Democrats face ethics déjà vu at NLRB

Republicans and business groups are eyeing conflict-of-interest complaints against former union lawyers on the newly Democratic-controlled labor board, borrowing a strategy Democrats themselves used to undercut the board when it was dominated by Republican appointees.

Such an effort could sideline the pro-labor agenda of President Joe Biden’s appointees before it even gets going, dealing a blow to their plans to reverse the pro-management tilt the National Labor Relations Board has taken in recent years.

During the Trump administration, Democrats battered the Republican-controlled board with subpoenas and investigations over Trump-appointed members’ participation in cases involving their former law firms, resulting in at least one major ruling being overturned and an internal audit .

Now, opponents of the NLRB’s labor-friendly agenda are digging into the past work of its newest members, Biden appointees Gwynne Wilcox and David Prouty, to see if their participation in several pending high-profile labor disputes would violate Biden’s ethics pledge.

“I have serious concerns about possible conflicts of interest involving new members of the NLRB which could put workers’ and employers’ rights at risk,” Rep. Virginia Foxx of North Carolina, the top Republican on the Education and Labor Committee, said in a statement. “Republicans plan to review carefully the actions of these political appointees and will hold them accountable.”

With a slim 3-to-2 Democratic majority, if either of those members had to step aside from an issue before the board, the NLRB would be grid-locked.

Wilcox and Prouty both formerly represented the Service Employees International Union in some capacity, ties that could spur ethics complaints from businesses and the GOP throughout the course of the board’s work, and especially as it attempts to rewrite how the agency polices “joint employer” relationships.

Biden’s ethics pledge requires that federal appointees recuse themselves from any “particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts,” for a period of two years from their appointment.

The SEIU, which also funds the Fight for $15 minimum wage and union organizing effort, is involved in two pending legal disputes over whether the labor board should hold large companies liable as joint employers for labor abuses committed by their contractors or franchisees.

Wilcox’s former law firm Levy Ratner P.C. brought one of those cases, and continues to represent Fight for $15 and the SEIU as it appeals a Trump-era NLRB settlement that relieved McDonald’s Corp. of liability as a joint employer for its franchisees' firing of workers who joined Fight for $15 protests. Wilcox was working on the McDonald’s case until at least 2016, according to NLRB case documents.

She has agreed to sit out of any cases involving the law firm for two years, according to her recusal list, which ethics experts say will likely include that McDonald’s settlement if it is eventually sent back to the board in the appeals process.

Prouty has agreed to recuse himself from any cases involving the SEIU Local 32BJ, where he served as general counsel. But when it comes to the larger cases involving the SEIU, Prouty may be able to participate.

In 2010, the NLRB’s inspector general and ethics officials determined that Craig Becker, a Democratic member of the board at the time, could participate in a case involving an SEIU local despite his past work for the union’s international chapter, on the grounds that international unions are separate entities from their local chapters.

But at least one management-side attorney says that precedent doesn’t apply to all situations.

Becker’s particular case is “not by any means the final word on position,” said attorney Michael Lotito, who represents employers for the law firm Littler. He expects there to be more legal discussion over time “on the issue of control by the international union over the locals,” especially given the direct financial interests between unions and their affiliates.

“If Wilcox and Prouty proceed in some manner on these issues” that involve SEIU, “what's going to happen is that it will set a cloud over whatever the board does,” Lotito added. “And as a result, their involvement will give rise to subsequent appeals.”

One way the Biden-appointed members could possibly avoid running afoul of the same recusal issues that plagued the GOP-led board would be to enact policy change via the formal rulemaking process, rather than through individual case decisions, according to federal ethics experts.

“Generally, [appointees] are allowed to draft regulations that have an impact on their former employer as part of an industry, not a regulation that's just tailored to that employer,” said Richard Painter, who was President George W. Bush’s chief ethics lawyer.

But Democrats had denounced that tactic too during the Trump administration, accusing the administration of using it to “avoid compliance with NLRB Members’ individual ethics obligations,” as Sen. Patty Murray (D-Wash.) put it in a 2019 letter to then-board Chair John Ring.

Painter said the regulatory route “is in a way” an end run around the ethics rules. But the rules generally permit a board member to participate in formulating a broad regulation that happens to benefit their former employer “as long as you sever all economic ties.”

If it’s a matter directly involving a particular party, though, like in the instance where Wilcox’s former law firm is representing the Fight for $15 in the McDonald’s settlement fight, “you’ve got to recuse,” Painter said.

Wilcox and Prouty could soon face a test over the issue.

The SEIU filed a lawsuit in September challenging a business-friendly joint employer standard issued under the Trump administration, which makes it harder for corporations to be put on the hook for their subsidiaries’ labor violations. Wilcox’s firm is not representing the SEIU in that case.

The union has argued that both the standard and the McDonald’s settlement were tainted by Trump-appointed member William Emanuel’s participation, after the agency's inspector general criticized him for not recusing himself from a high-profile joint-employer case because of a conflict of interest with his former law firm.

The board vacated that decision and instead issued a rule — on which Emanuel signed off — to establish the business-friendly joint employer standard it sought.

Now the shoe is on the other foot.

Government ethics experts say that Wilcox and Prouty would likely be in the clear to participate in a rulemaking to rewrite the joint-employer standard, because it affects the economy broadly and doesn’t involve any specific parties, even though a standard more friendly to workers would benefit the SEIU’s and Wilcox’s former law firm in court.

And Democrats say it was Republicans on the labor board who cemented that ethics standard.

“If we're in a situation where Emanuel is anywhere near close to having been able to participate in that rulemaking, Wilcox will definitely be able to,” a Democratic House committee aide told POLITICO.”

But that isn’t likely to stop business groups and Republicans from deploying the same fine-tooth ethics scrutiny Democrats and unions did over the Trump-era NLRB.

“It certainly seems to me that there's absolutely no way Gwynne Wilcox can justify her participation in the joint employer issue, and specifically with SEIU and McDonald's question,” said Sean Redmond, vice president of labor policy at the U.S. Chamber of Commerce.

“There's certainly going to be a question that the business community's going to be raising just as much as the unions were raising it with Bill Emanuel. You know, it's just, it's too glaring an issue not to weigh in on it.”