NLRB Decision Limits Employers' Right to Hire Permanent Replacements During Economic Strikes

In a 2-1 decision, the National Labor Relations Board (“NLRB” or “Board”) set forth a new standard for determining when an employer may legally hire permanent replacement workers during an economic strike.[i] The new standard considers an employer’s motivation for hiring permanent replacements and as a consequence materially limits employers’ ability to exercise a key economic “weapon” in response to a strike.

Governing Law and American Baptist Homes of the West Decision

Under NLRB law, an employer may hire permanent replacements during an economic strike in order to continue operations,[ii] so long as the employer was not motivated by “an independent unlawful purpose.”[iii] Before May 31, 2016, the NLRB held that the “independent unlawful purpose” exception only applied where the unlawful purpose was unrelated to the bargaining relationship or strike itself. As a result, an employer’s motivation for hiring permanent replacements was considered “immaterial.”[iv]

In American Baptist Homes of the West, an NLRB majority held: (1) that the “independent unlawful purpose” need not be unrelated to the bargaining relationship or strike itself; and (2) that the employer’s reasons for permanently replacing strikers—to punish the strikers and union and avoid future strikes—evidenced unlawful interference with employees’ right to engage in protected activities. The NLRB ordered reinstatement and back pay.

Practical Takeaways

The American Baptist Homes of the West decision is just the latest in a string of NLRB decisions and rules limiting management’s ability to effectively resist unionization efforts and defend itself economically during labor disputes. The decision will most directly affect employers faced with a strike. Such employers must understand that the NLRB will closely scrutinize the motivation in hiring permanent replacements, and that discouraging strikes and other protected activities is considered an improper motivation.

As always, employers should consult with their labor attorney to discuss available options and strategies during a strike. After American Baptist Homes of the West, employers considering hiring permanent replacements during a strike should, at a minimum, articulate only legitimate, business-related justifications for hiring permanent replacement workers, and communicate these reasons carefully with management and supervisors to ensure the employer stays on message before and during a strike.

[i] American Baptist Homes of the West, 364 NLRB No. 13 (May 31, 2016).

[ii] See, e.g., O.E. Butterfield, Inc., 319 NLRB 1004, 1006 (1995) (citing NLRB v. Mackay Radio & Telepgraph Co., 304 U.S. 333 (1938)). Employers violate Section 8(a)(3) of the Act by failing to reinstate striking employees upon their unconditional offer to return to work. NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 378 (1967). However, hiring a permanent replacement is considered a “legitimate and substantial business justification” for refusing to reinstate striking employees. Id.; NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333, 345 (1938).

[iii] Avery Heights, 343 NLRB 1301, 1305 (2004) (quoting Hot Shoppes, Inc., 146 NLRB 802, 805 (1964)).

[iv] Hot Shoppes, Inc., 146 NLRB 802, 805 (1964).