No. 15-60022 __________________

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT __________________

MACY’S, INCORPORATED,

Petitioner Cross-Respondent,

v.

NATIONAL LABOR RELATIONS BOARD,

Respondent Cross-Petitioner. __________________

Petition for Review of a Decision of the National Labor Relations Board

__________________

BRIEF OF PETITIONER CROSS-RESPONDENT __________________

Willis J. Goldsmith JONES DAY 222 East 41st Street New York, NY 10017 Tel: (212) 326-3649 Fax: (212) 755-7306 wgoldsmith@jonesday.com

Shay Dvoretzky David Raimer JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel: (202) 379-3939 Fax: (202) 626-1700 sdvoretzky@jonesday.com Counsel for Petitioner Cross-Respondent Macy’s, Inc.

Macy’s, Incorporated v. National Labor Relations Board, No. 15-60022

CERTIFICATE OF INTERESTED PERSONS

The undersigned counsel of record certifies that the following listed persons

and entities as described in the fourth sentence of Rule 28.2.1 of the Rules of this

Court have an interest in the outcome of this case. These representations are made

so that the judges of this court may evaluate possible disqualification or recusal.

Petitioner Cross-Respondent

1. Macy’s Incorporated. Macy’s, Inc. hereby discloses that it is a

publicly traded corporation. Macy’s, Inc. further discloses that no publicly held

corporation owns 10% or more of its stock, and that it does not have a parent

corporation. Macy’s, Inc. owns 100% of the stock of Macy’s Retail Holdings, Inc.,

which owns the store at issue in this litigation.

Respondent Cross-Petitioner 1. National Labor Relations Board Intervenor

1. Local 1445, United Food and Commercial Workers International Union

Appellate Counsel for Petitioner Cross-Respondent

1. Shay Dvoretzky David Raimer Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001

ii

2. Willis J. Goldsmith Jones Day 222 East 41st Street New York, NY 10017

Counsel for Petitioner Cross-Respondent in Proceedings Below 1. William F. Joy Morgan, Brown & Joy, LLP 200 State Street Boston, MA 02109

Appellate Counsel for Respondent Cross-Petitioner

1. Linda Dreeben Julie Brock Broido Gregory Paul Lauro National Labor Relations Board 1099 14th Street, N.W. Washington, DC 20570 3. Jonathan Kreisberg National Labor Relations Board 10 Causeway Street Boston, MA 02222-1072

Appellate Counsel for Intervenor

1. Alfred Sebastian Gordon O’Connell Pyle, Rome, Ehrenberg, P.C. 2 Liberty Square Boston, MA 02109 2. James B. Coppess Matthew James Ginsburg AFL-CIO 815 16th Street, N.W. Washington, DC 20006

iii

Counsel for Intervenor in Proceedings Below 1. Warren H. Pyle Pyle, Rome, Ehrenberg, P.C. 2 Liberty Square Boston, MA 02109

/s/ Shay Dvoretzky Shay Dvoretzky

iv

STATEMENT REGARDING ORAL ARGUMENT Pursuant to Fifth Circuit Rule 28.2.3, Petitioner respectfully requests oral

argument.

In the proceedings below, the National Labor Relations Board certified a

single department of a single department store as a unit appropriate for purposes of

collective bargaining. In doing so, it violated the National Labor Relations Act and

abandoned decades of precedent favoring storewide bargaining units in the retail

industry. Given the nature and importance of the issues at stake, Petitioner

respectfully submits that oral argument will be of assistance to the Court.

TABLE OF CONTENTS

Page

v

CERTIFICATE OF INTERESTED PERSONS ........................................................ i

STATEMENT REGARDING ORAL ARGUMENT ............................................. iv

TABLE OF AUTHORITIES ................................................................................. vii

INTRODUCTION .................................................................................................... 1

JURISDICTIONAL STATEMENT ......................................................................... 3

STATEMENT OF ISSUES ...................................................................................... 4

STATEMENT OF THE CASE ................................................................................. 4

I. FACTUAL BACKGROUND ........................................................................... 5

A. Macy’s Stores Are Organized to Provide Customers with an Integrated Shopping Experience ................................................................. 5

B. All Sales Employees Operate Under Nearly Identical Terms and Conditions of Employment While Working Together to Provide Customers with Seamless Service .............................................................. 7

II. PROCEDURAL HISTORY ............................................................................ 10

SUMMARY OF ARGUMENT .............................................................................. 14

STANDARD OF REVIEW .................................................................................... 16

ARGUMENT .......................................................................................................... 18

I. THE UNIT SANCTIONED BY THE BOARD WAS CLEARLY NOT APPROPRIATE .............................................................................................. 18

A. The Relevant Factors Establish That the Unit Approved by the Board Was Clearly Not Appropriate ........................................................ 21

B. The Board Failed to Adequately Explain Its Decision to Deem the Cosmetics-and-Fragrances Department an Appropriate Unit .................. 24

C. The Board’s Decision to Deem a Single Department of a Single Department Store an “Appropriate” Unit Will Wreak Havoc in the Retail Industry ........................................................................................... 30

TABLE OF CONTENTS (continued)

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vi

II. THE NLRB WAS ABLE TO CERTIFY THE PETITIONED-FOR UNIT ONLY THROUGH AN “OVERWHELMING COMMUNITY OF INTEREST” TEST THAT CANNOT BE SQUARED WITH THE NLRA OR PRIOR BOARD PRECEDENT GOVERNING INITIAL UNIT DETERMINATIONS ........................................................................... 35

A. The “Overwhelming Community of Interest” Test Violates the NLRA ........................................................................................................ 37

B. The Board Failed to Provide a Reasoned Explanation for Its Departure from Past Precedent When Adopting the “Overwhelming Community of Interest” Test .................................................................... 45

1. The “Overwhelming Community of Interest” Test Is Inconsistent with the Board’s Past Precedent Governing Initial Unit Determinations ........................................................................... 47

2. The Board Improperly Imported the “Overwhelming Community of Interest” Standard from the Accretion Context ......... 49

3. The “Overwhelming Community of Interest” Test Is Inconsistent with Standards the Board Has Previously Applied to the Retail Industry .......................................................................... 52

C. The Board Violated the Administrative Procedure Act by Using Adjudication to Promulgate a New “Rule” for Determining Appropriate Bargaining Units ................................................................... 55

III. EVEN UNDER THE SPECIALTY HEALTHCARE STANDARD, THE BOARD APPROVED AN INAPPROPRIATE BARGAINING UNIT ........ 60

CONCLUSION ....................................................................................................... 61

CERTIFICATE OF SERVICE ............................................................................... 64

CERTIFICATE OF COMPLIANCE ...................................................................... 65

TABLE OF AUTHORITIES

Page(s)

vii

CASES

Allied Chem. & Alkali Workers, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971) ............................................................................................ 18

Amalgamated Clothing Workers v. NLRB, 491 F.2d 595 (5th Cir. 1974) .......................................................................passim

American Cyanamid Co., 131 NLRB 909 (1961) ........................................................................................ 59

Arnold Constable Corp., 150 N.L.R.B. 788 (1965) .................................................................................... 54

Big Y Food, Inc., 238 N.L.R.B. 855 (1978) .................................................................................... 54

Blue Man Vegas, LLC v. NLRB, 529 F.3d 417 (D.C. Cir. 2008) .......................................................... 41, 42, 43, 51

Cont’l Web Press, Inc. v. NLRB, 742 F.2d 1087 (7th Cir. 1984) .....................................................................passim

Dunbar Armored, Inc. v. NLRB, 186 F.3d 844 (7th Cir. 1999) .............................................................................. 42

Excelsior Underwear Inc., 156 N.L.R.B. 1236 (1966) ............................................................................ 57, 58

First Bancorp. v. Bd. of Governors of the Fed. Reserve Sys., 728 F.2d 434 (10th Cir. 1984) .....................................................................passim

Ford Motor Co. v. FTC, 673 F.2d 1008 (9th Cir. 1981) ............................................................................ 56

Haag Drug Co., 169 N.L.R.B. 877 (1968) .................................................................................... 20

Hotel Servs. Grp., Inc., 328 N.L.R.B. 116 (1999) .................................................................................... 28

TABLE OF AUTHORITIES (continued)

Page(s)

viii

I. Magnin & Co., 119 N.L.R.B. 642 (1957) .............................................................................passim

Jewish Hospital Association, 223 N.L.R.B. 614 (1976) .................................................................................... 42

Kindred Nursing Ctrs. E., LLC v. NRLB, 727 F.3d 552 (6th Cir. 2013) ........................................................................ 41, 43

Kushins & Papagallo Divisions of U.S. Shoe Retail, Inc., 199 N.L.R.B. 631 (1972) .................................................................................... 53

Laneco Construction Systems, 339 N.L.R.B. 1048 (2003) .................................................................................. 49

Levitz Furniture Co., 192 N.L.R.B. 61 (1971) ...................................................................................... 53

Logidan, Inc., 332 N.L.R.B. 1246 (2000) .................................................................................. 42

Lord & Taylor, 150 N.L.R.B. 812 (1965) .................................................................................... 54

Lundy Packing Co., 314 N.L.R.B. 1042 (1994) ............................................................................ 40, 49

Motor Vehicle Mfrs. Ass’n. of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) .............................................................................................. 45

Newton-Wellesley Hosp., 250 N.L.R.B. 409 (1980) .................................................................. 19, 43, 47, 48

NLRB v. Bell Aerospace Co., 416 U.S. 267 (1975) ............................................................................................ 56

NLRB v. Catalytic Indus. Maint. Co., 964 F.2d 513 (5th Cir. 1992) .............................................................................. 17

TABLE OF AUTHORITIES (continued)

Page(s)

ix

NLRB v. DMR Corp., 699 F.2d 788 (5th Cir. 1983) .................................................................. 20, 21, 29

NLRB v. DMR Corp., 795 F.2d 472 (5th Cir. 1986) ........................................................................ 51, 52

NLRB v. Lundy Packing Co., 68 F.3d 1577 (4th Cir. 1995) .......................................................................passim

NLRB v. Lundy Packing Co., 81 F.3d 25 (4th Cir. 1996) .................................................................................. 62

NLRB v. Metro. Life Ins. Co., 380 U.S. 438 (1965) ...................................................................................... 37, 38

NLRB v. Meyer Label Co., 597 F.2d 18 (2d Cir. 1979) ........................................................................... 29, 31

NLRB v. Pioneer Nat. Gas Co., 397 F.2d 573 (5th Cir. 1968) ........................................................................ 18, 45

NLRB v. Purnell’s Pride, Inc., 609 F.2d 1153 (5th Cir. 1980) .....................................................................passim

NLRB v. Sec.-Columbian Banknote Co., 541 F.2d 135 (3d Cir. 1976) ............................................................................... 50

NLRB v. Superior Prot., Inc., 401 F.3d 282 (5th Cir. 2005) .................................................................. 33, 50, 51

NLRB v. Tallahassee Coca-Cola Bottling Co., 381 F.2d 863 (5th Cir. 1967) .............................................................................. 62

NLRB v. WGOK, Inc., 384 F.2d 500 (5th Cir. 1967) ........................................................................ 18, 45

NLRB v. WKRG-TV, Inc., 470 F.2d 1302 (5th Cir. 1973) ............................................................................ 45

NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969) ............................................................................................ 57

TABLE OF AUTHORITIES (continued)

Page(s)

x

Nueces Cnty. Navigation Dist. No. 1 v. Interstate Commerce Comm’n, 674 F.2d 1055 (5th Cir. 1982) ............................................................................ 56

Park Manor Care Center, 305 N.L.R.B. 872 (1991) .............................................................................. 58, 59

Patel v. INS, 638 F.2d 1199 (9th Cir. 1980) ............................................................................ 60

Pfaff v. U.S. Dep’t of Housing & Urban Dev., 88 F.3d 739 (9th Cir. 1996) .......................................................................... 56, 60

Pix Mfg. Co., 181 N.L.R.B. 88 (1970) ...................................................................................... 51

Raven Servs. Corp. v. NLRB, 315 F.3d 499 (5th Cir. 2002) .............................................................................. 18

Rayonier, Inc. v. NLRB, 380 F.2d 187 (5th Cir. 1967) .............................................................................. 45

