Denying a motion for reconsideration, the National Labor Relations Board recently affirmed its decision in American Baptist Homes of the West d/b/a Piedmont Gardens, addressing the relevance of an employer’s motive in hiring permanent replacement workers for economic strikers. 364 NLRB No. 95 (Aug. 24, 2016). As a result, in cases involving allegations that an employer unlawfully hired permanent replacements, motivation will be a focal point of any investigation, and any “retaliatory” conduct by an employer in response to economic strikers could violate the National Labor Relations Act and require that the employer pay full back pay to permanently replaced economic strikers.

The employer in the case operates a continuing care facility in Oakland, California. During successor negotiations for a new collective bargaining agreement, the union notified the company that it would strike on August 2, 2010, but notified the company that the strikers would unconditionally return to work on August 7, 2010. To prepare for the strike the company hired 60 to 70 temporary employees. When the strike began, the company made approximately 44 offers of permanent employment to the temporary employees and on-call employees who had continued to work through the strike. In all, about 20 economic strikers were permanently replaced during the strike.

The company admitted it made the decision to hire permanent replacements to avoid future strikes at the facility. During the strike, the company’s attorney told counsel for the union that the company “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.”

The General Counsel issued a complaint raising violations of Section 8(a)(1) and 8(a)(3) of the NLRA, alleging that the company’s decision to permanently replace the striking employees was motivated by an “independent unlawful purpose” within the meaning of the Board’s decision in Hot Shoppes, Inc., 146 NLRB 802 (1964). In Hot Shoppes, the Board held that an employer’s motivation in hiring permanent replacements for economic strikers is “immaterial” absent evidence of an independent unlawful purpose. The administrative law judge rejected the NLRB general counsel’s argument and held that an independent unlawful purpose is established only when an employer’s hiring of permanent replacements is “unrelated to or extraneous to the strike itself.” The judge concluded that the company’s motivations for permanently replacing striking employees – to teach strikers “a lesson” and to ensure that they would not strike again – were related to the underlying strike and, therefore, did not constitute an independent unlawful purpose.

In its decision, the Board majority first recognized that, consistent with U.S. Supreme Court precedent in Mackay Radio, 304 U.S. 333 (1938), an employer may hire permanent replacements to replace economic strikers at will, unless the employer was motivated by an independent unlawful purpose. The Board acknowledged that the case turns on an interpretation of the principles articulated in Hot Shoppes and held that an employer may not permanently replace economic strikers “for a purpose prohibited by the Act.” Thus, the Board held that the phrase “independent unlawful purpose” includes an employer’s intent to discriminate or to encourage or discourage union membership, and it does not require that the unlawful purpose be unrelated or extrinsic to the parties’ bargaining relationship or the underlying strike. 

Applying its interpretation of Hot Shoppes and Mackay Radio, the Board held here that the company’s two stated reasons for permanently replacing the strikers were unlawful because they revealed a “retaliatory motive prohibited by the Act” and a “desire to interfere with employees’ future protected activity.” The Board ordered the company to reinstate all of the employees who had participated in the strike and who were permanently replaced, with full back pay and interest, and to discharge the replacement workers.

Member Miscimarra drafted a lengthy dissent, in which he first noted that the Supreme Court has recognized that the hiring of permanent replacements is an “economic weapon” authorized by Congress that employers may use in response to an economic strike. Member Miscimarra contends that these weapons have a degree of equivalency and are statutorily protected so that the Board cannot create significant restrictions on one party’s right to use such an economic weapon. Additionally, Member Miscimarra argues that the phrase "independent unlawful purpose" must mean a purpose unrelated or extraneous to the strike itself or the preceding clause – that the employer's motive for hiring permanent replacements is “immaterial” – is “rendered a nullity.” In short, an independent unlawful purpose requires the NLRB general counsel to prove that permanent replacements were calculated to accomplish an unlawful purpose unrelated to the strike itself.

Member Miscimarra also contends that consideration of an employer’s motive in response to an economic strike is untenable given the uniquely volatile circumstances surrounding a strike. He notes that the “Act does not require parties to maintain Spock-like objectivity towards one another when resorting to economic weapons.”  Distinguishing between self-preservation and anti-strike motives in hiring permanent replacements is nearly impossible according to Miscimarra, and the inevitable result of the majority’s decision will be to preclude many employers from using permanent replacements because any stray comment that reflects negatively towards strike participants risks liability.

American Baptist Homes establishes that an employer’s motive in hiring permanent replacements is no longer “immaterial.” Accordingly, employers that hire permanent replacement employees now must be prepared to articulate a non-discriminatory, non-retaliatory reason for that decision in the event the union or the NLRB alleges the employer’s decision included an unlawful motivation. With this decision, the NLRB has created a significant obstacle and substantially increased the risk for employers that wish to hire permanent replacements as a valid strike response tactic, as the employer’s decision may now be second-guessed in great factual detail.