Labor Pains Employees focus groups may seem like a good idea, but they could land you in court.

In the 1990s workplace, business owners and their employeesoften sit at the same table to swap ideas and hammer out ways toimprove quality and efficiency. Instead of maintaining an us/themmentality, employers try to foster teamwork through employee focusgroups and involvement committees, working together to findsolutions to daily business problems. The approach tends to workwell. In fact, the Employment Policy Foundation, a research andeducation organization in Washington, DC, credits quality circlesand employee involvement committees with as much as 70 percent ofthe productivity increase and growth in the U.S. economy in theearly 1990s.

That's the good news. The bad news is the National LaborRelations Board (NLRB) deems some employee focus groups illegalemployer-dominated unions. To the dismay of many human resourcesexperts, federal courts have backed the NLRB's position.Indeed, in a 1996 case, the U.S. Supreme Court ruled that courtsmust defer to the NLRB's interpretation of the law in thisarea. Accordingly, employers who sponsor committees that cross theline into topics and strategies traditionally reserved for unionsmay have to answer for their actions in court--and be forced todisband their committees.

While business owners are trying to build teamwork and drawdiverse managers and employees together, labor unions are generallyopposed to blurring the distinction. Across the board, unionleaders envision employees being dominated by their employers andlosing ground gained through decades of collective bargaining.Accordingly, unions turn to the NLRB and, eventually, to the courtsto enforce Section 8(a)(2) of the 1937 National Labor Relations Act(NLRA), which prohibits employer-dominated labor organizations.

Steven C. Bahls, dean of Capital University Law School inColumbus, Ohio, teaches entrepreneurship law. Freelance writer JaneEaster Bahls specializes in business and legal topics.

Making A Case

Consider a case decided in July by the U.S. Court of Appeals forthe Sixth Circuit. Webcor Packaging Inc., a Flint, Michigan,manufacturer of corrugated packaging products, hired a new vicepresident of operations who aimed for increased cooperation betweenworkers and management. The vice president established an employeeinvolvement steering committee composed of three workers and twomanagers to investigate ways to improve safety, productivity andquality. When the committee's discussions kept veering into thearea of employer-employee relations, the vice president formed a"plant council" to address work rules, wages andbenefits. Consisting of five employees elected by their peers andthree appointed managers, the council made proposals to managementbased on suggestions solicited from all employees.

Perhaps prompted by an industrial workers union attempting toorganize at the plant, the NLRB investigated, declared the plantcouncil an illegal company-dominated labor organization anddemanded it be disbanded. Webcor contended that the council was anexample of worker-management cooperation, which deserved praiserather than legal attack.

The court found that the council was indeed a labor organizationas defined by the NLRA because 1) employees participate; 2) theydeal with employers; 3) those dealings concern grievances, labordisputes, work hours, wages, rates of pay or conditions of work;and 4) the committee in some way represents other employees. Thecourt noted that Webcor employees elected some of their peers tosit on the council and that proposed changes were circulated amongemployees with instructions to respond to the plant council. Bymaking proposals for management to consider, the council was"dealing with" management.

The question remained whether the company dominated the plantcouncil. The court noted that under NLRB definition, the companydominates an organization when its structure and function areessentially determined by management, and management can dissolveit at any time. Accordingly, the court ordered Webcor's plantcouncil disbanded.

This decision closely follows the landmark case in this area,Electromation v. NLRB. The opening pages of the opinion inElectromation read like a who's who of labor andbusiness, given the avalanche of amicus curiae briefs filedon the company's side by a host of business groups and tradeassociations, and on the NLRB's side by various labor unions.The case, decided by the U.S. Court of Appeals for the SeventhCircuit in 1994, concerned a nonunionized Indiana manufacturer ofsmall electrical components. When employees objected to a plan torevise the attendance bonus, the company met with randomly selectedemployees and decided to form action committees to seek solutionsto various problems. The company expressed its intention toimplement solutions acceptable to most employees if their cost wasreasonable. As in the Webcor case, the company asked members of theaction committees to talk with other employees--thus setting themup as representatives.

The court upheld the NLRB's ruling that the actioncommittees comprised an employer-dominated labor organizationbecause the company created the committees; presented them toemployees as the only viable way to remedy their grievances;determined each committee's goals, jurisdiction and number ofmembers; placed management representatives on each committee; andpermitted employees to attend the meetings on company time. Thecourt noted that the NLRA might need to be updated to allowmutually agreeable employee participation committees but that itwas up to Congress to do so.

Last year, Congress passed a bill, the Teamwork for Employeesand Management (TEAM) Act, designed to overturn the Electromationcase and allow nonunion employee participation groups to improvecommunication and productivity. However, President Clinton vetoedthe bill, claiming it would "undermine the system ofcollective bargaining that has served this country so well for manydecades."

Lawful Assembly

Don't let these court decisions keep you from institutingquality circles or employee participation committees because thesegroups can increase productivity, efficiency and morale. The key isto make sure they don't fit the NLRB definition of anemployer-dominated labor organization:

• Don't have employees who serve in the quality circle act asrepresentatives for other employees, soliciting ideas and surveyingopinions. Restrict their role to brainstorming their ownideas.

• Limit discussion to issues of work quality, efficiency,productivity or customer service, rather than terms of employmentsuch as wages, hours and benefits.

• Don't have the groups make proposals for management toconsider, implement or reject because that looks too much likecollective bargaining. Courts have ruled that an occasionalinstance of the group "dealing with" management is not aviolation, but a consistent pattern or practice is.

• Don't let management dominate the group. While an agendahelps keep the group focused on legitimate areas for discussion,let the employees create their own agenda and structure their ownmeetings. Simply being aware of the issues here will likely helpyou create quality circles that won't bring the NLRB to circlearound your business.