X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The National Labor Relations Act (NLRA) has a significant impact on benefit plans, even though it does not contain specific provisions regulating them. Lawyers drafting these plans typically take great pains to ensure that the plans neither offend Internal Revenue Service requirements nor inadvertently cover leased employees or independent contractors. However, the NLRA also imposes equally important requirements, albeit ones that hold some hidden pitfalls in their application. See Edward B. Miller, “Pensions, Profit-Sharing and the NLRB,” address before the Midwest Pension Conference, Chicago (March 15, 1972), in Labor Relations Yearbook (BNA: 1972) at 148. A lawyer drafting an employee benefit plan should be mindful of two basic principles of labor law: An employer may not discriminate against employees just because they decide to select a union as their bargaining representative, and benefit plans are bargainable subjects and thus may neither be taken away, instituted nor modified without first negotiating with a newly selected bargaining representative. Id. at 152. A plan must interfere with neither of these basic statutory requirements to be lawful under the NLRA. It must not discriminate by excluding employees from coverage solely because they are represented by a union, and it must not foreclose or inhibit true collective bargaining. Id. While these principles appear self-evident, and have been written about since at least the 1972 seminal analysis on this subject by Edward B. Miller, then the chairman of the National Labor Relations Board (NLRB), it appears that many employers still fail-perhaps unwittingly-to comply with them. Wal-Mart’s plan language was held to violate NLRA Most recently, in Wal-Mart Stores Inc., 2003 NLRB Lexis 86, 166-171 (Feb. 28, 2003), Wal-Mart, the largest private employer in the United States, had maintained the following provision in its associate benefits book: “If you are a leased employee, non-resident alien, independent contractor or consultant or are not treated as an employee of Wal-Mart Stores, Inc., and its participating subsidiaries, you are not eligible for coverage regardless of whether you are later determined by a court or any government agency to be, or to have been a common law employee of Wal-Mart Stores, Inc., or any participating subsidiary. Contractually excluded and certain other union represented associates are not eligible for coverage.” (Emphasis added.) Id. at 166. The general counsel of the NLRB contended that the italicized provision illegally denied benefits eligibility to union-represented employees. Wal-Mart contended that the quoted language was nothing more than an expression of the possibility that union-represented employees may be ineligible for the same benefits as unrepresented employees. Wal-Mart argued that the language merely put those employees contemplating union representation on notice that the Wal-Mart benefit might be contractually excluded. An administrative law judge of the NLRB agreed with the general counsel that the maintenance of the language in question, and its distribution nationwide to thousands of employees, had no legitimate purpose. The judge reasoned that an employer violates the NLRA by maintaining, promulgating or publicizing a benefit rule purporting to exclude members of a bargaining unit or those covered by a collective bargaining agreement. These restrictions are illegal because they are considered threats to discontinue the benefits or to refuse to bargain over their continuation if employees select union representation. This case is pending review at the NLRB. Although its language was found unlawful, Wal-Mart could have created language making it clear that union-represented employees’ benefits would be subject to good-faith negotiations or that the employer’s plan would not cover them because collective bargaining had provided them with other benefit programs. Such language would have been perfectly acceptable. For example, in Handleman Co., 283 NLRB 451, 452 (1987), the employer’s employee stock-ownership plan defined a covered employee as one who “is not covered by a collective bargaining agreement entered into by the Company unless such agreement, by specific reference to the Plan, provides for coverage under the Plan.” This exclusionary language, unlike that in the Wal-Mart case, indicates that coverage for the employees is subject to negotiations. This distinction is critical. Rather than automatically withdrawing or completely fore- closing coverage for represented employees, the plan in Handleman left continued coverage to collective bargaining, allowing the parties to decide on it. The NLRB has found that plans containing exclusionary provisions similar to those in Handleman are not unlawful. In KEZI Inc., 300 NLRB 594, 595 (1990), the NLRB found no violation when the plan excluded “employees who are members of a collective bargaining unit with whom retirement benefits were the subject of good faith bargaining.” The board found that this language indicated that the exclusion of unit employees was triggered only by the completion of good-faith bargaining, not by the mere commencement of bargaining. See also Sarah Neuman Nursing Home, 270 NLRB 663, 680 (1984). As the Wal-Mart case indicates, the board has not hesitated to find a violation when the benefit plan language excludes all union members from participation. As far back as 1959, the board found unlawful a pension trust plan that applied only to otherwise qualified “non-union office or salaried employees.” Jim O’Donnell Inc., 123 NLRB 1639, 1642 (1959). The exclusionary language was automatic and did not expressly contemplate good-faith bargaining over the benefits in the event that employees selected union representation. See also Niagara Wires Inc., 240 NLRB 1326 (1979). In The Rangaire Corp., 157 NLRB 682, 683 (1960), the NLRB found unlawful a statement by the employer’s chief negotiator incorrectly describing a pension plan as excluding employees represented by a union. Although the exclusionary language in the plan itself was not unlawful, the incorrect statement interfered with the bargaining process, and this violation was found “of particular significance” in concluding that the employees’ strike was from the outset an unfair labor practice strike. Indeed, the board has not permitted exclusionary language conveying the impression that the employees will lose the benefit immediately upon choosing union representation, even when the employer has also mentioned that the loss was subject to possible restoration. Thus, in Hertz Corp., 316 NLRB 672, 693 (1995), the board set aside an election lost by a union when a two-page summary of a 401(k) plan was distributed to employees in the voting unit just before a union-representation election specifying that the plan “applies to non-union weekly and bi-weekly salaried employees.” The employer’s statement to employees that things could stay the same, increase or decrease did not dispel the impression that the employees would lose the 401(k) plan immediately upon choosing union representation: The impression remained that unionization itself would trigger the loss of the plan, and that the loss would continue throughout negotiations unless and until it was restored. Finally, in B.F. Goodrich Co., 195 NLRB 914 (1972), the board found a violation when the employer’s stock purchase and savings plan specified: “Any person performing services for the employer shall be eligible to participate if, on the first day of such plan year, he . . . is not represented by a collective bargaining agent or, if so represented, is covered by an agreement between his employer and such agent which incorporates the plan.” Although not unlawful as to employees who were represented on the effective date of the plan, the plan was found unlawfully to restrict the eligibility of unrepresented employees who may thereafter become represented by a union. Some practical tips for employers While the typical NLRB remedy for benefit exclusions found unlawful is simply a cease-and-desist order and a notice posting, in Hertz, the impermissible language resulted in an election that a union lost being set aside, and in Rangaire, the unlawful language was found “of particular significance” in finding that a strike by the illegally excluded union-represented employees was an unfair labor practice strike from the outset. Given these potentially severe consequences for what is often merely an inadvertent drafting mistake, it becomes imperative for prudent employers to audit all of their benefit plan language to ensure compliance with the NLRA. An employer that desires to extend a new benefit plan only to its unrepresented employees must adopt carefully tailored language that does not automatically exclude union-represented employees from coverage. Similarly, the exclusion cannot discontinue coverage pending negotiations. Rather, such language may go no further than merely exclude employees who are covered by a collective bargaining agreement that does not, by its terms, provide for inclusion in the plan. Employers must also exercise caution in all benefits-related communications with hourly employees to avoid any communications that are inconsistent with the lawful exclusionary language contained in the plan, particularly during a union election campaign or collective bargaining negotiations. Kenneth R. Dolin is a partner and chairman of the labor and employment practice at Chicago’s Jenner & Block. David L. Streck is an associate in that department.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.