NLRB Judge Decides on Adverse Action for Legitimate Business Reasons

Recently, a National Labor Relations Board (NLRB) administrative law judge (ALJ) issued a decision stating that adverse employment action taken against an employee for legitimate business reasons does not violate the National Labor Relations Act (NLRA) even if the employer violated the NLRA elsewhere. Briefly, the employee had engaged in protected concerted activity in discussing wages with coworkers. However, they also demonstrated serious performance issues that qualified as unprotected misconduct unrelated to the previous protected activity. In April, the NLRB introduced a “Know Your Rights” card series to help inform workers of their rights under the NLRA.

Background of the Case

In the matter of Redi Carpet, Inc., No. 16-CA-292266, a Texas employer hired an employee as a purchasing inventory clerk. In January 2022, the employer hired another employee in the same department as the original employee. Based on experience, the employer hired the new employee at a pay rate of $18.00 per hour. Meanwhile, the previous employee was earning $16.50 per hour for the position. Upon learning of the pay discrepancy, the previous employee complained to management and coworkers, requesting a higher pay rate. According to the employer, the complaints were so disruptive that the newly hired employee resigned. Subsequently, the employer issued the employee a written warning for disruptive work behavior that resulted in a coworker’s resignation. Sometime after the warning, the employer discovered the previous employee’s serious performance issues. The employer stated that the employee had incorrectly processed orders, costing the business about $3 million. In response, the employer terminated the employee for purported legitimate business reasons. Subsequently, the employee filed a charge of unfair labor practices against the employer.

Employee Rights Under the NLRA

The NLRA is a federal law that gives employees the right to organize and to determine whether to have unions represent them during collective bargaining. In doing so, it ensures employees can work together to improve their wages and working conditions. Meanwhile, the NLRB’s statutory jurisdiction covers private-sector employers whose interstate commerce activities exceed specified minimum levels, variable by business type. Coverage is similar to that of the Fair Labor Standards Act (FLSA), one of five employment laws businesses need to know. Under the NLRA, both union and non-union employees have the right to engage in concerted activity whereby two or more employees act for their mutual aid regarding the terms and conditions of their employment. Two principles under the NLRA factored into the ALJ’s recent decision:

• The NLRA protects employees from adverse employment action for engaging in protected concerted activity like discussing wages and benefits with coworkers; but
• Employers can still discipline and/or terminate employees for legitimate business reasons relating to employee misconduct.

Decision on Discipline for Legitimate Business Reasons

Ruling, in part, against the employer, the ALJ found that the employer’s initial written warning against the employee violated the NLRA. The employee was engaged in protected activity when they discussed salaries with management and coworkers. However, the ALJ also pointed out that the employer’s original violation through issuing the written warning did not bar the employer from issuing other adverse employment actions for legitimate business reasons related to the employee’s unprotected misconduct. In the end, the ALJ found the termination lawful because it was for legitimate business reasons. In their decision, the ALJ pointed out that the employer had thoroughly investigated the employee’s errors. Furthermore, they had also fired another employee for a similar error. This was sufficient to show that the employer acted only out of legitimate business reasons and not in retaliation for the protected activity.