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NLRB Invalidates Employee Participation Programs: GOP Responds with Teamwork for Employees and Managers Act

January 1, 1996

Since the 1980s, over 80 percent of large U.S. companies have implemented some form of employee participation program designed to improve workplace policies and develop and effect operational changes advantageous to both management and workers. Such programs, variously referred to as managed work teams, quality–of–worklife groups, action committees, or labor–management committees, typically provide a forum in which employees may present proposals or ideas to management concerning workplace issues and obtain a management response. Many employers believe that this type of worker–employer cooperation is highly beneficial to all parties and essential to the ability of American companies to compete in a global economy. Any employer contemplating the institution of such a committee must be aware, however, that there can be serious implications under federal labor law. Specifically, under section 8(a)(2) of the National Labor Relations Act (the "NLRA"), 29 U.S.C. § 158(a)(2), it is an unfair labor practice for an employer to "dominate or interfere with the formation or administration of any labor organization." Although this provision is primarily intended to prohibit the establishment of "sham" or "sweetheart" unions, the National Labor Relations Board (the "NLRB"), in a series of cases, has found that employee participation committees may, depending on their organization and operation, fall within the statutory definition of "labor organization." Where that is the case, an employer may violate the NLRA by establishing or maintaining such a committee.

In its most recent decision in this area, for example, the NLRB found that the grievance committee set up by an auto parts manufacturer was a company–dominated labor organization in violation of section 8(a)(2). Keeler Brass Automotive Group, 317 N.L.R.B. 1110 (1995).

The committee at issue in Keeler Brass was comprised of self–nominated employee representatives elected to the committee for two–year terms. In analyzing the complaint under section 8(a)(2), the NLRB was first required to determine whether this committee was a "labor organization" as defined by the NLRA. Central to this determination is whether the committee's purpose is for employee representatives to "deal with" the employer concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work. The NLRB easily determined that the committee had been created for the purpose of "dealing with" the employer and was therefore a labor organization. This determination was based on the broad meaning imputed to that term by earlier NLRB and court cases, including the NLRB's controversial decision in Electromation, Inc., 309 N.L.R.B. 990 (1992), in which it first found that an employer's maintenance of an employee participation committee violated section 8(a)(2). "Dealing with" has been defined in those cases as a bilateral process that ordinarily entails a pattern or practice in which a group of employees makes proposals to management and management responds by acceptance or rejection. The committee in Keeler Brass was found to have dealt with the employer concerning the company's grievance procedure, the discharge and reinstatement of employees, and the future application of the company's attendance policy. Moreover, the committee, time and again, made decisions, such as reinstating a terminated employee, that it lacked the authority to implement without management approval. This approval process created a bilateral mechanism in which the company and the committee went back and forth explaining their positions until an acceptable result was achieved. Because the NLRB found the committee to have dealt on numerous occasions with the employer on matters of grievances or terms and conditions of employment, it was considered to be a labor organization for purposes of the statute.

Once it is determined that an employee participation committee is a labor organization, section 8(a)(2) is violated if the organization is dominated or controlled by the company. Under prior NLRB cases, a labor organization that is the creation of management, whose structure and function are essentially determined by management, and whose continued existence depends on the whim of management, is one whose formation and administration has been dominated under section 8(a)(2). In Keeler Brass, the company provided a meeting place for the committee on company grounds, paid employees' wages while the committee met, and provided clerical support. The company also determined the committee's membership eligibility rules, solicited employees to elect committee membership, posted sign up sheets, approved the candidates, conducted the election, counted the ballots, and announced committee membership. The committee charter was largely determined by the company as well. The company stipulated the number of committee members, the length of their terms, and when and where committee meetings would take place. Most importantly, the company maintained veto power on everything the committee did or decided. For all of these reasons, Keeler Brass was found to have dominated the grievance committee in violation of section 8(a)(2).

Since the practical result of this expansive interpretation of section 8(a)(2) is that it is exceedingly difficult for the typical employee participation committee to survive a challenge, the continued viability of these cooperative ventures remains in doubt. At the same time, it is clear that an employer's facilitation of mere communication, such as sharing information or management presence at a brainstorming session, does not violate the NLRA. There would also be no violation where a committee is governed by majority rule, management representatives are in the minority, and the committee has the power to make and implement decisions on its own, rather than simply make proposals to management.

Many employers view the legal restraints on employee participation committees as needlessly perpetuating a sharp division between labor and management, which impedes the kind of close cooperation that might be harnessed to improve productivity and quality. The Republican–controlled House of Representatives has responded to these concerns with the Teamwork for Employees and Managers ("TEAM") Act. The legislation passed in a 221–202 vote largely along party lines, and now awaits action by the Senate Committee on Labor and Human Resources. The TEAM Act would amend the NLRA to explicitly permit teams of employees in a non–union setting to interact with management, for limited purposes, regarding terms and conditions of their employment. The House bill would add the following language to the end of section 8(a)(2):

"Provided further, That it shall not constitute or be evidence of an unfair labor practice under this paragraph for an employer to establish, assist, maintain, or participate in any organization or entity of any kind, in which employees who participate to at least the same extent practicable as representatives of management participate, to address matters of mutual interest, including, but not limited to, issues of quality, productivity, efficiency, and safety and health, and which does not have, claim, or seek authority to be the exclusive bargaining representative of the employees or to negotiate or enter into collective bargaining agreements with the employer or to amend existing collective bargaining agreements between the employer and any labor organization, except that in a case in which a labor organization is the representative or such employees . . . this proviso shall not apply."

Organized labor is united in opposition to the TEAM Act, and has garnered the support of Democratic members of the Senate as well as of President Clinton, who has vowed to veto the legislation. Labor Secretary Robert Reich has stated that the Republican proposal would "pillage worker's rights" and is tantamount to "an all–out assault on working Americans." Opponents say they do not quarrel with the notion of greater cooperation between employers and employees, but charge that the TEAM Act would jeopardize the right of workers to organize independently and bargain collectively. They further claim the TEAM Act would permit management to essentially negotiate with itself while claiming that it is carrying on discussions with representatives of employees.

Behind all of these concerns lie fears that TEAM's passage would accelerate the decline of organized labor. Allowing closer management–labor cooperation to make changes in the workplace and address employee concerns outside the traditional sphere of collective bargaining could well make organized labor less relevant and appealing to employees.