June 14, 2016

DC Circuit Approves the NLRB’s Award of Bargaining Expenses for Bad Faith Bargaining

BY: L. Brent Garrett

The National Labor Relations Board (NLRB) furthered its quest to expand the remedies available under the National Labor Relations Act (NLRA) with a recent victory in the DC Circuit.  In Camelot Terrace, the DC Circuit held that the NLRB may order an employer to reimburse a union for its bargaining expenses for instances of “flagrant” or “egregious” bad faith bargaining.  Camelot Terrace, et al. v. NLRB, Slip Op., Case No. 12-1071 (D.C. Cir., June 10, 2016).

Penalty Available for Flagrant Instances of Bad Faith Bargaining

In the underlying decision, the NLRB held that the employer engaged in bad faith conduct when it restricted the dates and length of bargaining sessions, repeatedly canceled and shortened sessions, reneged on tentative agreements without good cause, refused to bargain over economic subjects, and refused to make economic proposals.  Id. at *1 (citing to Camelot Terrace, 357 NLRB No. 161 (2011)).  The NLRB also found that the employer engaged in direct dealing and made unlawful unilateral changes.  Id.  As a result of these “egregious” violations, the NLRB ordered the employer to reimburse the union for all of its costs and expenses incurred in the contract negotiations.  Id.

Court Holds “American Rule” Does Not Apply to Bargaining Expenses

The employer petitioned for review to the DC Circuit, arguing that the NLRB lacked authority to award bargaining expenses under the NLRA.  In its appeal, the employer relied in large part on an earlier ruling from the DC Circuit holding that the NLRB lacks authority to order an employer to reimburse the NLRB for its legal fees, even for flagrant violation of the NLRA.  See HTH Corp. v. NLRB, Slip Opinion, No. 14-2222 (D.C. Cir., May 20, 2016).  In that case, the court held that the American Rule applies, meaning that each party must pay its own litigation expenses.  See id.  In Camelot Terrace, the employer argued that the American Rule should also block the NLRB from authority to award reimbursement of bargaining expenses.  Camelot Terrace, supra, slip op. at *2.

The DC Circuit disagreed, holding instead that the NLRA affords the NLRB discretion to “fashion appropriate remedies” to effectuate the purposes of the NLRA.  Id. at *5.  Under a reasonableness standard, the DC Circuit accepted the NLRB’s explanation that an award of bargaining expenses is warranted where the employer’s “substantial unfair labor practices have infected the core of the bargaining process to such an extent that their effects cannot be eliminated by… traditional remedies.”  Id. (citations omitted).  Further, the DC Circuit agreed that an award of bargaining expenses allows the “injured party [to] return to the negotiations on the same footing it occupied before” the unfair labor practice.  Id. at *6.  The DC Circuit also opined that NLRB’s traditional remedies for bad faith bargaining, such as a bargaining order, are “of little value, if one party can drain another of its resources by bargaining in bad faith and then extracting concessions as the money wanes.”  Id.

Does the Ruling Give the NLRB License to Use the Remedy More Extensively?

Importantly, the NLRB awards bargaining expenses only as an extraordinary remedy for “unusually aggravated conduct.”  See Unbelievable, Inc., 318 NLRB 857, 859 (1995).  By contrast, in the vast majority of ordinary bad faith cases, the NLRB will rely on bargaining orders and a notice posting as a remedy for the unfair labor practice.  See id.  As such, the DC Circuit’s ruling should affect only a limited subset of cases for bad faith bargaining.

However, although the DC Circuit’s ruling applies only to “extraordinary remedies,” it should be of great concern to employers.  The court’s decision approves of the NLRB’s assertion that an award of bargaining expenses is “remedial” in nature.  This decision could pave the way for the NLRB to expand the use of bargaining expenses as a remedy for bad faith bargaining, including cases of ordinary bad faith bargaining.  This is particularly true because the NLRB is constantly searching for ways to expand the scope of the ‘make whole’ remedies available under the NLRA.   Further, because all NLRB decisions are appealable to the DC Circuit, rulings from this court are more significant in terms of guiding the direction of future labor law.

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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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