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The Bargaining Table

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When the National Labor Relations Board (NLRB or the Board) issues an administrative complaint accusing an employer of unlawful labor practices, it triggers in-house proceedings before the Board. These in-house proceedings can move at a glacial pace. And while they move sluggishly forward, employers or unions might take unlawful actions causing permanent harm that an eventual Board remedy cannot fix. For that reason, Congress gave the NLRB power – through Section 10(j) of the National Labor Relations Act – to petition a federal court for an injunction against unlawful labor practices for the duration of the proceedings.

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Section 10(j) injunctions are available when “just and proper.” The meaning of that deceptively simple phrase has split the federal appellate circuits. On Jan. 12, the Supreme Court agreed to hear a case – Starbucks v. McKinney – that could resolve the split. This decision could have significant ramifications for employers engaged in NLRB proceedings and large companies with unionized workforces.

The split: When is a preliminary injunction “just and proper”?

The federal appellate courts have adopted three tests to determine when a Section 10(j) injunction is just and proper:

The Four-Factor Test: Four circuits – the Fourth, Seventh, Eighth and Ninth – use the ordinary four-factor test, which treats preliminary injunctions as an extraordinary remedy. In those circuits, the court must weigh four factors: (1) the possibility of irreparable injury if relief is not granted, (2) the balance between the parties’ interests, (3) the likelihood of the NLRB’s success on the merits and (4) the public interest.

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The Relaxed Two-Factor Test: Five circuits – the Third, Fifth, Sixth, Tenth and Eleventh – apply a watered-down two-prong test. Under the first prong, the injunction-seeking party must show that its legal theory is substantial and not frivolous. Under the second prong, courts ask whether injunctive relief is needed to prevent harm that the NLRB would be unable to remedy at the end of agency proceedings.

The Hybrid Test: Two circuits – the First and Second – deploy a hybrid approach that is more forgiving than the four-factor test but stricter than the two-step approach. First, those circuits ask whether reasonable cause exists to believe that the employer committed an unlawful labor practice. Then, those circuits apply a more deferential version of the four-factor test applicable to injunctions generally.

The Supreme Court agrees to hear Starbucks v. McKinney

The Supreme Court granted certiorari in Starbucks v. McKinney presumably to resolve the split. In that case, Starbucks fired seven union-organizing baristas for violating company policy, leading to an NLRB administrative complaint accusing the coffeemaker of unfair labor practices. Once in-house proceedings began, the NLRB invoked Section 10(j) and asked a federal court to reinstate the fired workers pending the proceeding’s outcome. Applying the relaxed two-prong test, the District Court granted the preliminary injunction, and the Sixth Circuit affirmed.

The Sixth Circuit’s decision came with a catch. Though the decision was unanimous in result, Judge Chad Readler penned a concurrence in which he not-so-subtly called for an end to the relaxed two-prong test. Attacking the test as misguided, Judge Readler urged the en banc court to reverse its prior precedent and adopt the four-factor test governing ordinary injunctions. Nevertheless, Judge Readler “reluctantly concurred” in the result, recognizing the two-prong test was the circuit’s law.

Did Judge Readler’s concurrence pique someone’s interest at the Supreme Court? No one knows, but the issue he raised – whether Section 10(j) is governed by a relaxed two-prong test – now sits squarely before the Court.

Implications for employers

So, why should employers be interested in the Supreme Court's decision?

First, the decision could ease the settlement pressures imposed by Section 10(j) injunctions. Indeed, these injunctions allow the NLRB to intrude in an employer’s core operations and interfere with their business prior to a final determination of wrongdoing. For example, the NLRB has used Section 10(j) to force employers to reinstate employees fired for cause, change the terms and conditions of employment, update the employee handbook, and continue operations at facilities that are losing money. Section 10(j) injunctions last the length of the NLRB’s proceedings, typically two years, and once the injunction is in place, the Board has every incentive to drag its feet. These two factors – intrusiveness and duration – make Section 10(j) injunctions strong catalysts for forcing employer acquiescence to the Board’s settlement demands. Indeed, nearly 50 percent of Section 10(j) cases since 2010 have settled, and the Board itself has recognized the strong incentives these injunctions create, labeling them “one of the most important tools available” to it. If the Supreme Court adopts the four-factor test ordinarily applied to injunctions, it will relieve the settlement pressures employers face when the NLRB invokes Section 10(j).

Second, the decision could curb the NLRB’s increased Section 10(j) activity. There is no doubt that this activity is on the rise. In the first 15 years after its enactment, Section 10(j) was deployed, on average, only three times per year. Today, the Board puts Section 10(j) to work more than six times as often. And while Section 10(j) ostensibly permits injunctions against employers and unions, it has morphed into an employer-specific remedy, as the NLRB has not sought a Section 10(j) injunction against a union in more than a decade. Looking forward, the Board has vowed to “aggressively” seek Section 10(j) injunctions and promised to bring the “weight of a federal district court’s order” down on employers at the earliest stage of proceedings. If the Supreme Court adopts the more stringent four-factor approach, it should curb the NLRB’s increased use of Section 10(j).

Finally, the decision should protect large employers from the NLRB’s recent innovation – using Section 10(j) to seek “nationwide” injunctions in circuits that utilize the relaxed two-prong test. If the Supreme Court adopts the four-factor approach, it will protect employers from these broad injunctions.

A Brewing Issue: The Supreme Court Accepts a Coffeemaker’s Request To Revisit Section 10(J)