The National Labor Relations Act (Act) states that it is an unfair labor practice for an employer to refuse to bargain collectively with its employee representatives (i.e. a union).

Recently, the United States Court of Appeals for the 9th Circuit confirmed that when this happens, an employer may have to reimburse its union the legal fees it had to incur as a result of the breach of the Act.

In Ampersand Publishing, LLC, the NLRB had determined that the employer committed unfair labor practices by discontinuing its merit pay raise program, transferring bargaining unit work to non-union temporary employees without notice, discharging two employees and refusing to bargain in good faith with its union. The NLRB characterized all this as unusually aggravated misconduct that justified an exceptional remedy, and so it ordered that the employer reimburse the costs and expenses the union incurred during collective bargaining.

Following some further procedural steps, the matter ended up before the 9th Circuit, where the employer argued that case law precedent established that the NLRB lacks authority to make such a remedial order. However, the 9th Circuit noted that this line of precedent holds only that the NLRB does not have authority to order reimbursement of litigation costs. It further noted that, under D.C. Circuit jurisprudence, there is a distinction between an order of litigation costs, which is seen as a punitive measure, and ordering reimbursement of wasted bargaining expenses, which is seen as a compensatory measure that is well within the broad remedial powers of the NLRB in respect of unfair labor practices.

According to the 9th Circuit, the order to reimburse bargaining expenses sought to remedy the employer’s failure to bargain in good faith and to compensate the union in a way that would restore things to how they were at the bargaining table prior to the employer’s committing an unfair labor practice.

The 9th Circuit rejected the employer’s argument that the legal fees claimed should be denied because the parties were engaged in litigation at the same time that bargaining was going on. The Court noted that the amount the union spent on legal fees for bargaining and litigation could be separately calculated because the union’s law firm had tracked its time in different files, and had carefully excluded any expense that was unclear or questionable.

Take away

The obvious lesson of this case is that employers should not engage in bad faith collective bargaining with their union because, if they do, they may find themselves having to pay the union’s lawyers for bargaining costs thrown away.

This will not be so in all cases. As noted, legal fees related to bargaining were only ordered in this case because the NLRB was of the view that the employer had engaged in unusually aggravated misconduct that justified an exceptional remedy.

However, if facing a legal fees order, employers will want to closely look at what is claimed in the way of legal expenses, in order to exclude litigation costs and other costs that cannot be clearly justified as costs related to collective bargaining.

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