Strike Replacements—a New Paradigm? Strike Replacements—a New Paradigm?

Strike Replacements—a New Paradigm?

Since the Supreme Court's 1938 decision in Mackay Radio (304 U.S. 333), it has been well-established that a private sector employer subject to the NLRA may hire permanent replacements for employees who go on strike over contract proposals. The replaced strikers are not "fired;" instead they are placed on a preferential hire list to be offered reinstatement if and when an employee hired as a permanent replacement for them quits, is fired, or other otherwise leaves the job.

On May 31, 2016, the NLRB issued a decision holding that the employer's right to hire permanent replacement for economic strikers is not unlimited, and that an employer must be circumspect about its reasons for seeking permanent replacements, or risk substantial penalties. The case is American Baptist Homes of the West, 364 NLRB No. 13 ("American Baptist"). The decision has ominous overtones for the future.
The Board found that American Baptist hired permanent replacements not simply to be able to continue to run its business during a strike, but to punish the employees and "teach them a lesson" for striking. Relying on a Board case from 1964, Hot Shoppes, (146 NLRB 802) the Board found unlawful motivation sufficient to make the employer's hiring of permanent replacements an unfair labor practice.
The immediate impact is that American Baptist is to terminate any remaining permanent replacements, and offer reinstatement to replaced strikers with back pay to August 7, 2010, the date the offer to return to work was made—approximately 5½ years of back pay. However, the long term ramifications of the decision are even more ominous; ultimately, this may be the beginning of a trend leading to weakening or eliminating a significant economic weapon employers have been permitted to use for almost 80 years.
Brief Summary of Facts
The American Baptist case is only the second one to apply the 1964 Hot Shoppes decision. However, given the facts reported in the decision, it is not really a surprising result. American Baptist's negotiations were apparently contentious, and continued well after the collective bargaining agreement's expiration date of April 30, 2010. The employees engaged in some picketing, without striking, and, eventually, notified the employer they were going on strike.
The strike notification was delivered to the employer in 2 letters from the union, each sent on the same day, July 9. One letter advised that the employees were going on strike on August 2. The second letter advised that all of the striking employees “unconditionally offer to return to work at or after 5:00 a.m. on Saturday, August 7, 2010;” in other words, it was going to be a 5 day strike.
Through a staffing agency, the employer arranged for enough temporary employees to work the first 3 days of the 5 day strike. It also began seeking permanent replacements for the strikers immediately, and actually extended offers to 44 persons as permanent replacements by the end of the 4th day of the 5 day strike. On August 6, the employer began contacting the employees who had been replaced permanently, telling them that their names were being placed on a preferential hire list to be offered reinstatement if their replacement left in the future.
Not only was the timing of this hiring suspicious, given that the employer had been told all the strikers were returning the next day, but comments made by both the employer's executive director and its attorney established to the Board majority's satisfaction that the employer's motivation was not simply to weather the strike and continue operations: the executive director was quoted as saying that she hired the permanent replacements because she figured that if they would work through this strike, they would work through future strikes, and the employer would not need to pay temporary staffing agencies to weather strikes in the future; the employer's attorney was quoted as telling the union's attorney that the employer “wanted to teach the strikers and the Union a lesson. They wanted to avoid any future strikes, and this was the lesson that they were going to be taught.”
Any attempt to interfere with, or coerce employees with respect to, exercise of rights protected by the NLRA, such as the right to strike, is an unfair labor practice. The Board majority in American Baptist found that wanting to "teach them a lesson," amounted to wanting to punish the employees for exercising their statutory right to strike; the Board held that an employer is not privileged to hire permanent replacements if that is the employer's motivation.  
Given the recitation of facts that seem clearly to evince a motivation to punish striking employees, the result in American Baptist may not be alarming. To avoid such a result in the future, employers hiring permanent replacements need to be careful not to take actions or make statements implying any motivation to interfere with employees' protected NLRA rights. Instead, employers should focus their efforts, and their comments internally and externally, on ensuring continued operations during a strike. There are legitimate reasons why permanent replacements may be more likely to achieve that objective than temporary replacements, and those reasons should be stressed.
However, the long term concern arising from this decision is that it may signal a paradigm shift in the analysis and burden of proof applied regarding the hiring of permanent replacements during strikes.  Those who oppose the hiring of permanent replacements will undoubtedly stretch to argue that after American Baptist, in order to hire permanent replacements an employer must always prove that its motivation is solely to continue operations during a strike—something that was never contemplated by the Supreme Court in Mackay Radio, and something that neither the Board nor any court has ever held.
If the opponents of the practice of hiring permanent replacements succeed in convincing the Board to adopt such a rule, it would represent a sea change in the existing balance of economic weapons in the collective bargaining process. Employers and their attorneys need to be vigilant to guard against such an erosion of employer rights.
For more information, contact Michael Boldt or a member of our Labor and Employment group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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