June 1, 2016

NLRB Limits an Employer’s Right to Permanently Replace Economic Strikers

BY: L. Brent Garrett

A new NLRB decision dramatically restricts the ability of employers to “permanently replace” economic strikers.  See Piedmont Gardens, 364 NLRB No. 13 (May 31, 2016).  Since the Supreme Court’s landmark decision of NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333 (1938), it has been understood that employers have a broad right to “permanently replace” employees who are on an economic strike.  Previously, the employer’s right to “permanent replacement” was considered a key part of the system of “economic weapons” available to parties during labor negotiations.  Just as employees have a right to strike, the law granted employers a right to permanently replace those strikers.  The Piedmont Gardens decision upends this time-tested system of checks and balances by severely limiting the reasons an employer can permanently replace strikers.

New Motives Analysis on the Decision to Permanently Replace

For the first time ever, the NLRB now injects a motives analysis into the employer’s decision to permanently replace economic strikers.  In Piedmont Gardens, the NLRB held that the use of permanent replacements will be considered unlawful if the decision is motivated by “a purpose that is prohibited by the NLRA.”  Id. at *6.   According to the NLRB, “prohibited purposes” include a desire on the employer’s part to “punish” the strikers or a desire to deter future strikes.  Id. at *6-7.    Additionally, the NLRB suggested that any retaliatory intent on the part of the employer, or any attempt by the employer to interfere with future protected activities, would also be considered an “unlawful purpose” in the context of permanent replacements.  See id.

Piedmont Gardens overturns decades of NLRB precedent allowing employers to permanently replace economic strikers “at will.”  See Hot Shoppes, Inc., 146 NLRB 802 (1964) (citing to NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333 (1938)).  The prior NLRB standard recognized that the employer could use permanent replacement offensively, both to enforce contract demands and to counter future strike activity.  See id.  As a result, under the prior legal standard, the employer’s “motive” in permanently replacing the strikers was irrelevant.  See id.

In Piedmont Gardens, the NLRB concluded that the employer acted with an unlawful motive when a representative for the employer said the employer would permanently replace 20 strikers because “it wanted to teach the employees and the union a lesson.”  Id. at *2.  Finding the replacements were unlawfully motivated, the NLRB ordered reinstatement and six years of back pay for 20 economic strikers replaced by the employer.  Id. at *8.

A Strenuous Dissent

The dissenting NLRB member in Piedmont Gardens argued that the majority erred for several reasons.  The dissent explained that the majority badly misapplied an earlier case providing for a very limited exception to an employer’s right to permanently replace.  Id. at *16.  In addition, the dissent argued that the employer’s motive ought to be irrelevant to the question of permanent replacement.  Id.  As the dissent explained, difficult labor negotiations — the type that involve strikes — always engender animosity and hard feelings between the employer and the union.  See id.  Virtually all decisions to permanently replace strikers are motivated by the employer’s desire to gain a tactical advantage in the contract negotiations.  Against this tense backdrop, applying a motives analysis to the employer’s replacement decision is nonsensical.  As a practical matter, the dissent argued the NLRB’s new standard would effectively preclude many employers from permanently replacing economic strikers.   Id.

Commentary

Echoing the dissent’s final point, those of us who follow the NLRB regularly agree that the current NLRB would like to dramatically reduce, if not completely eliminate, the use of permanent strike replacements.  In fact, pro-labor legislators have, in the past, unsuccessfully attempted to pass legislation that would eliminate an employer’s right to permanently replace strikers.  And, there is no doubt that Piedmont Gardens raises the stakes on any decision to permanently replace economic strikers.  The NLRB’s new decision affords unions an ability to mount a legal challenge to any decision to permanently replace strikers.  The potential damages in a dispute over permanent replacement might be substantial if the employer replaced several strikers.

Advice to Employers

If upheld by the courts, the Piedmont Gardens decision will have dramatic consequences for employers, both in the context of economic strikes and in the context of organizing campaigns.

When faced with the question of whether to permanently replace strikers, employers should now assess the business reasons to use permanent, as opposed to temporary, strike replacements.  Employers should be prepared to defend the decision to permanently replace strikers based on legitimate business reasons, such as hiring costs, training costs, and workforce consistency following a long strike.  Conversely, employers should avoid communicating that strikers have been permanently replaced for any reason that might imply a retaliatory motive on the employer’s part, such as to punish strikers or to deter future strikes.

In the organizing context, employers are still free to communicate to employees that a vote for unionization could lead to a strike, which could in turn lead to permanent replacement of strikers.  However, in campaign communications, employers should avoid implying that they might seek to retaliate against the union or strikers by permanently replacing strikers.  Instead, employers should point to the legitimate business reasons that could lead to the permanent replacement of strikers.  The current NLRB is likely to overturn election results or find an unfair labor practice if the employer communicates about permanent replacement in a manner the NLRB considers to be retaliatory of labor rights.

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L. Brent Garrett

L. Brent Garrett

Partner

(562) 653-3200

bgarrett@aalrr.com

Brent Garrett is a partner in the firm's Cerritos and Irvine offices and is a member of the firm’s Private Labor and Employment Group. He exclusively represents management in labor and employment matters. He is also a frequent contributor to the Firm’s Labor Relations Blog, providing analysis and commentary about new developments in the area of traditional labor law.

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