National Labor Relations Board Allows Recovery of Consequential Damages for Unfair Labor Practices

For many years, employers that have been found in violation of the National Labor Relations Act (NLRA) had to pay traditional make-whole remedies to their employees, which mostly included back pay and reinstatement. However, due to a new 3-2 decision issued by the National Labor Relations Board (the Board), this rule is up for a big change.

On December 13, 2022, the Board ruled that employers who violate the NLRA could be required to pay consequential damages to their employees for any violation, no matter how big or small. The Board concluded that “in all cases in which our standard remedy would include an order for make-whole relief, the Board will expressly order that the respondent compensate affected employees for all direct or foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice.”

To receive a recovery for consequential damages, the general counsel will have to establish only the amount of pecuniary harm, the direct or foreseeable nature of that harm, and why that harm is due to the employer’s unfair labor practice (ULP). Thus, employers may be ordered to pay for any increases in premiums, copays, coinsurance, deductibles, and any still-unpaid medical bills. In coming to this conclusion, the Board reasoned that employees may face credit card interest and late fees, penalties for early withdrawals from retirement accounts to cover living expenses, and even the loss of a vehicle or home if the employee is unable to make loan or mortgage payments, as well as higher transportation or childcare costs. 

On the bright side, employers will still have a chance to rebut this evidence by establishing that the harms were not direct and foreseeable consequences of the employer’s unfair labor practices. However, considering the broad definition of consequential damages, this task will not be easy to accomplish.

Two members of the Board objected to this change, stating that the majority’s standard is too broad and thus invites parties for speculation. They believe that this standard would permit recovery for any losses indirectly caused by a ULP and require “intrusive and potentially humiliating inquiries into employees’ personal financial circumstances.”

For questions about this alert, please contact the authors or the Steptoe & Johnson Labor & Employment Team.