Clear and Unmistakable Uncertainty: MV Transportation and the Battle Over the Contract Coverage Test

By Joseph J. Brennan

About Employment & Labor

This article was originally published in Best Lawyers: The Employment Law Issue on May 23, 2022. To view the full publication, click here.

When the National Labor Relations Board (“NLRB” or the “Board”) was founded in the Landmark Wagner Act of 1935, as amended (the “National Labor Relations Act” or “NLRA”) Congress envisioned the Board as “strictly nonpartisan.” Although well-intentioned, it has proved impossible.  Partisanship within the Board is not only standard, it’s expected.  The sitting President, as a matter of tradition and custom, appoints three of the five Board members from his own political party and the remaining two from the opposition party.  In addition, the President is authorized to appoint the NLRB General Counsel—the Board’s chief prosecutor.  As a result, the Board—from one administration to the next—has used their respective majority to mold national labor law in a manner to better serve their own constituents and left conflicting case law, overruled precedent and confused labor lawyers in their wake.

The last two administrations are particularly illustrative of this fact. During the Obama Administration, the Board saw fit to overturn many significant and longstanding NLRB doctrines which it then replaced with union-friendly precedent.  After the election of President Trump, the newly constituted Board sought to swing the hammer back the other direction under the auspices of returning to normalcy by dismantling the Obama Board’s pro-labor rewriting of the NLRA. And while it largely accomplished this goal, the Trump Board also did some rewriting of longstanding Board law of its own, including the undoing of one of the longest lasting doctrines of the NLRB, the “clear and unmistakable waiver” (in short, “waiver”) standard.

Per Sections 8(a)(5) and (d) of the NLRA, unionized employers are obligated to bargain with their employees’ union “with respect to wages, hours and other terms and conditions of employment,” commonly referred to as “mandatory” subjects of bargaining, prior to implementing any change.  This duty to bargain continues during the term of a collective-bargaining agreement with respect to mandatory subjects of bargaining even if they are not covered by the agreement. As any labor law professional can attest, it is impossible to negotiate and agree to every term and condition of employment applicable in the workplace into a single union agreement. As a result, issues touching upon mandatory subjects often arise that require a management response without the benefit of express direction from a collective bargaining agreement. Under these circumstances, employers, through the exercise of their inherent management prerogative, form new policies or work rules to address an issue not covered by the union contract. But workplace rules are, in and of themselves, mandatory subjects of bargaining. This conundrum raises an important question: When, if at all, may an employer make a unilateral change to a mandatory subject of bargaining that is not addressed in the collective bargaining agreement without first providing the union notice and an opportunity to bargain in while complying with its obligation under Sections 8(a)(5) and 8(d) of the NLRA? 

Since 1949, the Board has answered this question through application of its waiver standard. If satisfied, the waiver serves as a defense to a Section 8(a)(5) unfair labor practice claim of unlawful unilateral change to a mandatory subject of bargaining. The waiver standard “is predicated on the union’s waiver of its right to insist on bargaining,” and it “requires bargaining partners to unequivocally and specifically express their mutual intention to permit unilateral employer action with respect to a particular employment term, notwithstanding the statutory duty to bargain that would otherwise apply.” But this exacting standard necessarily creates the same issue that has given rise to the underlying problem—the union and employer must have anticipated the need for unilateral action in a specific circumstance and expressly memorialized that understanding in the collective bargaining agreement.

Since its adoption, employers have sought language within their union agreements to satisfy the waiver standard burden. Most often, these attempts have manifested into broad management rights clauses and/or waiver (akazipper) clauses aimed at reserving management’s right to act unilaterally concerning matters not covered by the collective bargaining agreement. These efforts have been largely unsuccessful as the clear and unmistakable waiver standard has proven too high a hurdle in many (if not most) instances.

For this reason, the Board’s waiver standard has not been universally accepted. Indeed, the D.C. Circuit Court of Appeals—the appellate court with plenary appellate jurisdiction over all NLRB decisions—has flat out rejected the waiver standard, even going so far as saying the waiver standard “is impossible to meet.” The NLRB and D.C. Circuit, for more than 25 years, have battled over the issue, with the Board continuing to apply its waiver standard in defiance of the D.C. Circuit’s remands and admonishments to apply a different standard. Exasperated with the Board’s blatant disregard of D.C. Circuit precedent for more than two decades, the D.C. Circuit, in 2016, went so far as to sanction the Board by requiring it to pay an employer’s legal fees for, once again, arguing to the D.C. Circuit that the waiver standard should be applied.

