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MikLin Enterprises, Inc. v. National Labor Relations Board

United States Court of Appeals, Eighth Circuit

July 3, 2017

MikLin Enterprises, Inc., doing business as Jimmy John's Petitioner
National Labor Relations Board Respondent Industrial Workers of the World Intervenor National Labor Relations Board Petitioner
MikLin Enterprises, Inc., doing business as Jimmy John's Respondent Industrial Workers of the World Intervenor

          Submitted: September 19, 2016

         Petitions for Review of an Order of the National Labor Relations Board

          Before RILEY, Chief Judge, [*] WOLLMAN, LOKEN, MURPHY, SMITH, COLLOTON, GRUENDER, BENTON, SHEPHERD, and KELLY, Circuit Judges, En Banc.

          LOKEN, Circuit Judge, with whom SMITH, Chief Judge, WOLLMAN, RILEY, GRUENDER, and SHEPHERD, Circuit Judges, join.

         MikLin Enterprises, Inc. ("MikLin") petitions for review of a National Labor Relations Board ("Board") Order holding that MikLin violated Sections 8(a)(1) and 8(a)(3) of the National Labor Relations Act ("NLRA" or "the Act"), 29 U.S.C. §§ 158(a)(1) and (3), when it (i) discharged and disciplined employees who publicly distributed posters suggesting that MikLin's "Jimmy John's" sandwiches posed a health risk to consumers; (ii) solicited employees to aid in removing the posters; (iii) encouraged employees to disparage a union supporter; and (iv) removed union literature from in-store bulletin boards. MikLin argues that the Board misapplied governing law and its decision is not supported by substantial evidence. The Board cross-petitions for enforcement of its Order. A divided panel enforced the Order in its entirety. We granted rehearing en banc and vacated the panel decision. We now conclude that the means the disciplined employees used in their poster attack were so disloyal as to exceed their right to engage in concerted activities protected by the NLRA, as construed in a controlling Supreme Court precedent, NLRB v. Local Union No. 1229, IBEW, 346 U.S. 464 (1953) ("Jefferson Standard"). We therefore decline to enforce the determination that MikLin violated the Act by disciplining and discharging those employees and by soliciting removal of the unprotected posters. We enforce the remainder of the Order, as so modified.

         I. Background.

         A. The "Sick Day Posters" Campaign.

          MikLin is a family enterprise that owns and operates ten Jimmy John's sandwich-shop franchises in the Minneapolis-St. Paul area. Michael Mulligan is president and co-owner; Robert Mulligan, his son, is vice-president. In 2007, several MikLin workers began an organizing campaign seeking representation by the Industrial Workers of the World ("IWW") union. The IWW lost a Board-conducted election in October 2010, filed unfair labor practice charges and objections to the election with the Board, and continued its organizing campaign by urging MikLin to provide employees holiday pay in late 2010. On January 10, 2011, MikLin and the IWW settled the IWW's objections. MikLin admitted no wrongdoing but agreed to a Board-conducted rerun election if the IWW filed for the election after sixty days but not later than after eighteen months.

         With the holiday season passed, the IWW decided its next "march on the boss" group action would be to demand paid sick leave. The IWW concluded that the approach of flu season was a good time to raise the issue. At this time, MikLin's handbook required any employee who would be absent from a shift to find a replacement and notify the store manager. Rule 11 of Jimmy John's Rules for Employment, which employees received when hired, stated: "Find your own replacement if you are not going to be at work. We do not allow people to simply call in sick! We require our employees and [managers] to find their own replacement! NO EXCEPTIONS!" Failure to follow this procedure resulted in termination. MikLin did not offer paid leave for sick employees, though an employee with sufficient tenure was entitled to paid leave to care for a sick child.

