On August 15, 2013, the U.S. Court of Appeals for the Sixth Circuit affirmed the National Labor Relations Board's ("NLRB" or the "Board") controversial 2011 decision in Specialty Healthcare and Rehabilitation Center of Mobile v. NLRB. The Sixth Circuit's decision in Kindred Nursing Centers East, LLC (f/k/a Specialty Healthcare) v. NLRB ) represents a major victory for organized labor because the scope of a bargaining unit is critically important to the success or failure of a union organizing campaign. Many have argued that the Specialty Healthcare decision boosts union organizing efforts by promoting “micro-unions” in the workplace. These so called micro-unions allow organized labor to hand pick employees who want to form a union, thereby overriding the preference of employees at large and instead forming bargaining units based on discrete sections, units, departments, factions, or even job classifications within the workplace. In more plain terms, Specialty Healthcare has made it easier for unions to shrink the size of bargaining units in workplaces and assert control in workplaces where the majority of workers may not necessarily support unionization.

The National Labor Relations Act (the “NLRA” or the “Act”) requires private sector employees who wish to be represented by a union to petition the board and hold an election to determine if a majority of employees in the workplace share the desire to unionize. Section 9 (b) of the NLRA gives the Board broad discretion to determine what the appropriate “bargaining unit” is—i.e. what group of employees will vote on union representation—based on whether the employees share a "community of interest" sufficient to justify their mutual inclusion in a single bargaining unit. To determine whether or not employees share a community of interest, the Board looks to the following five factor test: (1) similarity in skills, interests, duties and working conditions; (2) functional integration of the plant, including interchange and contact among the employees; (3) the employer’s organization and supervisory structure; (4) the bargaining history; and (5) the extent of union organization among the employees.

The Specialty Healthcare Decision

In Specialty Healthcare, a union petitioned for a bargaining unit consisting of only certified nursing assistants ("CNAs") and excluding other non-supervisory service and maintenance employees in the workplace. For the preceding two decades, the Board had applied the standard set forth in Park Manor Care Center when considering how to determine the appropriate bargaining unit in non-acute health care facilities like Specialty. The Board overruled Park Manor Care Center, and articulated a new rule under which a unit of “all employees performing the same job at a single facility” is presumptively appropriate as a general matter in all industries. Additionally, the Board placed the burden of proving that a bargaining unit is inappropriate on the party challenging the appropriateness of the bargaining unit. Specifically, the Board stated that:  

We reiterate and clarify that, in cases in which a party contents [sic] that a petitioned-for unit containing employees readily identifiable as a group who share a community of interest is nevertheless inappropriate because it does not contain additional employees, the burden is on the party so contending to demonstrate that the excluded employees share an overwhelming community of interest with the included employees...  

This standard gives presumptive weight to the petitioned-for unit, a course of action which Section 9(c)(5) of the NLRA, which states that the “extent of organizing” may not be given controlling weight by the Board, explicitly disfavors. Although the Board contended that it had not articulated a new rule, and that the decision would not have broader implications on other industries, NLRB Member Brian E. Hayes stated the following in his dissent: “Make no mistake . . . Today’s decision fundamentally changes the standard for determining whether a petitioned-for unit is appropriate in any industry subject to the Board’s jurisdiction.”

Specialty refused to bargain with the group of CNAs despite the Board’s determination that the bargaining unit was appropriate, and the union subsequently filed an unfair labor practice charge. After Specialty was found to have violated the Act, it petitioned the Sixth Circuit Court of Appeals for review of the Board’s decision.

The Kindred Nursing Centers East Decision

In Kindred Nursing Centers East, the Sixth Circuit heard the employer’s appeal of the Board’s decision in Specialty Healthcare. The court affirmed the Board’s decision, and held that the Board has broad discretion when it comes to finding the appropriate bargaining unit, and that it must uphold a Board decision unless the employer establishes that the Board decision was arbitrary, unreasonable, or an abuse of discretion.

The court addressed four principal arguments asserted by Kindred: First, Kindred argued that the Board abused its discretion by departing from the long standing community of interest standards of its prior precedent.

The court rejected this argument, and stated that that an agency may depart from its prior precedents and, so long as the departure is explained, the court’s review is “limited to whether the rationale is so unreasonable as to be arbitrary and capricious.” Accordingly, the court ruled that because the Board adopted a community of interest test based on some of its own prior precedents and explained its reasons for doing so, the Board did not abuse its discretion by applying a different version of the community of interest test to find the specific bargaining unit to be appropriate.

