Partial Lockouts

The National Labor Relations Board recently issued a pair of decisions that clarified the legal status of partial lockouts. Specifically, the board held in Midwest Generation, 343 NLRB No. 12 (Sept. 30, 2004) and Bunting Bearings Corp., 343 NLRB No. 64 (Oct. 29, 2004) that partial lockouts in support of a legitimate bargaining position are lawful, absent specific proof of an anti-union motive. While the National Labor Relations Act (NLRA) does not expressly define the term, a “lockout” has been defined as the withholding of employment by an employer from its employees for the purpose of either resisting their demands or gaining a concession from them. See 2 Hardin & Higgins, The Developing Labor Law 1513 (4th Ed. 2001). While lockouts having an unlawful purpose are unlawful, a lockout is justifiable when it protects property or product (a “defensive” lockout), or it is intended to bring economic pressure to bear in support of the employer’s bargaining position (an “offensive” lockout). See American Ship Building v. NLRB, 380 U.S. 300 (1965). Use of temporary replacements during an otherwise lawful lockout is not unlawful absent specific proof of anti-union motivation, even if the lockout is “offensive.” See Harter Equipment, 280 NLRB 597, aff’d sub. nom Operating Engineers Local 825 v. NLRB, 829 F.2d 458 (3d Cir. 1987). An employer may lock out its employees to pressure the union to agree, as well as in response to a union’s “inside game” tactics-which are used by (nonstriking) bargaining unit employees to pressure the employer to agree to their union’s demands. These tactics include working to rule-e.g., working to the exact job description, working at the minimally acceptable rate of speed-and refusing voluntary overtime. Electrical Workers (IBEW) Local 702 v. NLRB, 215 F.3d 11 (D.C. Cir. 2000). Tactics can be factors in assessing lockout legality Unfair labor practices committed by an employer at the same time as a lockout do not necessarily invalidate the lockout, but will often be regarded as evidence of animus and thus of the illegality of the lockout itself. See 2 Hardin & Higgins, supra, at 1532. The locking out of fewer than all bargaining-unit employees, i.e., a partial lockout, had been treated by the board as an unlawful unilateral change in working conditions (see Laclede Gas Co., 173 NLRB 243 (1968), remanded 421 F.2d 610 (8th Cir. 1970)), and found justified only by business exigencies. See Bali Blinds Midwest, 292 NLRB 243 (1988); Laclede Gas Co., 187 NLRB 243 (1970). Commentators had recognized that “[t]he issue posed by [partial lockouts] represents a potentially important developing area of inquiry.” Hardin & Higgins, supra, at 1541. The board in Midwest Generation held that an employer did not violate the NLRA by locking out economic strikers who had remained on strike until it was over, while permitting nonstrikers and crossover employees who had returned to work during the strike to keep working. The board held that the employer’s statement to the union that full-term strikers would be permitted to return to work when “a new contract is agreed to and ratified by your membership” established that the partial lockout was in support of a legitimate bargaining position; that a partial lockout for the purpose of bringing economic pressure to bear in support of the employer’s bargaining position was a proper business justification, thus requiring proof of an anti-union motive for the lockout to be illegal; and that no anti-union motive existed because the employer bargained in good faith and did not otherwise violate the NLRA, it complied with the union’s information request and it accepted crossovers back to work without regard to union membership. Chairman Robert J. Battista and Member Peter C. Schaumber found that it was a legitimate business justification for the employer to exert additional economic pressure on those employees who continued to strike until the end of the union’s strike (as opposed to those employees who eschewed the strike weapon during the strike). Responding to Member Dennis P. Walsh’s dissent that the partial lockout discriminated based on the extent to which employees exercised their right to strike, Battista and Schaumber found that such “discrimination” was lawful because there was legitimate and substantial justification. Thereafter, in Bunting Bearings Corp., the board (Battista and Schaumber, Member Wilma B. Liebman dissenting in relevant part) held that an employer did not act unlawfully when, following an impasse in bargaining for a new contract, it locked out its nonprobationary employees and continued to operate using its probationary employees. The board reasoned that the nonprobationary employees, who were all union members, were accorded certain contractual rights and thus had different economic interests than the nonunion probationary employees; therefore the employer could lawfully lock out only the nonprobationary employees, who had a “more vital interest” in the contract proposals