Jan 18, 2006 Labor Relations

Discharge of Financial Consultant In Retaliation For Concerted Protest Of Compensation Practices Violates NLRA

The U.S. Court of Appeals for the District of Columbia Circuit recently upheld a decision of the National Labor Relations Board (“NLRB”) finding that a union-free investment advisory firm violated the National Labor Relations Act (“NLRA”) when it discharged a senior financial consultant after he protested the company’s changes in bonus practices that reduced his and other employees’ compensation. Citizens Investment Services Corp. v. NLRB, Docket No. 04-1317, 1334 (D.C. Cir., Dec. 16, 2005), enforcing 342 N.L.R.B. No. 26 (2004).

Most employers know that the NLRA protects the right of employees to join, form, or support labor unions. But even in the absence of a union that represents or seeks to represent workers, the NLRA protects employees when they engage in “concerted activity” for “mutual aid or protection.” Such protected conduct includes, for example, requests by or on behalf of a group of employees to preserve or improve wages, benefits, or other working conditions. Consequently, an employer commits an unfair labor practice if it retaliates against employees for engaging in such conduct.

In the Citizens Investment Services case, the NLRB found that the company violated the NLRA by discharging Christopher Hayward in retaliation for his leading role in expressing several senior consultants’ protest of the reduced commission schedule that the company implemented. Hayward both spoke up at a management-led meeting, complaining about the new commissions, and included similar objections in an e-mail to one of his superiors. Hayward’s employment was later terminated for what the company claimed were ethical breaches, and because he had disparaged and undermined the team operation that the employer was encouraging.

While the NLRA protects “concerted” activity by employees for “mutual aid,” it does not protect purely individualized protests by a single employee. Citing this principle, the employer asserted in its defense that Hayward had not been authorized by any co-workers to act on their behalf and that his conduct therefore fell outside the purview of the NLRA. The Court concluded, however, that the employer was fully aware that Hayward was not acting alone but was one of a group of disaffected employees, and the employer had expressed its dissatisfaction with Hayward’s complaints before he was discharged. The company also argued that Hayward, as a vice-president, was exempt from the protections of the NLRA because he was a managerial employee. The Court rejected this defense as well, finding that the assertion that Hayward was a managerial employee was not supported by evidence of any such status and authority. 

In affirming the findings of the NLRB, the Court took note of the fact that that Hayward had not been provided the progressive discipline used by the employer with other employees, and that the managers involved in the decision gave shifting and inconsistent explanations for Hayward’s discharge. Ultimately, based on the timing of the discharge (which occurred a few weeks after the meeting in which Hayward expressed his protest), the lack of contemporaneous disciplinary warnings for his purported ethical breaches, and the inconsistencies in the managers’ explanations for the discharge, the Court upheld the NLRB’s inference that the employer’s stated reasons were a pretext disguising the true reason for the discharge, which was Hayward’s concerted protest about commission changes. As a result, the Court affirmed the order of the NLRB directing that Hayward be reinstated with back pay.

The Citizens Investment Services decision serves as a reminder that even union-free employers must be mindful of the protections and prohibitions of the NLRA. In view of the breadth of the concept of protected concerted activity under the NLRA, an employer’s attempt to discipline or discharge an employee who has lodged protests over working conditions may be subject to challenge as an unfair labor practice. Accordingly, an employer considering the imposition of discipline in those circumstances must proceed with caution.