Last month, a unanimous three-judge panel of the U.S. Court of Appeals for the D.C. Circuit declined to enforce a bargaining order against the University of Southern California (“USC”), finding that part of the order “runs afoul” with Supreme Court precedent, NLRB v. Yeshiva Univ., 444 U.S. 672 (1980).

The case is Univ. of S. Cal. v. NLRB, Nos. 17-1149, 17-1171, 2019 U.S. App. LEXIS 7203 (D.C. Cir. Mar. 12, 2019) and involves managerial versus non-managerial employees. Though specific to the academic context, it represents a significant addition to Yeshiva and NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974), where the Supreme Court held that “managerial employees” are not covered by the National Labor Relations Act.

The dispute in Univ. of S. Cal. v. NLRB began in 2015 when the SEIU petitioned to represent non-tenure track faculty at USC’s School of Art and Design. Over USC’s objections, the Board’s Regional Director found the faculty to be non-managerial under Yeshiva and the Board’s interpretation of Yeshiva set forth in Pacific Lutheran University, 361 NLRB No. 157 (2014).

When the non-tenured faculty voted to join the SEIU, USC refused to bargain, claiming they were non-managerial. The Board later issued a bargaining order.

On appeal to the D.C. Circuit, the court rejected what it deemed the Board’s “subgroup majority status rule.” Though the non-tenured faculty served on USC committees and those committees weighed in on “significant issues” including curriculum, grading policies and academic programs, the committees were majority composed of tenured faculty. The Board had reasoned that because the non-tenured faculty constituted a minority of seats on most USC committees, they could not exercise the type of “effective control” over management that the Board deemed necessary in Pacific Lutheran University to be a managerial employee.

In rejecting the Board’s interpretation, the D.C. Circuit held that the subgroup majority status rule was “unfaithful” to Yeshiva because it ignores the possibility that subgroups “may share common interests and therefore effectively participate together as a body on some or all of the issues relevant to managerial status.” 2019 U.S. App. LEXIS 7203, at *29-30. Thus, the question of managerial status should not turn on headcount but on “whether that subgroup is structurally included within a collegial faculty body to which the university has delegated managerial authority.” Id. at *30-31.

The D.C. Circuit, however, otherwise upheld the two-part standard articulated in Pacific Lutheran University for “effective control,” that faculty recommendations must (1) almost always be followed by the administration, and (2) routinely become operative without independent administrative review.

Though Univ. of S. Cal. v. NLRB is most applicable to academic settings, it represents yet another instance where a court has overturned recent Board modifications to past precedent. The case also contains analysis on the managerial versus non-managerial distinction that may be useful in other contexts, such as to minority shareholders or workplaces with shared governance rather than traditional “pyramid” hierarchies. In particular, the D.C. Circuit reaffirmed the underlying analysis and policy articulated in Yeshiva and Bell Aerospace, that managerial employees are those who formulate and effectuate management policies, and must exercise discretion within or independently of established employer policy. Excluding managerial employees from collectively bargaining serves the Board’s goal to “ensure that employees who exercise discretionary authority on behalf of the employer will not divide their loyalty between employer and union.” Yeshiva Univ., 444 U.S. at 687-88.

In addition to managerial employees, shareholders, retirees, confidential employees, and certain employees of work programs have also been deemed excluded from bargaining units.