Seaboard Marine, Ltd., 327 N.L.R.B. 556 (1999) .................................................................................... 19

Sears, Roebuck & Co., 191 N.L.R.B. 398 (1971) .................................................................................... 52

Specialty Healthcare & Rehabilitation Ctr. of Mobile, 357 N.L.R.B. No. 83, 2011 NLRB LEXIS 489 (Aug. 26, 2011) ................passim

Specialty Healthcare & Rehabilitation Ctr., 356 N.L.R.B. No. 56, 2010 NLRB LEXIS 514 (Dec. 22, 2010) ................. 58, 59

Stern’s Paramus, 150 N.L.R.B. 799 (1965) .............................................................................. 20, 54

United States v. Fla. E. Coast Ry. Co., 410 U.S. 224 (1973) ...................................................................................... 56, 60

Wheeling Island Gaming, Inc., 355 N.L.R.B. 637 (2010) .............................................................................. 19, 30

TABLE OF AUTHORITIES (continued)

Page(s)

xi

Willamette Indus., Inc., v. NLRB, 144 F.3d 877 (D.C. Cir. 1998) ............................................................................ 55

Woolworth Co., 119 N.L.R.B. 480 (1957) .................................................................................... 20

STATUTES

5 U.S.C. § 551 .......................................................................................................... 60

5 U.S.C. § 557 .............................................................................................. 25, 45, 62

29 U.S.C. § 157 .................................................................................................. 33, 50

29 U.S.C. § 159 .................................................................................................passim

29 U.S.C. § 160 ...................................................................................................... 3, 4

OTHER AUTHORITIES

Zev J. Eigen & Sandro Garofalo, Less Is More: A Case for Structural Reform of the National Labor Relations Board, 98 Minn. L. Rev. 1879 (2014) ............................................................................ 46

William H. Haller, Tempest in a Bedpan? The Specialty Healthcare Controversy, 29 ABA J. Lab. & Employment L. 465 (2014) ............................ 46

H.R. Rep. No. 80-245 (1947), reprinted in 1 NLRB, Legislative History of the Labor Relations Act (1948) ................................................... 37, 38

H.R. Rep. No. 80-510 (1947), reprinted in 1 NLRB, Legislative History of the Labor Relations Act (1948) ......................................................... 33

Edward Phillips & Steven E. Kramer, The Law at Work: New NLRB ‘Quickie Election’ Procedures, 48 Tenn. B.J. 30 (2012) ................................... 46

Glen O. Robinson, The Making of Administrative Policy: Another Look at Rulemaking and Adjudication and Administrative Procedure Reform, 118 U. Pa. L. Rev. 485 (1970) ...................................... 57, 58

TABLE OF AUTHORITIES (continued)

Page(s)

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Tanja J. Thompson & Brenda N. Canale, Has Specialty Healthcare Changed the Landscape in Organizing and Representation Proceedings?, 29 ABA J. Lab. & Employment L. 447 (2014) .......................... 46

1

INTRODUCTION

Congress has tasked the National Labor Relations Board (“NLRB” or the

“Board”) with determining “unit[s] appropriate for the purposes of collective

bargaining” under the National Labor Relations Act (“NLRA”). 29 U.S.C.

§ 159(b). The Board may not allow a union’s choice of unit to have a

“controlling” effect on its determination. Id. §159(c)(5). Rather, the Board must

assess “in each case” whether the interests of employees seeking to unionize are

sufficiently distinct from those of their co-workers so that it is appropriate for them

to organize separately. Id. §159(b).

Here, the Board determined that the cosmetics-and-fragrances department of

a single Macy’s store in Saugus, Massachusetts, was an “appropriate” bargaining

unit. It did so even though the interests of cosmetics-and-fragrances sales

employees are virtually indistinguishable from those of sales associates in the

store’s ten other departments. All selling employees function as part of an

integrated store designed to provide customers with a single location at which to

purchase an array of products from knowledgeable salespeople. All are subject to

the same employee handbook, receive the same benefits, participate in the same

dispute resolution program, and are evaluated under the same criteria. Cosmetics-

and-fragrances sales employees staff the same shifts as their colleagues in other

departments, use the same entrances, share the same breakrooms, attend the same

2

daily meetings, and punch in and out using the same timecard system. No prior

experience is needed for any position in the store; Macy’s trains all employees in

customer service and selling techniques, and coaches them to encourage customers

to purchase items from different departments.

Because selling employees regularly share these and other interests, the

Board has long favored storewide bargaining units composed of all employees or

all selling employees in a particular retail store. Here, however, the Board swept

these similarities aside, applying a novel test from a completely different area of

labor law to stack the deck in favor of the union’s proposed unit. According to the

Board, if the employees of a proposed unit share even a modicum of common

interests, that unit is “appropriate” unless an objecting employer carries the heavy

burden of showing that the interests of excluded employees “overlap almost

completely” with those in the proposed unit. The manner in which the Board

applied this “overwhelming community of interest” test skews the analysis so

heavily in favor of union-proposed units that they become nearly impervious to

challenge. By impermissibly affording “controlling” weight to the union’s choice

of unit—a subset of the store’s selling employees—the Board dispensed with

decades of prior precedent and abdicated its statutory duty to assess the propriety

of petitioned-for units “in each case.”

3

The Board’s decision has far-reaching consequences for Macy’s and other

retailers. As evidenced by existing agreements with employees in other stores in

the region, Macy’s has long negotiated with properly constituted bargaining units.

But units of the sort approved by the Board here make bargaining unmanageable.

In Saugus alone, Macy’s could be forced to bargain with up to eleven unions,

should other sales departments unionize. Nationwide, Macy’s operates over 800

stores, and thus could be compelled to bargain with upwards of 8,000 units across

the country if each department organizes separately. Moreover, Macy’s and other

employers may be forced to address countless obligations within a single store, as

different unions lobby for different hours, wages, or benefits. And successive

strikes by different micro-unions could cripple entire stores—or, at a minimum,

prevent retailers from carrying out their business model of offering a full range of

products to customers.

These untenable results contravene the NLRA and the precedents of this

Court and the Board itself. Accordingly, this Court should grant Macy’s petition

for review and deny the Board’s cross-application for enforcement.

JURISDICTIONAL STATEMENT

The NLRB had jurisdiction under 29 U.S.C. § 160(a). The Board issued its

decision on January 7, 2015, and Macy’s filed a petition for review on January 8,

2015. The NLRB filed a cross-application for enforcement on February 26, 2015.

4

This Court has jurisdiction over the cross-application and petition under 29 U.S.C.

§ 160(e) and (f), respectively, because Macy’s transacts substantial business within

this circuit.

STATEMENT OF ISSUES

1. Whether a unit consisting only of the cosmetics-and-fragrances sales

employees at a single Macy’s store constitutes a “unit appropriate for the purposes

of collective bargaining” under the NLRA.

2. Whether the NLRB’s “overwhelming community of interest” test, as

set forth in Specialty Healthcare & Rehabilitation Center of Mobile, 357 N.L.R.B.

No. 83, 2011 NLRB LEXIS 489 (Aug. 26, 2011), and as applied in this case, is

improper for three independent reasons:

a. It impermissibly affords controlling weight to the union-

proposed unit in violation of the NLRA.

b. It departs from past Board precedent without a reasoned

explanation.

c. It violates the Administrative Procedure Act because the Board

improperly promulgated it through adjudication rather than rulemaking.

STATEMENT OF THE CASE

Macy’s Inc. owns and operates department stores across the country.

ROA.439. Macy’s stores—“like countless others in the retail industry”—are

5

“enormous[ly] complex[]” operations, involving “an array of products and brands”

and “salespeople who have overlapping relationships with customers and one

another.” ROA.471. This case involves the efforts of Local 1445, United Food

and Commercial Workers Union (the “Union”), to unionize a single department—

cosmetics and fragrances—at a single Macy’s store in Saugus, Massachusetts.

I. FACTUAL BACKGROUND

A. Macy’s Stores Are Organized to Provide Customers with an Integrated Shopping Experience

Macy’s stores are designed to maximize customer convenience. The Saugus

store is divided into eleven primary sales departments, staffed by dedicated

associates: bridal; cosmetics and fragrances; fashion jewelry; fine jewelry;

furniture; handbags; home (housewares); juniors; men’s clothing; ready to wear

(women’s clothing); and women’s shoes. ROA.439. These departments are

arranged contiguously throughout the two floors of the store, allowing customers

and employees to move easily from one department to the next. ROA.15-16, 85-

86, 442. Some primary departments contain smaller “sub-departments” for a

particular vendor’s merchandise. ROA.104-09, 439 n.3. These vendor-specific

sub-departments include, for example, Levi’s, Chanel, Clinique, INC, Guess,

Hilfiger, LaCoste, Lancôme, Lenox, Nautica, North Face, and Polo. ROA.104-09,

441.

6

A single manager oversees the Saugus store. ROA.439. Primary sales

departments are generally supervised by individual managers who report directly

to the store manager. ROA.10-11, 439. Within those departments, vendor-specific

sub-departments are staffed by specialists who focus on that product line.

ROA.54-55, 67, 440-41. These subdivisions also frequently work closely with

vendor representatives—some of whom are employed by Macy’s, others by the

vendor—who offer training, provide product information, and monitor stock.

ROA.440-42.

The cosmetics-and-fragrances department is spread across two floors.

ROA.85-86, 440. The first floor features both cosmetics and women’s fragrances,

while the second-floor area is devoted to men’s fragrances. ROA.440. The

department also contains vendor-specific sub-departments. ROA.440. A single

sales manager oversees the entire department. Sales counters are staffed by sales

specialists (known as beauty advisors) who, at some (but not all) counters, are

assisted by counter managers. ROA.440. The department also employs seven on-

call associates, who are allocated, as needed, among the ten counters in the

department. ROA.440.

Overall, Macy’s employs approximately 120 selling employees and 30 non-

selling employees at the Saugus store. ROA.439. Of the 120 selling employees,

7

41 work in the cosmetics-and-fragrances department: 8 are counter managers, 7 are

on-call employees, and the remainder are beauty advisors. ROA.440.

B. All Sales Employees Operate Under Nearly Identical Terms and Conditions of Employment While Working Together to Provide Customers with Seamless Service

Although they work in different departments, all sales employees at Macy’s

Saugus store work together under common policies towards a common goal.

1. All Sales Employees Perform the Same Kind of Work

All sales employees share similar responsibilities. Their primary duty is to

sell merchandise. ROA.449, 465-66. In addition, all sales employees must comply

with the store’s policy to “help out wherever needed,” ROA.50-51, and to “service

any customer with any product.” ROA.35-35, 104. For example, because “a lot of

customers” prefer “to make one transaction,” ROA.36, sales employees in one

department will not infrequently ring up items from other departments. ROA.36,

441, 442. Moreover, as detailed below, all sales employees are trained to

encourage customers to “complete” their purchases with complementary items

from other departments. Infra p.8.

2. All Sales Employees Operate Under Common Terms and Conditions of Employment

Employees are governed by virtually uniform storewide terms and

conditions of employment. For example, all employees are subject to the same

employee handbook, participate in the same benefits plans, and have access to the

8

same dispute resolution program. ROA.443. All employees staff the same shifts,

enter through the same employee entrances, use the same system for clocking in

and out, and share the same breakrooms. ROA.443.

3. All Sales Employees Receive Similar Training

All sales employees receive training (sponsored either by vendor

representatives or by Macy’s) about customer service, product knowledge, and

selling techniques. ROA.68-69, 140-47, 440-42. In addition, managers in all

departments use Macy’s “My Products Activities” program to coach their sales

employees. ROA.69-70, 443. As part of that training program, sales employees

are “regularly” taught to suggest items from different departments across the store.

ROA.69, Vol. II, Employer Ex. 2, at 3, 6, 12, 14, & Self-Directed Activity: Inspire

to Buy, and Sell More. As just one example, employees are trained to recommend

“jewelry, scarves, handbags, belts, shoes or watches to complete [an] outfit.”

ROA.Vol. II, Employer Ex. 2, at 14.

4. All Sales Employees Are Evaluated on the Same Basis

All sales employees are evaluated using common criteria, i.e., their customer

reviews and “sales scorecard” (which tracks various sales metrics—most

importantly, “actual sales”). ROA.156-59, 443.

