The NLRB’s recent rulemaking requiring private employers to post workplace notices of federal labor law rights, originally slated to take effect on November 14, 2011, has been delayed until January 31, 2012. The postponement follows litigation by various business groups challenging the final rule, as well as efforts by Congressional Republicans to overturn it. The NLRB has denied any connection between the delay and the litigation, instead explaining that it postponed the effective date to provide small- and medium-sized businesses additional time to familiarize themselves with the rule’s requirements.

Applying its rarely-used rulemaking powers, the NLRB published a final rule on posting that applies to unionized and non-unionized workplaces alike. Addressing the objections of various commenters over an eight-month comment period, the final rule omitted requirements obligating employers to distribute notice electronically and incorporated new notice language clarifying the right of employees to abstain from engaging in statutorily-protected activity under the NLRA.

Following the publication of the final rule on August 30, 2011, the National Association of Manufacturers and the National Federation of Independent Business each filed suit against the NLRB, asserting that the rulemaking exceeded the Board’s authority and violated their First Amendment rights. The cases were consolidated in Nat’l Assoc. of Manufacturers v. NLRB, No. 1:11-cv-01629 (D.D.C.). The NLRB’s postponement followed a request of the presiding judge in that litigation, who asked that the Board push back the effective date so that she would have more time to evaluate the parties’ arguments. The U.S. Chamber of Commerce and the South Carolina Chamber of Commerce have also challenged the final rule in a separate action on similar grounds, in federal court in South Carolina in Chamber of Commerce v. NLRB, No. 2:11-cv-02516 (D.S.C.).

Congressional Republicans have also challenged the final rule, introducing the “Workforce Democracy and Fairness Act” (H.R. 3094) in the House in October and challenging the rule, along with other recent Board actions in a recent hearing by the House Small Business Committee.

Under the rule, failure to adhere to the posting requirements may be treated as an unfair labor practice under NLRA Sec. 8(a)(1). Knowing and willful employer refusals to post notices could be considered evidence of unlawful motive in NLRB proceedings in which employer motive is at issue. The NLRB expects that most employers failing to post the notice, at least initially, will likely be unaware of the new rule. In those cases, the Board will not seek penalties against the employer as long as the employer promptly rectifies the non-compliance upon being informed of the posting requirement.

With the impending expiration of the term of recess appointee Craig Becker once Congress adjourns in December, the NLRB announced on November 3 that it will delegate authority over various litigation matters to Board Acting General Counsel Lafe Solomon. With the Supreme Court having invalidated nearly 600 rulings issued by a previous two-member Board between December 2007 and March 2010 in New Process Steel, L.P. v. NLRB, 130 S. Ct. 2635 (2010), the NLRB policy would provide Solomon with the authority to carry out basic Board functions.Without a three-person quorum, New Process Steel prevents the Board from issuing decisions. Although delegation to Solomon does not include this adjudicative authority, it will allow Solomon to carry out other key functions, including certifying the results of secret ballot elections, seeking 10(j) injunctions against employers and unions over unfair labor practices, and conducting appeals to the Supreme Court.

Congressional Republicans and business interests have been highly critical of Solomon’s tenure as Acting General Counsel, most notably his role in challenging various new state constitutional amendments banning the use of the card check process in union elections and for his role in initiating an unfair labor practice complaint against Boeing Company for purportedly engaging in anti-union discrimination in locating a new non-union production line in South Carolina. Solomon has been nominated to a full term as General Counsel, but his nomination remains stalled in the Senate.

Upon expiration of Becker’s term, the Board will be composed of Democratic chairman Mark Pearce and Republican member Brian Hayes. The Senate has not taken action on the nomination of Republican NLRB lawyer Terence Flynn and Senate Republicans have repeatedly blocked Becker’s nomination to a full five-year term.

On November 3, 2011, the Occupational Safety and Health Administration (OSHA) issued an interim final rule amending its regulations concerning employee protection from retaliation, or “whistleblower” claims, under Section 806 of the Sarbanes-Oxley Act. This interim rule implements changes to Sarbanes-Oxley made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The changes implemented by this rulemaking include adding employee protections against retaliation by nationally recognized statistical rating organizations, as defined by the Securities Exchange Act, or their officers and employees. They also include extending the filing period for retaliation complaints from 90 to 180 days after the date on which the violation occurs, or the employee becomes aware of the violation. And the interim final rule grants parties a right to a jury trial in district court actions brought under Sarbanes-Oxley’s “kickout” provision, which provides for de novo review in the appropriate district court, regardless to the amount in controversy, if the Secretary of Labor has not issued a final decision within 180 days of the filing of a complaint.

