Exclusive: Hospital chain defies NLRB rulings after court decision

A California-based hospital company says it will not comply with at least two National Labor Relations Board rulings from the past year after a federal court invalidated three of President Barack Obama's recess appointments to the NLRB last week.

Prime Healthcare Services, which owns 21 hospitals in California and three other states, told Reuters on Wednesday that it had informed one of its employee unions that it would not follow an NLRB ruling mandating the collection of union dues even after a collective bargaining agreement has expired, or a ruling compelling employers to provide unions with certain materials during internal investigations.

The decision by the U.S. Court of Appeals for the D.C. Circuit casts a shadow of doubt over rulings the board has issued over the past year because without the three appointments, the board lacked a quorum.

One lawyer for the Prime Healthcare union, the Service Employees International Union-United Healthcare Workers West, said the board's rulings from last year remain the law and criticized Prime Healthcare's stance.

"The employers' side is giving the finger to the NLRB and the National Labor Relations Act," the lawyer, Bruce Harland, said in an interview. "It's not well thought out, it's just an in-your-face, brazen, ���We're not going to comply with this.'"

When the D.C. Circuit invalidated Obama's three recess appointees, it did not specifically address the two board rulings Prime Healthcare said it will flout. It instead ruled that the president violated the U.S. Constitution when he used recess appointments to fill the labor board, a sweeping decision that experts said could limit presidential power to push through federal nominees. The court found that the Senate was not truly in recess when Obama installed three nominees to the NLRB in January 2012.

Prime Healthcare's decision is not unprecedented, lawyers said. In some cases, when a business disagrees with a board ruling, it has chosen to not comply and to fight any resulting unfair labor practice charge brought by a union.

Such challenges, however, usually target specific rulings. Prime Healthcare is taking the sweeping position that at least two and perhaps all the cases decided in the past year by the NLRB's recess appointees are invalid.

The company's decision could pave the way for other employers to follow suit. That would be a blow to labor unions after a string of rulings in their favor. Some management lawyers said labor scored so many wins from the NLRB in the closing weeks of 2012 that they refer to the period as "the December massacre."

Many of the board's findings changed longstanding rules governing labor relations and gave unions more leverage over employers, lawyers said. The rulings also provoked an outcry from the business community, which criticized the board as radically pro-union and attacked the legitimacy of Obama's recess appointments.

Already, lawyers who represent management are saying employers should not be afraid to defy NLRB rulings.

James Hendricks, a lawyer at Lewis Brisbois Bisgaard & Smith who represents management, said he is advising clients to assume that the pro-union decisions that came down during the "December massacre" no longer apply. "If we had decisions that have come down, those are now void," he said.

A spokeswoman for the NLRB said she was unaware of any increase in the number of companies refusing to comply with the board's rulings in the wake of the D.C. Circuit's decision.


Prime Healthcare was not a party in the cases involving union dues and internal investigations. But on Friday the company told the SEIU-United Healthcare Workers West that following the D.C. Circuit decision, it would disregard the NLRB rulings.

"The D.C. Circuit's ruling from last Friday held all the Board's cases decided by the recess appointments are void," wrote Prime Healthcare's assistant general counsel, Mary Schottmiller, in an email to Reuters. "As such, it would violate the law if we followed the Board's rulings ... regarding union dues and witness statements."

Schottmiller told Reuters that Prime Healthcare's response to the union needed no further elaboration because the D.C. Circuit's opinion was clear. "Void is void," she said, adding that all of the company's hospitals would take the same legal position on the issue.

NLRB Chairman Mark Pearce said in a statement on Friday that the D.C. Circuit's decision would not deter the board from getting on with its work. He has not spoken specifically about the Prime Healthcare case. The government can ask the D.C. Circuit to rehear the case before the decision takes effect, and the three recess appointees remain on the board.

Prime Healthcare's action is one of several developments that have followed Friday's ruling by the D.C. Circuit. On Wednesday, homebuilder D.R. Horton Inc asked a federal appeals court to throw out an NLRB ruling on grounds that another recess appointment Obama made in 2010 was invalid. On Thursday, three Republican senators introduced legislation that would prohibit the NLRB from enforcing any rulings made after January 4, 2012, without a quorum of constitutionally appointed board members.

SEIU-United Healthcare Workers West has been wrangling with one of Prime Healthcare's hospitals since December. In a letter dated December 3, the Centinela Hospital Medical Center in Inglewood, California, told the union that because the collective bargaining agreement had expired, the hospital would no longer collect union dues from employees' pay.

In response, Harland sent a letter to the hospital in January, insisting that it comply with the recent NLRB ruling.

"I assume that you must employ at least one lawyer who knows how to read," Harland wrote in a letter he shared with Reuters. "If you had bothered to consult with any first year Labor Law student, you would have learned that on December 12, 2012, the National Labor Relations Board issued a significant ruling, which overruled 50 years of bad law concerning the unilateral cancellation of dues check-off post contract expiration."

Schottmiller responded with a one-line email on Friday that read, "We hope your next letters are more professional and mature." She attached a copy of the D.C. Circuit's decision.

The NLRB's public affairs director, Nancy Cleeland, declined to comment specifically on the statements by Prime Healthcare. But she said the D.C. Circuit's decision applies only to the case the court was considering, a dispute between soda bottling company Noel Canning and the labor board, and not any of the board's rulings on other cases.

For Prime Healthcare, the main downside in not complying with the NLRB decisions is that it must now fight an unfair labor practice charge that SEIU filed in early January. Disputing such charges can be costly, requiring up to hundreds of lawyer hours. The union has said it intends to file a second unfair labor practice charge over the witness statements in the coming days.

(Reporting By Terry Baynes in New York; Editing by Eileen Daspin, Eric Effron and Douglas Royalty)