NLRB Overrules M.B. Sturgis

The Case

The case involved a familiar employment scenario involving an employer's regular workforce and a contingent workforce consisting of employees supplied by a third party. Oakwood operated a long-term residential care facility in Oakdale, NY. While some of Oakwood's employees were part of its regular workforce, it also employed individuals supplied by a personnel staffing agency, N&W. The employees supplied by N&W and the regular employees of Oakwood had similar job duties, and the N&W-supplied employees were supervised and evaluated by Oakwood supervisors. The pay and benefits of the N&W-supplied employees were determined by Oakwood and N&W together.

The Board focused on Section 9(b) of the NLRA, which provides that “the unit appropriate for the purposes of collective bargaining shall be the employer unit, craft unit, plant unit, or subdivision thereof … ” The broadest category in this section is that of “ employer unit.” In Sturgis, the Board reasoned that a unit of all of the user's employees, both those employed by the user and those jointly employed by the user and the supplier, is itself an “employer unit” within the meaning of the statute. However, in Oakwood, the Board found this interpretation of Section 9(b) to be strained, as well as inconsistent with decades of Board precedent regarding multi-employer units.

The Ruling

In addition to finding that Sturgis involved an incorrect interpretation of the NLRA, the Board noted several policy reasons why Sturgis should be overruled as well. The bargaining structure contemplated by Sturgis could cause conflicts among the various employers and employees participating in the process (ie, supplier employer, supplied employees, regular employer, and regular employees). For example, the wages paid to the supplied employees, which are frequently controlled by the supplier employer, could have an effect on the negotiation of wages of the regular employees, a matter controlled by the regular employer. Or, the regular employer could determine the holiday schedule for its facility while the supplier employer would control whether the supplied employees received pay for these holidays. Thus, Sturgis created a bifurcation of bargaining regarding employees in the same unit, and placed employers in the position of negotiating with each other as well as with the union. These problems could be magnified due to the status of the supplier as a customer of the employer, and are further confused when multiple supplier employers enter the picture. Finally, the majority suggested that Sturgis could have allowed situations where a representation petition only named one of the joint employers — thus creating the possibility that the union would be unable to bargain with respect to terms and conditions of employment controlled by the other, unnamed employer.

The Dissent

Writing in dissent, Members Liebman and Walsh argued that the Board effectively barred workers in “alternative work arrangements” from organizing labor unions. Recognizing that a growing number of employers are relying on “contingent labor,” and that the NLRA guarantees the “fullest freedom” of employees to pursue collective bargaining, the dissent stated that the majority “seems to have gone out of its way to make it impossible for joint employees to exercise their Section 7 rights effectively.” The dissent noted that the Board majority cited no empirical evidence for its policy considerations, so the deleterious practical effects of Sturgis were overstated. Further, Section 9(b) of the NLRA was characterized by the dissent as defining merely the scope of the bargaining unit, and not the source of its members. Therefore, the dissent would find that a bargaining unit could properly include both regular and supplied employees so long as there existed a sufficient community of interest between these employees. The dissent then engaged in a lengthy analysis of the modern employer's use of supplied employees, arguing that the rule in Sturgis was necessary to facilitate bargaining for such employees.

Conclusion

Because of the increasing prevalence of alternative work arrangements, and the practical importance of this decision for any employer who utilizes employees supplied by staffing agencies, it is likely that this decision will be appealed to the federal appellate court.

An important representation issue under the National Labor Relations Act (NLRA) involves scenarios where the scope of a bargaining unit is proposed to include both an employer's regular workers and employees supplied by a separate employer, such as a staffing agency. Just over 4 years ago in M. B. Sturgis, 331 NLRB 1298 (2000), the Board stated that “a growing number of employees who are part of what is commonly described as the 'contingent work force' are being effectively denied representational rights guaranteed them under the National Labor Relations Act.” Therefore, the Board majority in Sturgis – -consisting of Chairman Truesdale and Members Fox and Liebman — overruled prior precedent in Lee Hospital, 300 NLRB 947 (1990) and Greenhoot, Inc., 205 NLRB 250 (1973), and held that a bargaining unit could include both regular and supplied employees without the consent of both the regular employer and the supplier employer.

