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NLRB Rejects Challenge to Joint Labor-Management Committee

August 15, 2001

Section 8(a)(2) of the National Labor Relations Act (the "NLRA" or the "Act") makes it unlawful for an employer to dominate or support any labor organization. This provision was originally intended to outlaw "company unions" that were common when the NLRA was enacted in the 1930s. In recent years, however, Section 8(a)(2) has been used as a basis for challenging the legality of labor-management committees established by non-union employers for purposes such as recommending changes to the employer’s operation or improvements to the work environment. Such committees are widely viewed as an effective method for improving productivity and enhancing the quality of the employer’s operation and the employees’ work life. Unions, however, view such committees with suspicion, contending that they can effectively become company unions that are used to prevent organizing of employees by outside, independent labor organizations. In a number of cases, the National Labor Relations Board (the "NLRB" or the "Board") has accepted these arguments and has ruled that employee-management committees violated Section 8(a)(2). In its most recent decision on this issue, however, the NLRB rejected a challenge to an employer’s system of labor-management committees and provided further guidance as to how an employer may establish such committees without running afoul of the NLRA. Crown Cork & Seal Co., Inc., 334 N.L.R.B. No. 92 (July 20, 2001).

The employer in Crown Cork delegated various aspects of the management of the plant to joint labor-management committees, called Socio-Tech committees. The Socio-Tech structure included seven committees, all comprised of employees and a few members of management, and each given its own parameters within which to operate. The four lower level committees, or Production Teams, had the authority to decide and act upon a variety of workplace issues, including production, quality control, and discipline. Each of the three upper level committees (the Organizational Review Board, Advancement Certification Board, and Safety Committee) was responsible for either monitoring plant policies, certifying employees for additional pay based on acquired skills, or safety. The decisions of these committees were subject to review by a management team, which in turn had its own decisions reviewed by the plant manager. The plant manager testified that he rarely, if ever, overruled a recommendation of an upper level committee and, in fact, that he often deferred to the judgment of a committee rather than the management team's recommendation.

The NLRB dismissed an unfair labor practice charge alleging that this system violated Section 8(a)(2). The Board began its analysis by observing that in order for Section 8(a)(2) to be violated, the entity that the employer dominates or controls must be a "labor organization" within the meaning of the NLRA. Section 2(5) of the Act defines "labor organization" as an entity that "exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work." The Board concluded that the Socio-Tech committees did not constitute a labor organization because the committees did not "deal with" the employer. Under prior Board cases, joint labor-management committees "deal with" employers when they engage in a bilateral mechanism of making proposals to management, which management considers and either accepts or rejects. At Crown Cork, however, the Socio-Tech committees actually exercised managerial functions: in essence, the employer had delegated managerial authority to a descending levels of committees rather than the more traditional descending levels of managers. According to the Board, "There is no dealing if the organization's purpose is limited to performing essentially a managerial function."

The General Counsel of the NLRB, prosecuting the case, argued that because the Socio-Tech committees did not have final authority, "dealing with" must occur when the committee recommendations were passed onto the management team. The Board rejected this argument, stating that even in a traditional management structure, few managers have final authority and that passing on a proposal to a higher level of authority was common plant procedure, which cannot properly be characterized as "dealing with" under the Act.

The Crown Cork decision teaches that joint labor-management committees that are imbued with the authority to make managerial decisions do not "deal with" employers and therefore do not constitute labor organizations as defined in the Act. Employers can safely create such committees without running afoul of Section 8(a)(2) provided that the committees exercise managerial authority rather than acting merely as a forum for presenting employee proposals for management consideration.