NLRB Lacked Substantial Evidence to Find Unfair Labor Practice, Eighth Circuit Finds

The Eighth Circuit Court of Appeal has reversed a decision of the National Labor Relations Board, ruling that the Board’s decision lacked substantial evidence to support an unfair labor practice charge of unlawful termination under the Act. The Court held that the absence of evidence of anti-union animus was fatal to the challenge to an Air Force contractor’s decision to terminate 17 employees. The Court’s decision provides important guidance about the types of permissible inferences the Board may make in the absence of “direct evidence” of anti-union animus.

Strategic Technology Institute, Inc. had a contract with the Air Force to repair components of C-130 cargo planes at a base near Little Rock, Arkansas. Importantly, the supervisor for this unit of aircraft mechanics worked remotely from Texas and was generally not present in Little Rock. An employee resigned from his position with STI, and in an exit survey, he disclosed that deteriorating working conditions had caused workers to explore unionizing. That employee spoke with the supervisor and mentioned that employees were considering unionizing. The previous year, the International Association of Machinists and Aerospace Workers successfully petitioned to represent a group of employees with another employer at the same base. Thus, according to the ALJ and the Board, there was ample evidence of union activity as a backdrop to the events that followed.

Then, a screwdriver was found on or inside an engine component, and the Air Force issued a Corrective Action Report to STI. STI responded by discharging three employees for the safety violation and reporting to the Air Force – inaccurately – that prior training, re-training, and counseling had been ineffective in correcting the employees’ prior performance problems. Shortly after the discharges, the STI manager instructed the on-site assistant manager to rate all 41 employees at the Little Rock location. The assistant manager rated all 41 employees a “3” (out of 5), and because each employee had the same rating, they were ranked at random. The bottom 14 employees on the list were all discharged. Additionally, following the discharge, the manager placed identical verbal counseling forms in the 14 terminated employees’ personnel files, indicating, falsely, that each had received prior instances of training, re-training, and counseling, as well as a history of failure to comply with instructions from management.

The Board affirmed the ALJ’s decision finding that STI discharged the 17 employees in violation of Section 8(a)(1) and (a)(3) of the Act. The Board found that management had actual knowledge of union organizing efforts but acknowledged there was no traditional “direct evidence” of anti-union animus of management. Management denied knowledge of union organizing, but the Board applied the “small plant doctrine,” which raises an inference of knowledge in small and open work sites where employees have made no effort to hide their union activities.

The Board also affirmed the ALJ’s finding that STI management’s planting “outright lies” in the discharged employees’ personnel files made its proffered explanation pretextual. As a result, the Board was permitted to make an inference of anti-union animus. The Board ordered a make-whole remedy for the employees, including reinstatement with back pay and benefits.

STI petitioned the Eighth Circuit to review the Board’s decision. The Court granted the petition, vacated the Board’s decision, and remanded the case. The Court applied the Wright Line standard for determining an unlawful discharge. Under that standard, where the motive for termination is disputed, and an employer articulates a facially legitimate reason for the termination, the Board’s General Counsel must prove that protected activity was a “substantial or motivating factor” in the decision. If the GC meets that burden, the employer then must show that it would have taken the same action in the absence of the protected activity. The Court emphasized that to meet the substantial evidence standard, the Board could draw reasonable inferences from the evidence but could not rely on speculation, suspicion, or surmise.

The Court’s decision is primarily based on the lack of evidence of anti-union animus, which made any inferences of anti-union animus unreasonable, and in turn, meant the decision was not supported by substantial evidence. The Court rejected the Board’s application of several inferences to determine that the discharges violated the Act. First, while the “small plant doctrine” may be sufficient to impute knowledge, in the Eighth Circuit, that doctrine alone is insufficient to infer anti-union animus. Second, the temporal proximity between union activity and the discharges was not sufficient to raise an inference that anti-union animus motivated STI’s decision in the absence of additional evidence of animus.

Third, pretext alone is insufficient to create an inference of anti-union animus. The Court found that falsified verbal counseling forms could create suspicion, they did not amount to substantial evidence of a violation of the Act, noting that under Arkansas law the employees were employed at will. Finally, the Court rejected the application of a “mass discharge” or “mass layoff” inference that would relieve the GC of the burden of showing a correlation between union activity and adverse action on an individual basis. Under that standard, the presence of union activity and any mass discharge permits a plant-wide inference of anti-union animus.

Key Takeaways:

• The ALJ noted that the GC asked that the Board overrule its 2019 decision in Tschiggfrie Props., Ltd., which requires the GC to prove a nexus between anti-union animus and the termination. The ALJ declined to overrule Tschiggfrie, so the requirement remains in force. However, the Wright Line standard was clarified by the Board’s 2023 Intertape Polymer Corp. decision to affirm that the Board may support its decision with either direct or circumstantial evidence.
• This case involves the common, more difficult situation in which there is no “direct evidence” of anti-union animus, such as a manager’s disparaging remarks or an employer’s open efforts to resist unionizing.  The Eighth Circuit’s analysis tracks with the more familiar McDonnell Douglas burden-shifting framework, which requires more than just evidence of pretext to establish a claim, but requires a showing of pretext and evidence of discriminatory intent.

The NLRB has petitioned for an en banc rehearing of the case. If rehearing is denied, or the panel’s decision affirmed, it is unclear whether the Board would petition for certiorari with the Supreme Court. Given the Court’s recent trend towards limiting administrative agencies’ discretion, an appeal is unlikely to succeed.

* Kaleb McKinnon, Law Clerk, assisted in the research and drafting of this post. McKinnon is a 3L student at Drake University Law School.