than the probationary employees. Also, the probationary employees, unlike the nonprobationary employees, were disenfranchised from voting on the employer’s proposals. Dissenting, Liebman asserted that the employer chose to implement the lockout in a discriminatory manner, locking out union members and retaining nonunion employees. She claimed that the rationale proffered by the employer for its actions-continuing its operation-was false, since the employer had retained the employees with the least experience. These two cases have removed the somewhat uncertain legal status surrounding the management weapon of the partial lockout. Indeed, it appears likely that the board would also permit an employer in support of a legitimate bargaining position to target other specific groups of employees in a partial lockout, provided that it was not motivated by union animus and did not target the groups based on union membership. Such an employer, however, must neither ban the hiring of union members during the lockout nor consider employees for employment only if they resign from the union. Furthermore, a partial lockout not in support of a legitimate bargaining position remains unlawful. See Allen Storage, 342 NLRB No. 44 (July 16, 2004). These recent board decisions should result in the more prevalent use of lockouts, an economic weapon that carries with it potential benefits and costs. As to its potential benefits, a lockout is an aggressive weapon for an employer to show its resolve, as well as to bring economic pressure to bear on the union and bargaining-unit employees. A lawful lockout can prevent the targeted bargaining unit employees from working until the dispute is resolved, which is especially beneficial when these employees have engaged in “inside gamesmanship.” Relatedly, a lockout prevents the union from selecting the timing of a work stoppage, yet permits operations to be continued in even the very short term, as an employer is permitted to hire temporary replacements immediately during a lawful lockout. The two recent board cases will now better permit employers to “tailor” its lockout to the situation. Significant risks for using the lockout remain, however. The most significant risk is of the lockout being found unlawful because of the “taint” of unfair labor practices; such a tainted lockout results in the make-whole remedy of lost back pay and benefits, plus interest, for each unlawfully locked-out bargaining unit employee for each day unlawfully locked out, minus interim earnings. This remedy could be extremely large. For example, a lockout of 400 bargaining-unit employees making an average wage of $20 per hour creates a risk exposure of $40,000 per employee (plus benefits and interest) for each year of the lockout, or about $16 million (plus benefits and interest) annually. Furthermore, an illegal lockout will delay the existence of a bona fide impasse and thus delay an employer’s lawful unilateral implementation of terms reasonably comprehended within its proposals. Lockouts may result in bad publicity for the employer There are other potential shortcomings to using a lockout, even one found lawful. Lockouts often result in bad publicity for the employer because they are often portrayed as “union busting,” especially when the employer is profitable and the lockout is preceded by neither employee sabotage nor a strike. Relatedly, lockouts may very well result in the union responding by conducting a “corporate campaign” against the employer. Also, locked-out employees are eligible to receive unemployment insurance benefits in many industrial states. Finally, employers cannot hire permanent replacements during a lockout. In weighing the benefits and risks of a lockout, an employer considering this weapon should create a comprehensive lockout plan, which should include a comprehensive legal audit to ensure that neither bad-faith bargaining nor proof of an anti-union motive for the lockout exists. As to its bargaining proposals and conduct at the bargaining table, the employer considering whether to deploy a lockout should ensure that timely notice has been given, that its proposals and conduct do not indicate an intent to frustrate bargaining, that it did not unlawfully make any unilateral changes, that it lawfully complied with all union information requests and that it did not deal or bargain directly with any bargaining-unit employee. As to anti-union motive, the employer considering whether to deploy a lockout should ensure that it neither made any unlawful statements nor unlawfully discriminated against any bargaining-unit employee or applicants on the basis of union activity. Following Midwest Generation and Bunting Bearings, partial lockouts, especially those following strikes where crossovers and nonstrikers are permitted to continue working, will become a more viable option for many employers. Kenneth R. Dolin is a partner in the labor and employment practice group of Chicago’s Seyfarth Shaw. He can be reached at [email protected].