NLRB Goes Back to the ‘80s To Justify A Union-Notice Rule

“What Jefferson was saying was, Hey! You know, we left this England place ‘cause it was bogus; so if we don’t get some cool rules ourselves – pronto – we’ll just be bogus too! Get it?”

 — Jeff Spicoli, Fast Times at Ridgemont High (1982)

 This fall, the D.C. and Fourth Circuits will hear two parallel challenges to a union-notice rule promulgated by the National Labor Relations Board.  The NLRB’s rule would require virtually every private company in the country to post a Notice advising employees of their right to organize a union and to strike.  In justifying the rule, the NLRB explained that most employees do not know about their labor rights … as evidenced by surveys of high school students in the 1980s.  The NLRB also relied on anecdotal evidence from “West Germany” and a remarkably contorted statutory analysis.  If the circuit courts split, as the district courts split below, the cases could easily wind up in the Supreme Court.

The NLRB finalized its notice-posting rule in August, 2011, over a vigorous dissent from the NLRB’s lone Republican member.  Not surprisingly, the rule was seen by many observers as a political move designed to reward President Obama’s union allies.  In its 76-year history, the NLRB had never before asserted the broad authority to require employers to post such a Notice, or indeed to take any affirmative act outside the context of a union election or alleged misconduct.  The NLRB received 7,000 comments on the proposed rule.  Most opposed it.  Employer groups complained that “the notice reads more like a union manifesto than an unbiased explanation,” and that “the Notice makes no pretense about the poster’s primary purpose – the promotion of union organizing.”

Setting aside the political and ideological concerns, the NLRB’s rule rests on an evidentiary foundation that could be charitably described as less than robust.  The NLRB concluded that it had to adopt the notice-posting rule because “American workers are largely unaware” of their rights to organize a union.  In support, the Board cited three law review articles dated 1989, 1993, and 1995, respectively.  Only one of the three articles provides any support for the proposition that workers do not know their rights.[1]  That article, in turn, relied on surveys of dubious value from the 1980s, such as a 1985-86 study of high school students in southern Florida finding that “students have very little knowledge of collecting bargaining rights.”  Similarly, a 1989 study of high school students in Hawaii found that students “frequently answered basic questions on labor law incorrectly.”  One of the other law review articles viewed labor relations through the prism of the Cold War:  “Although we live in a politically democratic society, American employment relationships are typically authoritarian and militaristic in structure.”[2]  This article advocated that American companies emulate their counterparts in “West Germany.”

With due respect to our friends in West Germany, and to the high school graduating class of 1986, some may question whether their experiences justify an expansive rule in the United States of America in 2012.  The law review articles and surveys are a quarter-century old and were published long before the widespread use of social media.  In 2010, the NLRB’s own website attracted 2.8 million visitors, and a Google search for “starting a union” yields 541,000,000 results (the first result is the AFL-CIO’s website).  Moreover, and ironically, the NLRB finalized its rule at a time when union issues were dominating the national discourse, from the collective bargaining fights in Wisconsin and the right-to-work battles in Indiana, to ongoing labor strife in the NBA and NFL.  Anyone watching the news, or even ESPN, would gain passing familiarity with the concept of collective bargaining rights.

In addition to the law review articles, the NLRB drew inferences from two other facts.  The NLRB found support in the fact that private sector unionization has “decreased dramatically since their high point in the 1950s,” and that the labor force includes a “high percentage of immigrants who are unlikely to be familiar with the Act.”  Of course, there are many reasons to question validity of the NLRB’s inferences.  Union rates have fallen for a number of reasons, and immigrants composed a large percentage of the labor force in earlier generations, when the NLRB saw no need to impose a notice-posting rule.  More to the point, the NLRB saw no need to justify its inferences through a simple survey of employees that could have gathered current information about employees’ knowledge or lack thereof.  Instead, the NLRB contended that the rule’s opponents had the burden of disproving the need for the rule.

