Retail Employers Face New Challenges From Pro-Labor Measures Implemented by Biden NLRB in 2023

In 2023, the Biden National Labor Relations Board (NLRB or Board) and its General Counsel Jennifer Abruzzo continued implementing a highly pro-labor agenda that has significantly changed the union and labor landscape for retail employers. In addition, Abruzzo and the Board’s regional directors are imposing and enforcing aggressively some of their most controversial new measures against prominent retail employers to create and affirm new precedent, easing that path for union representation nationwide.

The Acceleration in Retail Union Organizing

2023 opened as union organizing efforts, including within retail, were already accelerating. Buoyed by the pro-labor agenda and rulemaking by the Biden Board, 2022 saw a 53 percent increase in the number of election petitions filed over 2021. This was the highest number of union representation petitions filed since 2016. The surge in retail organizing has seen traditional national unions such as the UFCW, Teamsters and others focus on grocery chains, retail stores, cannabis dispensaries, pharmacies and online retail companies, with a focus on strategic labor strikes that impact retail customer satisfaction.

And while unions historically have avoided organizing individual retail stores (preferring the larger targets of regional, warehouse and supply chain workforces), the emergence of so-called “homegrown” unions, purportedly unaffiliated with the large national unions, changed that over the past several years. Grassroots unions such as Starbucks Workers United, the REI Union, Trader Joe’s United, Pharmacy Workers United, Apple Retail Union, among others, have changed the calculus for both organizers and employers by attempting to organize and seek representation at the single-store level. As a result, employers and franchises are on heightened alert for piecemeal organizing that has previously presented a very limited challenge.

Notably, even retail employers boasting progressive company cultures and higher wages aren't immune to the trend. The growing Gen Z and millennial workforces still seek union representation at such employers, motivated by social justice issues, work-life balance and safety issues more so than the traditional economic motivators (wage and benefits) of union organizing.

2023 Developments That Ease the Path to Union Representation

The Board took several steps in 2023 to further ease the path to union representation, all of which increased the special challenges for retail employers. First, the Board’s August 25 decision in Cemex Construction Materials Pacific, LLC changed dramatically the historic and balanced process by which the Board determines whether an employer must recognize a union as representative of a bargaining unit. Cemex now establishes that the traditional process for which unions obtain certification — filing a petition for a secret ballot election, and allowing the employer to campaign against union representation — may be bypassed by unions that merely make a written demand for representation. Doing so now effectively shifts the burden of seeking an election from the union to the employer.

In response to such a demand, the employer must now either agree to recognize the union or bear the burden of filing a “RM” election petition of its own within two weeks of receiving the demand. Otherwise, the employer risks the union being installed without an election, and perhaps without any meaningful test of whether employees truly desire union representation.

Cemex went even further by clarifying that employers that challenge the union’s demand by seeking an election bear heightened risks in doing so: should the employer engage in conduct that would require setting aside the election (which is often low-level ULPs) in the course of that campaign, the Board has new freedom to order a Gissel-style bargaining order and overturn the election results altogether. Cemex currently is under appeal and the outcome of that appeal may be known in 2024.

The Biden Board further complicated an employer’s ability to resist union representation by resuscitating the Obama Board’s 2014 “ambush” election rules. Like the 2014 rules (which were withdrawn under the Trump administration) the Biden Board’s 2023 rules significantly shorten the time between when a representation petition is filed and the election itself. The employer’s deadlines and time frames for important filings are similarly shortened. This condensed pace makes it challenging for employers to educate voters about unionization prior to the vote. The likely result of the return to this rule will be the negative effect on employees who may not have enough time to fully consider their vote.

The Cemex decision and the return to ambush election rules together undermined the employer’s traditional ability to respond to union organizing coherently, cautiously, and with open and effective communication. For retail employers, those disadvantages are magnified because of the new and unorthodox tactics already in play from the homegrown unions, their focus on smaller and younger workforces, and the array of new tactics and motivations driving the efforts.

New Joint Employer Rule Heightens Risk for Retailers and Franchisors

In October 2023, the Board published its anticipated Final Rule regarding joint-employer status, relaxing the standard by which an entity may be considered a joint-employer with another entity. Under the prior rules, an entity was considered a joint employer only if it exercised “actual and direct control” over an essential term of employment. Under the new rule, merely “actual or indirect control” of one or more employees’ essential terms of employment will establish a joint employer relationship. The proposed new rule will have a significant impact on retail employers that separate operations among companies that employ distinct employee groups serving different brands or product categories. Under the new rule, liability for collective bargaining obligations, ULP and other labor law liability could attach to separate entities, third-party contractors, and across franchisee-franchisor relationships. Legal challenges have been raised to the new rule, causing the Board to postpone the effective date of the new rule to Feb. 26.

Stericycle Handbook Policy Ruling Stings Retailers

In August, the Board imposed a more permissive standard to judge if a handbook policy is unlawful for chilling an employee’s exercise of Section 7 rights (to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection). The prior standard looked at “the nature and extent of the potential impact on NLRA rights” and an employer’s “legitimate justifications associated with the rule.” In its August Stericycle decision, the Board relaxed the standard, removing the employer’s intent from the analysis and making a policy “presumptively unlawful” if an employee could “reasonably interpret” a policy as restricting Section 7 rights.

The new standard creates an outsize burden on retailers, which often rely heavily on conduct-based policies for employees who interact with customers. For example, policies addressing workplace civility, profanity, confidentiality, personal email and phone use, workplace attire and union insignia, and solicitation all will be scrutinized under this subjective new standard.

Campaign to Restrict Retail Employer Free Speech

Last year also saw the continued effort by the Biden Board to restrict both the logistics and content of employer speech to employees about unions and representation. In April 2022, NLRB General Counsel Abruzzo stated her intention to seek Board prohibition of so-called “captive audience meetings” during union election campaigns. Abruzzo’s position is that such mandatory meetings, which are sometimes a retail employer’s only opportunity for direct communication with employees about the facts of union representation, are unlawful. In 2023, Abruzzo pursued a litigation strategy to achieve that goal, filing complaints against high-profile employers such as Amazon.com for using employee meetings to speak with employees about their rights under the NLRA.

Abruzzo has also accelerated litigation over alleged ULPs based on claims of employer speech violations. One such action is against Starbucks and its former CEO Howard Schulz for alleged unlawful speech for stating during a public earnings call “[w]e do not have the same freedom to make these improvements at locations that have a union or where union organizing is underway” in the context of wage raises to U.S.-based employees. The General Counsel argued that Schultz’s comments interfered with employees’ rights to organize.

Conclusion

While litigation and appeals play out in 2024, retail employers should confer with counsel about their readiness to adapt to the new labor landscape rolled out in 2023. Retail employers should prepare for homegrown union activity at single-store locations, readiness for reacting to new election rules and a Cemex demand for representation. They should review multi-entity business models for exposure under new joint-employer rules, along with handbook policies and communication protocols to assess risk.

Robert Quackenboss is a partner at Hunton Andrews Kurth, a law firm.