NLRB Advice Memoranda, Kona Grill, National Labor Relations Board, (Jan 12, 2023)

United States Government

National Labor Relations Board

OFFICE OF THE GENERAL COUNSEL

Advice Memorandum

512-5006-5049

512-5072-2000

512-5036-6720-4300

524-3350-6300

524-5012

524-5012-7100

524-5017

524-5017-0100

524-5017-1400

524-5017-2800

524-5073-1114

The Region submitted this case for advice as to whether a refusal-to-hire or refusal-to-consider violation can be found where an applicant chooses to withdraw from the hiring process based on an unlawful statement made during the applicant's interview for employment—specifically, that employee wage discussions are prohibited. We conclude that existing doctrines—namely, the yellow-dog contract precedents as well as the Hobson's Choice constructive discharge theory—should be extended to find a violation in such circumstances. Thus, the Region should urge the Board to find a constructive refusal-to-hire violation where: (1) an applicant reasonably believes the employer has placed an unlawful condition on their hire or employment, by having explicitly or implicitly communicated during the hiring process that Section 7 activity is incompatible with employment; (2) the applicant removes themselves from consideration because of that unlawful condition; and (3) the applicant would have been hired but for their withdrawal from the hiring process. Likewise, the lesser constructive refusal-to-consider violation should be found where only the first two prongs are satisfied. Furthermore, the Region should use this case as a vehicle to clarify the standard for a Hobson's Choice-based violation; that is, urge the Board to make clear that an employee's reasonable belief that employment or hire is conditioned on the forfeiture of Section 7 rights is sufficient to establish that the employee faced an untenable choice, and that the condition need not be “clear and unequivocal.”

We conclude that the Employer placed an unlawful condition on the Charging Party's hire, that the Charging Party withdrew from consideration because of that condition, and that the Charging Party would have been hired but for ​     ​ withdrawal. Alternatively, we conclude that the employer refused to consider the Charging Party for hire because ​     ​ withdrew from the hirin. s rocess Accordin 1 the Re ion should ​     ​ urge the Board to clarify the Hobson's Choice standard. [1]

FACTS

Kona Grill (“the Employer”) is a restaurant chain with a location in Denver, Colorado. The Charging Party, who has about ​     ​ experience working in ​     ​, applied for a ​     ​ position in response to an active listing on Indeed advertising the position. ​     ​ selected for an interview, which was conducted by the restaurant's ​     ​ manager on ​     ​, 2022. After preliminary questions about the Charging Party's work history, the manager raised the subject of pay and benefits. The ​     ​ manager informed the Charging Party that the Employer maintained a policy prohibiting employees from discussing their wages with one another because it causes strife. [2] The Charging Party stated that such a policy is illegal and the ​     ​ manager replied that it is not. The Charging Party reiterated that the policy is illegal, and the ​     ​ manager responded by explaining the rationale behind the policy—namely, that workers with different levels of experience earn different wages and employee discussions about wages only result in everyone wanting higher compensation. The Charging Party responded that the restaurant was not the place for ​     ​ and ended the interview. But for the interviewer's unlawful statement, the Charging Party contends that the job would have likely been offered and accepted.

The Employer's handbook states, under the sections concerning confidentiality and social media guidelines, that those policies are “not intended to preclude or dissuade employees from engaging in legally protected activities such as discussing wages, benefits, or other terms and conditions of employment, or other legally-required activities.” At no point during the hiring process did the Employer provide the handbook to the Charging Party.

ACTION

We conclude that the Employer violated Section 8(a)(1) by conditioning the Charging Party's hire on the forfeiture of Section 7 rights and constructively refusing to hire ​     ​ (or, alternatively, constructively refusing to consider ​     ​ after ​     ​ withdrew from the hiring process. These violations are premised on expansions of two existing doctrines: extending the yellow-dog contract theory of violation to encompass employment conditioned on foregoing protected concerted activity and/or extending the Hobson's Choice theory of constructive discharge to the hiring context. Applying these theories, the Board should find a constructive refusal-to-hire violation where: (1) an applicant reasonably believes the employer has placed an unlawful condition on their hire or employment, by having explicitly or implicitly communicated during the hiring process that Section 7 activity is incompatible with employment; (2) the applicant withdraws from consideration because of that unlawful condition; and (3) the applicant would have been hired but for their withdrawal from the hiring process. Likewise, the Board should find a lesser refusal-to-consider violation where only the first two prongs are satisfied. Finally, in litigating the Hobson's Choice theory, the Region should also ask the Board to clarify the legal standard such that a constructive discharge (or a constructive refusal to hire, as in this case) is established where an employee or applicant reasonably believes employment or hire is conditioned on forfeiting Section 7 rights.

