Labor & Employment Law Daily Wrap Up, TOP STORY—3d Cir.: Finding employer had defaulted on settlement by sending notice to employees via email instead of text was punitive, (Jan 12, 2022)

By Ronald Miller, J.D.

The appeals court was satisfied that sending a text of a notice was manifestly not a material part of the settlement agreement, such that “forfeiture” was clearly disproportionate.

The Third Circuit granted an employer’s petition for review and denied enforcement of an NLRB order granting the General Couns ...

By Ronald Miller, J.D.

The appeals court was satisfied that sending a text of a notice was manifestly not a material part of the settlement agreement, such that “forfeiture” was clearly disproportionate.

The Third Circuit granted an employer’s petition for review and denied enforcement of an NLRB order granting the General Counsel’s motion for default judgment because of the employer’s failure to comply with a settlement agreement’s “Electronic Notification” provision requiring it to text the requisite notice to its employees. The Board had concluded the employer “defaulted” on the terms of the settlement agreement merely by sending the requisite notice to its employees by e-mail instead of by text message. The appeals court concluded there was no indication that texting as opposed to some other method of electronic communication (such as e-mailing) had any real significance to the employer, its employees, or the Board itself—and the employer otherwise fully complied with its other obligations under the terms of the settlement (East Brunswick European Wax Center, LLC v. NLRB , January 11, 2022, Cowen, R.).

Unfair labor practice charges. The employer operated a beauty salon. On November 30, 2016, the General Counsel issued a complaint alleging it had violated Section 8(a)(1) and (3) of the NLRA by implying that employees would be discharged if they engaged in union or protected concerted activity, soliciting employee assistance in ascertaining the union and protected activities and support of their coworkers, issuing a handbook rule subjecting employees to discipline for gossiping or complaining about its rules or procedures, prohibiting employee discussion of ongoing internal investigations, discharging one employee for engaging in concerted employee activities, and issuing a final written warning to another employee.

Settlement agreement. On December 19, 2016, the employer signed an informal settlement agreement in which it agreed to: (1) post an appropriate Board notice for 60 days; (2) send the notice by text message to all employees; (3) read, or have a Board agent read, the notice; (4) comply with all the terms and provisions of the notice; (5) pay backpay and interest to the discharged employee; (6) remove any references to her discharge; and (7) notify the regional director of what steps it had taken to comply with the settlement.

The settlement included a “non-admission clause,” which stated that the employer did not admit that it had violated the Act. A requirement of the settlement was that the employer would send a copy of the notice, by text, to all employees who worked at its facility. Further, in case of non-compliance, the regional director would issue a complaint that included the allegations covered by the notice. Thereafter, the General Counsel may file a Motion for Default Judgment with the Board on the allegations of the complaint.

On July 31, 2018, the regional director reissued the complaint after concluding that the employer failed to fully comply with all of the terms of the settlement agreement, including failing to text the notice to its employees. Thereafter, the General Counsel filed a motion for default judgment. On August 3, 2018, the Board issued a notice to show cause why the General Counsel’s motion should not be granted. The employer asked the Board to deny the relief requested by the General Counsel and find that it had fully satisfied the terms and conditions of the settlement agreement.

Default judgment. The Board granted the General Counsel’s motion for default judgment because the employer failed to “fully comply” with the settlement agreement’s “Electronic Notification” provision requiring that it text the requisite notice to its employees. The Board then found that the allegations set forth in the reissued complaint were true, made findings of fact and conclusions of law consistent with the pleading’s allegations, and granted the General Counsel’s request for a “full remedy” for the violations the Board found.

In a default, the defendant’s contentions are not considered, but rather the ex parte allegations of the adversary are accepted as true. Accordingly, “[t]he possibility that an injustice may occur is much more likely in those circumstances since the controversies are decided upon a procedural technicality instead of a ruling on the merits.”

The Board’s authority is limited to remedial actions and does not extend to punitive measures. Here, the employer asked the appeals court to grant relief from the Board’s decision.

Notice of objections. The Third Circuit first addressed the issue whether the employer adequately raised its objections before the Board as required by Section 10(e) of the NLRA. The crucial question was whether the Board “received adequate notice of the basis for the objection.” Here, the appeals court concluded that the employer adequately presented its objections of substantial compliance, disproportionate forfeiture, and punitiveness before the Board, such that it was satisfied that the Board received adequate notice of the basis for the objections.

Merits. Turning to the merits, the appeals court observed that it was undisputed that the settlement agreement provided for the notice to be sent by text but that it was actually sent by e-mail. However, to ensure that an injustice did not arise out of the default proceeding, the appeals court was satisfied that the occurrence of the condition was manifestly not a material part of the agreed exchange and that the “forfeiture” is clearly disproportionate. There was no indication that texting as opposed to some other method of electronic communication (such as e-mailing) had any real significance to the employer, its employees, or the Board itself. Moreover, the employer otherwise fully complied with its obligations under the settlement agreement.

Because the Board overreached and acted punitively, the appeals court granted the employer’s petition for review and denied the Board’s application for enforcement.

The cases are Nos. 20-2120 and 20-2233.

Attorneys: David Jasinski (Jasinski, PC) and Carmen M. Finegan (Law Office of Gerard C. Vince) for East Brunswick European Wax Center, LLC. David A. Seid for National Labor Relations Board.

Companies: East Brunswick European Wax Center, LLC

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