Threatening Managers' Pay During Union Drives Questioned

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By Michael J. Bologna

Dec. 11 — Legal scholars and management attorneys expressed doubts about the wisdom and lawfulness of a Wisconsin-based retailer's purported policy that it would slash supervisors’ salaries if a union organizing drive succeeds at their facility.

Scholars and attorneys told Bloomberg BNA in a series of interviews Dec. 10-11 that employers administering personnel policies that cut supervisors’ wages or impose other forms of aggressive punishment in the face of an organizing drive would likely invite an unfair labor practice charge under the National Labor Relations Act. In addition, supervisors disciplined under such policies could have grounds under state law to sue the employer for violating an explicit public policy.

“I think this policy is worrisome,” said Michael LeRoy, a professor of employment and labor relations law at the University of Illinois College of Law. “Whether you like unions or not, employees have a right to participate in organizing drives. So this really seems to raise questions about whether the employer is going too far to frustrate organizing.”

The controversial employment policy has been linked to Menards, the third largest home improvement retail chain in the nation after Home Depot Inc. and Lowe's Cos. Inc. The chain is owned by Eau Claire, Wis.-based Menard Inc., which operates more than 280 stores in 14 states across the Midwest. The privately owned company is controlled by John Menard, who ranks 49th on the Forbes Magazine list of richest Americans with a net worth of $10.4 billion.

Union Activity Clause

Menards's employment practices came into question recently when the peace and social justice magazine, the Progressive, published a story examining the company's long-standing hostility to union organizing drives. The magazine obtained a portion of an employment agreement store managers must sign pertaining to “union activity.”

“The Manager's income shall be automatically reduced by sixty percent (60%) of what it would have been if a union of any type is recognized within your particular operation during the term of this Agreement,” the agreement states. “If a union wins an election during this time, your income will automatically be reduced by sixty percent (60%).”

A Milwaukee business magazine pointed to the policy in a separate 2007 profile of John Menard.

Jeff Abbott, corporate spokesman for Menard Inc., denied the home improvement chain currently maintains this policy.

“I checked and our current 2016 contracts do not include such a clause,” Abbott said in a message e-mailed to Bloomberg BNA.

But Abbott did not respond when asked if Menards previously imposed the union activity policy on its managers. Abbott also declined to discuss union penetration and union organizing drives at the closely held company.

Hostile to Unions

Matthew Rothschild, executive director of the Wisconsin Democracy Campaign and the former publisher of the Progressive, said Menards's legacy of anti-union employment practices is well known across Wisconsin. Rothschild and a representative for the Wisconsin AFL-CIO said they were unaware of any successful efforts to organize portions of Menards's workforce, estimated at 42,000.

Rothschild attributed the company's ability to remain free of unions to founder and Chief Executive Officer John Menard, who retains tight control over his operations. Menard has a reputation for hard-nosed opposition to unions and supporting conservative advocacy groups.

“He is one of the most anti-labor guys in Wisconsin. He runs his company like a dictatorship,” Rothschild said in an interview Dec. 11. “His hostility to organized labor is well known, so it's no surprise that he has been able to keep his company union free.”

Overt Strategy

LeRoy said corporate measures aimed at defeating organizing drives are not new, but he has never seen an employer policy that “so overtly ties managerial pay to frustration of a union organizing drive.”

LeRoy said the policy alone does not appear to violate the NLRA, but a union engaged in an organizing drive could make the case that the policy, under the right circumstances, has a chilling effect on the affected workers.

“This raises an inference that the supervisor is being incentivized to discriminate against employees supporting the union,” LeRoy said. “If my pay is being cut 60 percent with a successful organizing drive, I'm incentivized to figure out who the union organizers are. So I give them bad schedules, I give them bad evaluations, I lay them off. And that all supports this idea of an unfair labor practice. This is unsound advice to any employer. There are far more effective ways to frustrate an organizing drive than this.”

Similarly, Barbara J. Fick, a professor at the Notre Dame Law School and a former NLRB field attorney, said the union could use the clause as evidence of a manager's motivation to violate the workers' rights under Section 8(a)(1) or 8(a)(3)

“This kind of clause in the manager's contract would certainly be probative evidence of the reason he is being motivated to act,” Fick said in an interview Dec. 11. “So this could be an evidentiary tool that might help to prove animus against the union, and that's what motivated him to take certain adverse actions against certain workers. You'd still have to prove that the manager or supervisor knew that those workers were somehow involved in union stuff.”

Public Policy Exception

In a different vein, LeRoy and Fick said managers penalized under such policies could have grounds for a state law claim under the “public-policy exception to employment at will doctrine.”

The doctrine generally protects workers from wrongful discharge in cases where termination by an employer is against an established public policy of the state. The doctrine is generally used to protect whistle-blowers and workers asked by their employers to engage in illegal conduct. While the doctrine is regarded in different ways in different states, LeRoy said some states extend the protection beyond an employer's decision to discharge a worker for breaching public policy.

Fick suggested a credible argument could be made in states recognizing even a modest interpretation of the doctrine that the employer's wage-cutting conduct constituted “constructive discharge.”

“You could foresee an argument in which the manager receiving the 60 percent pay cut would quit, and that was what the employer intended,” she said. “Therefore the employer's conduct is really a discharge, and therefore it does violate public policy even in a state that only recognizes [the exception in cases of] discharge.”

Impractical and Harmful

Beyond these legal problems, at least one management side labor attorney said Menards's union activity policy is impractical and potentially harmful to an employer hoping to hold off a successful organizing drive.

Howard Bernstein, a partner in the Chicago office of Neal, Gerber & Eisenberg LLP, said an employer with Menards's policy would lose credibility with employees, driving confused workers into the arms of the union.

“Very often the employees vote for or against the union based on who they trust and believe in. They are bombarded with much information, often conflicting and confusing,” Bernstein said in an e-mailed message. “If the voters know that their supervisors’ compensation depends on the company winning the election, they are highly unlikely to believe their supervisor even if the supervisor is telling them the truth.”

Bernstein added that the union would likely make the company's union activity clause a major issue in the campaign.

“So, legal or not, as a practical matter, I think it is a self-defeating concept,” he said.

Stephanie Bloomingdale, secretary-treasurer of the Wisconsin AFL-CIO, said Menards's policy is, at a minimum, “unjust.”

“If it's not illegal, it ought to be illegal,” Bloomingdale said in an interview Dec. 10. “It goes against the spirit of the law. It goes against the meaning of the law, which allows workers the freedom to associate and to come together to form unions. To fix the game, before workers get a chance to even come together, is just wrong.”

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

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