Reversing the National Labor Relations Board’s decision in Stern Produce Company v. NLRB, the U.S. Court of Appeals for the D.C. Circuit rejected the Board’s reasoning that a company had engaged in unlawful surveillance simply by directing a driver to uncover his onboard camera.  The court also said the Board failed to show that a written warning for insulting a coworker was motivated by the disciplined employee’s union activities.  Citing Allentown Mack, 522 U.S. 359, 366-67 (1998), it found the Board lacked the required “substantial evidence” to support its decision.  Whether the Board has met this threshold, the court said, depends upon “whether on this record it would have been possible for a reasonable jury to reach the Board’s conclusion.”  In this case, the court concluded, no reasonable jury could have done so.  

Background

Stern Produce had been the target of union organizing by the United Food and Commercial Workers Union since about 2015. In 2019, the Board ordered the company to cease violating the National Labor Relations Act (NLRA) based upon a finding that the company had committed several unfair labor practices. The present case arose out of two disciplinary actions taken by the company two years later, during the summer of 2021:

• In July, a supervisor sent a text message to an employee who was observed covering his in-truck camera in violation of company policy.  Like all company trucks, this one was equipped with tracking systems and two cameras.
• In August, another employee was investigated for allegedly making comments that violated the company’s anti-harassment and discrimination policies. Based upon its investigation, the company issued a written warning, arguably skipping a step in its disciplinary process.

The union filed an unfair labor practice charge alleging that, by issuing this discipline, the company had interfered with, restrained, or coerced employees in the exercise of rights guaranteed by the NLRA. The Board’s general counsel issued a complaint asserting that the company had created an impression of surveillance by texting about the camera rule and that imposing a written warning for a first violation of its anti-harassment policy was motivated by anti-union animus.

After a hearing, Administrative Law Judge Dickie Montemayor issued a decision siding with the company. The Board reversed that decision in Stern Produce Co., 372 NLRB No. 74 (2023), finding that because a supervisor’s texting employees was “out of the ordinary” it amounted to illegal surveillance that could suppress union organizing activity. The Board cited a history of union support by the employee and criticized the supervisor’s failure to explain specifically why he had checked the camera footage. The Board asserted that simply viewing the recording of an employee who broke a company rule and issuing discipline based upon it violated the NLRA even if the employee was not engaged in union advocacy or other protected activity.

The Board also found illegal anti-union motivation in the company’s issuing a written warning (rather than a first-level verbal counseling), to the employee who made a discriminatory comment.  Here, the Board relied in part upon the short time period between the company’s reinstating the employee under a settlement agreement with the union and its imposing the discipline.  The Board rejected the company’s claim that the company had issued similar discipline to other employees without a history of union support for the same or similar conduct. 

D.C. Circuit

On cross-petitions for review and enforcement of the Board’s decision, the D.C. Circuit rejected the NLRB’s analysis and supported the ALJ decision favoring the company. The court held unequivocally that the Board’s decision was not supported by substantial evidence and therefore had to be overturned.   

Using unusually strong language, the court labeled the Board’s assertion that a supervisor’s single text message reminding an employee of the rule requiring that cameras be left uncovered could lead a reasonable driver to think he was being surveilled for union activities as “nonsense.” 

The court also criticized the Board’s having “altogether ignored the critical coercion element” that the plain text of Section 8(a)(1) requires to establish a violation, noting that the Board cited no evidence of coercion in its decision.  While the employee was a known union organizer, the court said, that “cannot automatically render suspect any interaction between him and management in perpetuity.”  The court characterized the Board’s decision as “speculation” not based on “reasonable inferences” that could be drawn based on evidence in the case record.  “At bottom,” it wrote, “the Board's errors reveal just how far it strayed from its statutory mandate.”

The court also rejected the Board’s finding that discipline issued for discriminatory comments violated the NLRA.  Applying the Wright Line framework for proof in mixed motive cases, the court concluded that no evidence established that the company would have foregone discipline but for the employee’s union activity. The court observed that a company’s opposition to unions, by itself, is insufficient to establish illegal motivation for any particular decision. Because Wright Line is a causation test, “there must be something more to connect the employer’s animus to the adverse action.” The court held that there was no evidence of a nexus between the discipline and anti-union animus.

An Appealing Trend?

The D.C. Circuit’s decision in Stern Produce is the latest favorable outcome for employers in several recent appeals of NLRB decisions to federal courts. The following two cases indicate that employers may wish to evaluate whether appeals of a particular Board decision could represent a worthwhile investment – and possibly the only way to get full consideration of their defenses.

On February 16, 2023, the U.S. Court of Appeals for the D.C. Circuit held that the NLRB must consider an employer’s contract-based defenses in response to alleged violations of the NLRA. Am. Med. Response of Conn., Inc. v. NLRB, 22-1261 (D.D.C. 2024). The union alleged that AMR unlawfully withheld information it was obligated to provide in response to union information requests. AMR argued that the union had contractually waived its right to some of the requested information. The ALJ and the Board rejected that argument, but the court overturned, requiring the NLRB to use ordinary contract interpretation standards, not the “clear and unmistakable waiver” standard that the ALJ applied. The court remanded the case for the Board to do so.

On March 1, 2024, the D.C. Circuit held that the Northeast Center for Rehabilitation and Brain Injury did not engage in unlawful surveillance when it distributed flyers to employees and observed their reactions during a union campaign, thus making clear that sharing such information is an exercise by an employer of protected free speech under Section 8(c). NCRNC, LLC v. NLRB, 94 F.4th 67 (D.D.C 2024). See analysis of the decision here.

Takeaways for Employers

The pro-union agenda openly pursued by NLRB General Counsel Jennifer Abruzzo, as well as the support her initiatives have received from the current Board, have discouraged businesses from pursuing technology, management, and organizational changes they would otherwise consider desirable. For example, in 2022 Abruzzo issued guidance urging the Board to closely scrutinize employer use of performance management technologies such as the in-truck cameras at issue in Stern Produce.

Abruzzo encouraged her office to use unfair labor practice litigation to limit such technology because she took the position that it has the potential to discourage organizing efforts. Employers are reasonably concerned that it will be extremely difficult to get the GC, the Board’s ALJs, and the Board itself to accept virtually any technological advance questioned by unions, no matter how important they may be to success of the business.

Stern and other recent decisions suggest, however, that there is a realistic chance to have overreach by the Board held in check by courts of appeal. At a minimum, employers should seriously consider the basis for eventual appeals from the earliest stage of unfair labor practice litigation, lay the evidentiary foundation for such appeals during trials at the ALJ level, and preserve all potential legal arguments during subsequent proceedings before the Board.