9

5. All Sales Employees Have the Same Qualifications

All sales employees are hired pursuant to similar criteria. Prior experience,

while desirable, is not required for any selling position within the store. ROA.77-

78, 442-43.

6. All Sales Employees Have Daily Opportunities for Interaction and Collaboration with Their Colleagues

All sales employees are “expected to help each other out” in their efforts to

“assist customers.” ROA.85-86, 443. The contiguous arrangement of departments

throughout the store facilitates such interaction. ROA.85-86, 442. While sales

employees from one department do not typically staff another department, they

may do so occasionally; if they notice that “a customer is looking for support, they

are expected to go help and support.” ROA.50-51, 443. Sales employees may also

circulate through other departments to recruit customers. ROA.227, 443. For

example, sales employees from the cosmetics department might visit the women’s

shoe department to enlist customers. ROA.39. All sales employees may also

volunteer or be assigned to conduct inventory in other departments. ROA.86, 90-

92, 126-27, 443 n.25. And, as described above, sales employees are trained to

suggest items from other departments to customers. Supra pp.7-8.

Over the past two years, eight employees from other departments

permanently transferred into the cosmetics-and-fragrances department, while one

employee transferred out of that department into a supervisory position. ROA.443.

10

7. All Sales Employees Attend Storewide Meetings

All employees attend daily “rallies.” ROA.86, 442. These storewide

meetings occur before the store opens each morning; they are used to review sales

from the previous day, discuss overall store activities, and alert employees to

promotions. ROA.88-89, 442.

II. PROCEDURAL HISTORY

This is not the first time that the Union has attempted to organize a unit at

the Saugus store. Macy’s and the Union have collective bargaining agreements

covering six other retail locations in the region. ROA.443. On March 24, 2011,

the Union filed a petition for an election to determine whether the employees at the

Saugus store should join an existing five-store unit. ROA.444. Macy’s argued that

such an election would be inappropriate. The NLRB’s Regional Director agreed,

directing instead that the employees be allowed to vote on whether to create a

single-store unit consisting of all employees at the Saugus store. ROA.444. The

Union lost that election. ROA.444.

After its previous strategies failed, the Union filed a second petition on

October 12, 2012, seeking a unit ultimately limited to “all full-time, part-time, and

on-call employees employed in the Saugus store’s cosmetics and fragrances

department, including counter managers, beauty advisors, and all selling

employees in cosmetics, women’s fragrances, and men’s fragrances.” ROA.172,

11

439. Macy’s objected, contending that the smallest appropriate unit would be a

storewide unit of all employees or all selling employees. ROA.165-66, 439. On

November 8, 2012, the Regional Director sided with the Union and directed that an

election be conducted. ROA.221-34. In doing so, the Regional Director applied

the novel test for initial unit determinations that the Board articulated in Specialty

Healthcare. ROA.221-34.

Macy’s asked the full Board to review the Regional Director’s decision.

ROA.235-58, 439. Among other things, Macy’s contended that the Regional

Director’s decision was inconsistent with past Board precedent and that Specialty

Healthcare should be overruled. ROA.263-91, 444. The NLRB disagreed, and on

July 22, 2014, the Board issued a 3–1 decision extending Specialty Healthcare to

the retail context and approving the single-department unit that the Union sought.

ROA.439-71.

The Board stressed that cosmetics-and-fragrances sales employees operate in

a separate department, under separate supervision, and in distinct areas of the store.

ROA.447-48. It also perceived there to be limited interaction or interchange

among sales employees across departments. ROA.448-49.

The Board did, however, conclude that “several of the ‘meaningful

differences’ identified by the Acting Regional Director [we]re not fully supported

by the record, insofar as they do not distinguish all petitioned-for employees from

12

all other selling employees.” ROA.449. Contrary to the Regional Director’s

findings, the Board found that:

Macy’s coordinates with vendor representatives both inside and

outside the cosmetics-and-fragrances department for training purposes

and when assessing candidates for openings in vendor-specific sub-

departments. ROA.52-54, 440, 442, 449.

Sales employees receive commissions beyond their base salary both

inside and outside the cosmetics-and-fragrances department.

ROA.55, 74, 102-03, 442, 449. These include sales employees in

cosmetics and fragrances, fine jewelry, furniture, and men’s clothing,

as well as sales specialists for particular brands. ROA.74, 102-03,

441-42.

Sales employees both inside and outside the cosmetics-and-fragrances

department maintain client lists through Macy’s “My Client”

program. ROA.75-76, 441-42, 449. Employees in the cosmetics-and-

fragrances, fine jewelry, men’s clothing, furniture, and bridal

departments use these lists to maintain contact with existing clients,

inform them of promotions, and schedule appointments. ROA.75-76,

441-42, 449.

13

Sales employees both inside and outside the cosmetics-and-fragrances

department are subject to Macy’s “basic black” dress code, though

certain cosmetics vendors require employees selling their product line

to wear brand-specific uniforms. ROA.441, 450.

In dissent, Member Miscimarra argued that the Board “disregard[ed] wide-

ranging similarities that exist among sales employees generally throughout the

store.” ROA.460. He further contended that the Board focused on “distinctions

between [cosmetics-and-fragrances sales] employees and other salespeople,” while

ignoring “the same types of distinctions that exist between sales employees who

work within the [cosmetics-and-fragrances] unit.” ROA.460. The Board thus

recognized a unit that was “irreconcilable with the structure of the work setting”

and that “would give rise to unstable bargaining relationships.” ROA.460.

Moreover, according to Member Miscimarra, applying Specialty Healthcare to the

retail industry “illustrate[d] the frailties associated with” that standard. ROA.460.

Because “Specialty Healthcare affords too much deference to the petitioned-for

unit,” it is “contrary to the [NLRA],” and Member Miscimarra “would refrain from

applying [that decision] in this or any other case.” ROA.460, 471.

At the subsequent election, the cosmetics-and-fragrances sales employees

voted 23–18 to unionize. ROA.472. Macy’s refused to bargain with the unit. On

14

January 7, 2015, a three-member panel of the Board concluded that Macy’s had

thereby engaged in an unfair labor practice. ROA.510-13.

Macy’s filed a petition for review on January 8, 2015. Dkt.1. This Court

granted the Union’s motion to intervene as of right on January 26, 2015. Dkt.7.

On February 26, 2015, the Board filed a cross-application for enforcement.

Dkt.12.

SUMMARY OF ARGUMENT

1. A bargaining unit that consists of only a single department of a single

Macy’s store is clearly inappropriate under the NLRA. A proposed unit is

appropriate only if the unit’s members have interests sufficiently distinct from

those of others employees. In recognizing a unit of cosmetics-and-fragrances sales

employees at Macy’s Saugus location, the Board disregarded the virtually uniform

policies that govern all sales employees throughout the store. All sales employees

perform the same kind of work—selling goods and services in an integrated

department store. All operate under the same terms and conditions of employment,

participate in the same benefits programs, are evaluated using the same criteria,

enjoy the same training opportunities, and attend the same daily meetings. Thus,

the Board did not—and cannot—explain why the interests of the sales employees

in the cosmetics-and-fragrances department are sufficiently distinct from those of

their colleagues in other departments to warrant a separate bargaining unit.

15

2. The Board approved this fragmented unit only by extending the

standard articulated in Specialty Healthcare, which places a nearly insurmountable

burden on an objecting employer. That test is legally impermissible for at least

three independent reasons.

First, by forcing an employer to demonstrate that the interests of excluded

employees overlap “almost completely” with those of employees in the petitioned-

for unit, Specialty Healthcare’s “overwhelming community of interest test”

impermissibly affords “controlling” weight to the union’s choice of unit, and thus

violates the NLRA. This is not the first time that the Board has attempted to tip the

scales in favor of a union-proposed unit. Nearly twenty years ago, the Fourth

Circuit rejected the Board’s use of a virtually identical test. See NLRB v. Lundy

Packing Co., 68 F.3d 1577 (4th Cir. 1995). This Court should reach the same

conclusion.

Second, Specialty Healthcare (like the discredited test at issue in Lundy)

radically departs from past Board precedent without a reasoned explanation. It

imports the “overwhelming community of interest” test wholesale from the

accretion context—an entirely different area of labor law, where this high bar is

necessary to protect the rights of employees compelled to join preexisting

bargaining units. At the same time, Specialty Healthcare dispenses with decades

of precedent favoring storewide bargaining units consisting, at the least, of all sales

16

employees in a retail store. The Board has never before recognized a unit

consisting of the sort of fragmented subset of sales employees within a single store

that it approved in this case. Where, as here, an agency breaks from longstanding

precedent without reasoned justification, this Court and others have refused to

enforce the agency’s orders.

Third, the Board’s decision to use Specialty Healthcare—a case ostensibly

about discrete issues relevant to the non-acute health-care industry—to promulgate

a rule applicable to all future unit-determination cases contravenes the

Administrative Procedure Act. Where, as here, the Board purports to issue a

generalized, legislative-type judgment of prospective application, it must proceed

through rulemaking rather than adjudication.

3. Finally, even under the Specialty Healthcare standard, the petitioned-

for unit is clearly inappropriate. In approving the union-proposed unit, the Board

ignored widespread differences among cosmetics-and-fragrances sales employees,

while dismissing overwhelming similarities among all sales employees at Macy’s

Saugus store.

STANDARD OF REVIEW

Employees may unionize only in “‘a unit appropriate . . . for the purposes of

collective bargaining.’” NLRB v. Purnell’s Pride, Inc., 609 F.2d 1153, 1155 (5th

Cir. 1980) (quoting 29 U.S.C. § 159(a)). Congress has given “the Board the

17

authority to decide which group of jobs is to constitute [that] unit.” Id. To make

that determination, the “Board and the courts have developed a ‘community of

interest’ analysis to guide the Board in selecting viable bargaining units.” Id. at

1156. The Board should look to such factors as:

similarity in the scale and manner of determining earnings; similarity in employment benefits, hours of work and other terms and conditions of employment; similarity in the kind of work performed; similarity in the qualifications, skills and training of employees; frequency of contact or interchange among employees; geographic proximity; continuity or integration of production processes; common supervision and determination of labor-relations policy; relationship to the administrative organization of the employer; history of collective bargaining; desires of the affected employees; and extent of union organization.”

NLRB v. Catalytic Indus. Maint. Co., 964 F.2d 513, 518 (5th Cir. 1992). The

“crucial consideration” is not the number of factors on any side of a question, but

rather the “weight or significance” of the factors in each case. Purnell’s Pride, 609

F.2d at 1156-57.

The Board has “broad” discretion to select an appropriate unit, and “an

employer who challenges a Board certified unit has the burden of establishing ‘that

the designated unit is clearly not appropriate.’” Id. at 1155-56 (citation omitted).

Nevertheless, “it was manifestly not the congressional intent that appellate scrutiny

of Board decisions be relegated to a formalistic ritual of stamping an appellate

imprimatur on administrative determinations without having undertaken a careful

18

examination of the basis of the Board’s action.” Amalgamated Clothing Workers

v. NLRB, 491 F.2d 595, 597 (5th Cir. 1974). “[T]he Board’s powers in respect of

unit determinations are not without limits, and if its decision ‘oversteps the law,’ it

must be reversed.” Allied Chem. & Alkali Workers, Local Union No. 1 v.

Pittsburgh Plate Glass Co., 404 U.S. 157, 171-72 (1971).

Accordingly, this Court will scrutinize Board decisions to determine whether

they are “‘arbitrary, capricious, an abuse of discretion, or lacking in substantial

evidentiary support.’” Purnell’s Pride, 609 F.2d at 1155 (citation omitted).

“Where the NLRB applies an incorrect legal standard, [this Court] cannot enforce

its order.” Raven Servs. Corp. v. NLRB, 315 F.3d 499, 504 n.8 (5th Cir. 2002).

Likewise, this Court will “‘deny enforcement’” “‘where the Board makes an

unexplained departure from its established criteria.’” NLRB v. Pioneer Nat. Gas

Co., 397 F.2d 573, 576 (5th Cir. 1968) (quoting NLRB v. WGOK, Inc., 384 F.2d

500, 504 (5th Cir. 1967)).