Against this backdrop, in 2019, the Trump Board decided the case of MV Transportation—a prototypical unilateral change case. The employer in MV Transportation operated a transit system, and its union agreement permitted it “the right to issue, amend and revise policies, rules and regulations,” including disciplinary policies. The employer, while the union contract was in effect, unilaterally implemented a revised “light duty” policy and revised its disciplinary policy on “safety violations.” The union filed a Section 8(a)(5) unfair labor practice arguing that the management rights clause was not sufficiently specific to constitute a “clear and unmistakable waiver” of the employer’s obligation to bargain before implementing new rules and penalties. Under this set of facts, the Board formally abandoned the waiver standard, replacing it with the “contract coverage” test endorsed by the D.C. Circuit:

“[T]he Board will assess the merits of this defense by undertaking the more limited review necessary to determine whether the parties’ collective-bargaining agreement covers the disputed unilateral change (or covered it, if the disputed change was made during the term of an agreement that has since expired). In so doing, the Board will give effect to the plain meaning of the relevant contractual language, applying ordinary principles of contract interpretation; and the Board will find that the agreement covers the challenged unilateral act if the act falls within the compass or scope of contract language that grants the employer the right to act unilaterally.”

In applying its new test, the Board concluded that the employer’s new policies fell within the scope of the management rights clause as the contract coverage test did “not require that the agreement specifically mention, refer to or address the employer decision at issue” and the employer did not violate its duty to bargain under Sections 8(a)(5) or 8(d) of the NLRA in unilaterally implementing the policy changes.

MV Transportation, therefore, effectively breathed new life into the efficacy of generally worded management rights and zipper clauses, bolstered unionized employers’ autonomy in managing their union workforces and dwindled the authority of a union to insist upon the status quo over mandatory subjects. Management celebrated the ruling while the union reaction was swift and condemning. And while the labor professionals on either side debated the issue, the Board’s contract coverage test received a shot in the arm after it was affirmed and adopted by the Second Circuit Court of Appeals.

But this is far from the end of the story. A mere 308 days after the publication of MV Transportation, on November 7, 2020, Joe Biden was declared the presumed winner of the U.S. presidential election and, on January 20, 2021, he swore his oath of office. Per the traditions of the Board, President Biden swiftly nominated a new NLRB General Counsel and two new Board members, all three of whom were confirmed by the U.S. Senate on July 21 and July 28, 2021, respectively. On that date, the Board, for the first time in four years, again had a Democrat majority and its lead lawyer also hailed from the president’s political party. In what has become tradition, the Board’s new General Counsel, Jennifer Abruzzo, issued GC Memo 21-04 where she identified numerous legal issues the Board intended on revisiting, and specifically mentioned the MV Transportation decision as a Trump era “doctrinal shift” that requires “careful[] examination.”

As of the date of publication, MV Transportation and its contract coverage test remain the applicable standard. Nonetheless, given the partisan nature of the Board and the agenda of its current General Counsel, the legal limits of a unionized employer’s right to act unilaterally remains a highly divisive and a pragmatically amorphous concept. Indeed, management cannot rest on the laurels of the MV Transportation decision and assume the contract coverage test will shield them from potential liability for alleged Section 8(a)(5) unfair labor practices arising from management’s unilateral action. Prudent management labor lawyers must continue to insist upon specific language within the collective bargaining agreement to leverage against a possible return to the waiver standard. And, conversely, the uncertainty behooves union labor counsel to resist (and even seek to remove) any and all language from an agreement that could be seen to pass muster under the contract coverage standard, including generic or ambiguously worded management rights or zipper clauses.

The right of a union employer to take unilateral action on a mandatory subject absent specific language in its union agreement now joins the ranks of many other labor law doctrines subject to the whim of partisan politics within the Board.  The practical effect, therefore, is the appropriateness of a unionized employer’s actions necessarily depends on the current political composition of the Board.  As for the question of whether the waiver or contract coverage test will ultimately prevail, absent statutory amendment or Supreme Court opinion, the question remains uncertain.