An internal report released this week said a National Labor Relations Board member's vote in a case tied to his former law firm reveals a “serious and flagrant” ethics problem at the agency and calls into question the validity of a prominent business-friendly decision the Republican majority pushed through last year.

The NLRB inspector general's report reinforced the concerns of union attorneys and Democratic senators that Trump-appointed member William Emanuel should not have voted in the Hy-Brand Industrial Contractors case in December that overturned the broad joint-employment standard the Obama-era board set. Emanuel's former firm, Littler Mendelson, where he'd been a shareholder in Los Angeles, represented a party in the original case Browning-Ferris Industries that expanded joint-employment liability.

Yet, even the inspector general report itself did not telegraph any clear next steps for an agency that largely polices itself. Former board members and labor attorneys told the NLJ they are perplexed about how the board will resolve the legal jumble. More broadly, the inspector general's report said the “whole of the board's deliberative process is called into question.”

“It seems everyone recognizes there was a serious breach of conflict of interest rules. But the question is, what is the remedy?” said William Gould, a former NLRB chairman who's now a Stanford Law School professor. “So far as I can ascertain, that's uncharted territory.”

The board, including chairman Marvin Kaplan, general counsel Peter Robb and Emanuel, declined to comment on NLRB inspector general David Berry's report.

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Sen. Patty Murray, the ranking Democratic member of the Senate Health, Education, Labor and Pensions committee, has raised concerns about Emanuel's “ability to separate his decades-long career as a corporate lawyer from his responsibilities as a board member.” Murray said the report's conclusion made clear that the board must reconsider its ruling in Hy-Brand without Emanuel's participation.

“It is the board's responsibility to ensure workers have a voice and corporations are being held responsible to respect employees' rights,” Murray said in a statement.

The NLRB is “evaluating the inspector general's findings, considering appropriate actions related to [the Hy-Brand case], and reviewing current procedures for highlighting and addressing recusal issues with the assistance of the board's designated agency ethics official,” Kaplan wrote in a letter to Congress.

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Watchdog Report Urges NLRB to 'Restore Confidence'

The business community widely criticized the Obama board's 2015 decision in Browning-Ferris for essentially putting companies on the hook for its franchisees and independent contractors and exposing them to greater liability.

The case was pending in the U.S. Court of Appeals for the D.C. Circuit when Trump's appointees to the NLRB moved quickly to undo the decision. They used Hy-Brand as the vehicle to accomplish that.

Emanuel, in a Jan. 26 letter to committee members, addressed the alleged conflict by saying he was unaware Littler Mendelson represented a party in the Browning-Ferris case and would recuse himself in the case when it returned to the board.

A key finding in the inspector general's report said Browning-Ferris was “inextricably” linked to the decision in Hy-Brand. The report spotlighted an Oct. 18 email from then-chairman Philip Miscimarra that included a draft majority decision in Hy-Brand. The report determined the email made it clear the Republican majority was using the case to overturn the Browning-Ferris decision.

“The draft mostly includes the 'verbatim' language in the joint dissent in Browning-Ferris; There was great difficulty in producing the a consensus draft [dissent], and individual tinkering made it worse; The attached majority draft—just like the Browning-Ferris dissent—is clearly an imperfect compromise,” Miscimarra wrote in the email.

Miscimarra, who rejoined Morgan, Lewis & Bockius as a partner this week, declined to comment on the inspector general's report.

Berry's report recommended the board consult with agency ethics officials “to determine the appropriate action to take to resolve that issue and restore confidence in the board's deliberative process.”

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What Are the NLRB's Options?

Sharon Block, former NLRB member and now executive director of Harvard Law School's Labor and Worklife Program, said the inspector general report makes it clear that the Hy-Brand decision must be invalidated. Block said the board could ask for input from the parties in the case to show why it should or should not validate the decision.

While the board polices itself, the inspector general could also refer his report to the Office of Government Ethics, congressional oversight committees or the U.S. Justice Department, Block said. She said if other employers come to the board with a joint employer case, the issue of Emanuel's conflict will more than likely be raised.

“This issue undermines the credibility of the board, which is already subject to a lot of political attack,” Block said. “It's really unfortunate that they have done something that at least feeds that perception.”

Michael Avakian of Washington's Wimberly, Lawson, Steckel, Schneider & Stine, the attorney for the employer in the Hy-Brand case, said he was “startled” by the tone of the inspector general's report.

“It leaves a lot of questions,” Avakian said. “Emanuel has no involvement with this company. Why shouldn't he rule on the merits? My client feels like a pawn in someone else's fight.”

Jim Faul, the St. Louis-based attorney at Hartnett Gladney Hetterman who represents the workers in Hy-Brand, said the NLRB should reconsider the Hy-Brand case in response to Emanuel's conflict. An administrative law judge earlier ruled that the entities were a single employer.

“There is a larger institutional concern that should matter for everyone, regardless of this particular issue,” said Susan Garea, the attorney who represents union in Browning-Ferris. “The inspector general report gets to an institutional crisis when you lose the confidence of the public in the decision-making process and that process is fair and conflict free. That's a huge problem.”

Emanuel faced ethics scrutiny ever since he was confirmed to the board in September.

On the day he was confirmed, Outten & Golden's Justin Swartz filed a motion urging him to recuse himself from several cases involving his former firm. Emanuel, responding to a letter from Senate Democrats, said he would recuse in dozens of cases.

Meanwhile, Morgan Lewis partner John Ring, Trump's pick to replace Miscimarra, is heading soon to the Senate for his confirmation hearing, where he is expected to face similar questions about ethics and recusals.

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