Sturgis revisited; Sturgis reversed

By G. Phillip Shuler

The National Labor Relations Board recently issued a significant decision that may come as good news for contractors and those who supply contract laborers to them.

While the impact of the Board's decision in H.S. Care L.L.C d/b/a Oakwood Care Center may not be as profound in the construction industry as in others that rely more heavily on temporary labor, the impact may be felt nonetheless.

Here's what happened, and why it may be important to you.

On Aug. 25, 2000, the NLRB issued a decision, controversial in some quarters, in a case called M.B. Sturgis Inc. In Sturgis, the Board reversed longstanding precedent that allegedly made it difficult for unions to organize temporary workers. Prior to Sturgis, the leading case of Lee Hospital, and those that followed it, held that a proposed unit of nurses - some of whom were employed by the hospital, while others were employed by an independent service provider - was inappropriate, absent consent of both of the employers.

Lee Hospital, which held sway for 10 years, stood for the proposition that a union could not, without consent of both employers, organize a group that was made up of both employees employed by a staffing, leasing or contracting company and permanent employees employed by the primary or customer company. This, of course, was good news for employers who used temporary employees and the companies that provided them.

Sturgis, however, changed everything. There, the board overruled Lee Hospital and adopting rationale that was strained at best held that given the "community of interest" between temporary and permanent employees within the workplace of an employer that uses contract labor, an employer-wide unit consisting of both contract and permanent workers was, indeed, appropriate without the consent of both employers.

Thus, unions were now free to attempt to organize both employment leasing agencies and the companies who depended upon them for contract workers without regard to traditional notions of multiemployer unit consent. In the years following the Board's decision in Sturgis, the effects were felt far and wide.

Sturgis, it has been said, "wreaked havoc in staffing situations by holding that employees jointly employed by the staffing firm and the customer employer were to be included in the same bargaining unit as that employer's regular employees." (NLRB Watch, Nov. 29, 2004). It appears that all of that has changed with the Board's decision in Oakwood.

In Oakwood, the NLRB regional director for Region 29 found appropriate, under the Sturgis rationale, a petitioned-for unit consisting of both employees who were solely employed by Oakwood and employees who were jointly employed by Oakwood and a personnel-staffing agency, N&W Agency Inc.

Oakwood requested review of the regional director's decision from the NLRB, arguing that, among other things, the unit combining two groups of employees was inappropriate under the National Labor Relations Act. Oakwood specifically challenged the Board's prior decision in Sturgis and urged the Board to overrule it. Perhaps surprisingly to some, the Board did just that.

Finding the Sturgis rule "misguided both as a matter of statutory interpretation and sound national labor policy," the Board overruled Sturgis by a 3-2 majority, holding instead that "combined units of solely and jointly employed employees are multiemployer units and are statutorily permissible only with the parties' consent." For the moment at least, the rule of Sturgis is no more.

The Board's decision marks a victory, symbolic and substantive, for the Bush administration and many think that the decision is a harbinger of good things to come in the next three years. Whether this is so, or not, remains to be seen.

What is clear, though, is that the Board's decision in Oakwood will have an immediate and positive impact upon employers who use leased employees. The extent to which this may impact the construction industry is, too, unclear.

Editor's Note: G. Phillip Shuler is a partner in the New Orleans office of Chaffe, McCall, Phillips, Toler & Sarpy.