Sixth Circuit rejects the NLRB’s Cemex bargaining order standard

In Brown-Forman Corp. v. NLRB[1], the United States Court of Appeals for the Sixth Circuit became the first federal appellate court to reject the National Labor Relations Board (NLRB or Board)’s remedial standard established in Cemex Construction Materials Pacific, LLC (Cemex).[2]

In Cemex, the NLRB established that an employer that receives a request for voluntary recognition from a union and declines to grant recognition in lieu of an election would – even if the union lost the representation election – be subject to a bargaining order and forced to recognize and bargain with the union as the default remedy, if the employer committed any unfair labor practice in the period before the election. In Brown-Forman, the Sixth Circuit majority overturned a bargaining order issued by the Board as a remedy, reasoning that the establishment in Cemex of the use of bargaining orders as a default remedy was an improper exercise of the Board’s adjudicatory authority.

This alert reviews Cemex, discusses the Sixth Circuit’s decision in Brown-Forman, and considers potential next steps.

Background: Cemex sets a new standard for the issuance of bargaining orders

A bargaining order is an extraordinary remedy in which an employer is ordered by a court or the NLRB to recognize and bargain with a union, even though the union did not prevail in an election. Under the previous administration, the Board articulated a new standard for issuing bargaining orders in Cemex, replacing the almost 50-year-old Gissel[3] standard under which bargaining orders would only be issued based on a case-specific finding of either 1) extreme or pervasive unfair labor practices or 2) that a fair re-run election could not occur under all the circumstances of the case.

In Cemex, a union organizing campaign initially obtained majority support through union authorization cards but lost the election several months later. The union in Cemex filed unfair labor practice charges claiming that the employer made coercive threats of adverse consequences if the employees unionized in the run-up to the election. The union won at trial, and the NLRB set the election results aside. Rather than ordering a re-run election, the Cemex Board issued a bargaining order, reasoning that the employer “would likely meet a re-run election with a similarly aggressive union-avoidance strategy.”

The Board thus found that issuing a bargaining order was the proper remedy because it was unlikely that a future fair election could be held. The Board went on to articulate a new standard for issuing bargaining orders in future cases – namely, that an employer who was presented with a pre-election request for voluntary recognition would be subject to a bargaining order as a default remedy if the Board finds that the employer committed an unfair labor practice that required setting aside the election.[4]

The Sixth Circuit’s decision in Brown-Forman

Brown-Forman Corp. v. NLRB concerned an organizing campaign conducted by the International Brotherhood of Teamsters (Union) at Brown-Forman’s Woodford Reserve bourbon distillery in Kentucky. In the run-up to the election, the employer took several actions that the Union later challenged as unfair labor practices. These included giving a new across-the-board pay raise to all employees, expanding the company’s pay progression and merit-based salary increase policy, allowing employees to save their vacation hours during the December holidays, and providing bottles of bourbon as gifts to employees a week before the election. On election day, the Union failed decisively.

The Union then filed objections to the election, claiming that Brown-Forman’s conduct was unlawful and coercive. An NLRB Administrative Law Judge (ALJ) found for the Union and recommended a bargaining order based on Cemex and Gissel. Brown-Forman appealed to the Board. The Board affirmed the ALJ’s decision, relying exclusively on Cemex (i.e., disclaiming reliance on Gissel) and upheld the bargaining order against Brown-Forman. Brown-Forman petitioned for review to the Sixth Circuit and the Board cross-petitioned for enforcement.

The Sixth Circuit denied the Board’s petition for enforcement of the bargaining order. While the Court found that substantial evidence supported the Board’s finding that Brown-Forman had committed unfair labor practices, it refused to enforce the bargaining order because it relied solely on the Cemex standard, which it found to be invalid. The Sixth Circuit held that the Cemex standard was “created through an unlawful exercise of adjudicatory authority” and was “a new rule of general applicability” promulgated “under the guise of an adjudication.”

Specifically, the Sixth Circuit found that the Cemex standard was 1) not derived from the specific facts of the underlying dispute and 2) not necessary to resolve that dispute. The Court noted that, because the Cemex Board “acknowledged that applying the contemporaneously binding Gissel standard led to the appropriate resolution of the parties' dispute … the only purpose of the new standard was to deter future, hypothetical violations of the Act,” which the Court took as evidence of the Board’s improper purpose. Accordingly, the Sixth Circuit granted Brown-Forman’s petition for review, denied the Board’s cross-petition for enforcement, and remanded the case to the Board so that it can “start fresh with the proper standards in mind.”

Looking ahead

While the Cemex standard could be reversed by the NLRB under the second Trump Administration, either by a Board adjudicatory decision (which may not occur until another Republican Board member is seated due to the standard Board practice of not overturning precedential decisions without a three-member majority) or by notice-and-comment rulemaking, the Brown-Forman decision may be viewed as favorable to employers. Even though Brown-Forman is binding only in cases appealed in the Sixth Circuit, it has implications for future challenges, not only for the future application of the Cemex standard, but also for the Board’s adjudicatory power more broadly.

First, although the Board may still elect to pursue Cemex bargaining orders (even in cases in the Sixth Circuit’s geographic jurisdiction), the Brown-Forman decision may provide a roadmap for successfully challenging the Cemex standard outside of the Sixth Circuit. Second, the Sixth Circuit’s invalidation of Cemex provides a potential basis for challenges to other instances where the Board has used its adjudicatory power to craft prospective remedies in a possibly illegitimate fashion, such as in Board scrutiny of handbook rules.

Meanwhile, employers are encouraged to continue to monitor developments and consult with counsel to navigate the current landscape and assess any emerging opportunities.

For more information, please contact the authors.