I. The Employer violated Section 8(a)(1) by constructively refusing to hire the Charging Party after placing an unlawful condition on _ hire or employment

a. The Board's longstanding prohibition on contracts forbidding membership in labor unions

The Board has long held that requiring a job applicant to sign a declaration disavowing any union membership or affiliation as a condition of hire (a so-called “yellow-dog contract”) reasonably tends to restrain and coerce employees in the exercise of their Section 7 rights. [3] Such agreements and their solicitation are barred under Section 8(a)(1) and invalid as a matter of law. [4] Furthermore, conditioning employment on such unlawful terms is violative even if the condition is not reduced to writing. [5] When an employer insists that employees forfeit their right to union membership, and an applicant refuses to renounce their affiliation, the Board has found an unlawful refusal to employ. [6] Such a violation can be found even when an individual declines to apply, knowing it would be futile to do so in light of the unlawful condition. [7]

While yellow-dog contracts historically contained explicit language prohibiting union membership or activity, [8] the Board will also find a violation where employees are faced with an implicit choice between employment and retaining their Section 7 rights. For example, in Eddyleon Chocolate, an applicant agreed to sign a yellow-dog contract after being asked to do so at the interview, but she was never actually presented with the written agreement. [9] Nonetheless, the Board found that the employer had unlawfully solicited a yellow-dog contract. Given that the employer raised the prospect of working under an illegal contract at the interview and that the employee was asked to make known her willingness to sign as the final question before she was extended an employment offer, the Board observed that the employee could “reasonably have anticipated that her future employment depended on whether she refrained from union activity.” [10]

The Board made a similar inference in Ryder Truck Rental. [11] There the employer opened a new, nonunion facility and staffed it with four employees who had previously worked at one of its unionized facilities. Prior to being transferred, all four employees were told that the new facility would be nonunion, and one employee was told he would have to “be a nonunion employee” in order to work there. [12] The employer solicited the transferees' signatures on letters explaining the nonunion status of the new plant, but did not explicitly communicate that failure to resign union membership would foreclose the employees' transfer. [13] Nonetheless, the Board affirmed the Section 8(a)(1) and (3) violations because the employer's comments “implicitly suggested to the four transferees … that they would have to alter or terminate their relationship with the [u]nion if they wished to secure employment” at the new facility. [14] Thus, the employees faced a “Hobson's choice” of either “securing employment … by resigning or withdrawing from the [u]nion” or “foregoing possible employment.” [15] Accordingly, the letters were “tantamount” to a yellow-dog contract because applicants had been asked to acknowledge, as a precondition to employment, that the employer was no longer a union contractor. [16]

Finally, in Adco Electric, [17] in the context of an interrogation violation, it was also recognized that unlawful conditions on hire may be communicated implicitly. There the employer “in effect” presented an applicant with yellow-dog terms where the interviewer gave him the handbook, which stated that the employer's policy is to remain nonunion, told him that a union would not be tolerated at the company, and then unlawfully questioned him about his union membership. [18] Although the interviewer never explicitly conditioned the applicant's hire on agreeing not to join a union, it was observed that “[a]ny job applicant smart enough to find the restroom would have no trouble understanding that message—no union supporter will be hired.” [19]

b. The longstanding doctrine deeming a “quit” a constructive discharge where an employee resigns rather than comply with an unlawful condition

A constructive discharge is a quit or resignation that the Board treats as a discharge because of the circumstances in which it occurs. [20] Under the Hobson's Choice line of cases, an employee's voluntary resignation will be considered a constructive discharge when an employer conditions the employee's continued employment on the employee abandoning their Section 7 rights and the employee quits rather than comply with the condition. [21] While the Hobson's Choice must be “clear and unequivocal” and not left to “inference or guesswork” by the employee, [22] more recently the Board has emphasized that an employer need not “literally” or “explicitly” present the dilemma to an employee. [23] The Board views the factual circumstances from the employee's perspective in determining whether an employee was faced with a Hobson's Choice. [24]

