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December 22, 2014

NLRB Announces New Standards For Determining Jurisdiction over Religious Institutions and For Determining Managerial Status of Faculty at Colleges and Universities: Catholic Bishop and Yeshiva Revisited.

On December 16, 2014 , the National Labor Relations Board (the “Board”) issued its decision in Pacific Lutheran University, 361 NLRB No. 157, addressing whether that school’s full-time, contingent faculty were managers excluded from coverage under the National Labor Relations Act (the “Act”).  The decision is important in several respects and will, if sustained on appeal, fundamentally change the way in which faculty (both tenure-eligible and adjuncts) may be organized under the Act.  Specifically, the decision is important in three respects:  First, the Board revised the circumstances under which it will exercise jurisdiction over religious institutions.  Second, the Board revisited the so-called Yeshiva doctrine that sets forth the standard by which managerial status of faculty is determined.  Lastly, in applying this new managerial standard, the Board unanimously found this group of adjunct faculty were not managerial employees and were therefore entitled to the protections of the Act.

The Exercise of NLRB Jurisdiction over Religious Institutions: Catholic Bishop.

In 1979, the United States Supreme Court determined that the Board could not exercise its jurisdiction over lay teachers at church-operated schools in the Chicago area because to do so would create a “significant risk” that First Amendment religious rights would be infringed.  Opinion at 3 (citing NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 502, 507 (1979)).  Since that decision, the Board has determined “on a case-by-case basis whether a self-identified religious school had a “substantial religious character” such that exercise of the Board’s jurisdiction would present a significant risk of infringing on that employer’s First Amendment religious rights.”  Opinion at 4.  The Board’s approach has been criticized by many over the years and has been flatly rejected by some courts of appeals.  For example, in University of Great Falls v. NLRB, 278 F.3d 1335 (D.C. Cir. 2002), the court dismissed the Board’s test because it “boils down to ‘is [the university] sufficiently religious?’”  That court then proposed a simple, three-part test to determine whether the Board may exercise jurisdiction: (a) does the school hold itself out as providing a religious educational experience; (b) is it organized as a nonprofit; and (c) is it affiliated with or owned, operated or controlled directly, directly or indirectly by a recognized religious organization, or with an entity, membership of which is determined, at least in part, with reference to religion.  Great Falls, 278 F.3d at 1343.

Pacific Lutheran University and several amici urged the Board to adopt the Great Falls test while the union and other amici urged the Board to adopt a so-called “teacher religious function” test, focusing on whether teachers perform religious functions as part of their duties.  The Board did both.  It adopted some portion of the Great Falls test as well as the teacher religious function test.  Specifically, the Board announced its new test for determining whether it may exercise jurisdiction:

Step 1
The college or university must first demonstrate, as a threshold requirement, that First Amendment concerns are implicated by showing that it holds itself out as providing a religious educational environment. 

Step 2

The university must then show that it holds out the petitioned-for faculty members as performing a specific role in creating or maintaining the college or university’s religious educational environment, as demonstrated by its representations to current or potential students and faculty members, and the community at large.

Opinion at 11. 

This standard, the Board says, will be applied in the case at hand and retroactively to all other pending cases except those where an election has been held and the ballots have been opened and counted. 

The Board went on to find that Pacific Lutheran University satisfied the first step of the analysis, that is, it clearly held itself out as providing a religious education.  Opinion at 13.  The university failed the second prong of the test however because it failed to produce any evidence showing that it held out its contingent faculty members as performing any role in creating or maintaining the religious educational environment.  For example, the portion of the bylaws relating to faculty made no mention of its role in fostering Lutheran education.  Further, the faculty handbook made no mention of the contingent faculty’s performance of any religious functions.  The university’s website also made no mention of the faculty’s role in advancing Lutheran religion.  Nor is the contingent faculty’s member adherence to Lutheranism, membership in a Lutheran congregation or knowledge of Lutheranism an element in hiring, promotion, tenure or evaluation decisions.  The Board concluded its jurisdictional analysis by noting:

[T]here is nothing in PLU’s governing documents, faculty handbook, website pages, or other materials, that would suggest to faculty (either existing or prospective), students, or the community, that its contingent faculty members perform any religious function.

