On December 13, 2022, in a 3-2 decision, the National Labor Relations Board (NLRB or the Board) added consequential damages as a “make-whole” remedy for unfair labor practices, expanding the relief available to workers. Although employers that violated the National Labor Relations Act (NLRA) were traditionally required to pay make-whole remedies to employees, these remedies were limited to actual wages lost because of an employer’s unfair labor practices. Some examples of traditional make-whole remedies included lost benefits, reinstatement, and back pay. The addition of consequential damages as a make-whole remedy will require employers that violate the NLRA to compensate employees for all direct or foreseeable financial harms suffered as a result of the employer’s unfair labor practices.

The decision comes from a case against Thryv Inc., a marketing and software company headquartered in Texas. An administrative law judge decided that the company had violated labor laws by laying off six employees without first bargaining to impasse with the union. The damages assessed included restoring the employees’ prior customer assignments, compensating the employees for the cost of maintaining a car for use on company business, and medical expenses incurred by an employee who had been laid off while on disability leave. The Board reasoned that traditional make-whole remedies were insufficient to compensate the affected employees. The Board further reasoned that it had broad discretion to issue awards that compensate employees for all foreseeable harm suffered as a result of an employer’s actions.

What Is a Make-Whole Remedy?

The purpose of make-whole remedies is to restore the victim to the position they would have been in had the wrongdoing not occurred. In the context of unfair labor practices, the NLRB stated that make-whole remedies should compensate employees for all direct and foreseeable financial harms that result from an employer’s unfair labor practices. Therefore, consequential damages could require employers to compensate an employee for, among other things, the loss of an employee’s home or car, medical bills, and credit card debt. Employees will be required to present evidence, such as receipts and other financial statements, to demonstrate their direct and foreseeable financial harms.

It is important to note that despite the Board’s decision, employers will be able to rebut evidence of consequential damages by proving that the harms are not direct and foreseeable consequences of the employer’s unfair labor practices, or that they would have occurred regardless of the unfair labor practices.

What Does This Mean for Employers?

The new decision has significant implications for employers. The Board emphasized that it would pursue consequential damages in all cases, not just in cases that are egregious. The Board also stated that it would apply its decision retroactively to pending cases. Therefore, employers should be wary of violating the NLRA, even if the violation seems inconsequential.

In cases where the Board orders an employee to be made whole, employers may be ordered to pay consequential damages that could financially harm the employer.

Employers should expect unions to file more unfair labor practice charges as a result of this decision. However, although the NLRA typically applies to union employees, the implications of the Board’s decisions can affect nonunionized workplaces as well. Specifically, given that Section 7 of the NLRA applies to union and nonunion employees, nonunion employees have the right to collectively act to improve the terms and conditions of their employment.

Is the Decision Here to Stay?

The Board’s decision will likely experience some legal challenges and may be appealed. Many, including the Board’s dissenting members, have argued that the new remedy is too broad and exceeds the Board’s authority. However, for now, the decision remains in effect and additional remedies will likely be added by the Board.

(This article courtesy of Lexology from Venables LLP,  written byTodd J. Horn and Imani T. Menard, attorneys)