The National Labor Relations Board issued two complementary decisions on August 26, 2023, with a view to facilitating the collective bargaining process, the capstone of what amounted to an energetic and exciting week at the agency. The cases are Wendt Corporation and Tecnocap LLC, and the Board’s decisions therein carry the potential to serve as a fine complement to Cemex; whereas the latter sought to make it easier for unions to secure a bargaining order, Wendt and Tecnocap are calculated to constrain employers from interfering with the bargaining process once a firm becomes subject to a duty to bargain. The two cases entirely overrule Raytheon Network Centric Systems, a decision promulgated by the Trump NLRB that vested employers with extensive authority to unilaterally modify working conditions even while they were supposed to be bargaining for a new CBA. Under Wendt and Tecnocap, the NLRB now permits an employer to unilaterally change terms of employment while subject to a statutory duty to bargain only where the changes are consistent with a past practice and are effectively automatic. Moreover, unilateral changes predicated on a management-rights clause become unlawful once the agreement embodying the clause expires.

I. Wendt Corporation

In the first case, Wendt Corporation, the firm involved in the proceeding had furloughed ten employees in the midst of ongoing negotiations for a first collective bargaining agreement with a union freshly certified in its facility. The NLRB, in a 2-1 decision, found the layoffs unlawful, and in doing so the agency dismantled its 2017 Raytheon decision.

In Raytheon the Trump Board set forth the so-called “kind-and-degree” test to govern unilateral management actions during bargaining. Pursuant to that test, an employer was authorized to impose unilateral changes if the changes were “similar in kind and degree with what the employer did in the past,” even if they entailed a substantial exercise of managerial discretion. The Wendt NLRB declared the kind-and-degree test contrary to the Act; according to the Board majority, the Raytheon test conflicted with the Supreme Court decision in NLRB v. Katz,  which, after more than sixty years, remains the reigning precedent governing the realm of unilateral conduct during bargaining. In Katz, the Supreme Court proclaimed that a unilateral alteration of employment conditions in the course of bargaining amounts to “a circumvention of the duty to negotiate” and “must of necessity obstruct bargaining.” The Court accordingly enunciated the general rule that an employer’s unilateral change imposed during bargaining for a CBA “will rarely be justified.” The justices recognized a narrow exception for changes consistent with past practice, but then removed from the scope of that exception changes that, even if faithful to past practice, are “informed by a large measure of discretion” (as distinguished from those that are “automatic”). Subsequent applications of Katz by the NLRB and federal courts, the Board explained in Wendt, crystallized the principle that unilateral changes to employment conditions are allowed only where the employer has demonstrated that the action is consistent with a longstanding past practice and is not informed by a large measure of discretion. Yet in Raytheon, according to Wendt, the Trump NLRB contravened this established consensus by extending the past-practice exception to protect even unilateral conduct involving substantial employer discretion.

The NLRB in Wendt repudiated Raytheon’s expansive construction of the past-practice doctrine. Raytheon’s holding that Katz permitted unilateral conduct involving substantial employer discretion, the Board majority expounded, represented a misapplication of Katz, because the “unambiguous language” of that opinion “holds that the Act does not permit a unilateral change informed by a large measure of discretion.” Moreover, in addition to conflicting with Supreme Court precedent, the Board insisted that Raytheon warranted reversal as a matter of administrative policy, because the decision inhibited the central statutory purpose of the NLRA—namely, to encourage collective bargaining. Permitting discretionary unilateral changes, the Board reasoned, undermines and destabilizes the bargaining process.

In view of these considerations, the Wendt Board expressly overruled Raytheon and restored the doctrinal rule that unilateral conduct during bargaining is permitted “only when the employer has demonstrated a regular and consistent past practice that is not informed by a large measure of discretion.” For unilateral conduct to qualify as sufficiently nondiscretionary, it must effectively be automatic—“fixed by an established formula containing variables beyond the employer’s immediate influence . . . based on non-discretionary standards and guidelines” is the formulation supplied by the Board in Wendt. Finally, the Wendt Board reaffirmed that an employer’s past practice of implementing unilateral changes in terms and conditions of employment before a union was certified in the plant does not privilege the employer to continue implementing such changes after the employees have elected to be represented by a union.

II. Tecnocap LLC

In Tecnocap LLC, the NLRB overruled a separate dimension of Raytheon that was not addressed in Wendt. Tecnocap had unilaterally altered its employees’ work schedules— imposing mandatory 60-hour workweeks—while bargaining for a new collective bargaining agreement. But unlike in Wendt, Tecnocap and the union had previously executed a CBA, and that CBA contained a so-called “management-rights clause” granting the company discretionary authority to, inter alia, change work schedules. The administrative law judge found that the employer’s unilateral schedule modification was permissible because, among other grounds, it was authorized by the expired management-rights clause. The Board overturned that determination, and its treatment of this issue is the aspect of the Tecnocap decision carrying doctrinal significance.

The Tecnocap Board broadly pronounced that “a management-rights clause does not survive the expiration of the contract,” which, extending that logic, implies that a past practice developed pursuant to such a clause cannot privilege unilateral action following expiration of the agreement embodying the clause. In Raytheon the Trump Board had maintained that so long as the actions do not materially vary in kind or degree from those that had been customary in the past, an employer is privileged to continue engaging in unilateral conduct authorized by, or in accordance with a past practice stemming from, an expired management-rights clause. This doctrinal scheme had damaged the collective bargaining process, according to the Tecnocap Board. The scheme hindered unions from meaningfully revisiting a term in subsequent bargaining and compelled them to negotiate to regain terms lost to post expiration unilateral changes. Moreover, the doctrine discouraged unions from agreeing to accord employers any right to impose unilateral changes during the term of the contract and diminished the union’s stature in the eyes of employees. For these reasons, the Tecnocap Board held that an employer may not invoke a clause in an expired CBA, or a past practice based on such a clause, to sanction a unilateral modification to the terms of employment while bargaining for a new contract.

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As the law now stands under Wendt and Tecnocap, an employer is permitted to unilaterally modify working conditions while subject to a statutory duty to bargain only if the changes are harmonious with a regular and consistent past practice (prior actions in the absence of a union are irrelevant) and are in effect automatic. Moreover, unilateral changes purportedly sanctioned by an expired management-rights clause, or predicated on a past practice stemming from such a clause, are now unlawful.