         Organizers of the IWW sick leave campaign began their attack in late January and early February 2011 by designing and posting on community bulletin boards in MikLin stores posters that prominently featured two identical images of a Jimmy John's sandwich. Above the first image were the words, "YOUR SANDWICH MADE BY A HEALTHY JIMMY JOHN'S WORKER." The text above the second image said, "YOUR SANDWICH MADE BY A SICK JIMMY JOHN'S WORKER." "HEALTHY" and "SICK" were in red letters, larger than the surrounding text in white. Below the pictures, white text asked: "CAN'T TELL THE DIFFERENCE?" The response, in red and slightly smaller: "THAT'S TOO BAD BECAUSE JIMMY JOHN'S WORKERS DON'T GET PAID SICK DAYS. SHOOT, WE CAN'T EVEN CALL IN SICK." Below, in slightly smaller white text, was the warning, "WE HOPE YOUR IMMUNE SYSTEM IS READY BECAUSE YOU'RE ABOUT TO TAKE THE SANDWICH TEST." Text at the bottom of the poster asked readers to help the workers win paid sick days by going to their website.

         MikLin managers quickly removed the posters from store bulletin boards. On the morning of March 10 -- the day before the IWW could request a rerun election --IWW supporters distributed a press release, letter, and the sandwich poster to more than one hundred media contacts, including local newspapers and major news outlets such as the Associated Press, Reuters, Bloomberg, and NBC News. The press release highlighted "unhealthy company behavior." Its second sentence framed the message: "As flu season continues, the sandwich makers at this 10-store franchise are sick and tired of putting their health and the health of their customers at risk." The release declared: "According to findings of a union survey, Jimmy John's workers have reported having to work with strep throat, colds and even the flu." The release ended with a threat: if Robert and Michael Mulligan would not talk with IWW supporters about their demands for paid sick leave, the supporters would proceed with "dramatic action" by "plastering the city with thousands of Sick Day posters."

         Employees attached to the press release a "sick leave letter" to the Mulligans which asserted that health code violations occur at MikLin stores nearly every day. The employees complained: "By working sick, we are jeopardizing the entirety of [the company's] image and risking public safety." The letter accused MikLin of refusing to put customers first, risking customers' health, and "shoving [customers] to the bottom of the well of importance." Like the press release, the letter concluded with a threat: if the Mulligans would not meet the employees' demands, the campaign would "move forward with [its] Sick Day posters by posting them not only in stores, but on the University's Campus, in hospitals, on street corners, and any other place where postings are common, citywide."

         Also on March 10, four organizers met with Robert Mulligan. They told Mulligan that MikLin's attendance policy and low wages pressured employees to work while sick. Mulligan said MikLin was in the process of reforming its policies. The organizers provided Mulligan a printed version of their letter and press release and warned that, unless MikLin took action to fix the sick day policy within ten days, employees would display sandwich posters throughout the area. Employees who attended felt they had achieved some "common ground."

         MikLin posted a new sick leave policy in each store on March 16. The new policy provided a sliding scale of disciplinary points for absences. An employee who did not report but found a replacement would receive no points. An absent employee who could not find a replacement but notified the store manager at least one hour before shift start would receive one point. An absent employee without a replacement who called less than one hour prior to shift start would receive two points. An absent employee who did not call the manager and did not find a replacement would receive three points. An employee who received four disciplinary points within a twelve- month period would be terminated. The policy emphasized: "With regard to absenteeism due to flu like symptoms, Team Members are not allowed to work unless and until those symptoms have subsided for 24 hours." Between March 10 and March 20, MikLin posted a notice in its stores reminding workers: "[f]or those who 'don't feel good' we have a policy that expects them to find a replacement for their shift . . . . [T]he record clearly shows that we have demonstrated flexibility with regard to excusing those who cannot find replacements."

         On March 20, IWW supporters implemented their threat to plaster the city with a new version of the Sick Day posters they had placed in MikLin stores in January and February. The bottom of the publicly distributed posters incorporated one change: rather than asking for support of the employees' request for paid sick leave, the public posters listed Robert Mulligan's personal telephone number and instructed customers to call him to "LET HIM KNOW YOU WANT HEALTHY WORKERS MAKING YOUR SANDWICH!" A copy of the publicly distributed posters appears as Appendix A to this opinion. Organizers placed posters in various locations near MikLin stores, including lampposts, trash cans, and mailboxes. Robert Mulligan testified that he was "bombarded by phone calls" for close to a month from people who thought it was unsafe to eat at Jimmy John's. Concerned about the effect on MikLin's business, Mulligan and some managers took down the public posters. On March 22, MikLin fired six employees who coordinated the attack and issued written warnings to three who assisted.

