For the first time since 1993, the National Labor Relations Board has issued a major decision concerning the legality of employee participation programs. Despite mounting political pressure to provide employers with greater flexibility to allow employee participation in the workplace, the Board reaffirmed its position that employee participation programs will be closely scrutinized. EFCO Corporation, 327 NLRB No. 71 (1998). The decision, which is certain to impact both union and non-union employers, runs counter to many currently popular progressive management techniques.
Historical Perspective
Section 8(a)(2) of the National Labor Relations Act ("NLRA") makes it unlawful for an employer to establish certain employee participation programs or employee committees. Congress enacted section 8(a)(2) in 1935 to eradicate the growth of company-dominated unions, a strategy used by many employers prior to the NLRA to discourage independent unionization efforts. Though the company unions of the early 1900s are a thing of the past, the Board has continued to apply section 8(a)(2) in a very strict fashion.
The two landmark decisions concerning labor-management cooperative programs are Electromation, Inc., 309 N.L.R.B. 990 (1992), which dealt with the legality of such programs in a non-union setting, and E.I. du Pont de Nemours & Co. (E.I. du Pont), 311 N.L.R.B. 893 (1993), which addressed the legality of such programs in a union setting. In these cases, the Board explained that an employee committee violates section 8(a)(2) where:
- the committee is an employee group which exists for the purpose of "dealing with" the employer concerning wages, hours and/or working conditions; and
- the employer dominates or interferes with the formation or administration of the committee, or contributes support to it.
Political Backlash
There was a widespread belief that the Board's holdings in Electromation and E.I du Pont would be short-lived. Many politicians and lobbying groups pushed for legislative change in an effort to promote participatory management techniques.
Both former United States Secretary of Labor Robert Reich and former NLRB Chairman William Gould criticized these decisions as overbroad and as overrestrictive of an employer's flexibility to allow employee participation. In 1996, Republicans in Congress sought to overrule Electromation through legislation by proposing the Teamwork for Employees and Management Act ("TEAM Act"), which would have allowed nonunion employers to establish employee committees and meet with them regarding terms and conditions of employment. Despite fairly broad bipartisan support, the Act, bitterly opposed by unions, was vetoed by President Clinton.
As a result, the language of section 8(a)(2) remains unchanged and continues to limit the extent to which participatory management techniques may be utilized. As demonstrated in EFCO Corporation, under the current state of the law, an employee committee can easily run afoul of the Act, even where the committee has been set up with the best of intentions and without union avoidance in mind.
EFCO Decision
In EFCO Corporation, the Board analyzed four independent employer-established employee committees: a benefit committee, a policy review committee, a safety committee, and a suggestion screening committee. All four committees were made up of employee volunteers selected by management.
The Benefit Committee was created to evaluate existing employee benefit plans and recommend improvements to management. Committee members investigated potential plans, analyzed costs, and solicited ideas from other employees. The Committee was told to choose "its own route." However, management directed the Committee to focus first on the company's medical plan and dental plan.
The Policy Review Committee was created to evaluate company policies and to make specific recommendations to management regarding existing policies and potential new policies. Management instructed members to determine their own methods, scope of inquiry, and areas of concern, but asked the Committee to devise a new no-smoking plan.
The Safety Committee was responsible for addressing workplace safety problems and setting and enforcing safety policies. A management employee served on the Committee and established the Committee's agenda.
Finally, the Suggestion Screening Committee was responsible for overseeing a company policy which rewarded employees for submitting "valid" work-related suggestions. The Committee's purpose was to receive suggestions from employees and make recommendations to management regarding such suggestions.
The Board's Analysis
The Board held that the Benefit Committee, the Policy Review Committee and the Safety Committee were unlawful. The Board explained that while these committees did not engage in formal negotiations with management, the fact that they made proposals and requests relating to work-related policies and issues for management's consideration constituted "dealing with" the employer. In other words, each of these committees existed, at least in part, for the purpose of making proposals, which management would then consider and accept or reject.
For example, the Board explained that the Safety Committee, to the extent it reported and corrected safety problems, had a lawful purpose as the Act does not prevent an employer from encouraging employees to express safety concerns. However, the Board held that the Committee engaged in unlawful "dealings with" the employer by reviewing safety rules and policies, developing safety incentive programs, and making proposals to management about such policies and programs.
The Board further found that each of these committees was management-dominated, as management created the committees, announced their formation, explained to employees their goals and purposes, and held committee meetings on its premises during working hours. For example, although the employer instructed members of the Benefit Committee to choose "their own route," it expressly directed them to address specific benefit issues.
The only committee the Board found lawful was the Suggestion Screening Committee. According to the Board, while the committee could theoretically "deal with" management by weeding out proposals that it did not wish to advance and recommending other proposals, in practice, it did not serve such a function; the committee neither "recommended" nor provided an opinion about the viability of any suggestion. Accordingly, the Board held that the Screening Committee did not engage in unlawful "dealings with" management.
Decision Will Likely Affect Both Union and Non-Union Employers
An employer's maintenance of an unlawful employee participation program can have harsh consequences. For unionized employers, the Board's usual remedy is to disestablish the program, post a corrective notice, and possibly order the employer to bargain with the union over the subjects at issue. A finding that a program is unlawful may also serve to overturn an employee vote to decertify the union.
For non-union employers, the consequences are potentially more severe. Where the lawfulness of a committee is challenged during a union organizing drive, a finding against the employer will likely result in an employer election victory being set aside. Moreover, the existence of an unlawful committee, particularly if independent unfair labor practices are alleged, may support a union's request for a bargaining order remedy. Where a bargaining order is issued, the employer is ordered to bargain with the union without an election or despite the fact the employer prevailed in an election.
The Board's ruling in EFCO will probably be viewed by most employers as a hyper-technical interpretation of the Act. The decision is troubling because it discourages employee involvement and runs counter to well-intentioned employee participation techniques. The decision is helpful, however, in providing employers with practical examples of committee activity that the Board will and will not condone. Generally, an employee committee will only be found permissible where the committee simply shares information with the employer and the employer acts at its own discretion (without specifically accepting or rejecting the proposals), or where the committee itself is given authority to implement proposals, provided that management representatives are in the minority and do not have veto power.
*article courtesy of Litltler Mendelson, PC.