On June 23, 2020, the National Labor Relations Board (“NLRB”) ruled that newly-represented employees can be disciplined under existing disciplinary policies even if no bargaining has occurred. 800 River Road Operating Company, Inc., 369 NLRB No. 109 (2020). For the first eighty years of the National Labor Relation Act’s existence, this had been the law of the land. A surprise decision four years ago in Total Security Management Illinois, 364 NLRB No. 106 (2016), upended this rule by requiring an employer to bargain with its employees’ newly certified representative (union) before “serious” discipline could be imposed. The 800 River Road decision returned an employer’s bargaining obligation to that historical and long-standing status – discipline consistent with an existing disciplinary policy is permissible even if the employer has not bargained about the discipline with the employees’ representative. The 800 River Road decision places a premium on well-crafted employee handbooks and disciplinary policies and a solid record retention policy to demonstrate the employer’s record of enforcement.
The decision is only the most recent decision in the long-running debate over the proper interpretation and application of the unilateral change doctrine enunciated by the Supreme Court in NLRB v. Katz, 363 U.S. 736 (1962). In Katz, the Court held that upon commencement of a bargaining relationship, employers “are required to refrain from making a material change regarding any [mandatory] term or condition of …employment…unless notice [of the change] and an opportunity to bargain is provided to the union.” (Slip op.3). Immediately following this sweeping generalized holding, employers ceased providing annual wage increases under existing compensation policies. The NLRB responded by creating the “dynamic status quo” policy. The dynamic status quo exemption to the Katz rule is applied when an employer’s practice or the policy itself becomes a term or condition of employment.
Much litigation and frustration have occurred with the dynamic status quo. Compare The Finley Hospital, 362 NLRB 915 (2015) enf’d denied, 827 F.3d 720 (8th Cir 2016) (status quo required wage increases following contract expiration) with Pg Publ’g Co., 368 NLRB No. 41 (2019) (status quo did not abrogate any contractual duty to increase wage rate). Even more frustrating was the uncertainty the rule engendered since the determination of whether an employer’s policy itself was the term or condition of employment hinged on whether the employer exercised “discretion” under the policy. In the context of unilateral wage increases occurring during union organizing campaigns, the Sixth Circuit became so frustrated with the NLRB’s vacillation, it eventually refused to enforce the NLRB’s decisions. See, e.g., N.L.R.B. v. Newton Corp., 705 F.2d 873 (6th Cir. 1983) (refusing to enforce Board order where evidence in unfair labor proceeding was insufficient to sustain a finding that the employer made a unilateral wage increase).
The 800 River Road decision also eliminates the “discretionary” verses fixed policy dichotomy (a dichotomy previous NLRB panels had adopted in the larger context) at least when employee discipline is involved. Instead, the NLRB held in 800 River Road that discipline under an existing policy is not unlawful if the exercise of the employer’s discretion is consistent with the manner its discretion has been exercised in the past. Whether the NLRB will now take the logical step and extend this rule to other dynamic status quo analysis remains to be seen.
Employers can breathe a sigh of relief but should not become complacent. A well-crafted disciplinary policy is a prerequisite to avoiding bargaining before discipline can be administered. Employers with non-union workforces would be well served to review and update their disciplinary policies because of the changes in technology, intellectual property, privacy, remote work, and social distancing. Likewise, employers should review record retention policies to ensure adequate disciplinary files are maintained to establish a practice of policy enforcement.
If you would like a review of your disciplinary policy or record retention policy, please contact a Baker & McKenzie attorney.