ARGUMENT

I. THE UNIT SANCTIONED BY THE BOARD WAS CLEARLY NOT APPROPRIATE

A unit of cosmetics-and-fragrances sales employees at a single Macy’s store

“‘is clearly not appropriate’” under the standards that this Court and the Board

itself (before this case) have long applied. Purnell’s Pride, 609 F.2d at 1155-56

(citation omitted).

19

As this Court has explained, a separate bargaining unit is not justified merely

because employees share some interests in common. Id. at 1156 n.2. Rather, “the

touchstone of appropriate unit determinations is whether the unit’s members have a

‘recognizable community of interest sufficiently distinct from others.’”

Amalgamated Clothing, 491 F.2d at 598 n.3 (emphasis added) (citation omitted).

Indeed, the Board itself has articulated this test repeatedly. E.g., Wheeling Island

Gaming, Inc., 355 N.L.R.B. 637, 637 n.2 (2010) (stating that the Board must

“determin[e] whether the interests of the group sought are sufficiently distinct from

those of other employees to warrant the establishment of a separate unit”);

Seaboard Marine, Ltd., 327 N.L.R.B. 556, 556 (1999) (same); Newton-Wellesley

Hosp., 250 N.L.R.B. 409, 411-12 (1980) (same); infra Part II.B.1. In short, it is

the existence “of separate interests, distinct from those of co-employees, which

renders appropriate the Board’s determination of an intra-[store] bargaining unit.”

Amalgamated Clothing, 491 F.2d at 597.

To ascertain these distinctions, this Court and the Board have looked to the

community of interest factors described above. Supra p.17. Because “[t]he

greatest conflicts of interest among workers are over wages, fringe benefits, and

working conditions,” Cont’l Web Press, Inc. v. NLRB, 742 F.2d 1087, 1091 (7th

Cir. 1984), “[s]hared interest[s] which distinguish a homogenous employees group

from other employees will typically relate” to these considerations, Amalgamated

20

Clothing, 491 F.2d at 598. Thus, this Court has held that “[t]he most reliable

indicum of common interests among employees is similarity of their work, skills,

qualifications, duties and working conditions.” NLRB v. DMR Corp., 699 F.2d

788, 792 (5th Cir. 1983).

Because they regularly share “a functional integration and mutuality of

interests,” Woolworth Co., 119 N.L.R.B. 480, 484 (1957), “[t]he Board has long

regarded a storewide unit of all selling and non-selling employees as a basically

appropriate unit in the retail industry.” I. Magnin & Co., 119 N.L.R.B. 642, 643

(1957); see also Haag Drug Co., 169 N.L.R.B. 877, 877 (1968) (stating that the

“employees in a single retail outlet form a homogeneous, identifiable, and distinct

group”). Even when the Board has occasionally recognized the propriety of other

units within the retail industry, those units have still typically involved storewide

groupings of selling or nonselling employees, or employees with a distinct craft or

skill. E.g., Stern’s Paramus, 150 N.L.R.B. 799, 806 (1965) (approving units of

selling employees, nonselling employees, and restaurant employees); infra Part

II.B.3. In all events, the Board has consistently refused to fracture a

“homogeneous work force . . . into separate units,” which are “most unlikely to be

in the best interests of the work force as a whole.” Cont’l Web, 742 F.2d at 1091

(citations omitted).

21

But that “is precisely what the Board did in this case.” Id. The interests of

cosmetics-and-fragrances sales employees are virtually “indistinguishable” from

those of other sales employees. Amalgamated Clothing, 491 F.2d at 598. To the

extent some distinctions exist, the Board failed to explain why they are significant

and outweigh interests common to all sales employees. Cf. Purnell’s Pride, 609

F.2d at 1160. This led to the approval of an “arbitrary grouping of employees” that

will “impede rather than enhance the collective bargaining process,” Amalgamated

Clothing, 491 F.2d at 597, and a decision that will have serious repercussions not

only for Macy’s, but also for the entire retail industry.

A. The Relevant Factors Establish That the Unit Approved by the Board Was Clearly Not Appropriate

The sales employees at Macy’s Saugus location represent a homogenous

work force. As detailed above, supra pp.7-10, “[c]ompany policies . . . applicable

to the employees in the designated unit prevail throughout the [store] and . . . are

centrally determined.” Amalgamated Clothing, 491 F.2d at 598. All sales

employees at the Saugus store share similar “work, skills, qualifications, duties,

and working conditions.” DMR, 699 F.2d at 792. Specifically:

Same Type of Work. Sales employees “perform the same basic job

function of selling merchandise to customers.” ROA.466; supra p.7.

They all “help out wherever needed,” ROA.51, “service any customer

22

with any product,” ROA.104, and encourage customers to purchase

items from different departments, supra pp.7-8.

Same Terms and Conditions of Employment. All sales employees are

“covered by the same policies expressed in the same employee

handbook” and “are subject to the same in-store dispute resolution

program.” ROA.466. They “participate in the same benefits plans

that are administered by the same human resources representatives

and plan administrators.” ROA.466. Indeed, with respect to nearly

all “other important matters associated with their day-to-day existence

at [the store]”—such as the time periods they work, the timeclock they

use, the breakrooms they visit, and the doors through which they

enter—cosmetics-and-fragrances sales employees cannot be

distinguished from other sales associates. ROA.466; supra pp.7-8.

Same Training. Extensive training and coaching opportunities are

available to all sales employees. ROA.440-43; supra p.8. All sales

employees are “regularly” trained to cross-sell items from other

departments. Supra p.8.

Same Evaluations. All sales employees within the store “receive the

same types of performance evaluations based on the same criteria, and

23

the same ‘sales scorecard’ is used for rating purposes.” ROA.466;

supra p.8.

Same Qualifications. The qualifications for becoming a sales

employee are similar storewide. ROA.443; supra p.9.

Same Opportunities for Interaction and Collaboration. All sales

employees are “expected to help each other out” in their efforts to

“assist customers,” ROA.85-86, 443, whether that means ringing-up

purchases from other departments or recruiting customers in other

areas of the store. ROA.39, 227, 441-43. All sales employees may be

assigned to conduct inventory in other departments, and if a customer

in another department is looking for assistance, “they are expected to

go help and support.” ROA.50-51, 443. Over the past two years, nine

of the cosmetics-and-fragrances department’s forty-one employees

have transferred into or out of the department. ROA.443; supra pp.9-

10.

Same Daily Meetings. All sales employees attend storewide daily

“rallies” before the store opens. ROA.443; supra p.10.

Thus, all sales employees work under virtually uniform terms and conditions

of employment towards the common goal of providing customers with seamless

service across the store. The record establishes a “complete lack of separate

24

interests in any conditions of employment so as to distinguish [the cosmetics-and-

fragrances department] from the other [selling] employees” at Macy’s Saugus

location. Amalgamated Clothing, 491 F.2d at 597. A separate bargaining unit of

cosmetics-and-fragrances sales employees is therefore not “appropriate.” 29

U.S.C. § 159(b).

B. The Board Failed to Adequately Explain Its Decision to Deem the Cosmetics-and-Fragrances Department an Appropriate Unit

Notwithstanding these similarities among all sales employees, the Board

recognized a unit of cosmetics-and-fragrances sales employees because the

cosmetics-and-fragrances sales department is (1) organized as a separate

department, (2) supervised by a separate sales manager, and (3) operated primarily

in distinct areas of the store. ROA.447. The Board also found a lack of “any

significant contact between the petitioned-for employees and other selling

employees”—dismissing evidence of daily interaction and numerous transfers to or

from the cosmetics-and-fragrances department. ROA.448. But the Board never

explained why those purported differences “outweigh” the similarities described

above, much less why they justify a separate bargaining unit. ROA.447-51. That

lack of explanation is fatal to the Board’s decision.

As this Court has explained, “a finding of community of interest, such that

the proposed unit is appropriate, is equivalent to a finding that the aggregate of the

evidence under all the relevant factors preponderates in favor of the proponent [of

25

the unit].” Purnell’s Pride, 609 F.2d at 1156. “This determination demands that

the Board do more than simply tally the factors on either side of a proposition.” Id.

“The crucial consideration is the weight or significance, not the number, of factors

relevant to a particular case.” Id. This requires the Board to “assign a relative

weight to each of the competing factors it considers”; indeed, a “unit determination

will be upheld only if the Board has indicated clearly how the facts of the case,

analyzed in light of the policies underlying the community of interest test, support

its appraisal of the significance of each factor.” Id. at 1156. See generally 5 U.S.C.

§ 557 (requiring agencies to provide “the reasons or basis” for their decisions);

Cont’l Web, 742 F.2d at 1093 (stating that “[t]his general principle of

administrative law is fully applicable to unit determinations”).

Applying these standards, in Purnell’s Pride, this Court refused to enforce a

Board order certifying a unit of production and maintenance employees across

several facilities run by a single employer. 609 F.2d at 1159-62. In a detailed

opinion that the Board affirmed, the Regional Director noted that production and

maintenance employees were separately supervised, lacked significant interaction

with other employees, operated in a distinct work area, and had unique skills. Id.

at 1159-60. But the decision failed to explain why these distinctions outweighed

countervailing considerations, such as “the central determination of labor policies”

and the location of all the employer’s facilities “in the same general area.” Id. at

26

1160. Concluding that the “reasons supporting the Decision and Direction of

Election [we]re not sufficiently articulated to permit proper judicial review,” this

Court denied enforcement. Id. at 1161-62.

Here, too, the Board “does not adequately explain . . . the weight that has

been assigned to each individual factor,” nor does it “sufficiently justify the

conclusion that the totality of the factors” favoring a “community of interest”

among the cosmetics-and-fragrances sales employees “preponderates over the

opposing criteria.” Id. at 1160. Instead, the Board “recite[s] the differences in

working conditions” mentioned above, “and then,” without explanation, “tack[s]

on a conclusion that therefore the [employees of the cosmetics-and-fragrances

department] have a sufficient community of interest to be a separate unit.” Cont’l

Web, 742 F.2d at 1092 (“We understand everything but the ‘therefore.’”).

For example, though it is undisputed that the cosmetics-and-fragrances

department is separately supervised, why should that carry more weight than

uniform benefits, job responsibilities, and hiring and performance standards that

are applicable to all employees? See Purnell’s Pride, 609 F.2d at 1160

(questioning “why the degree of departmental supervision outweighs central

determination of labor policies and plant-wide hire, dismissal, and compensation”).

Likewise, while the department operates in distinct areas of the store, why is that

dispositive, particularly when all sales departments throughout the store are

27

arranged contiguously? See id. (criticizing the Board for failing to explain “why

the separate location of the processing plant has such significance when all of the

facilities are in the same general area”). The Board further fails to explain why the

transfer of nine employees into and out of the cosmetics department—a substantial

percentage of the department’s forty-one employees—“do[es] not establish

significant interchange between petitioned-for and nonpetitioned-for employees.”

ROA.448; see Purnell’s Pride, 609 F.2d at 1160 (“[T]he decision does not

articulate why, in the context of the particular business, the transfer of twenty

employees from one department to another is so insubstantial as to tell in favor of

the unit.”). 1

The Board fails to explain why these distinctions matter because they are, in

fact, immaterial. First, the Board emphasizes that cosmetics-and-fragrances sales

employees work in a “distinct area.” While that may be relevant if the area is a

“separate” building—as in the case cited by the Board, ROA.447 (citing DTG

Operations, Inc., 357 N.L.R.B. No. 175, 2011 NLRB LEXIS 803, at *24 (Dec. 30,

2011))—it should not carry similar weight where, as here, the employer operates a

single store and the “distinct area” is a department immediately adjacent to several

other departments. Supra pp.5, 9.

1 The failure to explain the significance of these purported distinctions between the petitioned-for unit and other sales employees is all the more striking because the Board minimized the distinctions within the cosmetics-and-fragrances department. See infra Part III.

28

Second, it is true that the cosmetics-and-fragrances department is supervised

by a separate sales manager. But all sales managers in the store report to a single

store manager. ROA.439; supra p.6. In any event, “the Board has long held that a

difference in supervision does not necessarily mandate excluding differently

supervised employees.” Hotel Servs. Grp., Inc., 328 N.L.R.B. 116, 117 (1999).