         The IWW continued its sick leave attack. In a press release issued a day after the terminations, a discharged employee stated: "It just isn't safe -- customers are getting their sandwiches made by people with the flu, and they have no idea . . . . [R]ather than safeguard public health and do the right thing for their employees and their customers, Jimmy John's owners Mike and Rob Mulligan are trying to silence us." On March 30, the IWW issued another press release stating that "[c]ustomers have a right to know that their sandwich could be filled with germs, " that IWW members have a duty to speak out on this "public health issue, " and that employees "blew the whistle by posting 3000 copies of a poster advising the public of health risks at the sandwich chain." The release quoted one employee as stating: "The unfettered greed of franchise owner Mike Mulligan and Jimmy John Liautaud himself jeopardizes the health of thousands of customers and workers almost every day. We will speak out until they realize that no one wants to eat a sandwich filled with cold and flu germs."

         B. The NLRB Proceedings.

         Following a two-day evidentiary hearing, the Board's Administrative Law Judge ("ALJ") concluded that MikLin violated Sections 8(a)(1) and 8(a)(3) of the Act. Citing prior Board decisions, the ALJ ruled that "Section 7 [29 U.S.C. § 157] protects employee communications to the public that are part of and related to an ongoing labor dispute, " such as the Sick Day posters and related press releases, unless they are "so disloyal, reckless, or maliciously untrue as to lose the Act's protections." To lose Section 7 protection, "an employee's public criticism . . . must evidence 'a malicious motive'" or be made with knowledge of the statements' falsity or with reckless disregard for their truth or falsity.

         The ALJ found that the Sick Day posters were not maliciously untrue. While "it is not literally true that employees could not call in sick, " the ALJ observed, employees "are subject to discipline if they call in sick without finding a replacement." Thus, the assertion, "SHOOT, WE CAN'T EVEN CALL IN SICK, " was "protected hyperbole." The ALJ acknowledged record evidence that MikLin had served more than six million sandwiches over its ten-year existence and had been investigated by the Minnesota Department of Health only two times for food borne disease -- once in 2006 and once in 2007, when the investigating sanitarian "noted overall compliance with food code requirements and no critical violations." The ALJ found, however, "it is at least arguable that [MikLin's] sick leave policy subjects the public to an increased risk of food borne disease, " and MikLin "could have waged its own publicity campaign" to attract consumers. The ALJ made no mention of the false assertion in the open letter accompanying the IWW press release that health code violations occurred at MikLin stores nearly every day. Nor did the ALJ even attempt to analyze and apply the disloyalty principle of Jefferson Standard.

         A divided panel of the Board affirmed the ALJ's findings and conclusions. MikLin Enters., Inc., 361 N.L.R.B. No. 27, at *7 (2014). The majority concluded "that neither the posters nor the press release were shown to be so disloyal, reckless, or maliciously untrue as to lose the Act's protection." The public communications "were clearly related to the ongoing labor dispute concerning the employees' desire for paid sick leave. . . . Indeed, any person viewing the posters and press release would reasonably understand that the motive for the communications was to garner support for the campaign to improve the employees' terms and conditions of employment by obtaining paid sick leave rather than to disparage [MikLin] or its product." Nor were any of the statements maliciously untrue.

         Turning to the question of disloyalty, the majority noted that "Board law has developed considerably in its approach to the question of employee disloyalty." "To lose the Act's protection as an act of disloyalty, an employee's public criticism of an employer must evidence a malicious motive, " even if the public communication "raise[s] highly sensitive issues such as public safety." Accepting the majority's summary of prior Board decisions, the dissenting Member would nonetheless have held the Sick Day posters and press release unprotected, because "it is well established that employees lose the Act's protection if their means of protest are 'flagrantly disloyal, wholly incommensurate with any grievances which they may have, and manifested by public disparagement of the employer's product or undermining of its reputation, '" quoting Five Star Transportation, Inc., 349 N.L.R.B. 42, 44-47 (2007), enforced, 522 F.3d 46 (1st Cir. 2008).

