Tesla, Inc. and the National Labor Relations Act: A Reminder that Labor Law Applies to Nearly All Employers

If you think your business is immune from unions and union laws because you have not signed a collective bargaining agreement – think again. Many small to medium sized businesses believe they cannot be charged with violating labor laws because they are not a “union shop.” This thinking is incorrect and can lead to great financial distress or ruin if employers do not understand how labor law can affect their business, even if their employees never formed a union.

On September 27, 2019, an administrative law judge found that Tesla, Inc. (“Tesla”) had committed multiple violations of the National Labor Relations Act (the “Act”) when it interfered with employees’ efforts to join a union. Notably, Tesla is not a “union shop” or a party to a collective bargaining agreement (“CBA”). This case demonstrates that employers may be held liable for violating the Act because of conduct or policies that, at face value, appear to have no relationship to unions.

The Act Protects the Right to Organize

Originally implemented in 1935, the Act contains many provisions, amended through the years, that apply to nearly all private sector employers. The Act does not apply to public-sector employees, agriculture or domestic workers, independent contractors, workers employed by a parent or spouse, and employees of air and rail carriers (covered by the Railway Labor Act). While supervisors are not directly protected by the Act, the Act (under interpretive case law) protects supervisors who experience retaliation because they refuse to violate labor law.

The Act is subject to decades of interpretation by the courts and the National Labor Relations Board (the “Board”). As a result, labor law is complex and contains many traps for the unwary. Employers can reduce their risk of a violation, however, by understanding several general principles and by involving experienced labor law counsel when forming policies.

Generally, Section 7 of the Act guarantees the right of employees to organize for better working conditions, such as higher pay, better benefits, or more vacation time. Section 8 of the Act prohibits employers from interfering with their employees’ Section 7 rights. If employees believe their employer violated the Act, they can submit a complaint to the Board. If the Board believes the complaint has merit, the Board may appoint an attorney (or attorneys) to investigate and file a formal charge. Assuming the matter does not settle, an administrative law judge will then determine whether the employer is liable for a labor law violation.

Tesla’s Alleged Violation of Labor Laws

In the summer of 2016, several employees with the help of the United Automobile Workers (“UAW”) formed a Voluntary Organizing Committee to unionize Tesla’s workforce. This committee held regular meetings and distributed pro-union literature inside and outside the plant. Employees also wore union-friendly shirts and stickers during work hours. One of the employees wrote a blog article about the working conditions at Tesla.

Security guards at Tesla began asking leafletting employees to show their badges, or outright told them to leave the premises. One Tesla supervisor allegedly told employees that the distribution of stickers, pamphlets and leaflets would be grounds for termination. Tesla also disciplined two of the employees most heavily involved in organizing efforts, one of whom was terminated. Elon Musk, Chief Executive Officer of Tesla, made a post on Twitter stating that employees would no longer have stock options if Tesla unionized.

On September 27, 2019, an administrative law judge found, among other things, that Tesla had violated the Act based on the conduct described above.

Many of the findings in this case were based on the administrative law judge’s credibility determinations, and Tesla has appealed the decision. Nonetheless, this matter serves as a warning to employers that they may face a Board charge alleging labor law violations if employees believe the employer interfered with their right to unionize.

Hiring and Firing

When hiring, employers may be concerned that an applicant is sympathetic to unions or may even lead an organizing effort, but the Act forbids an employer from making hiring decisions based on an applicant’s union affiliations. For this reason, employers should not ask questions that relate to unions during the hiring process.

An employer should also exercise care when firing or otherwise disciplining an employee actively involved in organizing. Of course, an employee is not shielded from all discipline merely because of union activity; and the vast majority of employment is at-will. Regardless, employers should be prepared to articulate a legitimate business reason for terminating or disciplining an employee involved in unionizing. Careful documentation and early involvement by experienced counsel can reduce the inherent risk that comes with any disciplinary action.

Leafletting

Handbills are a common part of organizing efforts. While leafletting can be disruptive, an employer may violate labor law if it prevents leafletting that does not threaten, coerce, or restrain anyone from doing business with the employer. Employers concerned about leafletting should thus identify legitimate business reasons for any restrictions. Ideally, an employer facing a Board charge related to leafletting can show, with objective evidence, that the leafletting prevented others from doing business with the employer.

Union Garb

According to the Act’s interpretive case law, an employee has the right to wear union insignia. An employer may still enforce policies requiring certain clothing, however, if the employer can show the policies are necessary due to “special circumstances,” such as safety issues, the importance of protecting the employer’s public image, or when necessary to maintain employee discipline.

In the Tesla case, the administrative law judge found that Tesla violated the Act because its “team wear” policy did not allow employees to wear union insignia. On the other hand, the administrative law judge rejected allegations that Tesla violated the Act by unequally enforcing the “team wear” policy––the evidence showed Tesla enforced its policies regardless of whether the offending garb was related to unions.

Employers should be wary of policies that prevent an employee from wearing any union insignia. These policies should be narrowly tailored to “special circumstances” recognized by the Board. Further, an employer should enforce these policies equally, regardless of whether non-conforming clothing is related to unions.

Statements Regarding the Union

An employer violates labor law if it threatens to remove benefits if employees unionize, though an owner may make statements reflecting their personal opinions or about the detrimental effects of a union contract.

In the Tesla matter, the administrative law judge found that Musk violated the Act when he posted a Twitter message stating employees would lose stock options if Tesla employees joined the UAW. This decision was based on the fact Musk did not make any reference to good-faith collective bargaining nor did he present objective facts to support the loss of benefits. The administrative law judge also found that Musk’s statements on his personal Twitter account could be attributed to the company––Musk was Tesla’s highest-ranking officer and, according to the Act and its case law, an employer is liable for a supervisor’s actions.

While there may be circumstances where an employer (or its owner) can issue anti-union statements without violating the Act, such statements should be carefully phrased. The Board may charge an employer with a labor law violation for making such statements, even if they were not intended to discourage unionization and even if they had no effect on collective bargaining. Employers (and their owners) wishing to make public statements about unions should discuss the intended statement with experienced labor law counsel before doing so, even if the statement is made on a personal social media account.

Conclusion

Labor law is complex and can affect many different aspects of business. Most employers, with some limited exceptions, are subject to the Board’s jurisdiction. To reduce the risk of a Board charge alleging a labor law violation, employers should consider a legal review to ensure their policies and procedures comply with the Act. The costs of such preventative measures are almost certainly less than the costs of litigating against the Board.