In a divided ruling yesterday (in International Union of Operating Engineers v. NLRB), a Ninth Circuit panel majority enforced a National Labor Relations Board order against an employer, Macy’s. The NLRB ruled that Macy’s committed an unfair labor practice when it locked out union members in the midst of a labor dispute. Dubious as that ruling was, it was overshadowed by the NLRB’s “make-whole remedy” that extends beyond back pay and includes (as the majority puts it) “direct or foreseeable pecuniary harms incurred due to the lockout.”
As Judge Patrick Bumatay explains in his powerful dissent, the National Labor Relations Act authorizes the NLRB to order only “back pay” and such “affirmative action … as will effectuate the policies” of the Act. “Until two years ago, the Board had never claimed the authority to award consequential damages.” But the “direct or foreseeable” pecuniary harms that the NLRB holds Macy’s liable go beyond lost earnings and include consequential damages for “credit card debt, withdrawals from retirement accounts, car loans, mortgage payments, childcare, immigration expenses, and medical expenses.” Moreover, because the labor dispute continues, these consequential damages continue to accumulate.
The Board has no statutory authority to award such damages, Bumatay argues, and any such statutory authority would violate the Seventh Amendment. (See slip op. at 50-71.)
Bumatay further concludes that the NLRB was wrong to conclude that Macy’s committed an unfair labor practice. Here is the gist of his analysis (which he develops on pages 71 to 81):
[After it had been on strike for three months,] the Union demanded to return to work within one business day on a Friday evening. Macy’s reasonably asked the Union to hold off on returning to work while it figured out its position over the weekend. On Monday, Macy’s told the Union that it was locking out the Union members in support of its bargaining position and notes that a new bargaining agreement must be reached before reinstatement. Two days later, Macy’s and the Union were back at the bargaining table with Macy’s presenting a new proposal. The Board decided that this two-day delay in informing the Union of its latest offer was an unfair labor practice. Indeed, the Board held that Macy’s failure to communicate a new offer by Monday morning (one business day) was an unfair labor practice. But this is not even close to meeting the exacting standard of “inherently destructive” conduct.
This ruling threatens severe consequential damages of its own. Look for the Supreme Court to reverse it, if (as is likely) the en banc Ninth Circuit doesn’t have the sense to do so first.