The NLRB and the States

Interesting argument here from Benjamin Sachs about the NLRB empowering state experimentation.

But there is another, as yet untapped, mechanism for relaxing preemption rules and enabling states to improve upon the federal system. That mechanism is hiding in plain sight in an obscure section of the federal statute. § 14(c), enacted by Congress as part of the 1959 amendments to the NLRA, gives the National Labor Relations Board the authority to cede jurisdiction to states in a wide range of cases. In particular, § 14(c)(1) reads:

The Board, in its discretion, may, by rule of decision or by published rules . . . decline to assert jurisdiction over any labor dispute involving any class or category of employers, where, in the opinion of the Board, the effect of such labor dispute on commerce is not sufficiently substantial to warrant the exercise of its jurisdiction . . . .

§ 14(c)(2), in turn, allows states to assume the jurisdiction that the Board cedes under § 14(c)(1).

Labor disputes involving a “class or category of employers” — i.e., an industry — may have an insufficient effect on interstate commerce because the industry in question is itself just too small or too local in nature, and, indeed, this has been the conventional understanding of the types of cases reached by § 14(c). To the extent that § 14(c) amounts to a kind of discretionary small-business exception to NLRB jurisdiction, it constitutes another very modest incursion into general preemption principles. But, and here is the far more important point, § 14(c) promises to be more than a small–business exception. The section also gives the Board discretion to determine that an industry’s labor disputes are unlikely to have a substantial effect on interstate commerce because a state regulates — or intends to regulate — the industry’s labor relations in such a way so as to minimize such disputes. As the Second Circuit put it:

The impact of labor disputes on commerce is, of course, the overall guide, but the dollar volume of business in interstate commerce is not the only yardstick that the Board can or should consider. Many other factors can be important. For instance, if the states regulate a given industry adequately, labor disputes in that industry might well be reduced to the point where their impact on commerce would be insignificant, whatever the volume of interstate commerce in the industry.

Stated even more simply, § 14(c) can be read to give the Board discretion to cede jurisdiction over an industry to a state when the state adequately regulates — or intends to regulate — the labor relations of that industry. This type of cession of jurisdiction is far from a modest exception to labor preemption. To the contrary, § 14(c) gives the Board a mechanism to unpreempt extensive sectors of the contemporary labor market and thereby to give states the latitude to experiment with alternative forms of labor law in those sectors of their economies.

Here’s how it could work. A state could seek the Board’s opinion — through an advisory opinion following hearings or through a rulemaking — as to whether the Board would decline to assert jurisdiction over an industry in that state. In its petition, the state could detail the types of labor regulation it would enact, or has enacted, to prevent labor disputes in the industry. For example, a state could enact a comprehensive system of collective bargaining for employees in a particular industry in the state. Such a system could provide for many pro-union policies, like works councils, members-only unions, and card check recognition at the level of the individual workplace, as well as sectoral representation and sectoral bargaining at the level of the industry. It might also provide union organizers with the right to access employees on employer property and set up a procedure to allow employers to receive compensation for such access rights. Just as the 1935 Congress viewed the granting of union organizing and collective bargaining rights as an important means to reduce labor disputes, the Board could today decide that these state-level policies would have similar results. And if, in the Board’s opinion, the state’s proposal would reduce labor disputes so that their effects would not be “sufficiently substantial to warrant the exercise of jurisdiction,” the Board could decline jurisdiction and thereby unpreempt the state’s policy. The state would then be free to implement or enforce its alternative labor law.

§ 14(c)(1) does contain a proviso that limits the sweep of the Board’s discretion to unpreempt state law. That proviso states that the Board “shall not decline to assert jurisdiction over any labor dispute over which it would assert jurisdiction under the standards prevailing upon August 1, 1959.” There are two ways to interpret this proviso, both of which allow for a significant range of Board action, but only the second of which takes full account of the relevant statutory language.

Prior to 1959, the Board had adopted ten specific jurisdictional standards for ten industries, all based on the dollar amount of business conducted by employers in the industry. Those industries were: non-retail; office buildings; public utilities; newspapers and communications systems; retail (including restaurants); hotels; transportation enterprises, links, and channels of interstate commerce; transit systems; taxicabs; and national defense. For example, under the 1959 enumerated standard for the hotel industry, the Board would assert jurisdiction over a hotel that had $50,000 in gross revenues but not over a hotel that had less revenue. The first way to read the § 14(c) proviso is that the Board cannot, today, decline jurisdiction over an employer that meets one of these ten volume-of-business standards. On this reading, in addition to its discretion to cede jurisdiction over small, local employers, § 14(c)(1) would give the Board the power to unpreempt those industries not covered by one of the ten enumerated volume-of-business standards. Given that this power would include the option of ceding jurisdiction over health care, for example, § 14(c) significantly frees states to act even on this first reading.

There is, however, a potential problem with this narrow reading of the Board’s § 14(c) power — a problem that suggests § 14(c) is amenable to a much broader potential sweep. The problem arises because the ten enumerated volume-of-business standards were not the only way the Board made jurisdictional decisions prior to August 1, 1959. The Board had on at least one occasion utilized a second standard for making jurisdictional decisions prior to the operative date. In 1955, the Board declined to assert jurisdiction over a unit of security guards at a harness racetrack not because the security contractor (or the racetrack) did less than a certain amount of business. Rather, the decision to decline jurisdiction was based on the fact that, inter alia, the labor relations of the industry in question were “the subject of special laws enacted by the State of New York for the regulation of employment at race tracks and for the representation of race track employees by labor organizations.” That is, there were two standards according to which the Board had declined jurisdiction prior to 1959: the volume-of-business standard and the sufficient state regulation standard.

To know for any particular industry whether the Board “would assert jurisdiction under the standards prevailing upon August 1, 1959,” then, we must ask two questions: we must ask whether the volume-of-business in that sector is above the relevant threshold and whether state law regulating the sector will minimize labor disputes to the extent that such disputes will not have a substantial effect on commerce. Only if the answer to the first question is yes and the answer to the second question is no, can we say for certain that the Board would assert jurisdiction under the pre-1959 standards. This means that if the answer to the second question is yes (if the Board finds that state law would sufficiently minimize labor disputes) then we cannot say for certain that the Board would have been compelled to assert jurisdiction under the standards prevailing in 1959. And this means, in turn, that a Board decision today to cede jurisdiction over an industry because of state regulation of that industry’s labor relations could survive the proviso even if the industry satisfies one of the enumerated volume-of-business standards. For example, should California propose to enact a comprehensive labor law for the hospitality industry, the Board could have discretion to cede jurisdiction to California even over hotels that exceed the 1959 volume-of-business standard.

I am not a labor lawyer so I can’t so much speak to the case law Sachs cites, but I’m surely interested in hearing more.