In litigation, the “American Rule” applies …. unless Congress states otherwise.   Unless the NLRB states otherwise.

That is the lesson employers can take away from a recent Board case, Camelot Terrace. The facts of the case are pretty dry — the employer arguably engaged in bad-faith bargaining.   One remedy in this situation is that the employer has to foot the negotiating expenses for the union.

But the NLRB took it one step further and ordered the company to also pay the litigation expenses for both the Union and the NLRB.   This contravenes what is commonly referred to as the “American Rule” — in that each side bears its own litigation expenses.   Like every issue in the law, there are exceptions to this, but, under a 1975 Supreme Court case, these exceptions are supposed to come straight from Congress — here’s the quote from the Supreme Court:

“Circumstances under which attorney’s fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine”

In a case before the DC Circuit some years ago, that court specifically found that nothing in the National Labor Relations Act gives the NLRB the authority to impose attorney’s fees on the losing party.   In Camelot Terrace,  the Board relied on a broad but extremely rarely used exception to the “American Rule” for “bad-faith.” The DC Circuit did not directly rule on that issue in the prior case, only because the NLRB abandoned the argument.

The end result for employers is simple: the current NLRB believes that it can force you to pay litigation costs for both the Union and the Board in an unfair labor practice case. The Courts might ultimately disagree, but, for now, Camelot Terrace could require you to pay up.

The New York Times has a very interesting story on lockouts and their increased use by employers. The story paints a dreary picture for employees — according to the story, employees are facing foreclosure and can’t pay for new clothes for their kids, while companies are out hiring replacement workers and humming along, business as usual.

The reality for many lockouts is more nuanced of course. But the story begs an important question — why exactly have the Company and the union been unable to reach an agreement? What issue in the collective bargaining process is leading to such labor strife?

Wages? Unlikely. Buried in the story is a little nugget that wages for replacement workers were actually higher than regular employees:

“American Crystal has hired more than 900 replacement workers to keep its plants running. Federal law allows employers to hire such workers during a lockout, although they cannot permanently replace regular employees. Employers can pay the replacements lower wages, although as is the case with American Crystal, the companies sometimes need to offer higher wages and help pay for housing to attract replacements.”

Without being privy to the American Crystal negotiations, it’s possible that what drove this lockout was health care and pension costs. As most employers know, the impact of rising health care costs and many union health care plans that offer overly generous benefits is a toxic combination. On top of that, many unions continue to want employers to offer retirement plans that are simply unheard of in other non-unionized environments.

A lockout can be an unfortunate event for all parties involved, but for companies faced with health care and pension costs that are simply unsustainable, there might not be too many other options. In our experience, most employers would prefer not to lockout — is it possible that sometimes union themselves are locking employees into a lockout?