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The National Labor Relations Board recently clarified the reinstatement rights of striking employees when it announced that at-will employment status does not detract from an employer’s otherwise valid showing that it has permanently replaced strikers. Jones Plastics & Engineering Co., 351 NLRB No. 11 (Sept. 27, 2007). The board found that replacements hired on an at-will basis may nonetheless be found to be permanent replacements for strikers and overruled Target Rock Corp., 324 NLRB 373 (1997), enf’d, 172 F.3d 921 (D.C. Cir. 1998), to the extent it was inconsistent with this principle. It is unlawful for an employer to refuse to reinstate economic strikers who unconditionally offer to return to work unless it has shown that its refusal was due to a legitimate and substantial business justification. Permanent replacement of economic strikers is a substantial and legitimate business justification for refusing to discharge replacements hired permanently to fill the places of economic strikers. Thus, at the conclusion of an economic strike, an employer is not bound to discharge those hired to fill the places of strikers if it has made assurances to those replacements that they would not be displaced by returning strikers when the strike is over, i.e., that their employment would be “permanent.” Permanent replacement status, however, is an affirmative defense, and the employer has the burden of proving that the replacements it had hired were permanent. Significant in meeting this burden is a showing that there was a mutual understanding between the employer and the replacements that the nature of the latter’s employment was permanent. Hansen Bros. Enterprises, 279 NLRB 741 (1986), enf’d mem. 812 F.2d 1443 (D.C. Cir. 1987), cert. denied, 484 U.S. 845 (1987). The high court’s precedent in ‘Belknap v. Hale’ In Belknap v. Hale, 463 U.S. 491 (1983), the U.S. Supreme Court held that the National Labor Relations Act did not pre-empt a state court breach-of-contract suit by replacements who were laid off in favor of returning strikers in alleged violation of a promise of “permanent” employment. The court stressed that its holding was not in derogation of federal labor policy favoring settlement of labor disputes, and it stated that promises of permanent employment are as a matter of law “defeasible” if strikers are ordered reinstated by the board because a strike “turns out to be an unfair labor practice strike” or if the “employer chooses to settle with the union and reinstate the strikers.” The court further stated that specification of these conditions in an employment contract with a replacement would not in itself render the replacement temporary and subject to displacement by a striker. Id. at 503. Many employers hire employees on an “at-will” basis, meaning they can be discharged at any time with or without cause. In Target Rock Corp., 324 NLRB 373 (1997), the board concluded that an employer unlawfully refused to reinstate economic strikers following their unconditional offer to return to work because the replacements hired were not permanent. A board majority relied in part on the employer’s application form that contained the following statement: “I understand that the employer follows an employment at-will policy in that I or the employer may terminate my employment at any time, or for any reason, consistent with applicable state or federal law.” The Target Rock majority noted that statements advising replacement employees of their at-will status “obviously [did] not support the [employer's] position that the striker replacements were permanent.” 324 NLRB at 374. While acknowledging that the inclusion of certain conditions in an offer of employment to a replacement would not necessarily foreclose finding that the offer was permanent, the majority nevertheless concluded that conditional offers of at-will employment were not offers of permanent employment. Id. at 374 n.9. ‘Target Rock’ listed factors for nonpermanent status The board in Target Rock also relied on other evidence in finding that the replacement workers were not permanent, including the language of the advertisement for replacements, which stated in part that “[a]ll positions would lead to permanent full-time positions after the strike”; the fact that the employment and screening forms given to each replacement contained no reference to permanent employment; and the fact that on several occasions during the strike, the employer’s representatives stated that the replacements were “temporary” and would be discharged if the strikers made an unconditional offer to return to work. In Target Rock, former Member John E. Higgins Jr. agreed with the majority’s conclusion that the replacements were not permanent, though he disagreed with the majority’s reliance on the at-will disclaimer as a basis for that conclusion. Instead, Higgins interpreted the term “permanent replacement” to connote the mutually understood intention that an employer would retain replacements after the strikers offered to return. In Higgins’ view, this intention is not the same as a binding, unconditional promise of employment. Thus, the employer could state its intention and nonetheless state that no promise of employment is made, i.e., that employment is at will. According to Higgins, the at-will disclaimer is a legitimate protection against individual employee lawsuits grounded in state law, and is not inconsistent with an intention to retain replacements even after strikers seek to return to work. In Jones Plastics, a board majority (Chairman Robert J. Batista and members Peter C. Schaumber and Peter N. Kirsanow) concluded that at-will employment status did not detract from permanent replacement status. Applying this principle, the board found that the employer’s issuance of at-will disclaimers informing replacements that their employment was for “no definite period,” and could be terminated for “any reason” and “at any time” “with or without cause,” did not detract from its showing of permanent status. ‘Jones Plastics’ listed factors showing permanent status The board found the following evidence supported a finding of permanent replacement status: The forms signed by each replacement employee stating they were “permanent replacements” for strikers and in many cases naming the striker whom the replacement was hired to permanently replace; the employer’s letter sent to striking employees telling them that it was hiring permanent replacements and that they risked permanent replacement if they did not return to work; the employer’s human resources manager telling one replacement that he was a “permanent” employee; and the absence of any evidence in job advertisements, applications and interviews contradicting the status of the replacement as permanent. Therefore, the board concluded that the employer established a mutual understanding with its replacements that they would not be replaced by returning strikers at the end of the strike. Dissent stressed lack of commitment to replacements Members Wilma B. Liebman and Dennis P. Walsh dissented. In their view, board precedent established that at-will employment was not incompatible with permanent-replacement status and nothing in Target Rock required the overruling of that case. What was required to show permanent status, in their view, was “the assurance to the replacements of some right vis-�-vis the strikers.” The dissent noted that the employer had advised the replacements that their employment may be terminated as a result of a strike settlement agreement or by order of the National Labor Relations Board. According to the dissent, these statements, taken together with the statement that the replacements could be discharged at any time for any reason, and absent any other evidence of mutual understanding of permanence, “did not reflect any commitment to the replacements,” and certainly did not reflect a commitment that the employer would refuse, even in the absence of a striker settlement, to reinstate strikers if it meant terminating replacements. According to the dissent, the employer’s use of the term “permanent replacement” was undercut by failing to provide the replacements any assurance that they had rights vis-�-vis the strikers. Under the dissent’s approach, it appears that permanent replacement status can only be reconciled with the at-will doctrine when an employer expressly limits its at-will right to terminate a replacement, by committing that it would refuse, in the absence of a strike settlement, to terminate replacements in order to reinstate strikers. Jones Plastics clarified that the use of the term “at-will” does not preclude a finding of permanent-replacement status. Consistent with the view of the law set forth by Higgins in his Target Rock concurrence, the term “at-will” merely serves as a reminder to the replacement employees of the employer’s existing right under state law to terminate any employee with or without cause. “Permanent replacement,” on the other hand, connotes an intention to retain the replacements after strikers unconditionally offer to return to work, and when the employer has otherwise established a mutual understanding with its replacements that they are “permanent,” at-will disclaimers will not detract from this showing. Kenneth R. Dolin is a partner in the labor and employment practice group of Chicago’s Seyfarth Shaw. He is a fellow in The College of Labor & Employment Lawyers and an associate editor of The Developing Labor Law (BNA, 5th ed. 2006).

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