The NLRB’s rule also rests on an aggressive, if not contorted, statutory analysis.  Most labor statutes expressly require companies to post notices advising their employees of various rights.  Those statutes include the Americans with Disabilities Act, Age Discrimination in Employment Act, Family and Medical Leave Act, Occupational Health and Safety Act, Title VII of the Civil Rights Act, and others (you can typically find such notices in employee break rooms).  The National Labor Relations Act, however, does not include an express posting requirement.  Remarkably, the NLRB uses this stark contrast as a sword to justify the rule.  In explaining away its lack of statutory authority, the NLRB asserted that the rule “corrects the long-standing anomaly that, until now, the Board has been almost unique among agencies and departments . . . in not requiring covered employers to routinely post notices.”  In other words, in the NLRB’s view, the fact that Congress gave other agencies notice-posting authority shows that Congress also gave the NLRB the same authority.  The NLRB discounted the more natural possibility that Congress did not give the NLRB express notice-posting authority because, just perhaps, Congress did not want the NLRB to have such authority.

Finally, the NLRB also downplayed the rule’s costs on small businesses.  The NLRB estimated that businesses would have to spend only two hours to comply with the rule:  30 minutes to learn about the rule, 30 minutes to acquire the notices, and 60 minutes to post them physically and electronically.  The NLRB, however, pulled this estimate out of a hat – it cited no studies or surveys for this estimate.  Moreover, the NLRB completely ignored entire categories of costs, such as training costs and legal costs.  According to some estimates, total compliance costs could approach five to thirteen billion dollars annually, given that many employers may feel compelled to train their managers and to explain the notice to their employees.  Similarly, the NLRB discounted the notice’s potential negative effects on employee relations.  One of the three law review articles cited by the NLRB predicted that a notice could cause “some minor, short-term disruption to production.”

Trade associations have filed two lawsuits challenging the rule.  The National Association of Manufacturers, National Right to Work Legal Defense Foundation, and other groups brought one lawsuit in Washington, D.C.  The D.C. district court largely sided with the NLRB.  Relying on Chevron, the D.C. district court held that the NLRB was allowed to promulgate the notice rule because the statute did not expressly deny the NLRB the authority to issue it.  The court also found that the agency’s interpretation of the statute was reasonable.    The court did strike down a small part of the rule’s remedial provisions that penalize employers for not posting the notice.

A second lawsuit was filed in South Carolina by the Chamber of Commerce of the United States of America and the South Carolina Chamber of Commerce.  Unlike the court in D.C., the South Carolina district court agreed that the NLRB had exceeded its statutory authority.  Among other things, the court relied on the NLRB’s legislative history and a comparison with similar statutes.  The court also advised the NLRB against relying on statutory silence as support for a regulation.  As the court explained, “Perhaps the Board should have heeded the admonition of Simon and Garfunkel:  ‘And no one dared / disturb the sounds of silence.’”

Both cases are now on appeal.  Depending on the outcome of the cases at the circuit court level, and the outcome of the November elections, the cases could well end up in the Supreme Court (presumably, if Governor Romney wins the election, a reconstituted NLRB would revoke the rule, thereby mooting the lawsuits).  On its own terms, the rule would impose a regulatory burden on virtually all of the nation’s six million employers, which by itself might pique the Court’s interest.  Beyond that, the rule could affect the rulemaking process at other agencies.  If the NLRB wins, federal agencies could have much broader discretion to promulgate affirmative rules, checked only by express denials of authority in the authorizing statutes.  Moreover, federal agencies would have discretion to rely on decades-old data and anecdotes to justify new rules, thereby effectively placing the burden on the public to locate or generate evidence demonstrating the lack of need for a new regulation.  On the other hand, if the employers win, federal agencies will have to tie their regulatory actions much more closely to express statutory authorizations, and justify those actions with more current and relevant data.  In either event, these cases may leave a lasting legacy for employers, unions, and federal agencies – as well as West Germans and the Spicoli generation of high school students.

[1] See DeCiara, The Right to Know: An Argument for Informing Employees of Their Rights Under the NLRA, 32 Harv. J. on Legis 431, 467 nn. 27-33 (1995).

[2] Morris, NLRB Protection in the Nonunion Workplace: A Glimpse at a General Theory of Section 7 Conduct, 137 U. Pa. L. Rev. 1673, 1753 (1989).