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May 28, 2020

Not Just ‘Clear and Unmistakable’: NLRB and Courts Embrace Contract Coverage Waiver Standard

Last fall, the National Labor Relations Board (NLRB) moved away from the strict “clear and unmistakable” standard when determining whether unions and their members waived certain rights. Since issuing its MV Transportation, Inc. decision in September 2019, the NLRB no longer requires employers to demonstrate that a union clearly and unmistakably waived its right to bargain over the subject of a unilaterally implemented change. For a detailed analysis of last September’s NLRB decision, please see our September 2019 MV Transportation, Inc. alert. In the eight months since that decision, some courts have begun to apply elements of the new waiver standard.

The Contract Coverage Standard and its Limits

In eliminating the “clear and unmistakable” waiver standard, the NLRB adopted a new “contract coverage” standard. The contract coverage standard requires employers to demonstrate that any unilateral change to the terms and conditions of employment fell within the compass or scope of its contractual rights. Contract coverage allows employers to rely on broad management rights clauses to justify unilateral changes the employer seeks to implement. The NLRB and courts will look to the plain language of the contract to determine if the unilateral action fell within the coverage of the employers’ contractual rights.

Contract coverage has limits. In April 2020, the NLRB described one such limitation in its Nexstar Broadcasting decision. There, the NLRB declined to extend the contract coverage standard to unilateral changes made after the expiration of a collective bargaining agreement. The NLRB ruled that the contract coverage standard does not comport with an employer’s duty to maintain the status quo after expiration unless there is explicit language that the employers’ right to unilaterally alter a term or condition of employment survives the expiration of the agreement.

For employers, the contract coverage standard was a welcome relaxation of the standard for lawful unilateral action. The National Labor Relations Act (NLRA) prohibits employers from unilaterally changing a term or condition of employment without first giving the union notice and the opportunity to bargain about that change. Unions can waive this right in contract bargaining, but prior to MV Transportation, Inc., employers had to attempt to bargain a “clear and unmistakable” waiver for each specific term and condition of employment that the employer thought it might need to unilaterally alter during the life of the contract — a strict standard that employers seldom met. Under the clear and unmistakable waiver standard, the NLRB and courts would not rely on general language in the contract to determine whether the union waived the right to bargain over a particular subject. A recent decision by the Third Circuit indicates that courts are also relaxing the clear and unmistakable waiver standard.


The Third Circuit Relaxes Its Clear and Unmistakable Standard

In 1998, the Supreme Court decided Wright v. Universal Maritime Serv. Corp. There, the Court held that any waiver, negotiated by a union, of an employee’s statutory right to bring an employment discrimination claim in court must be clear and unmistakable. The Court never explained what constitutes a clear and unmistakable waiver, leaving the interpretation open to the various circuits. On May 6, 2020, the Third Circuit Court of Appeals addressed the clear and unmistakable waiver standard in Darrington v. Milton Hershey School. There, employees argued the employer failed to demonstrate that the union clearly and unmistakably waived members’ right to pursue federal discrimination claims in court. Although the District Court initially refused to compel arbitration, the Third Circuit Court of Appeals disagreed despite the breadth of the collective bargaining agreement’s arbitration provision.

The collective bargaining agreement’s arbitration provision contained a broad waiver prohibiting the union from initiating any employment discrimination lawsuit in any state or federal court where the alleged discrimination was based upon being a member of any protected class. The court noted that its clear and unmistakable waiver standard prevents employers from relying on general arbitration clauses to prevent litigation, but still held that this clause constituted a clear and unmistakable waiver. Although the arbitration provision was broad, the plain meaning of the word “any” explicitly indicated which rights the union waived. Despite acknowledging the law’s distaste for overly broad arbitration clauses, the court upheld the employer’s arbitration provision and its all-encompassing waiver.

The court recognized that not all circuits agree on this interpretation of the clear and unmistakable standard with regard to employment discrimination claims. For example, the First, Sixth and Seventh Circuits typically require an explicit enumeration of the rights waived with regard to federal antidiscrimination statutes. In contrast, the Second, Fourth, Fifth and Eighth Circuits take a more lax approach that permits a broad arbitration clause combined with a reference to federal antidiscrimination statutes somewhere else in the agreement. Whether a court will find waiver in a general arbitration clause will vary depending on where an employee files the lawsuit, but with Darrington, the Third Circuit joins the ranks of other circuits with a lower standard for finding waiver.

What Does This Mean for Unionized Employers?

In the short term, relaxing the waiver standard allows employers to retain more flexibility. Employers no longer need to bargain for management rights clauses with detailed specificity. For now, broad management rights clauses will permit employers to implement unilateral changes to the terms and conditions of employment so long as the change falls within the scope of the employer’s contractual rights. However, to guarantee maximum flexibility upon the expiration of the agreement, employers should seek to include explicit language that management rights clauses survive the agreement. Maintaining the status quo without the power to adopt new policies can be particularly challenging given the uncertainty in the modern business world.

By relaxing the waiver standard, the NLRB and courts are effectively raising the stakes in bargaining. Broad management rights clauses used to be largely aspirational, but now they mean what they say. When unions agree to broad management rights clauses, they will likely seek concessions in other areas or shorter agreements (shorter agreements effectively curb the employer’s ability to unilaterally alter terms and conditions of employment by requiring the employer to return to the bargaining table more often). If a union agrees to a long-term agreement with a broad management rights clause, it may seek to otherwise retain the right to reopen bargaining over certain terms and conditions of employment during the lifetime of the agreement. For employers, it is important to bargain with at least some degree of specificity if they want management rights clauses to survive contract expiration due to the Nexstar Broadcasting decision.

With two vacant seats and a presidential election in November, the NLRB’s composition may change significantly in the coming years. The uncertainty makes it difficult for employers to predict how long the contract coverage standard will remain effective. In the short term, however, employers should use the relaxed standard to their advantage. Now, more than ever, is the time to be especially thoughtful about proposals during the bargaining process.

If you have any questions about the contract coverage standard or the clear and unmistakable waiver standard, or about any other management-side labor law issues, please contact any attorney on the Faegre Drinker labor management relations team.

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