          II. "Sick Day" Poster Issues.

         It is well established that an employer commits an unfair labor practice if it discharges employees for engaging in concerted activities that are protected by Section 7 of the NLRA, including communications to third parties or to the public that seek to "improve their lot as employees through channels outside the immediate employee-employer relationship." Eastex, Inc. v. NLRB, 437 U.S. 556, 565 (1978). Section 10(c) of the Act, however, expressly limits the Board's broad authority to remedy unlawful employee discharges: "No order of the Board shall require the reinstatement of any individual as an employee . . . if such individual was suspended or discharged for cause." 29 U.S.C. § 160(c). The interplay between Section 7 and Section 10(c) was the critical question the Supreme Court addressed in Jefferson Standard.

         A. In Jefferson Standard, the Court upheld the Board's decision that a broadcasting station did not violate the Act when it fired technicians who distributed handbills "making a sharp, public, disparaging attack upon the quality of the company's product and its business policies, in a manner reasonably calculated to harm the company's reputation and reduce its income." 346 U.S. at 471. After bargaining negotiations broke down, employees first picketed the station for treating its employees unfairly. When this tactic failed, the employees distributed thousands of handbills, signed "WBT Technicians, " criticizing the station's poor programming quality and asserting that Jefferson Standard did not value its customers and considered the local city to be a "second-class community." Id. at 468. The Board found the employee handbills unprotected because the technicians "deliberately undertook to alienate their employer's customers by impugning the technical quality of his product." Jefferson Standard Broadcasting Co., 94 N.L.R.B. 1507, 1511 (1951). Though the technicians' purpose was "to extract a concession from the employer with respect to the terms of their employment, " the Board found that they lost the Act's protection when they failed to disclose their interests as employees. Id. at 1511. The Board reasoned that the technicians lost the Act's protection because "the gist of [the technicians'] appeal to the public was that the employer ought to be boycotted because he offered a shoddy product to the consuming public -- not because he was 'unfair' to the employees who worked on that product." Id. at 1512. The Board declined to decide whether the product disparagement in the handbills would justify discharge "had it been uttered in the context of a conventional appeal for support of the union in the labor dispute." Id. at 1512 n.18.

         The Supreme Court, in affirming the Board, decided the case on broader grounds. After quoting the "for cause" language of Section 10(c), the Court declared that "[t]here is no more elemental cause for discharge of an employee than disloyalty to his employer." Jefferson Standard, 346 U.S. at 472. Congress in the NLRA "did not weaken the underlying contractual bonds and loyalties of employer and employee." Id. at 473. Absent a labor controversy, the technicians' conduct "unquestionably would have provided adequate cause for their disciplinary discharge within the meaning of § 10(c). . . . The fortuity of the coexistence of a labor dispute affords these technicians no substantial defense." Id. at 476. Thus, the handbill attack targeting "the quality of the company's product . . . was as adequate a cause for the discharge of its sponsors as if the labor controversy had not been pending." Id. at 477. Though the Court noted several times that the technicians failed to disclose a connection between their labor dispute and the handbill attack, the Court declined to remand for further consideration of whether the handbills were an "appeal for support in the pending dispute, " rather than "a concerted separable attack, " because the attack would be unprotected either way:

Even if the attack were to be treated, as the Board has not treated it, as a concerted activity wholly or partly within the scope of those mentioned in § 7, the means used by the technicians in conducting the attack have deprived the attackers of the protection of that section, when read in the light and context of the purpose of the Act.

Id. at 477-78.

