Labor Board Ditches the “Clear and Unmistakable Waiver” Standard in Favor of the Employer-Friendly “Contract Coverage” Test

2019 has been the “Summer of Love” for employers at the Trump-administration National Labor Relations Board (“Board” or “NLRB”). Over the past several weeks, the Board has issued a handful of employer-friendly decisions covering issues such as worker misclassification, the rights of union organizers and the appropriate scope of a proposed bargaining unit. Perhaps the most far-reaching of these decisions came down on September 10, when the Board eased a unionized employer’s ability to make unilateral changes to terms and conditions of employment. In M.V. Transportation, Inc. (368 NLRB No. 66), the Board overturned decades of precedent when it abandoned the “clear and unmistakable waiver” standard in favor of the “contract coverage” test for evaluating unilateral changes.

As background, under the National Labor Relations Act (“NLRA” or “Act”), an employer with a unionized workforce has a duty to bargain with the union over wages, hours, and terms and condition of employment. An employer that fails to meet its bargaining obligation and institutes “unilateral changes” to terms and conditions of employment violates the Act. The Board’s decision in M.V. Transportation changed the standard that the Board uses to evaluate unilateral changes.

The Clear and Unmistakable Waiver Standard

Under the now-defunct clear and unmistakable waiver standard, an employer was forbidden to take unilateral action unless the parties’ contract permitted the action. Under this standard, an employer was found to have violated the Act unless a provision of the collective-bargaining agreement “specifically refers to the type of employer decision” at issue “or mentions the kind of factual situation” the case presents.

In other words, if the parties’ collective bargaining agreement did not explicitly sanction the employer’s actions, the employer was required to bargain with the union before making any changes. Failure to bargain with the union would result in the union filing an unfair labor practice charge, where it would almost assuredly prevail.

An Unworkable Standard

Obviously, the standard was a nightmare for employers. An employer who failed to bargain the ability to make a specific change into an agreement with the union was generally prohibited from making a change, even if the change was reasonably within the scope of the CBA. For example, if an agreement contained a management’s rights clause that permitted the employer to run its business and direct employees, the employer’s ability to exercise those rights were nonexistent unless the express change the employer sought to implement was contained in the agreement.   Indeed, the Board recognized that the “level of specificity demanded under [the clear and unmistakable waiver] standard requires ‘near-supernatural prescience’” that was simply not attainable.

The clear and unmistakable waiver standard also undermined the contractual grievance and arbitration process because unions opposed to an employer’s change would file unfair labor practice charges with the Board rather than use the parties’ agreed-upon dispute resolution process. Instead of a neutral arbitrator applying general principles of contract interpretation, the union was able to have its case heard under the Board’s much more favorable clear and unmistakable waiver standard.

The problems with the clear and unmistakable waiver standard ran deeper than employer dissatisfaction. Numerous circuit courts had flat-out rejected the NLRB’s standard in favor of the “contract coverage” test. Under the contract coverage test, the question was whether the employer’s actions fell within its authority under the contract’s plain language – i.e., whether the contract allowed the employer to make changes generally. Chief among the dissenting courts, the D.C. Circuit, which by statute has plenary jurisdiction to review Board decisions, had rejected the standard for over 20 years. The dispute between the Board and the D.C. Circuit reached its apex in 2016, when the D.C. Circuit sanctioned the Board for its continued adherence to the clear and unmistakable waiver standard.

In abandoning the standard, the Board recognized that its “dogged adherence to the clear and unmistakable waiver standard has become an exercise in futility.” Specifically, if the Board found that an employer failed to bargain with the union, the employer simply would appeal the decision to a favorable circuit court, which would deny enforcement of the Board’s order. The entire process had become a charade and waste of governmental resources.

The Contract Coverage Test

The adoption of the contract coverage test puts to bed what was in essence an impossible standard for employers to meet. Instead, the Board will now “examine the plain language of the collective-bargaining agreement to determine whether action taken by an employer was within the compass or scope of contractual language granting the employer the right to act unilaterally.” In doing so, the Board will now apply ordinary principles of contract interpretation.

In the decision, the Board posed the example: if the contract permits the employer the ability to implement and revise work rules, then it may lawfully implement new safety rules or revise an existing attendance policy under the contract coverage test. The resulting analysis gives effect to the plain meaning of the contract and is more consistent with arbitration and federal law.

Key Takeaways

M.V. Transportation, however, does not give an employer carte blanche authority to make unilateral changes. If the contract does not cover the changes, the employer must honor its bargaining obligation or risk violating the NLRA. Additionally, unions still have recourse to challenge the change through contractual grievance and arbitration provisions and the Board’s decision does not guarantee an arbitrator will find the action permissible under the contract. The decision does remove the assured lay-up unions had before the Board if an employer acted unilaterally.

Nevertheless, employers should rejoice in this decision as it allows more freedom to act within the scope of its agreement with a union. It also disincentivizes unions from bypassing the grievance and arbitration process in favor of the Board. Perhaps most importantly, the decision gives effect to the purpose of the management’s rights clause and other contractual language. Employers should review the rights contained within its agreements, and if possible, seek to bolster those rights during the next round of bargaining.