Earlier this week, in a 3-1 decision in Macy’s Inc., the NLRB applied its controversial Specialty Healthcare decision in holding that an appropriate bargaining unit consists of employees in the cosmetics and fragrances department at a Boston-area Macy’s store, one of 11 store departments, and excludes all other sales employees at the store.  This is the first case in which the NLRB has applied the Specialty Healthcare standard to a retail employer. The NLRB’s decision is unwelcome news for employers, particularly in the retail industry, as it provides support for unions’ increasing efforts in seeking to organize “micro-units” consisting of small, discrete subsets of employees.

Macy’s urged the NLRB to reject the petitioned-for unit as inappropriate, relying on pre-Specialty Healthcare decisions in which the NLRB had established a presumption in favor of storewide or “wall-to-wall” units in the retail industry. Macy’s argued that under those precedents, the smallest appropriate unit must include all sales employees at the store, not merely the employees in one of the 11 departments. Macy’s also argued that the petitioned-for unit would result in a “fractured” unit because the cosmetics and fragrances employees shared an overwhelming community of interest with the other sales employees.

The NLRB majority, which consisted of Obama-appointed Chairman Pearce and Members Hirozawa and Schiffer, rejected Macy’s arguments, and applied the controversial standards established in Specialty Healthcare.  The NLRB found that the petitioned-for unit was appropriate because the 41 cosmetics and fragrances employees are a “readily identifiable group who share a community of interest,” and Macy’s had not satisfied its burden of establishing an “overwhelming” community of interest between those employees and the sales employees in the store’s 10 other departments.

Member Miscimarra wrote a lengthy dissent in which he concluded that the bargained-for unit of only cosmetics and fragrances employees was not appropriate under any standard. Rather, he agreed with Macy’s that the smallest appropriate unit would include all of the 120 sales employees who work at the store. Member Miscimarra also confirmed his disagreement with Specialty Healthcare, stating that he “would not apply Specialty Healthcare [in this case] or in any other decision.”

Insights for Employers

The NLRB’s decision in Macy’s Inc. is significant because it will continue to allow unions to strategically control the composition of a bargaining unit, which is a critical factor in a union’s ability to prevail in a union election. Employers must be mindful of this issue in preparing for and responding to union organizing campaigns, as unions increasingly seek to organize the smallest subset of employees which they believe can secure a majority of supporters.