Likewise, while counter managers and on-call employees are unique to the

cosmetics-and-fragrances department, those employees (with only minor

variations) perform tasks common to all sales employees. Supra pp.7-10.

Third, a separately supervised department hardly suggests that the interests

of sales employees within that department are distinct from those of sales

employees outside that department when all sales employees are governed by

virtually uniform policies. Supra Part I.A. The departmental label may be

significant if it represents a categorization based on unique skills or

qualifications—but that is not the case here. See ROA.443 (no prior skills or

qualifications required of any department). Indeed, Macy’s could just as easily

have laid out its store identically—with different products sold in different areas—

but declined to formally structure those areas as separate “departments.”

As the dissent observed, “the considerations that directly bear on unit

‘appropriateness’ are those that directly affect employees.” ROA.467 n.38. Thus,

the factors involving traditional topics of collective bargaining—i.e., duties,

29

working conditions, benefits—should carry more weight than those identified by

the Board. Cf. DMR, 699 F.2d at 792 (describing these as among the “most

reliable indicum of common interests”). But though the Board concedes that sales

employees are governed by identical policies on these subjects, and that they all

perform similar duties (“selling merchandise”), it dismisses those considerations in

two sentences, summarily concluding that they are outweighed by the

“distinctions” listed above. ROA.449; cf. NLRB v. Meyer Label Co., 597 F.2d 18,

22 (2d Cir. 1979) (concluding that the Board’s analysis “gave insufficient weight

to the uniformity of treatment of the Company’s personnel” where, inter alia, “[a]ll

employees work the same hours, receive the same sick-pay benefits, are entitled to

promotions, vacations, and life insurance in accordance with their plant-wide

seniority, and share the same locker room and other facilities”).2

The Board’s decision is all the more perplexing because it has previously

found that distinctions similar to those identified here did not justify separate units.

2 The Board also noted that the storewide unit of all selling employees that

Macy’s advocated would be inappropriate because some sales associates—including but not limited to those in the cosmetics-and-fragrances department—are trained and hired in coordination with vendor representatives; receive commissions; maintain client lists; and deviate from the store’s “basic black” dress code. ROA.449-50. But the Board failed to explain why these distinctions among some sales employees are outweighed by the overwhelming similarities among all sales employees discussed in Part I.A. ROA 450. An explanation was particularly warranted because the Board itself has previously said that such distinctions (e.g., compensation disparities) do not necessarily justify the creation of a separate unit. E.g., I. Magnin, 119 N.L.R.B. at 642-643.

30

Cf. Amalgamated Clothing, 491 F.2d at 598 (“The basis for the unit determination

in this case appears even more tenuous upon examining prior [Board] decisions.”).

For example, in Wheeling Island Gaming, the Board concluded that the interests of

poker dealers were not sufficiently distinct from those of other table game dealers,

despite “some factors which would support finding the petitioned-for unit

appropriate, such as separate immediate supervision, absence of daily interchange

and the relatively small number of employees who have moved from one group to

the other.” 355 N.L.R.B. at 642. And in I. Magnin, the Board rejected a

petitioned-for unit that would have consisted solely of shoe salespeople within a

retail department store. “[W]hile a different method of compensation obtain[ed] in

the shoe departments,” all salespeople “[we]re hired through the personnel

department,” “work[ed] the same number of hours and enjoy[ed] the same

benefits,” had skills “of the same general type,” and did not need any “prior

experience” in selling shoes. 119 N.L.R.B at 642-43.

In sum, because the Board failed to provide a reasoned basis for its decision

in this case, that decision should be set aside.

C. The Board’s Decision to Deem a Single Department of a Single Department Store an “Appropriate” Unit Will Wreak Havoc in the Retail Industry

The Board’s decision will also have significant repercussions throughout the

retail industry.

31

As the dissent observed, “if a unit limited to [cosmetics-and-fragrances]

salespeople is deemed appropriate, that will raise the prospect of one or more

additional separate bargaining units for other segments of sales personnel at the

same store.” ROA.471. It simply makes no sense to subdivide Macy’s Saugus

location—or any department store—into a dozen different bargaining units.

Indeed, until this case, the Board had long presumed the propriety of storewide

bargaining units in the retail industry. See infra Part II.B.3.

First, a “multiplicity of bargaining relationships would . . . be at odds with

the Employer’s overriding business objective: to attract and retain customers who

purchase products throughout the store.” ROA.471. A department store is

predicated on providing one-stop shopping for customers to purchase a variety of

products in different departments. But if those different departments are allowed

to unionize separately, the store’s business model quickly becomes unworkable.

Cf. Meyer Label Co., 597 F.2d at 22 (questioning unit determination that

jeopardizes a company’s business model). For example, a customer getting off

work in the evening could swing by the store to pick up a dress, but may not be

able to purchase coordinating accessories, because while the women’s clothing

department is open until 8PM, the fine jewelry department has bargained to go

home at 5PM. Unions could insist upon restrictive staffing and transfer provisions

that could limit an employee’s ability to work anywhere but within his department,

32

and, in turn, preclude an employer from temporarily reassigning employees to

other departments during periods of high-volume sales. Indeed, such provisions

might even prevent an unoccupied sales associate in the cosmetics-and-fragrances

department from serving a customer needing assistance in the immediately

adjacent women’s clothing department.

Second, a small number of employees could cripple an employer’s

operations. Business could grind to a halt if several departmental unions went on

strike consecutively, particularly if they played a significant role in the employer’s

operations. See Cont’l Web, 742 F.2d at 1090 (stating that “any one of the unions

may be able to shut down the plant (or curtail its operations) by a strike, thus

imposing costs on other workers as well as on the employer’s shareholders,

creditors, suppliers and customers”). At a minimum, employers would lose

business from disgruntled customers who, for example, walked into a Macy’s to

buy a mattress only to find the furniture department on strike.

Third, the “cost[s] for an employer to have to negotiate separately with a

number of different unions . . . are not born by the employer alone.” Cont’l Web,

742 F.2d at 1090. For example, the same collectively bargained restrictions that

would make it difficult for an employer to operate an integrated department store

would also likely stunt employees’ opportunities for advancement and professional

development. Employees unable to transfer from one unionized department to

33

another (or from a nonunionized department to a unionized one) could miss out on

opportunities for advancement or the chance to pick up extra shifts to supplement

their income.

Fourth, the Board’s decision undermines an employee’s right under the

NLRA to engage in collective bargaining activities. 29 U.S.C. § 157. “[B]reaking

up a work force into many small units creates a danger that some of them will be

so small and powerless that it will be worth no one’s while to organize them, in

which event the members of these units will be left out of the collective bargaining

process.” Cont’l Web, 742 F.2d at 1090. Moreover, as this Court has explained,

“the designation of . . . small unit[s] that exclude[] employees with common skills,

attitudes, and economic interests may unnecessarily curtail the union’s bargaining

power and may generate destructive factionalization and in-fighting among

employees.” Purnell’s Pride, 609 F.2d at 1156.

Fifth, the Board’s decision would likewise undermine an employee’s right to

“refrain” from collective bargaining activities. 29 U.S.C. § 157; NLRB v. Superior

Prot., Inc., 401 F.3d 282, 288 n.7 (5th Cir. 2005) (stating that the right to organize

and the right to refrain from organizing are to be guarded “‘with equal jealousy’”

(citation omitted)); H.R. Rep. No. 80-510, at 47 (1947) (Conf. Rep.), reprinted in 1

NLRB, Legislative History of the Labor Management Relations Act 551 (1948)

(stating that “one of the principal purposes of the [Act] is to give employees full

34

freedom to choose or not to choose representatives for collective bargaining”).

Specifically, the Board’s decision invites unions to gerrymander. Rather than

being forced to persuade dissenting employees in a broader unit, a union may

simply seek out a targeted group of employees where it knows it has the upper

hand. In practice, this means that “unions [will] engage in incremental organizing

in the smallest units possible.” Specialty Healthcare, 2011 NLRB LEXIS 489, at

*86 (Member Hayes, dissenting); see also Lundy, 68 F.3d at 1579. This effectively

disenfranchises dissenting employees who, though they may be in the majority in

defeating a larger unit, find themselves marginalized within the petitioned-for unit.

This case illustrates these concerns perfectly. After failing in its effort to

unionize the entire Saugus store, the Union hand-picked a unit limited to the

cosmetics-and-fragrances department that ultimately voted for unionization by a

narrow vote of 23-18. ROA.472. While the eighteen dissenting employees were

evidently in the majority with respect to the initial storewide petition, their right to

refrain from collective bargaining was undermined when the Board allowed the

union a second bite at the apple.

35

II. THE NLRB WAS ABLE TO CERTIFY THE PETITIONED-FOR UNIT ONLY THROUGH AN “OVERWHELMING COMMUNITY OF INTEREST” TEST THAT CANNOT BE SQUARED WITH THE NLRA OR PRIOR BOARD PRECEDENT GOVERNING INITIAL UNIT DETERMINATIONS

As detailed above, a unit composed exclusively of members of the

cosmetics-and-fragrances department at a single Macy’s store is not “appropriate”

under the NLRA. The Board was able to reach a contrary conclusion only by

applying the novel “overwhelming community of interest” test set forth in

Specialty Healthcare. ROA.445-51.

Under Specialty Healthcare, if a union petitions for a unit composed of

employees that are “‘readily identifiable as a group’” and “‘share a community of

interest,’” “the Board will find the petitioned for unit to be an appropriate unit.”

ROA.445 (quoting Specialty Healthcare, 2011 NLRB LEXIS 489, at *2). If an

objecting employer contends that such a unit “is nevertheless inappropriate

because it does not contain additional employees, the burden is on the party so

contending to demonstrate that the excluded employees share an overwhelming

community of interest with the included employees.” Specialty Healthcare, 2011

NLRB LEXIS 489, at *2-3 (emphases added). In other words, “the burden is on

the proponent of a larger unit to demonstrate” that the interests of employees

excluded from the proposed unit “‘overlap almost completely’” with the interests

36

of the employees the union has petitioned to represent. ROA.445 (emphasis

added) (quoting Specialty Healthcare, 2011 NLRB LEXIS 489, at *50).

The manner in which the Board applied this standard proved dispositive

here. Rather than assessing the workforce as a whole to determine if the

cosmetics-and-fragrances department shared interests sufficiently distinct from

those of their counterparts in other departments—as this Court and the Board had

previously done, see supra pp.18-21—the Board looked only to the employees of

the proposed unit, concluding that they shared interests in common. ROA.446-47.

Because virtually any group of employees, considered in isolation, shares some

interests, this was hardly a significant obstacle. Only later did the Board ask

whether those interests were distinct from those of other employees—but it did so

with a jaundiced eye, requiring Macy’s to demonstrate that the interests of other

sales employees “overlapped almost completely” with those in the cosmetics-and-

fragrances department. ROA.447-51. This almost-insuperable burden allowed the

Board to seize on insignificant differences between selling employees, while

ignoring or downplaying critical similarities. ROA.447-51.

The resulting decision cannot be squared with federal law or the Board’s

own precedent. The Board improperly afforded “controlling” weight to the extent

of Union organization in violation of Section 9(c)(5) of the NLRA. It ignored its

own prior unit determination precedent, improperly importing the “overwhelming

37

community of interest” interest standard from the accretion context, and discarding

decades of precedent favoring storewide bargaining units. And it violated the

Administrative Procedure Act by promulgating a sweeping rule for unit

determinations through adjudication rather than rulemaking. For all these reasons,

explained further below, the Board’s decision should be set aside.

A. The “Overwhelming Community of Interest” Test Violates the NLRA

By tipping the scales so heavily in favor of the union-proposed unit, the

“overwhelming community of interest” test violates the NLRA.

1. While the “Act offers little guidance to the Board in making unit

determinations,” Purnell’s Pride, 609 F.2d at 1156, Congress entrusted the

Board—not the petitioning union—with the power to make such determinations

“‘in each case,’” id. (quoting 29 U.S.C. § 159(b)). In fact, in response to Board

“decisions where the unit determined could only be supported on the basis of the

extent of organization,” NLRB v. Metro. Life Ins. Co., 380 U.S. 438, 441 (1965),

Congress amended the NLRA to provide that “[i]n determining whether a unit is

appropriate[,] . . . the extent to which the employees have organized shall not be

controlling,” 29 U.S.C. § 159(c)(5). Section 9(c)(5) was thus designed to “strike[]

at a practice of the Board by which it has set up [as] units appropriate for

bargaining whatever group or groups the petitioning union has organized.” H.R.