Opinion at 14.

Managerial Analysis of Full-Time, Contingent Faculty Members:  Yeshiva.

Having determined that it could exercise its jurisdiction over the university, the Board next turned to whether the contingent, full-time faculty were outside the protection of the Act as managers.  In doing so, the Board revisited the so-called Yeshiva doctrine derived from the Supreme Court’s decision holding that managers in the university setting are those who “formulate and effectuate management policies by expressing and making operative the decisions of their employer.”  NLRB v. Yeshiva University, 444 U.S. 672, 682 (1980) (citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 288 (1974)).  The Supreme Court specifically noted the Yeshiva faculty’s substantial and pervasive role in operating the school:

They decide what courses will be offered, when they will be scheduled, and to whom they will be taught.  They debate and determine teaching methods, grading policies, and matriculation standards.  They effectively decide which students will be admitted, retained and graduated.  On occasion their views have determined the size of the student body, the tuition to be charged, and the location of a school.

Yeshiva, 444 U.S. at 686. 

Since Yeshiva, the Board has struggled to articulate a clear standard by which faculty may be classified as managerial.  For example, then-Judge Roberts criticized the NLRB’s case-by-case analysis, stating, “[i]n the absence of an explanation, the totality of the circumstances can become simply a cloak for agency whim – or worse.”  LeMoyne-Owen College v. NLRB, 357 F.3d 55, 61 (D.C. Cir. 2005).

The Board therefore announced a new standard that focuses on three “primary” and two “secondary” areas of decisionmaking:

Primary Areas of Decisionmaking

  1. Academic Programs.  This area includes curriculum, research, offering of  majors, minors and certificates and the requirements necessary to satisfy those offerings.  These areas are akin to the school’s “product” and the terms upon which that product is offered to students.
  1. Enrollment Management.  This area relates to the size, scope and make-up of the student body.  These are essentially the school’s customers who will be served by the university. 
  1. Finances.  This area relates to the power to control or make effective recommendations as to expenditures.  The Board cited in particular the determination of net tuition (tuition less financial assistance) because it sets the “price point” for the student-customers and plays a significant role in determining which university a student will attend. 


Secondary Areas of Decisionmaking

  1. Academic Policy.  This covers a broad area including teaching and research methods, grading policy, academic integrity policy, syllabus policy, research policy and course content policy.
  1. Personnel Policy and Decisions.  This area includes hiring, firing, promotion, tenure, leave and dismissal.  The Board admits that this area “potentially implicates the divided loyalty concern that underlies the managerial exception,” but this decision-making only indirectly implicates the product to be produced, the terms in which it is offered, and the customers sought.  Opinion at 18.

The Board not only re-cast the Yeshiva factors but went on to require that the party asserting managerial status must demonstrate that faculty actually exercise control or make effective recommendations.  In a footnote that is certain to garner great attention, the Board found that the decisions of committees will not be treated as evidence of managerial status unless the faculty constitute a majority of the committee.  Opinion at 18, fn. 36 (citing University of Great Falls, 325 NLRB at 95). 

Actual Control or Effective Recommendation

The Board has also revised under what circumstances a decision over a particular area may be deemed to be attributable to the faculty.  Citing Yeshiva, the Board held that the faculty must actually exercise control or make effective recommendation.  Opinion at 18 (citing Yeshiva, 444 U.S. at 683 fn.17). 

Control.  The Board will require that the party asserting managerial status must prove actual, rather than mere paper, authority.  It will not be enough to quote from a faculty handbook; the university will need to demonstrate that the faculty actually exercises its stated authority. The Board made clear that it would now require specific evidence or testimony regarding the nature and number of faculty decisions or recommendations in a particular area and the subsequent review of those decisions or recommendations by university administration. 

