The Incredible Shrinking Bargaining Unit - The NLRB Strikes Again

In a July 24, 2014 decision involving the retailer Macy’s, the National Labor Relations Board (“NLRB”) made the path easier for unions to organize “micro bargaining units;” that is, units of employees consisting of only a fraction of an employer’s workforce. In 2011, the Board approved such micro-units in the health care industry in the landmark case of Specialty Healthcare, 357 NLRB No. 83 (2011). The Board’s latest decision in Macy’s Inc., 361 NLRB No. 4 (2014), now paves the way for more micro-units, not only in the retail industry, but in a variety of industries.

Specialty Healthcare Overview

In its controversial 2011 Specialty Healthcare case, the Board rejected arguments that a petitioned for-unit was inappropriate based on only its small size. Instead, the NLRB concluded it would focus on the community of interest among the proposed unit of employees, the extent of common supervision, interchange of employees, and geographic considerations, all of which may justify the finding of a small unit. The Board set a high bar for employers to challenge the determination regarding the composition of the unit. The employer’s burden is to demonstrate that a smaller unit is not appropriate by proving an “overwhelming” community of interest between the employees in the petitioned-for unit and the larger workforce.

The Macy’s Decision

Applying those principles in Macy’s, the NLRB affirmed the direction of an election for a proposed bargaining unit that included only 41 cosmetic and fragrance department sales employees at a Macy’s store in Massachusetts. The unit excluded all other sales employees in that store. Macy’s argued that the appropriate unit included all sales employees in other departments of the store as well as stock and other support employees. Macy’s also argued that the NLRB had previously established a presumption in favor of storewide (wall-to-wall) units in the retail industry. Further, Macy’s asserted that the micro-unit would be a “fractured” unit because the cosmetic and fragrance employees shared an “overwhelming community of interest” with other sales employees.

The Board rejected those arguments and concluded that the cosmetic and fragrance sales employees constituted an appropriate bargaining unit because they represented a “readily identifiable group” and shared a “community of interest.” In addition, the Board found that the employees at issue made up the entirety of the nonsupervisory workforce within a “primary selling department.”

Notably, the Board determined that these employees share a community of interest, as they all worked in the same department, were directly supervised by the same manager, all sold cosmetics and/or fragrances, had limited contact with other selling employees, were paid the same commission-based pay structure and benefits, and finally, there was very limited transfer of employees between the cosmetic and fragrance department and other store departments. Importantly, the Board made clear that its determination was not governed by whether the petitioned-for unit was the most appropriate unit, but rather, whether the unit was an appropriate unit.

Less than a week after it issued the Macy’s decision, the Board rejected a micro-unit at another retailer, Bergdorf-Goodman. The Neiman Marcus Group, Inc. d/b/a Bergdorf Goodman, 361 NLRB No. 11 (July 30, 2014). The NLRB found the petitioned-for unit (looking to combine salon shoes salespeople with contemporary shoe salespeople) was not appropriate because the petitioned-for employees lacked a community of interest. The Board found that, unlike in Macy’s, “[t]he boundaries of the petitioned-for unit do not resemble any administrative or operational lines drawn by the [e]mployer.” The Board further noted that the employees worked under “different department managers, different floor managers, and even different directors of sales.” Id. at 3.

Impact of the Macy’s and Bergdorf Goodman Decisions

The Board’s decision in Bergdorf-Goodman, while superficially encouraging for employers, was not surprising, given that the petitioned-for unit did not follow any departmental lines. The Macy’s decision, in contrast, is the more worrisome result. As a result, it is likely that the lower “community of interest” test, first enunciated in Specialty Healthcare, will now be applied in a variety of industries. That spells trouble for employers seeking to remain union-free, as micro-units are typically easier to organize. Additionally, once a micro-unit is certified within an employer, other organizing efforts may be easier, resulting in multiple bargaining units in one business or retail store. That in turn could be destabilizing to the operations of a business, which could face contradictory or conflicting work-rules within one facility.

Action Steps for Employers

To help avoid micro-units, employers may consider centralizing supervisory structures, standardizing pay practices and work rules, and having a unified labor relations function. Other steps, if appropriate operationally, would be to cross-train and rotate employees, in order to limit the specialization and uniqueness that make it easier for a union to justify a micro-unit. Those steps may enhance the likelihood of a wall-to-wall unit.

Quarles & Brady LLP’s National Labor Relations Act Team has extensive experience in training supervisors and otherwise assisting employers in maintaining union-free status. If you have needs in this area, or if you have any questions about the new Board decision, please contact Mike Aldana at (414) 277-5151 / michael.aldana@quarles.com, David B. Kern at (414) 277-5653 / david.kern@quarles.com, Jon E. Pettibone at (602) 230-5572 / jon.pettibone@quarles.com, Fred Gants at (608) 283-2618 / fred.gants@quarles.com, John Klages at (312) 715-5060 / john.klages@quarles.com, or your Quarles & Brady LLP attorney.