         The Supreme Court's decision not to remand in Jefferson Standard made clear that the Court's disloyalty ruling includes communications that otherwise would fall within Section 7 protection, if those communications "mak[e] a sharp, public, disparaging attack upon the quality of the company's product and its business policies, in a manner reasonably calculated to harm the company's reputation and reduce its income." 346 U.S. at 471. In NLRB v. Washington Aluminum Co., 370 U.S. 9, 17 (1962), the Court confirmed that Section 10(c) "cannot mean that an employer is at liberty to punish a man by discharging him for engaging in concerted activities which § 7 of the Act protects." But the Court explained that Jefferson Standard "denied the protection of § 7 to activities characterized as 'indefensible' because they were there found to show a disloyalty to the workers' employer which [the] Court deemed unnecessary to carry on the workers' legitimate concerted activities." Id., quoting Jefferson Standard, 346 U.S. at 477. Thus, we reject the dissent's suggestion that Jefferson Standard does not apply in this case because the employees' disparaging communications "expressly reference[d] ongoing labor disputes." Post at 31.[1]

         B. Board decisions applying Jefferson Standard initially recognized that employers may protect their businesses from detrimental product disparagement whether or not an employee attack referenced a labor dispute. See Patterson-Sargent Co., 115 N.L.R.B. 1627, 1630 (1956) (employees' handbill asserting replacement workers produced defective paint was unprotected "public disparagement of the quality of the employer's product"); Coca Cola Bottling Works, Inc., 186 N.L.R.B. 1050, 1063-64 (1970) (employees' leaflet warning that inexperienced workers could leave objects such as roaches, bugs, and dead mice in the company's bottles was "the very type of [disparaging] conduct" held unprotected in Jefferson Standard).

         Though the Supreme Court's interpretation of the NLRA in Jefferson Standard remains unchanged, "Board law has developed considerably in its approach to the question of employee disloyalty." MikLin, 361 N.L.R.B. No. 27, at *5 n.18. In 1987, the Board articulated its modern interpretation: "Jefferson Standard held that employees may engage in communications with third parties in circumstances where the communication is related to an ongoing labor dispute and when the communication is not so disloyal, reckless, or maliciously untrue to lose the Act's protection." Emarco, Inc., 284 N.L.R.B. 832, 833 (1987); see Am. Golf Corp., 330 N.L.R.B. 1238, 1240 (2000). Although Jefferson Standard did not involve employee public communications that were reckless or maliciously untrue, we do not question the Board's view that such communications are not entitled to the protection of Section 7 as limited by Section 10(c).[2] Indeed, we applied that standard in St. Luke's Episcopal-Presbyterian Hosp. v. NLRB, 268 F.3d 575, 580 (8th Cir. 2001), citing Montefiore Hosp., 621 F.2d at 517.

         The issue in this case is the Jefferson Standard disloyalty principle -- Section 10(c) permits an employer to fire an employee for "making a sharp, public, disparaging attack upon the quality of the company's product and its business policies, in a manner reasonably calculated to harm the company's reputation and reduce its income." 346 U.S. at 471. On this issue, while always purporting to apply Jefferson Standard's holding, the Board has migrated to a severely constrained interpretation of that decision. "To lose the Act's protection as an act of disloyalty, an employee's public criticism of an employer must evidence a malicious motive." MikLin, 361 N.L.R.B. No. 27, at *5 (quotation omitted). "[E]ven communications that raise highly sensitive issues such as public safety [are] protected where they are sufficiently linked to a legitimate labor dispute and are not maliciously motivated to harm the employer." Id. at *4-*5.

         In our view, the Board fundamentally misconstrued Jefferson Standard in two ways. First, while an employee's subjective intent is of course relevant to the disloyalty inquiry -- "sharp, public, disparaging attack" suggests an intent to harm --the Jefferson Standard principle includes an objective component that focuses, not on the employee's purpose, but on the means used -- whether the disparaging attack was "reasonably calculated to harm the company's reputation and reduce its income, " 346 U.S. at 471, to such an extent that it was harmful, indefensible disparagement of the employer or its product, id. at 477. By holding that no act of employee disparagement is unprotected disloyalty unless it is "maliciously motivated to harm the employer, " the Board has not interpreted Jefferson Standard -- it has overruled it.[3]