The Consent Principle

The Board revived the consent principle recently in Oakwood Care Center, 343 NLRB No. 76 (2004), holding that units consisting of both regular and supplied employees constitute multiemployer units, which may be appropriate only with the consent of the parties. This time, a Board majority consisting of Chairman Battista and Members Schaumber and Meisburg found that while the Supreme Court has authorized the practice of multiemployer bargaining units where the parties consent to such a unit, the NLRA “reflects that Congress has not authorized the Board to direct elections in units encompassing the employees of more than one employer” without such consent. The Board's decision in Oakwood Care Center serves to resurrect the employer's voice in the determination of an appropriate unit where a “contingent workforce” is involved — and possibly at the expense of supplied employees who seek union representation.

The Case

The case involved a familiar employment scenario involving an employer's regular workforce and a contingent workforce consisting of employees supplied by a third party. Oakwood operated a long-term residential care facility in Oakdale, NY. While some of Oakwood's employees were part of its regular workforce, it also employed individuals supplied by a personnel staffing agency, N&W. The employees supplied by N&W and the regular employees of Oakwood had similar job duties, and the N&W-supplied employees were supervised and evaluated by Oakwood supervisors. The pay and benefits of the N&W-supplied employees were determined by Oakwood and N&W together.

The Board focused on Section 9(b) of the NLRA, which provides that “the unit appropriate for the purposes of collective bargaining shall be the employer unit, craft unit, plant unit, or subdivision thereof … ” The broadest category in this section is that of “ employer unit.” In Sturgis, the Board reasoned that a unit of all of the user's employees, both those employed by the user and those jointly employed by the user and the supplier, is itself an “employer unit” within the meaning of the statute. However, in Oakwood, the Board found this interpretation of Section 9(b) to be strained, as well as inconsistent with decades of Board precedent regarding multi-employer units.

The Ruling

In addition to finding that Sturgis involved an incorrect interpretation of the NLRA, the Board noted several policy reasons why Sturgis should be overruled as well. The bargaining structure contemplated by Sturgis could cause conflicts among the various employers and employees participating in the process (ie, supplier employer, supplied employees, regular employer, and regular employees). For example, the wages paid to the supplied employees, which are frequently controlled by the supplier employer, could have an effect on the negotiation of wages of the regular employees, a matter controlled by the regular employer. Or, the regular employer could determine the holiday schedule for its facility while the supplier employer would control whether the supplied employees received pay for these holidays. Thus, Sturgis created a bifurcation of bargaining regarding employees in the same unit, and placed employers in the position of negotiating with each other as well as with the union. These problems could be magnified due to the status of the supplier as a customer of the employer, and are further confused when multiple supplier employers enter the picture. Finally, the majority suggested that Sturgis could have allowed situations where a representation petition only named one of the joint employers — thus creating the possibility that the union would be unable to bargain with respect to terms and conditions of employment controlled by the other, unnamed employer.

The Dissent

Writing in dissent, Members Liebman and Walsh argued that the Board effectively barred workers in “alternative work arrangements” from organizing labor unions. Recognizing that a growing number of employers are relying on “contingent labor,” and that the NLRA guarantees the “fullest freedom” of employees to pursue collective bargaining, the dissent stated that the majority “seems to have gone out of its way to make it impossible for joint employees to exercise their Section 7 rights effectively.” The dissent noted that the Board majority cited no empirical evidence for its policy considerations, so the deleterious practical effects of Sturgis were overstated. Further, Section 9(b) of the NLRA was characterized by the dissent as defining merely the scope of the bargaining unit, and not the source of its members. Therefore, the dissent would find that a bargaining unit could properly include both regular and supplied employees so long as there existed a sufficient community of interest between these employees. The dissent then engaged in a lengthy analysis of the modern employer's use of supplied employees, arguing that the rule in Sturgis was necessary to facilitate bargaining for such employees.

Conclusion

Because of the increasing prevalence of alternative work arrangements, and the practical importance of this decision for any employer who utilizes employees supplied by staffing agencies, it is likely that this decision will be appealed to the federal appellate court.