Tuesday, September 16, 2008

Jones Plastic Affirmed

Nlrb The Seventh Circuit has just enforced the NLRB's decision in Jones Plastic & Engineering Co.  In that case, a 3-2 Board found that striker replacements whose job applications said they were at-will employees could be considered permanent replacements who would block the reinstatement of workers who who seeking to return to work after an economic strike.  This decision overruled the Board previous rule in Target Rock, which stated that at-will disclaimers undermined an employer's attempt to show that the replacements were permanent.  As described by the BNA's Daily Labor Report (subscription required), the court agreed with the new Board rule:

A Tennessee company did not violate the National Labor Relations Act by failing to reinstate immediately economic strikers because it had hired permanent replacements, even though those "permanent" workers had signed job applications indicating that they could be fired at will, the U.S. Court of Appeals for the Seventh Circuit ruled Sept. 15. 

Denying a United Steelworkers challenge to a National Labor Relations Board decision, the court found that the board permissibly held that Jones Plastic and Engineering Co. had proven that the company and striker replacements had a "mutual understanding" that their employment was permanent. In a 3-2 decision, the board ruled that an at-will employment clause in the striker replacements' job applications did not make them "temporary" replacements who must give way to returning strikers. 

The union argued that although an at-will employment clause does not by itself defeat a finding of "permanency," it weakens the argument that Jones and the replacement workers had a mutual understanding their jobs were permanent. The Steelworkers warned that by allowing employers such as Jones to "keep all options open," NLRB's ruling could permit employers to manipulate the process to allow only favored strikers to return to work.

 The appeals court, however, found that under NLRB's approach, an employer could not fire some replacement workers in order to bring back strikers who had renounced the union, for example, and still assert that the replacement workers were "permanent." "Plainly, such conduct would constitute nearly incontrovertible evidence that the replacements--despite their label as 'permanent'--were not in fact permanent," Judge William J. Bauer wrote. "Thus, contrary to the dissenting Board members' view and the Union's argument, Jones Plastic has not kept all its options open." 

In a separate concurring opinion, Judge Diane P. Wood said the union "has in fact won the war even if it lost the battle" regarding Jones Plastic. She explained that although the court rejected the union's argument that in order to be considered "permanent," replacements must have contractual protections against discharge, it effectively agreed with the Steelworkers that employers cannot supplant replacements with returning strikers on an ad hoc basis and still call them "permanent" replacements. "[T]his case presents the question whether a company is entitled to exercise its discretion to fire an at-will employee solely because it wants to bring back strikers in the absence of a formal settlement or order from the Board," Wood wrote. "In my view, the [Seventh Circuit] majority has answered that question 'no.' " . . .

  The court's "important gloss" on NLRB's decision is "exactly what the union requested, as a matter of law," Wood wrote. "Before a replacement worker who was hired as an employee at will can be characterized as 'permanent,' and thus before an employer may refuse to release the worker when the economic strikers make an unconditional offer to return to work, the company must somehow make it clear that the employer's normal discretion to fire the at-will employee is constrained," Wood wrote. "It may not fire the at-will worker just to create a position for a returning striker, unless that action is required either by a strike settlement agreement or by an order of the Board."

 I'm OK generally with the court's statements that the classification of a replacement as "permanent" need not always require an enforceable contract under state law (if only because the states can have widely different approaches to accepting the validity of such agreements--Tennessee, in particular, is very resistant to finding that an employment agreement trumps the at-will default).  But I'm also not as sanguine as the concurrence about the basic holding of the case; I fear that it will give employers too much of a leash with which they can treat replacements as at-will employees, but still use them to block strikers' return.  Indeed, the fact that the other two judges didn't sign on to Judge Wood's analysis seems telling.  Only time will tell, I guess.

Hat Tip:  Dennis Walsh



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In most states employees are at will unless there is a contract or other authority to the contrary. Thus most strike replacements are at will as a matter of law. Does writing out their status change anything?

Posted by: Dennis Nolan | Sep 17, 2008 7:14:04 AM

I agree with Dennis. One can critique the doctrine that allows employers to permanently replace economic strikers. But given that this doctrine is the law, this seems like the correct result to me.

Posted by: Joseph Slater | Sep 18, 2008 6:49:13 AM

If you read the dissent carefully, you will see that it did not disagree with the basic notion that at-will employment is not inconsistent with permanent replacement. But in this case the Company, in the dissent's view, went further than just stating that these replacements were at-will employees. In the same document, they called them "permanent," and in the next sentence said they could be discharged for any reason (without specifying that this is because, by law, they are at-will employees). This at the very least, in the dissent's view, created an ambiguity and thus did not satisfy the requirement of a "mutual understanding" that they could not be discharged to make way for returning strikers.

Posted by: Dennis Walsh | Sep 18, 2008 10:37:15 AM

Adding to Dennis Walsh's comments, I don't think it's as clear as Joe and Dennis Nolan suggest. Part of the issue derives from problems with Mackay and its application. The theory behind allowing permanent replacements is, at least partially, that employers need "permanent" replacements to keep their business going during a strike. The at-will default obviously undermines that logic, but an employer expressly emphasizing replacements at-will status does so even more. That added emphasis is particularly significant given the studies by Pauline Kim and others that a large majority of employees erroneously think they have just cause protection. Given that, an employer's emphasizing to replacements that they are at-will should be relevant in defining whether they are permanent or not. Otherwise, the employer gets to have its cake and eat it too.

Posted by: Jeff Hirsch | Sep 18, 2008 10:38:17 AM

By "dissent," of course, I meant the dissent in the Board decision.

Posted by: Dennis Walsh | Sep 18, 2008 10:38:24 AM

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