The Forgotten NLRB Case That Can End Bad-Faith Bargaining

Labor law has long needed a compensatory remedy for deliberate stalling tactics. Enter the Ex-Cell-O remedy.

I’ve written quite a bit here recently about two proposed changes to the National Labor Relations Board’s enforcement schema: (1) the portion of the Protecting the Right to Organize Act that would give the NLRB the power to levy punitive fines against companies that commit unfair labor practices as defined under the National Labor Relations Act, which is currently a part of the Senate reconciliation bill, and (2) the return of Joy Silk bargaining orders, which was signaled last week in Jennifer Abruzzo’s first General Counsel Memo. Both changes, for reasons I have highlighted, would greatly improve the Labor Board’s ability to enforce federal labor law.

But I would argue that there is a third piece to the puzzle, one which addresses the agency’s decades-long problem of being unable to prevent employers from stalling out organizing drives, contract negotiations, and the effects of any administrative consequences. The Abruzzo Memo additionally proposed reviewing the make-whole relief for failures to bargain that was contemplated—and rejected—in Ex-Cell-O Corp., 185 NLRB 107 (1970). Here is what I wrote about the Ex-Cell-O episode in Board history for an upcoming article set to be published in the Pittsburgh Law Review:

The NLRB has a statutory mandate “to take such affirmative action ... as will effectuate the policies” of the NLRA. This means the agency must calibrate its remedies to both cure the ills of individual cases and deter widespread wrongdoing. In 1967, the Kennedy-Johnson Board appeared ready to fashion a remedy which would require an employer to reimburse its employees for the loss of wages and fringe benefits that they would have obtained through collective bargaining if the employer had not unlawfully refused to bargain in good faith. The experimental case, Ex-Cell-O Corp., touched off a firestorm of academic debate and political lobbying as labor and management prepared for a world in which companies could not simply flout bargaining obligations at will.

But in an excruciating instance of administrative delay, the Democratic majority was not able to draft its decision before Richard Nixon won the presidency in 1968. The moderates on the panel thereafter shelved the case until the new president got to weigh in on the controversy with appointments of his own. Finally in 1970, the Nixon Board handed down its ruling in Ex-Cell-O: a sheepish capitulation that argued the agency was without power to order compensatory (“make-whole”) relief in refusal-to-bargain cases, even in the face of an employer’s frivolous appeals. The majority reasoned that such relief amounted to compelling contractual agreement in contravention of the NLRA’s statutory “laissez faire” approach to bargaining; that the relief was too speculative; and that it would constitute an illegal punitive penalty.

In an unusual reversal of roles, the reviewing District of Columbia Circuit took a more expansive view of the NLRB’s powers and urged it to rethink its concession. First, the court argued, compensatory relief would not force contract terms on an employer; it and the union were free to bargain above or below the hypothetical wage and benefit amounts the Labor Board would order as remuneration. Second, the mere fact that the relief would require speculation by the Labor Board did not invalidate the approach, as speculative relief was a hallmark of much of American damages law. And third, while the Supreme Court had prevented the NLRB from ordering punitive damages, the relief in question was strictly compensatory rather than penal. Employers would otherwise receive a windfall from their intransigence.

The Nixon Board refused the D.C. Circuit’s proposition and maintained in subsequent cases that the NLRB should not order make-whole relief in refusal-to-bargain cases. According to the majority, the mere fact that damages would largely be speculative—how could NLRB attorneys determine what a new union would have earned in wage and benefit increases if bargaining had taken place?—meant that they should refuse to contemplate this sort of remedy altogether. But this belies a simple lack of motivation to redress employer abuses of the agency’s procedures. As contemporary commentators mentioned, the Bureau of Labor Statistics has tracked industrial economic data for decades. Expert civil servants could very feasibly base their calculations off these indices just as the National War Labor Board did in making its wage adjustments during World War II. The Biden Board should thus finish what the Kennedy-Johnson Board started and adopt the make-whole relief contemplated in Ex-Cell-O. Complaints that the relief is an “extraordinary” remedy would accordingly fall on deaf ears.

All of that is to say, the NLRB should implement the remedy teased in Ex-Cell-O on its own merits, as it would remove much of the incentive employers currently have to abuse the agency’s administrative appeals. However, the Board should also view the remedy as a natural pairing with the beefed-up bargaining orders available under Joy Silk. In a 1969 law review article that examined the doctrine’s murky success record in creating fruitful bargaining relationships where employers still chose to resist unionization (a phenomenon later repeated under Gissel), Benjamin Wolkinson pointed out that the Ex-Cell-O remedy then pending before the Board would do much to prevent employers from escaping the consequences of a bargaining order:

A compensatory remedy would be valuable in Joy Silk cases. As this study has shown, union chances of obtaining contracts in litigated cases are minimal. While the case is being litigated, the union loses the support of many employees who become dissatisfied with the union’s inability to fulfill its promises; following the issuance of a bargaining order, efforts to re-convince employees that their support of the union will bring them tangible economic gains are often futile. Implementing this remedy should help correct the situation. Compensating employees for the losses they sustain as a result of the employer’s failure to bargain would demonstrate that the NLRB and the union can protect their interests. Consequently, employees would be more inclined to support the union during the litigation period and in contract negotiations. The remedy would thus make the employees whole for their losses and enhance the union’s chances of executing contracts in the litigated Joy Silk cases.

…

By eliminating the profit that the Joy Silk employer accrues from his law-breaking, the compensatory remedy would significantly increase the relative cost of his anti-union campaign. Under such circumstances many of the most inveterate anti-union employers might be dissuaded from violating their obligation to bargain collectively.

Abruzzo was thus wise to include both Joy Silk and Ex-Cell-O as part of her vision of the next four years of labor law enforcement. Both remedies should be pursued simultaneously in litigation and presented to the Board for adoption, backed by thoughtful arguments which demonstrate the current broken state of labor law and the ways these long-forgotten remedies could have prevented its degradation. And given the ubiquitous factual scenarios in which Joy Silk and Ex-Cell-O can be applied to, the General Counsel’s office won’t have to look far for suitable test cases.