• When is a Settlement Agreement Too Favorable to Gain NLRB Approval?
  • March 7, 2013
  • Law Firm: Jackson Lewis P.C. - White Plains Office
  • Employers who wish to attempt negotiating a favorable settlement agreement of an unfair labor practice charge have been offered a sobering lesson by the National Labor Relations Board. In Michels Corporation, 30-CA-081206 (Dec. 19, 2012) (unpublished), the NLRB decided that the settlement agreement reached between the employer-charged party and the union-charging party was unacceptable because it did not meet the agency’s guidelines.

    An unfair labor practice charge can be settled by one of three agreements: a “formal” agreement, an “informal” agreement, and a “non-Board” agreement. Michels Corporation involved a non-Board settlement agreement. A non-Board settlement agreement is one in which the charged party and charging party agree on terms between themselves. Subject to certain Board requirements, this form of agreement allows an employer, usually the charged party, to negotiate more favorable terms than it would have obtained in an NLRB-prescribed formal or informal settlement agreement, in which agency officials are involved.

    In Michels Corporation, an unfair labor practice charge had been filed by a union on behalf of a former employee. After an investigation, the Regional office decided the charge had merit and issued an unfair labor practice complaint. The complaint alleged the employer had made repeated threats to an employee of more onerous working conditions or discharge if he tried to enforce a particular provision of the collective bargaining agreement between the employer and the union. The complaint also alleged the employer eventually imposed more onerous working conditions by changing the employee’s hours of work and ultimately laying off the employee. At trial before an NLRB Administrative Law Judge (ALJ), the parties reached a non-Board settlement. Although the ALJ approved the agreement, the NLRB’s Acting General Counsel disagreed, and appealed the ALJ’s approval to the NLRB.

    Under the agreement, the employer would pay $7,500 to the former employee and provide him with a neutral employment reference. In return, the employee agreed not to seek reinstatement or apply for future employment with the employer. The agreement also contained a broad confidentiality provision:

    The Parties agree to keep the terms of this Agreement strictly confidential and will not communicate or disclose to any other person, natural or otherwise, except as required by law, the contents of any term or provision contained herein or any other aspect of this agreement between the parties....

    The settlement agreement did not contain a notice-posting provision and did not provide for reinstatement of the employee.

    The NLRB revoked the ALJ’s approval of the non-Board settlement agreement. It did so on the grounds that the agreement did not meet the standards in Independent Stave Co., 287 NLRB 740 (1987). In that case, the NLRB said it would decide whether a non-Board settlement is acceptable using these criteria:

    (1) Whether the charging party(ies), the Respondent(s) and any of the individual discriminatees have agreed to be bound, and the position taken by the General Counsel regarding the settlement; (2) whether the settlement is reasonable in light of the nature of the violations alleged, the risks inherent in litigation, and the stage of litigation; (3) whether there has been any fraud, coercion or duress by any of the parties in reaching the settlement; and (4) whether the respondent has engaged in a history of violations of the [National Labor Relations] Act or has breached previous settlement agreements resolving unfair labor practice disputes.

    The NLRB found that factors (1), (3), and (4) weighed in favor of approval of the settlement agreement in Michels Corporation. However, the agreement did not comply with factor (2), it said, because it left the complaint allegations largely unremedied. The NLRB, therefore, revoked the ALJ’s approval.

    The NLRB focused on the lack of notice-posting and reinstatement provisions and the inclusion of the broad confidentiality provision. It suggested the agreement would have been acceptable if at least one of the following had been included: (1) a notice to unit employees assuring them they could exercise their statutory rights without fear of reprisal; (2) reinstatement of the former employee; or (3) a more limited confidentiality clause permitting the employee and the union to tell other employees that the matter had been successfully resolved (without regard to the specific monetary terms). According to the NLRB, the agreement’s failure to include any of these resulted in the unit employees not knowing whether they would be subjected to threats of adverse consequences and retaliatory actions if they were in the same position as the alleged discriminatee.

    Non-Board settlements are preferred for settling unfair labor practice charges, especially those involving alleged unlawful layoffs, terminations and the like. Michels Corporation should not deter employers faced with unfair labor practice charges from seeking such agreements and negotiating the best possible provisions. However, they should keep in mind that it may be better to “give a little” than to risk rejection of the agreement by the NLRB.