Parties before the National Labor Relations Board (“NLRB” or the “Board”) often wonder whether it is worthwhile to appeal adverse rulings or respond when favorable rulings are received. Two recent appellate court decisions demonstrate the value of sticking with an argument from start to finish.

A Winning Formula

First, in Davidson Hotel Company v. NLRB (D.C. Cir. 2020), the D.C. Circuit recently took the highly unusual step of rejecting an NLRB determination as to the appropriate unit for bargaining at a small, full-service hotel in Chicago. For context, the NLRB had determined that the Davidson Hotel’s employees should be segregated into three separate bargaining units: a unit of front desk employees, a unit of housekeeping employees, and a unit of food and beverage employees. The union petitioned the Board to certify a single unit of housekeeping employees and food and beverage employees.

The Board’s Regional Director decided that a unit consisting of the housekeeping and the food and beverage employees was not an appropriate unit because it did not include the front desk employees, and he dismissed the union’s petition for an election. The Regional Director reached his decision by applying the NLRB’s “community of interest” test, under which the NLRB examines: (1) whether employees in the proposed unit have sufficient commonality in working conditions and job duties (among other factors) such that bargaining as a collective group is possible; and (2) whether employees in the unit have such distinctive interests from those who are excluded-here, the front desk employees-such that they should bargain separately. In his order dismissing the union’s initial petition for a single bargaining unit of housekeeping and food and beverage employees, the Regional Director decided that the unit did not have distinctive interests from the front desk workers, but he hinted that two separate units (one for housekeeping and another for food and beverage) might be appropriate.

Following his cue, the union promptly filed two petitions seeking one election in the housekeeping unit and a second election in the food and beverage service unit. Again, the union did not seek to represent the front desk employees. This time, the Regional Director found that the community of interest test was satisfied and he certified the two units. When an election was held, the union prevailed in both units.

Gerrymandering a workforce to exclude pockets of anti-union workers (here, the front desk employees) is a common tactic unions employ. Davidson Hotel refused to bargain with the two units and tested the NLRB’s decision to certify the units (for those who are unfamiliar, this is the procedure employers must follow to challenge union certification in representation cases).

In considering the issue, the D.C. Circuit applied the well-worn rule that the NLRB must not only explain its reasoning when certifying bargaining units, but also distinguish contrary Board precedent. The Court focused on the NLRB’s failure to explain the basis for its decision. The Court was particularly put off by the fact that the Davidson Hotel decision was contrary to at least two Board decisions which the Board simply ignored, although Davidson Hotel had brought both decisions to the Board’s attention. In both of those decisions, the Board had rejected smaller, separate units of hotel employees, expressing the preference for a single wall-to-wall unit. Additionally, the Court faulted the NLRB for not explaining, or even acknowledging, the Regional Director’s initial decision.

The Court remanded the case to the NLRB for an explanation, so this saga is not over yet. Still, the decision points to the value of a well-researched brief-no surprise there-and the value of following a line of defense to its conclusion in the courts. Knowing the standards that administrative agencies must meet when issuing a decision was as important to the Hotel’s win as was knowledge of the substantive area of law. The Hotel may ultimately achieve an election in a wall-to-wall unit, which is usually preferred by most employers. In other good news for practitioners, the Court refused to consider the NLRB’s attorneys’ post-hoc explanations for the NLRB’s decision, insisting the explanation had to be included in the NLRB’s decision, not come from the NLRB’s attorneys.

Avoid This Mistake

The result in Davidson Hotel stands in contrast to a decision earlier in the month in Laborers’ International Union of North America, Local Union No. 91 v. NLRB (2d Cir. 2020). There, the Court relied on a frequently overlooked procedural provision in Section 10(e) of the National Labor Relations Act. Section 10(e) provides that “no objection…not urged before the” NLRB shall be considered by a court of appeals. The courts have expansively defined the term “objection,” as Local 91 learned.

Local 91 operated a hiring hall that referred union members to jobs as they became open. Local 91 was charged with unlawfully threatening to file internal union charges against a union member, refusing to show a union member the union’s out of work list, and retaliating against him by not referring him for work. Only the last charge carried any monetary penalty.

After a trial, the Administrative Law Judge found Local 91 guilty of the first two allegations, but determined that it prevailed on the third issue, as the General Counsel had failed to carry his burden of proof. When the General Counsel filed objections to the ALJ’s decision as to this latter finding, Local 91 did not respond. Having heard only one side of the story, the NLRB reversed the ALJ and found that Local 91 had violated the Act on the third retaliation claim as well.

Instead of first moving for reconsideration by the NLRB, Local 91 immediately appealed what was no doubt a surprising turn of events. The Second Circuit invoked Section 10(e) and summarily enforced the NLRB’s order stating “where a party has prevailed before the ALJ, but receives an adverse ruling from the Board, it waives any objections not preserved …through a motion for reconsideration following the Board’s decision.”

By not filing a brief to support the ALJ’s decision or a motion for reconsideration, Local 91 snatched defeat from the jaws of victory. Attorneys who disregard the procedural requirements when litigating before administrative agencies will likely receive an unpleasant surprise. The NLRB has adopted an extensive set of procedural rules which it invokes rigorously. And there is a substantial body of common law hidden away in the appellate court opinions, which practitioners must remember if they want to succeed. For assistance with your labor and employment law needs, contact your Baker McKenzie attorney.