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Labor Board Adds Teeth With New Consequential Damages Remedy (1)

Dec. 13, 2022, 6:44 PMUpdated: Dec. 13, 2022, 8:53 PM

Employers that violate federal labor law will face having to pay workers for the consequences of their unfair labor practices, thanks to a National Labor Relations Board precedential decision.

The NLRB ruled 3-2 on Tuesday to add consequential damages to its traditional make-whole remedies like back pay and reinstatement.

“‘Make-whole relief’ is more fully realized when it consistently compensates affected employees for all direct or foreseeable pecuniary harms that result from a respondent’s unfair labor practice,” the board said in its ruling.

The new remedy could cover things like medical expenses that workers had to pay out of pocket because they lost health insurance because of an unlawful termination.

The addition of consequential damages gives the NLRB an additional weapon in its limited arsenal for going after lawbreakers and discouraging unfair labor practices. The agency lacks the power to levy monetary fines or impose punitive damages.

While Tuesday’s ruling establishes the board’s power to order consequential damages, NLRB prosecutors have negotiated settlement agreements that pay workers for the economic ramifications of alleged labor law violations.

Those deals have included reimbursement of fees for late rent and car payments, interest payments on a loan that a worker took out to cover living expenses, and the cost of baby formula because of the loss of a workplace breast pumping station.

The ruling came in a case against marketing and software company Thryv Inc., which violated labor law by laying off workers without first bargaining with their union. The company sells Yellow Pages advertising as well as a computer application for small businesses.

Thryv’s attorney, Arthur Telegen of Seyfarth Shaw LLP, didn’t immediately respond to requests for comment on the decision.

Not Just Egregious Cases

The NLRB’s three Democratic members authored the ruling, while the two GOP members dissented.

Under the new precedent, the board will consider the economic consequences of labor law violations in any case that calls for make-whole relief, not just the most egregious cases.

The general counsel’s office, which prosecutes unfair labor practice cases, will present evidence during compliance proceedings to show the amount of economic harm and why an employer is responsible for those damages.

Employers will have the chance to challenge the amount, argue that the harm wasn’t direct or foreseeable, or contend that the harm would’ve occurred regardless of the unlawful conduct.

The Democratic majority rejected the term “consequential damages” for its new remedy in Tuesday’s ruling, despite using that term in its invitation for public comment on the issue.

The phrase is “a legal term of art more suited for the common law of torts and contracts,” the decision said. Instead, the majority called the remedy “compensation for direct or foreseeable pecuniary harms.”

Republicans Decry Standard

The NLRB’s two Republican members agreed that workers should be made whole for losses indirectly caused by labor law violations. But the majority’s standard is too broad, opening the door to speculative damages that exceed the board’s legal authority, they said.

“On its face, this standard would permit recovery for any losses indirectly caused by an unfair labor practice, regardless of how long the chain of causation may stretch from unfair labor practice to loss, whenever the loss is found to be foreseeable,” the GOP members said.

In addition, attempting to calculate consequential damages will make compliance proceedings unnecessarily long and delay workers from getting back pay—and invite “intrusive and potentially humiliating inquiries into employees’ personal financial circumstances,” they said.

The Democratic board members acknowledged the “possibility of increased complexity in compliance proceedings,” but said that shouldn’t stop the NLRB from issuing remedies that further the purposes of the National Labor Relations Act.

“Simplicity of administration will not be given priority when balanced against our overarching duty to make employees whole for violations of the Act,” they said.

The case is Thryv, Inc., N.L.R.B., Case 20-CA-250250, 12/13/22.

(Updated with additional details from ruling.)

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloombergindustry.com