38

Rep. No. 80-245, at 37 (1947), reprinted in 1 NLRB, Legislative History of the

Labor Management Relations Act 328 (1948).

Congress viewed Section 9(c)(5) as essential to “assure full freedom to

workers to choose, or to refuse, to bargain collectively, as they wish.” Id.; see also

29 U.S.C. § 159(b) (same). Affording too much deference to the petitioned-for

unit undermines that freedom, because the union’s overriding consideration in

selecting a unit is its ability to win a representation election. This jeopardizes both

the right of dissenting employees within that unit to refrain from organizing, and

the right of excluded employees to engage in collective bargaining. See id. § 157.

To safeguard these rights, Section 9(c) “does not merely preclude the Board

from relying ‘only’ on the extent of organization. The statutory language is more

restrictive, prohibiting the Board from assigning this factor either exclusive or

‘controlling’ weight.” Lundy, 68 F.3d at 1580. Thus, though the Board is not

“prohibit[ed] . . . from considering the extent of organization as one factor . . . in its

unit determination,” Metro. Life Ins. Co., 380 U.S. at 442, “this evidence should

have little weight,” H.R. Rep. No. 80-245, at 37.

2. As the Fourth Circuit concluded nearly twenty years ago in Lundy, 68

F.3d 1577, the Board’s “overwhelming community of interest” test contravenes

Section 9(c).

39

In Lundy, the Board recognized a unit composed solely of production and

maintenance workers at an employer’s pork processing facility. 68 F.3d at 1579.

In doing so, the Board found that other plant workers did “‘not share such an

overwhelming community of interest with the petitioned-for production and

maintenance employees as to mandate their inclusion in the unit.’” Id. at 1581

(quoting Lundy Packing Co., 314 N.L.R.B. 1042, 1043 (1994)). The Fourth

Circuit concluded that this “novel legal standard” “both contravened [the Board’s]

own announced standards and accorded controlling weight to the extent of union

organization . . . , thereby violating § 9(c)(5) of the National Labor Relations Act.”

Id. at 1579, 1581.

Despite its “broad discretion” with respect to unit determination, the Fourth

Circuit explained, “the Board must operate within statutory parameters,” and

§ 9(c)(5) prohibits the Board from allowing the extent of union organization to be a

“dominant” or “controlling” factor. Id. at 1580. A union will naturally “‘propose

the unit it has organized.’” Id. at 1581 (citation omitted). Allowing the employer

to challenge the propriety of that unit only if it can show that excluded employees

share an “overwhelming community of interest” with those in the petitioned-for

unit sets the bar so high as to “effectively accord[] controlling weight to the extent

of union organization”—a “classic § 9(c)(5) violation.” Id.

40

3. The Board has now resurrected the same “overwhelming community

of interest” test that the Fourth Circuit rejected. See supra pp.35-37 (describing

Specialty Healthcare test). The Board contends that its new version of the

“overwhelming community of interest” differs from the test at issue in Lundy.

Specialty Healthcare, 2011 NLRB LEXIS 489, at *51 n.25. But that assertion

does not withstand scrutiny.

As an initial matter, it is belied by Specialty Healthcare itself, in which the

Board said it was “articulat[ing] the same standard” as the one it used in Lundy.

Specialty Healthcare, 2011 NLRB LEXIS 489, at *50-51 (citing Lundy Packing

Co., 314 N.L.R.B. 1042, 1043 (1994)). Despite this acknowledgement, the Board

later purports to distinguish its standard from that applied in Lundy. The Board

reads the Fourth Circuit’s decision in Lundy to reject not the “overwhelming-

community-of-interest standard,” but a categorical “presum[ption]” in favor of the

petitioned-for unit. Specialty Healthcare, 2011 NLRB LEXIS 489, at *51 n.25

(citing Blue Man Vegas, LLC v. NLRB, 529 F.3d 417 (D.C. Cir. 2008)).

That reading of the Fourth Circuit’s decision (and of the underlying Board

decision in Lundy) is simply wrong. There was no dispute that the petitioned-for

unit in Lundy was readily identifiable as a group and possessed a community of

interest. See Lundy, 314 N.L.R.B. at 1043, 1045. As the Fourth Circuit explained

at length, the problem with the test imposed by the Board was that, by requiring the

41

employer to show that other employees share an overwhelming community of

interest with the petitioned-for unit, the test relied too heavily on the union’s

choice of unit and created too high a burden for an objecting employer. See 68

F.3d at 1580-81; supra p.39. In this way, the Board’s overwhelming community of

interest test effectively precluded the employer from challenging the petitioned-for

unit even where “it [wa]s impossible to escape the conclusion that” the only reason

certain employees “were excluded” was that the union “‘d[id] not seek to represent

them.’” Id. at 1581. This near-total deference to the union’s proposed unit—the

same flaw from which Specialty Healthcare suffers—amounts to a virtually

insuperable presumption, and thus violates the NLRA.

4. To be sure, the D.C. Circuit and the Sixth Circuit have approved some

iteration of the overwhelming community of interest test in recent years. See

Kindred Nursing Ctrs. E., LLC v. NRLB, 727 F.3d 552, 565 (6th Cir. 2013); Blue

Man, 529 F.3d 417. In Specialty Healthcare, the Board relied on the D.C.

Circuit’s decision in Blue Man to revive the “overwhelming community of

interest” test. E.g., 2011 NLRB LEXIS 489, at 47-50 (citing Blue Man, 529 F.3d

417). The Sixth Circuit then endorsed Specialty Healthcare, again relying heavily

on the D.C. Circuit’s reasoning. Kindred, 727 F.3d at 561-65. But Blue Man and

Kindred are not persuasive.

42

First, as to Blue Man, the D.C. Circuit principally justified the

overwhelming community of interest test based on cases setting forth the standard

for appellate review of unit determinations already made by the Board. See 529

F.3d at 421 (citing County Ford Trucks, Inc. v. NLRB, 229 F.3d 1184, 1189 (D.C.

Cir. 2000) and Dunbar Armored, Inc. v. NLRB, 186 F.3d 844, 847 (7th Cir. 1999));

see also Specialty Healthcare, 2011 NLRB LEXIS 489, at *46 (citing Dunbar, 186

F.3d at 847).3 In light of the discretion Congress has afforded the Board in

identifying units appropriate for collective bargaining, supra pp.17-18, an

appellate court will invalidate a unit certified by the Board only if the employer

can demonstrate that the unit is “truly inappropriate.” Blue Man, 529 F.3d at 421;

see also Purnell’s Pride, 609 F.2d at 1155-56; Dunbar, 186 F.3d at 847. But

Section 9(c) prohibits the Board from giving comparable deference to the union’s

3 The Board cases cited by the D.C. Circuit do not support the

“overwhelming community of interest” standard either. Jewish Hospital Association, 223 N.L.R.B. 614, 617 (1976), recounted that “the employer argued” that two groups of employees shared “an overwhelming community of interest.” And Logidan, Inc., 332 N.L.R.B. 1246 (2000), is a one-paragraph denial of a request to review a decision of a Regional Director. The phrase “overwhelming community of interest” appears in the opinion sought to be reviewed, which the Board attached as an appendix. In neither case did the Board endorse an “overwhelming community of interest” standard.

The D.C. Circuit also analogized initial unit determinations to the accretion context—an analogy that, for the reasons explained below, is inapt. See infra Part II.B.2.

43

proposed unit—and the Fourth Circuit rejected the “overwhelming community of

interest” test for precisely that reason.

Second, as to Kindred, the Sixth Circuit—relying on Blue Man—opined that

Specialty Healthcare solves the problem identified by Lundy because it first

requires the Board to determine whether the unit is “‘prima facie appropriate.’”

727 F.3d at 565 (citation omitted). In other words, before asking whether the

employer has met its burden to show that excluded employees share an

“overwhelming community of interest” with those in the petitioned-for unit, the

Board will first assess whether the petitioned-for unit is “readily identifiable as a

group” and shares “a community of interest.” Specialty Healthcare, 2011 NLRB

LEXIS 489, at *51 n.25.

Far from solving the problem, this inquiry almost ensures controlling weight

for the union’s choice of unit. After all, a finding that a group of employees shares

a “community of interest” has never been enough, in and of itself, to make a unit

“appropriate” for bargaining. Indeed, many groups of employees, considered in

isolation, may share interests in common. See Newton-Wellesley, 250 N.L.R.B at

411-12; supra Part II.B.1. Accordingly, courts and the Board have traditionally

asked not if the employees in the petitioned-for unit share some interests in

common, but if their interests are “sufficiently distinct” from those of other

employees. Supra Part I; infra Part II.B.1.

44

Specialty Healthcare short-circuits this analysis. If the proposed unit is

“readily identifiable as a group” and shares “a community of interest,” the “Board

will find the petitioned-for unit to be an appropriate unit”—without any

consideration of whether those interests are sufficiently distinct from those of other

employees. 2011 NLRB LEXIS 489, at *54. To be sure, the Board will then

proceed to determine whether the employer has shown that the interests of

excluded employees “overlap almost completely” with those of the petitioned-for

unit. See id. at *52-55. But that is too little too late. At that point, the deck has

already been stacked in favor of the union-proposed unit; it will receive the same

level of deference as would be afforded by an appellate court to a unit certified by

the Board. It is this thumb on the scale in favor of the petitioned-for unit that

“effectively accord[s] controlling weight to the extent of union organization”—“a

classic § 9(c)(5) violation.” Lundy, 68 F.3d at 1581.

Accordingly, this Court should follow the Fourth Circuit’s decision in Lundy

and reject the NLRB’s attempt to resurrect the discredited “overwhelming

community of interest” standard. Just as in Lundy, the Specialty Healthcare test

allows even “meager differences” in employee interests to justify the creation of

separate bargaining units. Lundy, 68 F.3d at 1581. Just as in Lundy, the union-

proposed unit will be deemed appropriate unless the employer shows that it shares

an “overwhelming community of interest” with excluded employees. Id. And just

45

as in Lundy, this “effectively accord[s] controlling weight to the extent of union

organization” in violation of § 9(c)(5) of the NLRA. Id.

B. The Board Failed to Provide a Reasoned Explanation for Its Departure from Past Precedent When Adopting the “Overwhelming Community of Interest” Test

The Board’s extension of Specialty Healthcare to this case requires this

Court to set aside the Board’s decision for another reason: Specialty Healthcare

(like the discredited test at issue in Lundy) radically departs from past Board

precedent without a reasoned explanation.

“[T]here is clearly an obligation on the Board to maintain a consistent

approach in [its] unit determinations.” NLRB v. WKRG-TV, Inc., 470 F.2d 1302,

1311 (5th Cir. 1973). “This is not to say that the Board may not change its view of

what test is to be applied in unit determination cases and what factors are to be

considered in its application.” Rayonier, Inc. v. NLRB, 380 F.2d 187, 189 (5th Cir.

1967). But if the Board changes course, it must “supply a reasoned analysis for the

change.” Motor Vehicle Mfrs. Ass’n. of U.S., Inc. v. State Farm Mut. Auto. Ins.

Co., 463 U.S. 29, 42 (1983); see also 5 U.S.C. § 557; Lundy, 68 F.3d at 1583;

Rayonier, 380 F.2d at 189. Thus, this Court will refuse to enforce the Board’s

orders where the Board has made “an unexplained departure from its established

criteria for unit determination.” Pioneer Nat. Gas Co., 397 F.2d at 576; Rayonier,

380 F.2d at 189, 194-95 (same); WGOK, 384 F.2d at 504 (same).

46

As the dissent in Specialty Healthcare explained, that decision

“fundamentally change[d] the standard for determining whether a petitioned-for

unit is appropriate in any industry subject to the Board’s jurisdiction.” 2011

NLRB LEXIS 489, at *65 (Member Hayes, dissenting).4 But the Board did not

acknowledge this departure from decades of precedent, much less provide a

reasoned explanation for it. Indeed, the Board claimed to be doing nothing more

than “clarify[ing]” existing law. Id. at *2, *58 (majority opinion). For the reasons

discussed below, however, Specialty Healthcare is flatly inconsistent with prior

precedent, improperly imports a heightened standard from an inapposite area of

law, and is at odds with presumptions that the Board has long applied to the retail

industry.