         Second, the Board's definition of "malicious motive" for these purposes excludes from Jefferson Standard's interpretation of Section 10(c) all employee disparagement that is part of or directly related to an ongoing labor dispute. While the employees "may have anticipated that some members of the public might choose not to patronize [MikLin's] restaurants after reading the posters or press release, " the Board ruled, their public communications were protected activity because "there is no evidence that [their] purpose was to inflict harm on [MikLin]." Rather, "they were motivated by a sincere desire to improve their terms and conditions of employment." MikLin, 361 N.L.R.B. No. 27, at *6. In other words, the Board refuses to treat as "disloyal" any public communication intended to advance employees' aims in a labor dispute, regardless of the manner in which, and the extent to which, it harms the employer. As the Court held in Jefferson Standard that its disloyalty principle would apply even if the employees had explicitly related their public disparagement to their ongoing labor dispute, once again the Board has not interpreted Jefferson Standard --it has overruled it.

         By requiring an employer to show that employees had a subjective intent to harm, and burdening that requirement with an overly restrictive need to show "malicious motive, " the Board has effectively removed from the Jefferson Standard inquiry the central Section 10(c) issue as defined by the Supreme Court -- whether the means used reflect indefensible employee disloyalty. This is an error of law. See George A. Hormel & Co. v. NLRB, 962 F.2d 1061, 1065 (D.C. Cir. 1992). Our prior cases confirm that an employee's disloyal statements can lose Section 7 protection without a showing of actual malice. In St. Luke's, we expressly rejected the contention that public disparagement of an employer "was protected activity unless maliciously false." 268 F.3d at 579. We explained that cases interpreting Jefferson Standard "establish that an employee exceeds the boundaries of protected activity when she falsely and publicly disparages her employer or its products and services." Id. at 580. By requiring proof that disloyal conduct was the product of a malicious motive, the Board fundamentally misinterpreted both Jefferson Standard and our decisions construing and applying Jefferson Standard.

         Rather than employee motive, the critical question in the Jefferson Standard disloyalty inquiry is whether employee public communications reasonably targeted the employer's labor practices, or indefensibly disparaged the quality of the employer's product or services. The former furthers the policy of the NLRA; the latter does not. See Jefferson Standard, 346 U.S. at 476; see also Five Star, 349 N.L.R.B. at 46. This distinction focuses on the type of harm employees' methods cause. When employees convince customers not to patronize an employer because its labor practices are unfair, subsequent settlement of the labor dispute brings the customers back, to the benefit of both employer and employee. By contrast, sharply disparaging the employer's product or services as unsafe, unhealthy, or of shoddy quality causes harm that outlasts the labor dispute, to the detriment of all employees as well as the employer. See Diamond Walnut Growers, Inc. v. NLRB, 113 F.3d 1259, 1267 (D.C. Cir. 1997) (en banc), cert. denied, 523 U.S. 1020 (1998); compare Montefiore, 621 F.2d at 517 (efforts by striking doctors to discourage patients from entering the clinic were unprotected, although related to labor dispute, because they "appealed to patients to turn away not out of sympathy with the aims of the striking workers . . ., but in the belief that they could not obtain competent treatment there"), and St. Luke's, 268 F.3d at 580 (nurse's public statements relating to ongoing labor dispute were unprotected because she "disparaged the quality of patient care being provided by [her employer] in a way guaranteed to adversely affect the hospital's reputation with prospective patients and the public at large"), with NLRB v. Greyhound Lines, Inc., 660 F.2d 354, 357 (8th Cir. 1981) (bus drivers' factual statements regarding anticipated service delays were not unprotected because they "did not contain any insults or negative insinuations about the Company's services or integrity with respect to its customers").[4]

         C. The Board argues, and our dissenting colleagues agree, that its decision is entitled to judicial deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). It is certainly well established that "the task of defining the scope of § 7 is for the Board to perform in the first instance as it considers the wide variety of cases that come before it." NLRB v. City Disposal Sys., Inc., 465 U.S. 822, 829 (1984) (quotation omitted). But the dissent argues for far greater Board autonomy, relying on the statement in National Cable & Telecommunications Ass'n v. Brand X Internet Services, 545 U.S. 967, 982 (2005), that a prior court of appeals "construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion." This principle, if applied literally here, would leave the Board free to disregard ...

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