Board Clarifies Duty to Reinstate Striking Employees

A National Labor Relations Board decision in Jones Plastic & Engineering Co. v. United Steelworkers of America, 351 N.L.R.B. No. 11 (Sept. 27, 2007) helps employers establish the permanency of striker replacements. The National Labor Relations Board, in a 3-2 decision, held that at-will disclaimers do not undermine the permanency of replacement workers. Employers must take deliberate steps, however, to ensure replacement workers understand they are "permanent" employees not subject to displacement at the end of the strike.

Most employers with unionized workforces know one of their options in the event of an economic strike is to hire permanent replacements. The Professional Air Traffic Controllers Organization strike in 1981—which resulted in economic strikers being permanently replaced— shifted the balance at the bargaining table in favor of management. But hiring permanent replacements is still fraught with risk.

If striking workers offer to return to work, and the National Labor Relations Board later concludes replacement workers were not "permanent replacements," the employer will have to displace the replacements and pay back pay to strikers not immediately reinstated upon conclusion of the strike. Thus, when hiring workers to take the place of strikers, everything possible must be done to ensure replacements will be deemed "permanent replacements" by the board.

The National Labor Relations Act protects the right of employees to strike for better wages or benefits. As a general rule, the struck employer must reinstate an economic striker immediately if the striker unconditionally offers to return to work. However, the employer can avoid doing so if it can show a "legitimate and substantial" business justification for its refusal.

The employer's permanent replacement of economic strikers as a means of continuing its business operations is just such a business justification, absent proof of an otherwise unlawful motive. It is the employer's burden, however, to prove that replacement workers understood, at the time that they were hired, that their positions would be "permanent" within the meaning of federal labor law. But such unvarnished promises potentially expose the employer to breach of contract and promissory estoppel claims if it later discharges the replacement workers.

At-Will Disclaimers Undermined Permanency Prior to Jones Plastic

A struck employer typically wants to tell permanent replacements that, although they are permanent within the meaning of federal labor law, they are nevertheless "at-will employees" who may be discharged at the discretion of the employer. In Jones Plastic, the National Labor Relations Board holds that such at-will disclaimers do not undermine the replacements' status as permanent replacements.

Until Jones Plastic, the lead case on the topic was Target Rock, 324 N.L.R.B. No. 71 (Sept. 18, 1997). There, the National Labor Relations Board found the striker replacements were not permanent in part because they had been required to sign at-will disclaimers. The Target Rock majority wrote that the at-will disclaimer "obviously [did] not support the [employer's] position that the striker replacements were permanent." Target Rock relied largely upon dictum in Belknap, Inc. v. Hale, 463 U.S. 491, 504 n. 8 (1983), which held that federal labor law does not preempt state law claims for breach of contract and misrepresentation by supposedly "permanent" replacements who were subsequently displaced in order to settle unfair labor practice charges.

Although not necessary to its decision, and although the employer in that case had not inserted at-will disclaimers in its offers to replacements, the U.S. Supreme Court stated that it found "unacceptable the notion that the federal law on the one hand insists on promises of permanent employment if the employer anticipates keeping the replacement workers in preference to returning strikers, but on the other hand forecloses damage suits for the employer's breach of these very promises."

The Jones Plastic Decision

In Jones Plastic, the employer began hiring replacement employees after approximately 53 of 75 employees went on strike over contract demands. Each new hire completed a job application stating that: "I understand and agree that my employment is for no definite period and may . . . be terminated at any time without any previous notice." In addition, they signed forms stating:

"I [name of replacement] hereby accept employment with [Jones Plastic] as a permanent replacement for [name of striker] who is presently on strike with Jones Plastic. I understand that my employment with Jones Plastic may be terminated by myself or Jones Plastic at any time, with or without cause. I further understand that my employment may be terminated as a result of a strike settlement agreement reached between Jones Plastic and the U.S.W.A. Local Union 224 or by order of the National Labor Relations Board."

The employer also notified strikers that it had "begun to hire permanent replacement employees" and warned them they risked being permanently replaced if they failed to report to work immediately. Nearly four months later, the union made an unconditional offer to end the strike and for the strikers to return to work. By that time, the employer had a full complement of replacement employees. Accordingly, it informed the union that returning strikers would be placed on a preferential recall list. The union then filed unfair labor practices charges based on the employer's refusal to immediately reinstate the strikers.

The National Labor Relations Board held that the refusal to immediately reinstate the strikers did not violate the National Labor Relations Act because the employer and the replacement workers had a "mutual understanding" at the time of hiring that the replacements' positions were permanent within the meaning of federal labor law. The National Labor Relations Board concluded that the repeated at-will disclaimers did not detract from permanent replacement status and noted that three replacements had testified they understood their jobs were permanent.

The National Labor Relations Board also noted that at-will employment was the norm at Jones Plastic, which had been in first-contract negotiations with the union. A preexisting employee handbook governed terms and conditions of the struck employment and plainly stated that all employees were hired and employed on an at-will basis. Therefore, the National Labor Relations Board reasoned, if an at-will disclaimer were to preclude permanent replacement status under federal labor law, in order to establish permanency, Jones Plastic "would have had to offer [the replacements] tenure rights superior to those enjoyed by the strikers," which itself would have violated federal labor law.

The two Democrat members of the National Labor Relations Board dissented. They argued that it is not enough for an employer to tell replacements they are permanent if in "actuality" they can "be fired at the will of the employer for any reason." The dissent agreed that the at-will status of replacement workers is not necessarily inconsistent with them being permanent replacements. The key is whether the replacement workers are given assurances of their rights vis-à-vis the strikers.

Both the majority and the dissent agreed that conditioning the replacements' employment on the absence of a strike settlement calling for the reinstatement of strikers or a National Labor Relations Board order ordering reinstatement of strikers would not preclude a finding of permanency.

Lessons for the Employer

After Jones Plastic, it is clear for the moment that an at-will disclaimer will not automatically preclude a finding that striker replacements are permanent replacements. Nevertheless, an employer replacing strikers must still take care to assure that it can prove that each replacement worker clearly understood he or she was a permanent worker not subject to displacement at the end of the strike (except in the case of a strike settlement or National Labor Relations Board order calling for the displacement).

Typically, this means that offers of employment to permanent replacements must be carefully crafted and countersigned by the replacements. Even then, the National Labor Relations Board will consider factors such as verbal statements made to potential replacements, language in newspaper advertisements seeking applicants for replacement positions, and statements made during the interview process.