In addition to addressing these changes under Dodd-Frank, the new rule amends OSHA’s procedural requirements under Sarbanes-Oxley to make them more consistent with OSHA’s procedural rules under other whistleblower statutes, such as the Surface Transportation Assistance Act, the National Transit Systems Security Act, and the Federal Railroad Safety Act. Pursuant to these revisions, whistleblower complaints no longer need to be in writing or “include a full statement of the acts and omissions, with pertinent dates, which are believed to constitute the violations.” Instead, the new rule provides that complaints “need not be in any particular form,” may be made orally or in writing, may be filed in any language, and may be filed by any person on the employee’s behalf.

Similarly, the new rule seeks to make the complainant’s burden of proof consistent with OSHA’s treatment of claims under other whistleblower statutes. Sarbanes-Oxley does not address the evidentiary standard that applies to a complainant’s showing that his or her protected activities were a contributing factor in an adverse employment action. Instead, it simply provides that the Secretary may find a violation only “if the complainant demonstrates” that protected activity was a contributing factor in the alleged adverse action. The new OSHA rule clarifies that the complainant must prove by a “preponderance of the evidence” that his or her protected activity contributed to the adverse action. If the complainant makes this showing, the burden shifts to the employer to prove by “clear and convincing evidence” that it would have reached the same decision even in the absence of the protected activity.

The new interim final rule also revises the regulations governing reinstatement. Whereas the prior regulations provided that reinstatement would not be appropriate where the respondent establishes that the complainant is a security risk. Under the new rule, the determination of whether reinstatement is inappropriate in each instance will be made “on the basis of the facts of each case and the relevant case law.” Moreover, where it deems appropriate, OSHA may now order “economic reinstatement,” instead of the usual remedy of preliminary reinstatement. Such economic reinstatement provides the complainant with the same pay and benefits that he received prior to his termination, or front pay, but does not require the complainant to actually return to work. An employer does not have a statutory right to choose economic reinstatement, and does not have a statutory right to recover the costs of such an economic reinstatement if the employer ultimately prevails in the whistleblower adjudication.

Interested parties can submit comments concerning the rulemaking within 60 days of its publication in the Federal Register today, November 3, 2011.

In today’s Federal Register, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) issued a final rule amending the Federal Acquisition Regulation (FAR) to prohibit reimbursement to federal contractors of the costs associated with persuading employees to exercise or not to exercise, or the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing.

This regulation implements a 2009 executive order that President Obama signed shortly after entering office (E.O. 13494). The stated goal of that executive order was to promote economy and efficiency in government contracting by ensuring that certain costs not directly related to contractors’ provision of goods or services to the government were not reimbursable. To achieve this goal, the executive order specifically singled out contractors’ costs in persuading employees concerning the exercise of their collective bargaining rights.

The new regulation, which is effective as of December 2, 2011, amends FAR 31.205-21, the cost principle addressing labor costs. Currently, this cost principle states that costs incurred in maintaining satisfactory relations between the contractor and employees, including the costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable. The amendment does not alter the existing language or change contractors’ ability to seek reimbursement for non-persuader activities aimed at maintaining relations with employees.  This includes collective bargaining costs that do not implicate persuader activities, such as paying employees who participate in the collective bargaining process, or the development, negotiation, and enforcement of neutrality agreements. 

Instead, the rule adds a new paragraph to FAR 31.205-21, stating that costs associated with persuading employees to exercise or not to exercise the right to organize and bargain collectively are not reimbursable. The regulation further provides examples of specific activities that constitute unallowable costs if they are engaged in for the purpose of persuading employees concerning the exercise of their collective bargaining rights, including: ”(1) [p]reparing or distributing materials; (2) [h]iring or consulting legal counsel or consultants; (3) [m]eetings (including paying the salaries of the attendees at meetings held for this purpose); and (4) [p]lanning or conducting activities by managers, supervisors, or union representatives during work hours.”

Opponents of this new rule argued that the proposed restrictions will act as an effective gag order and will significantly chill the exercise of employers’ right to engage in speech that does not violate the National Labor Relations Act (NLRA). The DoD, GSA, and NASA deflected this criticism, arguing that the new rule “does not prohibit or otherwise regulate persuader activities.” They asserted that the rule merely identifies types of costs that are not allowed for reimbursement under the well-established Federal procurement scheme, which already contains mechanisms for submission to and review of contract costs to avoid unnecessary expenditures, while preserving the contractor’s freedom to spend its own funds, including funds received from the government, however it wishes.

Separately today, the DoD, GSA, and NASA also adopted as final, without change, an interim rule that requires federal contractors to post a notice informing their employees of their rights under federal labor laws, including the NLRA. This rule, which is effective as of today, implements related Department of Labor regulations. It also arises out of an executive order signed by President Obama shortly after his inauguration (E.O. 13496). Copies of the required notice are available for download or order on the DOL’s website.