NLRB Revises Back Pay Formula

NLRB Revises Back Pay Formula

In a 3-1 ruling, the National Labor Relations Board (“Board”) recently revised its back pay formula and radically departed from its traditional remedy for compensating employees who have been unlawfully terminated. The Board’s ruling now supports employees’ rights to recover search-for-work and interim employment expenses, regardless of whether the employees have interim earnings and regardless of the amount in question.

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The case involved King Soopers, Inc. who employed the complainant who was a barista at a Starbucks kiosk in a King Soopers grocery store located in Denver, Colorado. The employee had been asked by a store manager to assist with bagging groceries. She refused and questioned whether she should be doing the work, given that she belonged to a different union. The employee was suspended for five days and then terminated for gross misconduct after a meeting with store managers and her union. In its decision, the Board affirmed the finding that King Soopers violated the National Labor Relations Act (“NLRA”), which protects an employees’ right to engage in protected, concerted activity. It found that she was within her rights to question whether the work she was being assigned belonged to a different union.

As for damages, a former employee has an obligation to mitigate any losses due to an unlawful discharge, which means obtaining alternative employment. For her remedy here, the employee sought two categories of damages – (1) search-for-work expenses; and (2) interim employment expenses, under the make-whole approach. Traditionally, these types of damages were treated as offsets to reduce a former employee’s interim earnings, which were then deducted from any back pay award. Moreover, because the damages were treated as offsets, if an employee was unable to obtain interim employment, he or she could not receive any compensation at all for search-for-work or interim employment expenses. However, in King Soopers, the Board held that the employee was entitled to these categories of damages as separate and apart from any lost wages resulting from an unlawful termination. The Board acknowledged that under the new formula an employee could potentially receive a windfall but that such a windfall was permissible because the new formula helped employees to be made whole and further discouraged employers from committing unfair labor practices.

The Board invited third parties to file amicus briefs in the case, but the only party to file a brief in favor of the old “traditional” approach was King Soopers itself. Although the ruling will likely be challenged, courts generally defer to the administrative agencies in propagating its own regulations and objectives.

Employers should be mindful of this change and factor in the additional potential exposure for damages when dealing with an unlawful termination case involving the NLRA.

Contributor:  Daniel C. Kim, Attorney at Law | Weintraub Tobin