For example, in Intercon, an employee who had discussed union organizing with her coworkers received a written warning, which informed her that termination was the next step if she did not improve her “negative attitude” within four days. [25] Finding the employee's subsequent resignation to be a constructive discharge under the Hobson's Choice doctrine, the Board observed that “negative attitude” was a euphemism for pro-union activity and that by conditioning her continued employment on an improved demeanor, the employer had “effectively told [the employee] that she had 4 days to abandon her pro-union attitude if she wanted to preserve her job.” [26] This conduct, the Board determined, led the employee to “reasonably believe that continuing to support the [u]nion and continuing her employment were incompatible,” even though the employer did not “literally state” this condition. [27] The Board thus concluded that the employer's message was “unmistakable,” that the Hobson's Choice was “clearly and unequivocally conveyed,” and that the employee “understood [the] choice and resigned to avoid it.” [28] It therefore rejected the ALJ's conclusion that the employer's “words and conduct” must “expressly convey” the dilemma for there to be a Hobson's Choice. [29]

Similarly, in Titus Electric Contracting, the Board found the employer constructively discharged an employee by informing him he must go home to change out of a union shirt. [30] The Board determined that by telling the employee he was not allowed to work until he changed, the employer had conditioned employment on abandonment of the Section 7 right to wear union insignia in the workplace. [31] It observed that although the employer did not “explicitly threaten [the employee] with discharge,” its “message was clear” that the employee would not be permitted to work while wearing the union shirt. [32]

c. To fully effectuate the Act, the Board should extend the Yellow-Dog and Hobson's Choice doctrines to recognize constructive refusal-to-hire and refusal-to-consider violations.

This case presents an opportunity to expand the above doctrines and urge the Board to recognize a constructive refusal-to-hire or refusal-to-consider violation where an applicant withdraws from the hiring process because their hire or employment is conditioned on refraining from engaging in protected concerted activity. Doing so would best effectuate the policies of the Act and afford appropriate relief to applicants who refuse to relinquish their right to engage in protected concerted activity.

The theory underlying the Board's longstanding prohibition on yellow-dog contracts compels a finding that it is an unlawful condition of hire or employment to require applicants or employees to refrain from engaging in protected concerted activity. Improperly limiting or prohibiting Section 7 activity even before an applicant is hired undermines the Congressional purpose behind the NLRA, whether that restriction takes aim at union affiliation or protected concerted activity. [33] The right of employees to join a union is fundamentally intertwined with their right to engage in protected concerted activity, such that damage incurred by one necessarily weakens the other. [34] Just as discrimination in hiring based on union affiliation is “a dam to self-organization at the source of supply,” [35] hiring practices that eliminate applicants who might take the first steps toward self-organization—that is, who might engage in protected concerted activity, such as discussing wages—likewise serve to preemptively stifle union organizing. [36] In other words, extending the yellow-dog prohibition to hiring that is contingent on the forfeiture of protected concerted activities would prevent employers from discriminating against union activity by proxy, as well as better effectuate the Act's independent promise that safeguards employees who band together for mutual aid or protection. [37] Since the Board has found an unlawful refusal to employ where strikers were denied reemployment because they refused to accept yellow-dog terms—and ordered reinstatement and backpay [38] —it follows that a refusal-to-hire or refusal-to-consider violation should lie when an applicant refuses to relinquish their right to engage in protected concerted activity in order to obtain employment.

The same result can be reached by extending the Hobson's Choice theory of violation to the hiring context. [39] Just as with a constructive discharge—where an employee quits rather than agree to refrain from engaging in Section 7 activity—an applicant who withdraws from the hiring process when faced with an unlawful condition on hire or employment has simply exercised their right to be free from unlawful interference. Given that a constructive discharge is fundamentally a resignation whose circumstances demand a more nuanced analysis, an applicant's choice to remove themselves from consideration because of an unlawful condition on hire or employment warrants a similar approach. In either case, it is the employer's unlawful conduct that impedes the employee from continuing or securing employment.

