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Ethics Questions Await Biden’s Federal Labor Board Nominee

May 27, 2021, 8:22 PM

The Biden administration’s pick to join the National Labor Relations Board could find herself in a position to help former union clients who took on McDonald’s Corp. in a high-profile board case—thanks to a relaxed ethics precedent from the Trump era.

NLRB nominee, Gwynne Wilcox, represented the union-backed Fight for $15 group that accused the fast-food giant of labor law violations in the biggest joint employer liability case in the agency’s history. If she wins confirmation, she’ll be part of an eventual Democratic board majority with the power to remake the legal test for joint employment to benefit workers and unions.

The potential impact of Wilcox’s union work on her ability to participate in board deliberations is likely to take center stage at her Senate confirmation hearing. The White House, which tapped Wilcox to fill a vacant seat on the five-member board on Wednesday, will be able to appoint a third Democratic member after another seat opens in late August.

Wilcox could face criticisms similar to those lobbed at Republican member William Emanuel, who came under fire early in his tenure over another joint employer case linked to his former law firm. Responding to those objections, the agency made ethics determinations that gave Emanuel and other members more authority to participate in cases and rulemakings despite potential conflicts of interest.

“Her nomination is all about conflicts and recusals, and joint employer is going to be right at the top,” said Roger King, a senior labor and employment counsel at HR Policy Association, a trade group representing Fortune 500 companies.

Joint employment has emerged as one of the most hotly contested issues in federal labor law in the last decade. When one company jointly employs the workers directly employed by another, then—under the National Labor Relations Act—it must bargain collectively with the union that represents those workers and face liability for unfair labor practices.

Business advocates have warned that a broad joint employer test could disrupt a range of business-to-business relationships and destroy franchising. Unions and worker advocates have suggested a broad legal test could bring large employers out from behind corporate veils and make them accountable for the contract and for franchisee employees who ultimately labor for them.

Joint Employer Rulemaking

Conflicts and recusals collided with joint employment at the NLRB shortly after Republicans took control of the board early in the Trump administration.

The NLRB established a narrower, more employer-friendly joint employer standard in a 2017 decision called Hy-Brand but then quickly scrapped that decision in the face of concerns that Emanuel should have recused himself from the case due to his former law firm’s involvement.

In the wake of the Hy-Brand withdrawal, the NLRB turned to administrative rulemaking to set the legal test for joint employment. Board leadership announced in 2018 that the agency’s ethics officer had cleared Emanuel to participate in the joint employer rulemaking, which it completed last year.

Wilcox did not immediately respond to an email seeking comment on her recusal plans.

Using rulemaking to retool the joint employer standard was an ethically problematic strategy to avoid Emanuel’s recusal obligations in litigation, said William Gould, who chaired the NLRB during the Clinton administration and now teaches at Stanford University.

Nevertheless, the same rule that allowed Emanuel to participate should also apply to Wilcox, Gould said.

“What’s sauce for the goose is sauce for the gander,” he said.

Litigating Joint Employment

“It seems like there would be a long list of cases she’s conflicted out of,” countered Jim Paretti, an attorney at Littler Mendelson, the management-side firm where Emanuel worked. “She’s not your average lawyer who gets plucked from a union-side firm.”

Yet the NLRB’s handling of Emanuel’s ethics issues could give Wilcox some leeway to consider cases involving former union clients—including the massive joint employment case against McDonald’s, should it return to the board.

At the New York-based law firm Levy Ratner, Wilcox was an attorney representing Fight for $15, an activist group affiliated with the Service Employees International Union, which undertook a years-long legal campaign to hold the fast-food giant as jointly liable for various labor law violations.

Beginning in the Obama administration, NLRB prosecutors took up Fight for $15 allegations that McDonald’s jointly employed franchise workers and shared liability. But the agency’s Trump-era general counsel reached a roughly $170,000 settlement agreement with McDonald’s and several franchisees that absolved McDonald’s of any liability as a joint employer.

An administrative law judge initially rejected the deal, but the NLRB’s 2-1 ruling in 2019 ordered the judge to approve the settlement. Emanuel was in the majority on that three-member panel.

Wilcox has said the McDonald’s case was one of her proudest equal rights achievements. In a question-and-answer dialogue posted by her firm, she said the case represents new, nontraditional ways of organizing.

“I am inspired by the evolution of unions organizing in new areas of work, the formation of worker centers and other organizations that are committed to empowering more workers, and the increased interest in equal rights in the workplace,” she said then.

The NLRB last year rejected the Fight for $15 group’s request to reopen the case, which was based on an Emanuel recusal list that wasn’t in the trial record. That list of cases Emanuel should sit out included McDonald’s.

Possible McDonald’s Redux

Fight for $15 and the SEIU have challenged the NLRB’s order on the McDonald’s settlement in federal court. Briefing at the U.S. Court of Appeals for the District of Columbia is set to wrap in August.

The NLRB’s ethics protocols call for members to sit out cases involving their clients and firms for the first two years on the board. But the agency’s self-review of its ethics procedures—which was triggered by the drama surrounding the Hy-Brand case—produced a report with a lenient standard on recusals.

The report said that members can “insist” on participating in cases even if the agency’s ethics officer found that there’s a conflict of interest. In such a case, the board chair would have to alert the White House.

But that conclusion has never been scrutinized, and a decision made by an NLRB panel that included a member who shouldn’t have participated could be overturned by a court, said Mark Gaston Pearce, former Democratic NLRB chair who directs the Workers Rights Institute at Georgetown University Law Center.

After confirmation, Wilcox would meet with the agency’s ethics officer to determine which cases she should sit out, said Pearce.

“If she’s anything like me, she’s going to engage in the appropriate due diligence,” he said. “A board member can make determination whether, in their personal view, participation would create the appearance of a conflict.”

To contact the reporters on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com; Ian Kullgren in Washington at ikullgren@bloombergindustry.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Travis Tritten at ttritten@bgov.com

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