4 See also, e.g., Zev J. Eigen & Sandro Garofalo, Less Is More: A Case for

Structural Reform of the National Labor Relations Board, 98 Minn. L. Rev. 1879, 1890 (2014) (“[I]n the highly controversial Specialty Healthcare & Rehabilitation Center decision, the Board radically changed its historical ‘community of interest’ standard for determining the scope of appropriate bargaining units.”); Tanja J. Thompson & Brenda N. Canale, Has Specialty Healthcare Changed the Landscape in Organizing and Representation Proceedings?, 29 ABA J. Lab. & Employment L. 447, 450 (2014) (“In truth, however, Specialty Healthcare did not ‘clarify’ an old standard for election cases; rather, it created a new standard—one that establishes a virtually impossible hurdle for employers to overcome.”); Edward Phillips & Steven E. Kramer, The Law at Work: New NLRB ‘Quickie Election’ Procedures, 48 Tenn. B.J. 30, 31 (2012) (“In Specialty Healthcare, the NLRB reversed two decades of board law, changing the standard for determining the appropriateness of a bargaining unit.”). But see William H. Haller, Tempest in a Bedpan? The Specialty Healthcare Controversy, 29 ABA J. Lab. & Employment L. 465 (2014).

47

1. The “Overwhelming Community of Interest” Test Is Inconsistent with the Board’s Past Precedent Governing Initial Unit Determinations

Specialty Healthcare transformed the multi-factor balancing test that courts

and the Board had traditionally applied into a rigid, two-step formula that places an

almost-insuperable burden on an employer challenging the propriety of a

petitioned-for unit.

Before Specialty Healthcare, to determine the propriety of a petitioned-for

unit, the Board applied the multi-factor community of interest test to ascertain

“whether the interests of the group sought are sufficiently distinct from those of

other employees to warrant the establishment of a separate unit.” Newton-

Wellesley Hosp., 250 N.L.R.B. at 411-12; supra Part I. In other words, the Board

engaged in “a careful examination” and comparison “of what interests are shared

within and outside the proposed unit” to determine whether the petitioned-for unit

was appropriate. ROA.469.

As noted above, this Court and the Board reaffirmed this test repeatedly.

See supra pp.18-21. Significantly, under the multi-factor test, the Board “never

addresse[d], solely and in isolation, the question whether the employees in the unit

sought have interests in common with one another.” Newton-Wellesley Hosp., 250

N.L.R.B. at 411-12. And for good reason: as the Board explained, “numerous

groups of employees”—when viewed in isolation—“fairly can be said to possess

48

employment conditions or interests ‘in common.’” Id. But that does not mean

those groups are necessarily appropriate units: before that determination can be

made, the Board has always analyzed whether the interests of employees in the

petitioned-for unit are “sufficiently distinct” from those of other employees. Id.

Specialty Healthcare broke with this standard, holding that the Board will

“examine[] the petitioned-for unit first.” Specialty Healthcare, 2011 NLRB

LEXIS 489, at *36. If the employees in the proposed unit are “readily identifiable

as a group” and share “a community of interest” the “Board will find the

petitioned-for unit to be an appropriate unit.” Id. at *54. “[N]ever” before has the

Board been willing to conclude a unit is appropriate solely on this basis. Newton-

Wellesley, 250 N.L.R.B. at 411-12. And rather than assessing whether the interests

of the petitioned-for unit were “sufficiently distinct” from those of excluded

employees, the Board placed the burden on the employer to affirmatively

demonstrate that excluded employees share an “‘overwhelming community of

interest’” with those in the proposed unit such that their interests “‘overlap[]

almost completely.’” 2011 NLRB LEXIS 489, at *50 (quoting Blue Man, 529

F.3d at 422).

Indeed, in this very case, the Board all but confirmed that it was applying a

new and different standard. The Board attempted to distinguish Wheeling Island

Gaming—a case that applied traditional community of interest factors—by stating

49

that it was “decided before Specialty Healthcare, did not apply the Specialty

Healthcare framework, and Specialty Healthcare gave no indication how the

overwhelming community of interest framework might have been applied in

Wheeling Island Gaming.” ROA.451. But if the “overwhelming community of

interest” test does nothing more than “clarif[y]” existing unit determination

standards, there is no reason to think that outcome of a case would turn on whether

it arose before or after Specialty Healthcare.5

2. The Board Improperly Imported the “Overwhelming Community of Interest” Standard from the Accretion Context

While the Fourth Circuit correctly described the application of the

“overwhelming community of interest” test to initial unit determinations as

“novel,” the Board had previously applied that standard in “an entirely different”

context, namely, so-called “accretion cases.” Lundy, 68 F.3d at 1581. The Board’s

transposition of the “overwhelming community of interest” standard from an

5 In Specialty Healthcare, the Board mustered only two cases in which the

NLRB had used the phrase “overwhelming community of interest” in the initial unit determination context. 2011 NLRB LEXIS 489, at *50 (citing cases). Those cases do not support the standard articulated by the Board. The Board cited its decision in Lundy Packing Co., 314 N.L.R.B. 1042 (1994), the very decision that the Fourth Circuit rejected for the reasons explained above, supra Part II.A. And the Board’s citation of Laneco Construction Systems, 339 N.L.R.B. 1048, 1050 (2003), fares no better, because in that case, the Board was simply recounting a party’s arguments, not adopting the overwhelming community of interest test as the standard for unit determinations. Id.

50

inapposite area of labor law further demonstrates that the Specialty Healthcare test

distorts, rather than follows, prior precedent.

“Simply stated, an accretion is the incorporation of employees into an

already existing larger unit when such a community of interests exists among the

entire group that the additional employees have no separate unit identity.” NLRB

v. Sec.-Columbian Banknote Co., 541 F.2d 135, 140 (3d Cir. 1976). Significantly,

those employees “are added to [the] existing bargaining unit without being

afforded an opportunity to vote in a union election.” Superior Prot., 401 F.3d at

287 (emphasis added). For this reason, this Court has observed that “the accretion

doctrine sits in substantial tension with the guarantee of employee self

determination reflected in § 7 of the [National Labor Relations Act].” Id. 6

“Recognizing this conflict, the Board’s jurisprudence has historically favored

employee elections, reserving accretion orders for those rare cases” in which the

accreted employees have no identity of their own, but instead “‘share an

6 Section 7 provides that:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities . . . .

29 U.S.C. § 157.

51

overwhelming community of interest with the preexisting unit.’” Id. at 288

(quoting Safeway Stores, Inc., 256 N.L.R.B. 918 (1981)).

Before Specialty Healthcare, neither the NLRB nor this Court ever

suggested that the standard applied to test the propriety of initial union-proposed

units is identical to the test used to add employees to existing units. To the

contrary, this Court has explained that the accretion test “is substantially more

stringent than the traditional community of interest test applied in ‘the Board’s

more ordinary decision to certify initially a particular group of employees as an

appropriate bargaining unit.’” Id. at 288 n.9 (emphasis added) (citation omitted);

see also NLRB v. DMR Corp., 795 F.2d 472, 475-76 (5th Cir. 1986). This is hardly

surprising, as the demanding nature of the accretion test reflects the Board’s

“heightened concern” for employees’ Section 7 rights, Superior Prot., 401 F.3d at

287 n.6 (citation omitted), which are “to be restricted only under compelling

conditions” and in “extraordinary cases,” Pix Mfg. Co., 181 N.L.R.B. 88, 91

(1970); Superior Prot., 401 F.3d at 288 n.9 (citation omitted).7

Yet with no explanation whatsoever, the Board has now taken a test

designed for the “extraordinary” context of accretion and applied it to initial unit

7 Without acknowledging the different rights implicated by an accretion, the D.C. Circuit cited the use of the “overwhelming community of interest test” in that context as support for its holding in Blue Man. See 529 F.3d at 422 n.*; see also Specialty Healthcare, 2011 NLRB LEXIS 489, at *85 n.17 (Member Hayes, dissenting) (stating that Blue Man was “wrongly decided” based on “an inapt analogy to accretion law”).

52

determinations. Consequently, according to the Board, the showing necessary to

challenge the propriety of a union-proposed initial unit is the same showing

necessary for the “rare case” in which it is permissible to forcibly compel an

employee to join a union. Compare Specialty Healthcare, 2011 NLRB LEXIS

489, at *50 (interests of excluded employees must “overlap almost completely”

with those in the petitioned-for unit), with DMR Corp., 795 F.2d at 476 (employees

must “have no true identity distinct from” the unit to which they will be accreted).

This is not a “clarif[ication]” of existing law, but a wholesale rewriting of the

manner in which the Board determines whether a petitioned-for unit is appropriate.

3. The “Overwhelming Community of Interest” Test Is Inconsistent with Standards the Board Has Previously Applied to the Retail Industry

The “overwhelming community of interest” test is also inconsistent with a

line of Board decisions that presumed the appropriateness of storewide bargaining

units—consisting of all employees or, at the least, all selling or non-selling

employees—in the retail context.

As noted above, the Board has long recognized the propriety of storewide

bargaining units in the retail industry. E.g., I. Magnin, 119 N.L.R.B. at 643; see

also, e.g., Sears, Roebuck & Co., 191 N.L.R.B. 398, 404 (1971) (agreeing with the

employer that, “to make this kind of retail operation viable a high degree of

compartmentalization cannot be utilized,” and thus concluding that “the only

53

appropriate unit should consist of all employees of the service station, warehouse,

and retail store); Levitz Furniture Co., 192 N.L.R.B. 61, 62 (1971).

Thus, the Board has consistently rejected petitioned-for units consisting

solely of the employees of a particular department within a retail store. For

example, as explained above, see supra p.30, in I. Magnin, the Board rejected a

petitioned-for unit that would have consisted solely of shoe salespeople within a

retail department store. The Board noted that “all employees [we]re hired through

the personnel department,” “work[ed] the same number of hours,” received “the

same benefits, and had skills “of the same general type.” 119 N.L.R.B. at 642-43.

Moreover, “[t]he employer d[id] not require prior experience of all shoe

department personnel, and employees from other departments ha[d] been assigned

to work as shoe salesmen.” Id.

Likewise, in Kushins & Papagallo Divisions of U.S. Shoe Retail, Inc., 199

N.L.R.B. 631 (1972), the Board rejected a petitioned-for unit “limited to one

division of sales employees in a multidepartment retail store that sold shoes,

dresses, and accessories.” ROA.468. “[C]onsistent with [its] unit policy in

department store cases,” the Board held that “the unit must be broadened in scope

to encompass all store employees.” U.S. Shoe, 199 N.L.R.B. at 631-32.8

8 The Board tried to distinguish such cases because they note that “smaller

units of retail clothing store employees are appropriate . . . where departments composed of employees having a mutuality of interest not shared by other store

54

Even when the Board has deviated from the presumption favoring units of

all storewide employees, it has favored storewide units of selling or nonselling

employees. In a series of cases known as the “Stern’s Trilogy,” the Board

recognized that “differences in work tasks and interests between selling and

nonselling employees in department stores” could warrant the creation of separate

units. Stern’s Paramus, 150 N.L.R.B. 799, 806 (1965) (approving units of selling

employees, nonselling employees, and restaurant employees); Arnold Constable

Corp., 150 N.L.R.B. 788 (1965) (approving units of selling employees, office

employees, and cafeteria employees); Lord & Taylor, 150 N.L.R.B. 812 (1965)

(approving a unit of all nonselling employees at a department store). At the same

time, the Board has recognized that separate units could be created for certain

employees with special skills or duties, like those of craftspeople, that make them

“singularly different” from selling or nonselling employees. E.g., Arnold

Constable Corp., 150 N.L.R.B. at 791 (cafeteria employees); Stern’s Paramus, 150

N.L.R.B. at 806 (restaurant employees); Big Y Food, Inc., 238 N.L.R.B. 855 (1978)

(meat department). For fifty years, until this case, the Board made unit

determinations consistent with these standards.

employees are involved.” Decision 14 (quoting I. Magnin, 119 N.L.R.B.at 643). But as discussed supra Part I, the Board failed to explain how the interests of the cosmetics-and-fragrances sales associates are sufficiently distinct from those of the remainder of the store’s selling employees. I. Magnin, 119 N.L.R.B.at 643.