Extending these existing doctrines, the Board should find that employers commit a constructive refusal to hire where: (1) an applicant reasonably believes that the employer placed an unlawful condition on their hire or employment, by having explicitly or implicitly communicated during the hiring process that Section 7 activity is incompatible with employment; (2) the applicant withdraws from the process because of that unlawful condition; and (3) the applicant would have been hired but for their withdrawal from the process. [40] Likewise, a lesser constructive refusal-to-consider violation should lie where only the first two prongs are satisfied. [41]

Such a framework would best effectuate the Act. First, it would recognize and appropriately compensate applicants for harm caused by an employer. Ordering an employer to rescind its unlawful policy and cease imposing the unlawful condition is not enough to put the applicant back in the position they would have been in but for the employer's unlawful conduct—with a job free from coercive rules or policies—if it can be shown that they would have been hired, together with backpay for wages that would have otherwise been earned. Second, it would provide a much more effective deterrent against hiring practices that filter out applicants who are inclined to exercise their Section 7 rights. Such practices are akin to a “preemptive strike” designed to suppress future protected activity—a violation of Section 8(a)(1) under extant law that affords the discharged employee make-whole relief. [42] The policy rationale underpinning such a violation is equally applicable where an applicant withdraws from the hiring process based on a reasonable belief that their hire or employment would be conditioned on forfeiting their Section 7 rights.

d. The Employer unlawfully conditioned the Charging Party's hire or employment on forfeiture of Section 7 rights, constructively refused to hire _ or, in the alternative, constructively refused to consider _

Applying the foregoing framework, we conclude that it is appropriate to pursue a constructive refusal-to-hire allegation in this case and, in the alternative, a constructive refusal-to-consider allegation.

As an initial matter, we find that the Employer imposed an unlawful condition during the interview since the Charging Party reasonably believed that ​     ​ hire or employment was predicated on the abandonment of Section 7 rights. The interviewer's unlawful statement that the Employer prohibits discussions about wages among its employees [43] signaled to the Charging Party that such conversations are incompatible with employment at the restaurant. Even after the Charging Party asserted that such a policy is illegal, the interviewer doubled down on the policy by reasserting its lawfulness and explaining the rationale behind it. This further suggested to the Charging Party that relinquishment of that core Section 7 right was non-negotiable. The Board has repeatedly held that employers need not literally state the dilemma it presents to employees through such statements, nor explicitly assert the consequences for failing to conform. [44] That the ​     ​ hire or employment Employer did not openly inform the Charging Party that depended on refraining from discussing wages does not dull the natural implication of the interviewer's statements. The very act of raising this supposed “policy” in the context of the employment interview—especially where it was in conflict with the handbook [45] —indicates that the Employer's purpose was to determine whether the Charging Party would conform to the unlawful condition. [46] Further, the manager's conveyance of the policy supports the Charging Party's reasonable belief that ​     ​ hire was contingent upon the abandonment of Section 7 rights; had the Employer not been prepared to offer the Charging Party employment, albeit conditioned on this unlawful policy, the manager would have had no reason to communicate the policy at all. The Charging Party understood the choice inherent in the situation and ended the interview to avoid it. [47]

In so finding, we emphasize that it is the employees' perspective that ultimately dictates whether an employer offered a Hobson's Choice. [48] The economic dependence of employees on their employers leads the former to “pick up intended implications of the latter that might more readily be dismissed by a more disinterested ear.” [49] Job applicants arguably occupy an even more vulnerable position, which can heighten their intuition about the true stakes intrinsic in certain employer inquiries or cause them to answer in a particular manner out of economic necessity. [50] Here, the Employer highlighted its wage policy after conducting at least a sortion of the interview, allowing the Chargin Party to reasonably infer that ​     ​ future with the Employer depended on ​     ​ willingness to abandon ​     ​ right to discuss wages and that it would be futile to continue pursuing the job opening if ​     ​ were unwilling to refrain from Section 7 activity. [51]

We also find the second and third prongs of the proposed framework satisfied here. The unlawful condition was the reason the Charging Party withdrew from the hiring process. The Charging Party indicates that the unlawful policy caused ​     ​ to terminate the interview. Indeed, ​     ​ stated to the interviewer that the Employer was not the right place for ​     ​ and left on the heels of the back-and-forth about the lawfulness of the prohibition on wage discussions. The fact that the Charging Party pushed back on the lawfulness of the policy, despite being in a vulnerable position, reinforces that ​     ​ troubled by it. Furthermore, the Charging Party believes ​     ​ would have been offered the job and accepted it but for the exchange about the wage policy. As noted earlier, that the interview progressed to a discussion of wages and benefits which were raised by the Employer, supports the Charging Party's belief that ​     ​ on the verge of being hired. And even if the Employer can show that it would not have hired the Charging Party, it undoubtedly removed ​     ​ from consideration once the Charging Party terminated the interview. Accordingly, a constructive refusal-to-consider allegation can be established in the alternative. [52]

II. The Board should clarify that an employee faces a Hobson's Choice when they reasonably believe employment is incompatible with the exercise of Section 7 rights.

