Will ABHOW’s Brewing Legal Battle Redefine Labor Law?

One of the nation’s largest nonprofit senior housing providers is digging in for a legal battle, and the company’s lawyers say that the outcome could have far-reaching implications for any employer with union workers.

The case has its roots at the Piedmont Gardens community in Oakland, Calif., operated by American Baptist Homes of the West (ABHOW). Piedmont Gardens is a continuing care retirement community (CCRC) offering independent living, assisted living, and skilled nursing to about 300 residents.

In August 2010, workers at Piedmont Gardens went on strike following the breakdown of contract negotiations, prompting the community to engage temporary employees.

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After five days of picketing, the strikers had not succeeded in winning the contract provisions they were seeking, but they ended the strike as previously planned. When they attempted to return to their jobs, Piedmont Gardens did not reinstate 44 of those workers, saying they had been permanently replaced.

This set off proceedings before the National Labor Relations Board (NLRB), pitting the ABHOW community against the workers belonging to the Service Employees International Union (SEIU) United Healthcare Workers West.

The case involved several issues that arose in relation to this dispute, including the question of whether Piedmont Gardens acted within its rights in refusing to automatically reinstate the 44 workers. An initial decision from an administrative law judge (ALJ) favored the senior living community on this point, but in May 2016, the NLRB issued a contrary decision and order.

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Under that decision, Piedmont Gardens was ordered to offer all the strikers their jobs back, discharging employees currently in those positions if necessary. In addition, the community was required to repay those strikers any loss of earnings and benefits, with interest, for the time period between Aug. 7, 2010, and their reinstatement. That could lead to associated costs running to the millions of dollars, according to ABHOW’s attorneys.

The senior housing company now has petitioned for a federal appeals court to hear the case, arguing that the NLRB’s decision flies in the face of established precedent and threatens to tilt the employer/labor balance unfairly toward workers.

The Issues

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Two different types of strikes are recognized by the NLRB—those motivated by economic considerations and those to protest unfair labor practices. In the case of Piedmont Gardens, it has been determined that the strike was on economic grounds, to put pressure on Piedmont Gardens in the contract negotiations.

This is important because in an economic strike, the employer has the right to permanently replace the striking workers “to preserve efficient operations” of the business, as long as there is not an “independent unlawful purpose” behind doing so.

The NLRB did determine that Piedmont Gardens had such an unlawful purpose in permanently replacing the striking workers—namely, to punish the workers and union, and to avoid future strikes.

Among the evidence cited by the labor board was that ABHOW’s attorney, David Durham, told the workers’  counsel, Bruce Harland, that Piedmont Gardens wanted to teach the union a lesson. Durham and Harland offer competing versions of this conversation, but the NLRB opted to believe Harland’s account. In addition, there was testimony from the Piedmont Gardens human resources director to the effect that replacing the strikers would be more expensive than settling with the union, but the community wanted to permanently replace the workers to prevent future strikes.

However, one member of the NLRB entered a dissenting opinion and sided with the ALJ, finding that Piedmont Gardens’ desire to punish the union and prevent future strikes did not constitute an independent unlawful purpose.

In this interpretation, employers can permanently replace workers at will during an economic strike—regardless of motive. The only limitation is that an employer cannot use the strike as a pretext for permanently replacing the workers in order to accomplish some unlawful goal that is not related to the strike. Essentially, the “independent” aspect of “independent unlawful purpose” is important in this reading.

The stakes

The NLRB’s ruling in this case creates a new standard that changes the status quo in labor law, making the stakes extremely high, according to Durham.

“That’s because under the old rule that existed from the 1930s, employers could counter strikes by permanently replacing the strikers with employees willing to work,” he told Senior Housing News. “The possibility of that made it much riskier for the union to strike, so they were more likely to accept the employer’s proposal if it was reasonable rather than ‘shooting for the moon’ and trying to get the most possible.”

If upheld, the ruling in this ABHOW case would have a starkly chilling effect on employers, making them much more reluctant to permanently replace workers, Durham believes. This could be especially corrosive in industries like senior housing, where tight margins make it very hard to hire and terminate temporary replacements repeatedly, he told SHN.

In the past, questions of an employer’s motives in these circumstances were not so important; in part, because there was an assumption that labor disputes inflame emotions both on the labor and employer sides, and there is a natural desire for the employer to use permanent replacement as a “weapon” against workers. At least, that’s what NLRB board member Philip A. Miscimarra wrote in his dissent.

“The [National Labor Relations] Act does not require parties to maintain Spock-like objectivity towards one another when resorting to economic weapons,” he wrote. “Nor is it realistic to believe that parties in these circumstances will remain in a dispassionate state of cool detachment. Yet, under the majority’s decision of today, if the employer hires permanent replacements, it appears that any evidence of antistrike animus will render unlawful the employer’s actions, resulting in potentially debilitating backpay liability.”

Counsel for the SEIU takes a different position.

There really is no new standard that the NLRB applied, Harland told SHN. Punishing the union or the strikers always has been an unlawful reason for permanently replacing workers, and there’s a self-interested reason why ABHOW is arguing that a new standard is being applied here.

If the NLRB really had applied a new standard in this case, even if ABHOW were to lose on the merits, the company could say that under Board law they cannot be held responsible for failing to comply with the standard in 2010, before it was established, Harland said. This would let ABHOW off the hook for the workers’ backpay.

In fact, this case doesn’t represent a “radical departure,” according to Harland. The real lesson for employers here might be that they should be discreet about their reasons for permanently replacing strikers.

“If we don’t get into [employers’] heads or meetings, we won’t really know their true motivation for hiring permanent replacements,” he said. “If they keep their mouths shut and secrets well hidden, it will be difficult for us [to prove unlawful purposes]. That was a problem before this case and will continue to be a problem for us in the labor movement when faced with these situations.”

Currently, it is being determined whether the case will move forward in the court of appeals for the 9th Circuit or the D.C. Circuit. While the exact timing for that decision is not certain, ABHOW’s lawyers anticipate it will come in the next few months.

Written by Tim Mullaney

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