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Here, however, the Board sanctioned a unit unlike any it has previously

approved in the retail context. The Union did not ask the Board to certify a unit of

selling or nonselling employees. Nor did it seek a carve-out for employees with

craft-like skills. Rather, it requested—and the Board approved—a unit consisting

of a particular subset of selling employees within a particular store. Courts have

not hesitated to set aside agency action reflecting such breaks from prior precedent.

E.g., Willamette Indus., Inc., v. NLRB, 144 F.3d 877 (D.C. Cir. 1998) (setting aside

agency order for failure to explain break with wall-to-wall presumption in the

lumber industry)..

* * * * *

For all these reasons, the Board’s Specialty Healthcare test, which the Board

applied in this case, departs from past Board precedent without any reasoned basis.

That alone provides grounds to set aside the Board’s decision. See supra pp.45-46.

C. The Board Violated the Administrative Procedure Act by Using Adjudication to Promulgate a New “Rule” for Determining Appropriate Bargaining Units

The Specialty Healthcare test is improper for another, independent reason:

by announcing its new rule for unit determination through adjudication rather than

formal rulemaking, the Board violated the Administrative Procedure Act (“APA”).

The Supreme Court has recognized a “distinction in administrative law

between proceedings for the purpose of promulgating policy-type rules or

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standards, on the one hand, and proceedings designed to adjudicate disputed facts

in particular cases on the other.” United States v. Fla. E. Coast Ry. Co., 410 U.S.

224, 245 (1973). The APA, in turn, provides different guidelines applicable to

rulemaking and adjudication. As relevant here, if an agency “seeks to change the

law and establish rules of widespread application,” it “must proceed by

rulemaking.” Ford Motor Co. v. FTC, 673 F.2d 1008, 1009 (9th Cir. 1981); see

also NLRB v. Bell Aerospace Co., 416 U.S. 267, 291 (1975) (explaining that the

Board cannot “improperly promulgate a ‘rule’” in the context of an adjudication).

In other words, the Board cannot use an adjudication to propound a “generalized,”

“basically legislative-type judgment” that will have “prospective application”

beyond the “particular set of disputed facts” at issue. Fla. E. Coast Ry., 410 U.S.

at 246; cf. Nueces Cnty. Navigation Dist. No. 1 v. Interstate Commerce Comm’n,

674 F.2d 1055, 1065 (5th Cir. 1982) (stating that “rulemaking [i]s particularly

appropriate . . . to consider the adoption of a new standard . . . that would transcend

the interests of the particular petitioners”).

Courts have set aside agency action where the agency effectively

promulgated a rule through adjudication. See, e.g., Pfaff v. U.S. Dep’t of Housing

& Urban Dev., 88 F.3d 739, 748 (9th Cir. 1996). This is particularly true where

agencies have “singled out individual cases as vehicles in which to consider and

promulgate general policy rules which are largely independent of the facts and

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issues of the particular case.” Glen O. Robinson, The Making of Administrative

Policy: Another Look at Rulemaking and Adjudication and Administrative

Procedure Reform, 118 U. Pa. L. Rev. 485, 512 (1970).

For example, in NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969), the

Supreme Court determined that the Board had improperly promulgated a “rule” in

an earlier adjudication, Excelsior Underwear Inc., 156 N.L.R.B. 1236 (1966).

Like Specialty Healthcare, Excelsior involved the adjudication of a union

representation dispute. Wyman-Gordon Co., 394 U.S. at 763 (plurality op.). The

Excelsior “Board ‘invited certain interested parties’” to participate in the

proceedings as amici curiae. Id. And, as in Specialty Healthcare, the Excelsior

Board “purported to establish [a] general rule” that would be “‘applied in all

election cases.’” Id.

The Supreme Court explained that “the rule-making provisions of [the

APA], which the Board would avoid, were designed to assure fairness and mature

consideration of rules of general application. . . . There is no warrant in law for the

Board to replace the statutory scheme with a rule-making procedure of its own

invention.” Id. at 764 (plurality op.). By “purport[ing] to make a rule: i.e., to

exercise its quasi-legislative power,” without complying with the APA, the Board

engaged in unlawful rulemaking. Id. at 765; id. at 777-79 (Douglas, J., dissenting);

id. at 780 (Harlan, J., dissenting); see also First Bancorp. v. Bd. of Governors of

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the Fed. Reserve Sys., 728 F.2d 434, 438 (10th Cir. 1984) (concluding that an

agency had “abused its discretion” “by improperly attempting to propose

legislative policy by an adjudicative order”).9

The Board violated these precepts in Specialty Healthcare. Specialty

Healthcare began as a dispute about the proper application of Park Manor Care

Center, 305 N.L.R.B. 872 (1991), a case in which the NLRB had articulated the

standard for unit determinations in non-acute healthcare facilities. See Specialty

Healthcare, 2011 NLRB LEXIS 489, at *1. None of the parties asked the court to

create a new, generally applicable standard for determining appropriate bargaining

units. Indeed, the employer’s request for review was limited to its contention that

the Regional Director had improperly applied Park Manor in the industry in which

it arose. Specialty Healthcare & Rehabilitation Ctr., 356 N.L.R.B. No. 56, 2010

NLRB LEXIS 514, at *16 (Dec. 22, 2010) (Member Hayes, dissenting).

Without any prompting from the parties, the Board issued an order inviting

amicus briefs addressing “the procedures and standards for determining whether

proposed units are appropriate in all industries.” Id. at *5 (majority op.) (emphasis

9 To be sure, the Court also faulted the Excelsior Board because the rule that the Board set forth was solely prospective in nature and was not applied to the parties in Excelsior itself. The “real trouble” with Excelsior and Specialty Healthcare, however, is that they were both “manipulated or at least distorted for the ulterior ends of rulemaking.” Robinson, supra, at 512. While Specialty Healthcare adjudicated the rights of the parties to the proceeding, it also purported to set rules that would prospectively govern all unit determination standards “in all industries.” 2010 NLRB LEXIS 514, at *5 (emphasis added).

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added).10 These unprompted questions foreshadowed the Board’s “broad revision

of a test for determination of appropriate units in all industries under [the NLRB’s]

jurisdiction—a test that has stood for at least 50 years.” Id. at *24 (Member

Hayes, dissenting).

Indeed, the Board “seize[d] upon [Specialty Healthcare] as an occasion for

reviewing not only Park Manor and the standard for unit determinations in

nonacute health care facilities, but also for reviewing ‘the procedures and standards

for determining whether proposed units are appropriate in all industries.’” Id. at

*15-16. Thus, in addition to overruling Park Manor, Specialty Healthcare

declared (1) “that the traditional community of interest test . . . will apply as the

starting point for unit determinations in all cases not governed by the Board’s

Health Care Rule” and (2) that “for those cases in which an employer contends that

a proposed bargaining unit is inappropriate because it excludes certain employees .

10 The Board asked potential amici to address, among other things:

(7) Where there is no history of collective bargaining, should the Board hold that a unit of all employees performing the same job at a single facility is presumptively appropriate in nonacute health care facilities. Should such a unit be presumptively appropriate as a general matter. (8) Should the Board find a proposed unit appropriate if, as found in American Cyanamid Co., 131 NLRB 909, 910 (1961), the employees in the proposed unit are “readily identifiable as a group whose similarity of function and skills create a community of interest.”

Id. at *6 (majority op.) (emphases added).

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. . the employer must show that the excluded employees share an ‘overwhelming

community of interest’ with the petitioned-for employees.” Specialty Healthcare,

2011 NLRB LEXIS 489, at *64 (emphases added). These sweeping

pronouncements amount to “an agency statement of general or particular

applicability and future effect designed to implement, interpret, or prescribe law or

policy”—in other words, a “rule.” 5 U.S.C. § 551(4).

The Board used Specialty Healthcare as a vehicle to promulgate “policy-

type rules or standards” to be applied in all future unit determination cases. Fla. E.

Coast Ry. Co., 410 U.S. at 245. Because the Board failed to comply with the

APA’s rulemaking provisions, the rule it announced in Specialty Healthcare

should be set aside. E.g., First Bancorp., 728 F.2d at 438 (setting aside ruling

when agency promulgated a rule through adjudication rather than rulemaking);

Pfaff, 88 F.3d at 748 (same); Patel v. INS, 638 F.2d 1199 (9th Cir. 1980) (same).

III. EVEN UNDER THE SPECIALTY HEALTHCARE STANDARD, THE BOARD APPROVED AN INAPPROPRIATE BARGAINING UNIT

For all the reasons stated above, the Specialty Healthcare test is contrary to

law and should be set aside by this Court. But even under that test—properly

applied—the unit approved by the Board is not appropriate for collective

bargaining.

First, as Member Miscimarra explained in dissent, the Board erred in

concluding that the cosmetics-and-fragrances sales employees shared a community

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of interest despite widespread differences among the employees within that

department. ROA.461-67. After all, the unit approved by the Board includes three

different classifications of employees (beauty advisors, on-call employees, and

counter managers) who sell eight different product lines while wearing seven

different uniforms at ten different counters located on two different floors within

the store. ROA.440-41, 446-47. And although all cosmetics-and-fragrances sales

employees receive commissions, the percentages vary based on job title. ROA.441.

Second, in any event, Macy’s carried its burden under Specialty Healthcare

of showing that all selling employees within the store share an overwhelming

community of interest. As detailed in Part I.A, all sales employees perform the

same kind of work, operate under the same terms and conditions of employment,

participate in the same benefit programs, enjoy the same training opportunities, are

evaluated using the same criteria, collaborate in the same integrated workplace,

and attend the same daily meetings. Accordingly, the Board committed legal error

by carving out a unit consisting exclusively of cosmetics-and-fragrances sales

employees.

CONCLUSION

For the reasons articulated above, the Board’s unit determination can be

explained only by affording “controlling” weight to the extent of employee

organization in violation of the express terms of the NLRA. Accordingly, Macy’s

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respectfully requests that the Court grant the petition for review and deny the

Board’s cross-application for enforcement. E.g., NLRB v. Lundy Packing Co., 81

F.3d 25, 27 (4th Cir. 1996) (clarifying that after “enforcement of the Board’s

bargaining order [wa]s denied,” the case was “closed in all respects). At a

minimum, the matter should be remanded to the Board with instructions to apply

the appropriate legal standard or to provide “the reasons or basis” for its decision.

5 U.S.C. § 557; e.g., Purnell’s Pride, Inc., 609 F.2d at 1161-62; NLRB v.

Tallahassee Coca-Cola Bottling Co., 381 F.2d 863, 869 (5th Cir. 1967); Cont’l

Web, 742 F.2d at 1094.

Willis J. Goldsmith JONES DAY 222 East 41st Street New York, NY 10017 Tel: (212) 326-3649 Fax: (212) 755-7306 wgoldsmith@jonesday.com

Respectfully submitted, /s/ Shay Dvoretzky Shay Dvoretzky David Raimer JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel: (202) 379-3939 Fax: (202) 626-1700 sdvoretzky@jonesday.com Counsel for Petitioner Cross-Respondent Macy’s, Inc.

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CERTIFICATE OF SERVICE

I hereby certify that this 20th day of April 2015, I caused a true and correct

copy of the foregoing Brief of Petitioner Cross-Respondent to be filed

electronically with the Clerk of the Court using the CM/ECF system. Notice of

this filing will be sent to all attorneys of record by operation of the Court’s

electronic filing system.

/s/ Shay Dvoretzky Shay Dvoretzky

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CERTIFICATE OF COMPLIANCE WITH RULE 32(a)

This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because this brief contains 13,845 words, excluding the parts of the

brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this

brief has been prepared in proportionally spaced typeface using Microsoft Word

2007, in Times New Roman style, 14 point font.

April 20, 2015 /s/ Shay Dvoretzky Shay Dvoretzky