In litigating this case, the Region should urge the Board to clarify the standard for finding a Hobson's Choice violation. The “clear and unequivocal” standard, which originated in ComGeneral and has been repeatedly recited as the benchmark, is in tension with other cases that focus on an employee's reasonable interpretation of the circumstances. Accordingly, the Region should urge the Board to clarify that an employee faces a Hobson's Choice when they hold a reasonable belief that the employer has conditioned hire or employment on the abandonment of Section 7 rights—that is, a reasonable belief that exercising Section 7 rights is incompatible with employment.

The “clear and unequivocal” standard was first articulated by an administrative law judge, summarily affirmed by the Board, in ComGeneral. [53] In that case, the employer had laid off a number of employees in the wake of organizing activity at its facility. Two employees separately quit during the spate of layoffs, one because he feared he might also be fired along with the other union supporters and the other because she found the employer's treatment of other employees unfair and no longer wanted to work for the company as a result. [54] Neither was deemed to have been constructively discharged because they were not faced with a “clear and unequivocal” Hobson's Choice in which the predicament was “not … left to inference or guesswork.” [55] The ALJ, affirmed by the Board, reasoned that neither was told to forego union activity or leave the plant, and that the employee who quit for fear of termination had reached a “wholly speculative” conclusion based on the layoffs of other workers. [56]

One of the cases relied on in ComGeneral for the “clear and unequivocal” standard, Masdon Industries, Inc., [57] actually supports the notion that an employee's interpretation is relevant to whether a Hobson's Choice exists. There, the employer told striking unrepresented employees it would move the plant to another town rather than recognize a union. [58] In rejecting the constructive discharge allegation, the Board reasoned that the employer did not threaten to discharge the strikers, “nor were [its] remarks so interpreted by the striking employees.” [59]

A better standard—reasonable belief—was suggested in Intercon. [60] As discussed above, section I.b., there the Board determined that an employee was constructively discharged when she was informed she would be imminently terminated unless she improved her “negative attitude,” a euphemism for her union activity. [61] The Board recited the “clear and unequivocal” standard before determining that the test was satisfied because the employee “understood the choice and resigned to avoid it.” [62] Although the employer did not “literally” state the condition, it “effectively” told her that she had mere days to abandon her pro-union attitude in order to keep her job; therefore, the employer led her to “reasonably believe” that her continued union support. was incompatible with continued employment. [63] Thus, the Board relied on the employee's response to the employer's conduct to determine whether the choice was clear and unequivocal.

Considering the above, the Region should urge the Board to clarify the standard underlying the Hobson's Choice doctrine to ensure that employees who reasonably believe they must choose between forfeiting their statutory rights or abandoning their job are afforded relief under the Act. Such an approach is more consistent with the Board's actual application of the Hobson's Choice framework both pre- and post-ComGeneral. [64] It would also better recognize the “economic dependence of the employees on their employers,” which causes employees (and applicants) to more readily discern “intended implications” behind employer communications. [65] Finally, a reasonableness standard would also prohibit savvy employers from escaping liability for their unlawful conduct so long as they refrain from uttering magic words. [66]

CONCLUSION

Based on the foregoing, the Region should ​     ​ urge the Board to apply the proposed framework described above and adopt a reasonableness standard for determining whether an employee is faced with a Hobson's Choice.

⁶⁷ ​     ​ The oral or unwritten ban on wage discussions, ​     ​ involve the same Wal theory and arise fro in the same factual situation and sequence of events. ​     ​ allegation involves employees' right to discuss wages and the Employer's alleged attempt to interfere with that right. ​     ​ The allegations occurred in the same factual setting—a single employment interview—and involved the same people. ​     ​ The Emplover's alleged unlawful statement forms the basis for the unlawful condition ​     ​

/s/

R.A.B.

ADV.27-CA-294651.Response.KonaGrill. ​     ​