Next, the court evaluated Kindred’s argument that the Board abused its discretion by adopting an “overwhelming community of interest test” in any situation where an employer attempted to challenge the appropriateness of the proposed unit due to the exclusion of employees. The court also rejected this argument, reasoning that the Board explained its reasons for adopting the overwhelming-community of interest standard and that the Board applied a standard that was supported by precedent. Specifically, the court pointed to the D.C. Circuit’s 2008 decision in Blue Man Vegas, LLC v. NLRB. In Blue Man, the D.C. Circuit held that an employer claiming that a unit should include more employees could not merely show that there is another appropriate unit, because "more than one appropriate bargaining unit logically can be defined in any particular factual setting." The Blue Man court noted that if excluded employees share an overwhelming community of interest with included employees, there was no legitimate reason to exclude them from the bargaining unit. Based on this precedent, the Sixth Circuit held that the Board was entitled to overrule some of its own precedents and follow the precedent approved by the court in Blue Man as long as it explained why. The Sixth Circuit accepted the Board’s explanation that it needed to clarify its law because it had sometimes used different words to describe the standard and sometimes decided cases similar to Specialty Health without articulating a clear standard, and ruled that there was no abuse of discretion.

Kindred’s third argument was that the test articulated by the Board in Specialty Healthcare went against the explicit provisions of the Act. Specifically, Kindred argued that the Board violated Section 9(c)(5) of the NLRA, which forbids the NLRB from making the extent of union organizing the controlling factor in determining an appropriate unit. Kindred argued that the heavy burden of requiring the employer in a given case to establish an “overwhelming community of interest” between the proposed unit and others who should also be in the unit made the union proposed unit—which would undoubtedly be based on the extent of the union’s organizing—the controlling factor in most cases, and rendered the union’s initial choice of unit practically impervious to attack.

The court found no such violation of the Section 9(c)(5) of the Act, and again rejected Kindred’s argument. Specifically, the court stated that “Section 9(c)(5) appears to have been added to prevent the Board from . . . [determining] a bargaining unit without applying any kind of community of interest analysis, but solely on the basis that the workers wanted to organize a union.” The court continued that:

Kindred’s argument misses the mark, because here . . . the Board did not assume that the CNA-only unit was appropriate. Instead, it applied the community-of-interest test . . . to find that there were substantial factors establishing that the CNAs shared a community of interest and therefore constituted an appropriate unit—aside from the fact that the union had organized it. Indeed, nowhere in its briefs, nor before the Board, did Kindred dispute that the CNAs shared a community of interest. Therefore, the Board’s approach. . . did not violate section 9(c)(5).

Kindred’s final argument was that the Board abused its discretion by adopting a generally applicable rule through adjudication rather than rulemaking. The court again rejected Kindred’s argument and held that the Board did not abuse its discretion. The court noted U.S. Supreme Court authority that held that the Board was not precluded from announcing new principles in an adjudicative proceeding and that the Board has discretion in the decision of whether to promulgate new rules through rulemaking or adjudication. The Sixth Circuit acknowledged, as did the Supreme Court, that some situations where the Board relies on adjudication rather than rulemaking might be a violation of the NLRA, but that Kindred had not explained why the Board’s choice of adjudication in this case amounted to an abuse of discretion or a violation of the Act.

What this Means for Employers

The full effect of “micro unions” and union efforts to create such unions are still relatively unknown, but this certainly won’t be the last word from the NLRB on the issue. As things stand today, the law makes it much more likely for an employer to have to deal with the disruptive effect of having multiple bargaining units under one roof; if an employer has eight groups of employees with differing job titles, it is not inconceivable that the employer will be forced to bargain with each of those eight groups individually.

With this in mind, employers should be wary of creating too much compartmentalization within their workforce, as unions may seize on the ready made micro-units during future organization efforts. Employers should also keep in mind some of the community of interest factors in organizing their workforce in order to better support arguments that a proposed unit is not appropriate. For example, employers can create cross-training programs for their workforce in order to ensure the similarity in skills, interests, and duties of workers or create a supervisory structure where employees in various departments report to the same supervisors in order to present a strong argument of overwhelming community interest.