaining and to be more willing to deploy the strike weapon in support of those demands,” Durham said.

SEIU-UHW representatives didn't immediately respond to Bloomberg BNA's June 1 request for comment.

Majority Interprets Hot Shoppes

In Hot Shoppes Inc., 146 N.L.R.B. 802, 55 LRRM 1419 (1964), the NLRB held that an employer may permanently replace strikers for any reason, unless there's evidence that it did so based on an independent unlawful purpose.

The board relied on the U.S. Supreme Court's ruling in NLRB v. MacKay Radio & Telegraph Co., 304 U.S. 333, 2 LRRM 610 (1938), to reach that conclusion.

In the present case, the board majority said the high court subsequently clarified in NLRB v. Erie Resistor Corp., 373 U.S. 221, 53 LRRM 2121 (1963), that an employer's purposes for replacing workers may be “wholly impeached by the showing of an intent to encroach upon protected rights.”

Based on this precedent, the board held that “independent unlawful purpose” under Hot Shoppes includes an employer's replacement of striking workers with the intent to discriminate or to discourage union membership.

The phrase doesn't require the unlawful purpose to be separate from the bargaining relationship or the underlying strike, the board majority said.

SEIU-UHW presented evidence that Piedmont Gardens hired the replacements to “teach the strikers and the union a lesson” and to “avoid any future strikes,” the board said.

Those reasons constituted independent unlawful purposes under Hot Shoppes because they reveal an intent to punish employees for engaging in NLRA-protected conduct, a retaliatory motive barred by the NLRA and a “desire to interfere with employees' future protected activity,” the board said.

As such, Piedmont Gardens' refusal to reinstate strikers violated the NLRA, it held.

Dissent Argues for Narrow Interpretation

In dissent, Miscimarra contended that employers have the right under Hot Shoppes to hire permanent replacements regardless of motive.

He said the “independent unlawful purpose” exception applies only where the hiring of replacements is linked to an unlawful purpose that itself is “unrelated to or extraneous to the strike itself.”

“Yet, under the majority's decision, it appears that any evidence of antistrike animus will render unlawful the employer's action, resulting in potentially debilitating backpay liability,” he said.

Christopher Foster of DLA Piper in San Francisco also represented Piedmont Gardens. Bruce Harland, David Rosenfeld and Manuel Boigues of Weinberg Roger & Rosenfeld in Alameda, Calif., and Judith Scott of SEIU in Washington represented the union.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

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