NLRB revises back pay formula



Publication August 2016

In a 3-1 ruling, the NLRB (Board) revised its formula for compensating workers who have been unlawfully terminated.  The Board ordered King Soopers, Inc. to compensate a former employee for her search-for-work and interim employment expenses regardless of whether those expenses exceed her interim earnings, and to calculate such expenses separate from taxable net back pay, with interest.  This decision is a radical departure from the Board’s traditional remedy which would order search-for-work and interim employment expenses paid as an offset to reduce interim earnings and included in the calculation for back pay.

The Board’s decision in King Soopers, Inc., stems from a charge that the employer, King Sooper, violated the National Labor Relations Act (Act) by unlawfully interrogating the employee about her protected, concerted activity, and twice suspending before ultimately terminating the employee for engaging in protected, concerted activity.  Specifically, the employee, who was a barista at the Starbucks kiosk in King Soopers’ Denver, Colorado grocery store, was asked by the store manager to assist with bagging groceries.  The employee questioned whether she should be required to bag groceries because she belonged to a different union.  She also asked if she could take her lunch break since she would be leaving soon.  The store manager accused the employee of refusing to bag groceries and suspended her for five days.  The employee was suspended for an additional five days and ultimately terminated for gross misconduct after a meeting between the employee, her union representative, and three managers to discuss the employee’s first suspension grew tense as the parties discussed whether the employee refused to bag groceries or just questioned the propriety of the task.

In its decision, the Board affirmed the Administrative Law Judge’s finding that King Soopers violated the Act when it suspended and terminated the employee after she engaged in protected, concerted activity by questioning whether the work she was assigned to do belonged to a different union and by participating in the grievance meeting regarding her first suspension.  The Board then quickly proceeded to address the make whole remedy requested by the NLRB General Counsel.  The General Counsel had asked the ALJ to include two types of expenses: (a) search-for-work and (b) interim employment expenses, in a make-whole remedy as opposed to just ordering the traditional back pay award.  The ALJ, however, deferred to the Board.

The Board majority found that the General Counsel’s requested remedial changes were warranted in order to satisfy the Board’s statutory obligation to provide meaningful, make-whole relief for losses incurred by former employees as a result of a respondent’s unlawful conduct.  The Board reasoned that the remedial changes are consistent with the Act and with Board precedent which has held search-for-work and interim employment expenses to be a permissible remedy.  For example, the Board references its decision in Crossett Lumber, 8 NLRB 440, 497-98 (1938), where the Board found it appropriate to compensate former employees for search-for-work and interim employment expenses, yet it treated them as an offset to interim earnings rather than as a separate element of the back pay award.  The Board in King Soopers, Inc. believes these expenses are an injury separate and apart from lost wages that stems from the unfair labor practice.  Thus, in order to fully effectuate the policies of the Act, the Board ruled that these expenses should be separate remedies and not included in back pay, which is taxable as wages. 

With this decision, the Board revised its traditional make-whole remedy which treated search-for-work and interim employment expenses as offsets that reduced former employees’ interim earnings, which were then subtracted from the back pay award.  Traditionally, the Board would not award search-for-work and interim employment expenses that exceeded interim earnings; and because these expenses were treated as an offset to interim earnings, former employees who were unable to find interim employment did not receive any compensation for search-for-work or interim employment expenses.  Under the new formula, not only may former employees receive search-for-work and interim employment expenses regardless of whether they have interim earnings, they may receive such expenses regardless of the amount in question.  The Board reasoned that such an employee windfall is permissible where it bears an appropriate relation to the policies of the Act, which are to make victims of unlawful discrimination whole and discourage the commission of unfair labor practices.   

In his dissent, Member Miscimarra noted that although the Board’s traditional treatment of search-for-work and interim employment expenses may result in less than make-whole relief for some former employees, the Board majority’s decision is not in keeping with the policies of the Act where it permits an employee to receive a windfall in compensation.  Such an award would amount to compensatory damages, which are not permitted under the Act.  Member Miscimarra also noted that the Board’s decision is a retreat from the formula used by other federal agencies when calculating back pay.

It is highly anticipated that the Board’s decision will be challenged.  However, as the Board notes, the Supreme Court gives extreme deference to administrative agencies and their formulation of remedial awards.  That being said, when seeking damages, the General Counsel must establish that search-for-work and interim employment expenses were actually incurred in order for them to be awarded. Therefore, make sure to request job search documents and documents detailing interim expenses and income early in the discovery process.

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