Effective Recommendation.  The Board will also now insist that for recommendations to be effective they “must almost always be followed by the administration.”  Opinion at 18 (emphasis added). 

In concluding its revision of managerial analysis in the university setting, the Board noted the changes in colleges and universities since Yeshiva was handed down:

Indeed, our experience applying Yeshiva has generally shown that colleges and universities are increasingly run by administrators, which has the effect of concentrating and centering authority away from the faculty in a way that was contemplated in Yeshiva, but found not to exist at Yeshiva University itself.  Such considerations are relevant to our assessment of whether the faculty constitute managerial employees.
Opinion at 19.  The passage suggests the structure of Yeshiva University may, in the Board’s view, prove to be the exception rather than the rule, particularly in light of the trend since the Yeshiva decision that has taken authority away from the faculty and placed it in the realm of the administration. 

Whether the University’s Full-Time, Contingent Faculty Are Managers

The Board applied its new standard and unanimously found that the faculty at issue were not managers.  It is important to note the university claimed only that its full-time, contingent faculty were managerial, effectively conceding that its part-time, contingent faculty were not.  Opinion at 14, fn. 28.  Also, the university asked that the case be remanded for a determination as to whether its regular faculty were managerial, essentially arguing that its full-time, contingent faculty are no different than its regular faculty.  The Board rejected the invitation for remand, finding that the university had failed to raise the issue at the hearing. Opinion at 24, fn. 65. 

The Board’s application of the new managerial standards is cause for concern for institutions facing organization efforts by both their adjunct and tenure track faculty. 

Primary Areas.  The Board found no evidence that the contingent faculty had only limited involvement in academic programs, finding that they are barred from serving on faculty standing committees. The Board also found no evidence that the full-time, contingent faculty vote on enrollment management policies (the size, scope and composition of the student body). Lastly, the Board noted that there was no evidence that the full-time, contingent faculty are involved in decisions affecting the university’s finances.

Secondary Areas. The full-time, contingent faculty played only a similar, limited role in academic policy (teaching and research methods, grading policy, academic integrity, and related areas).  Lastly, the full-time, contingent faculty played only a limited role in personnel decisions, as they are barred from taking part in personnel decisions and are excluded from faculty standing committees. 

Control or Effective Recommendation.  The university wholly failed to demonstrate that the full-time, contingent faculty controlled or made effective recommendations as to the areas referenced above.  Indeed, in some areas there was no evidence that any full-time, contingent faculty member had voted or taken part in the decisions at issue.

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The Board’s abandonment of its “substantial religious character” test will be hailed by many religious colleges and universities as a positive development.  No longer will such schools be forced to demonstrate their religiosity in order to fend off the assertion of jurisdiction by the Board.  Others will argue that the Board’s new test does not go far enough because such schools must still demonstrate to the Board that they hold out their faculty as having a role in the school’s religious educational environment.

Religious and secular institutions alike must take note of the Board’s new test for determining whether faculty members are managers under the Act.  The test is certainly simpler to understand and apply, but colleges and universities will likely find that the new test makes it more difficult to prove that their faculty are managerial employees. 

Lastly, the Board emphatically rejected the argument that adjunct faculty, even full-time adjunct faculty, should be treated as managers who are excluded from the protections of the Act.

Pacific Lutheran University may appeal the Board’s decision to either the Ninth Circuit Court of Appeals or, more likely, to the District of Columbia Circuit Court of Appeals.  On the question of the Board’s exercise of jurisdiction, the reviewing court owes no deference to the Board’s decision.  Rather, the question will be whether the Board faithfully applied the Supreme Court’s decision in Catholic Bishop so as to avoid intrusion upon the university’s First Amendment rights.  On the question of managerial status, however, the reviewing court may grant deference to the Board’s interpretation of the Act.  In any event, legal challenges of the Board’s new standards are likely and may ultimately be determined by the Supreme Court.  

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If you have any questions regarding these important developments from the Board, please do not hesitate to contact us.

Although the decision is dated December 16th, it was not posted to the Board’s website until December 20th.