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Case number 20-1516, Fast Food Workers Committee and Service Employees International Union Petitioners versus National Labor Relations Board.

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Mr. West for the petitioners, Mr. Heller for the respondents, Mr. Shaw for the respondent intervener.

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Please support.

[00:00:20] Speaker 04:
Thank you.

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Council for, Council for Petitioners.

[00:00:29] Speaker 06:
Yes, you are just together with Michael element representing petitioners.

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Would you like to start your argument?

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May it please the court.

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This case began in 2014 with a complaint filed by the NLRB's general counsel against McDonald's Corporation and many of its franchisees alleging widespread unfair labor practices on a nationwide scale in opposition to a union organizing campaign.

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These were not alleged to be individual actions taken by the individual franchisees

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but rather part of a coordinated effort by McDonald's directing the activities of its franchisees on a system-wide basis.

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So counsel, since your time is limited, why don't we just hone in on the critical issues here?

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And the argument is made by opposing counsel that some of your arguments are not properly before the court.

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because you never gave proper notice that you were appealing certain matters.

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I'm sorry.

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I'm having a little trouble hearing at the beginning, Judge Rogers.

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You're talking about the- I'm talking about whether the recusal issue is properly before the court.

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Your Honor, I think there are two answers to that.

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Number one, the appeal of the raising the issue of the board's refusal to reopen the hearing certainly was properly brought before the court in that the board's order was attached to the notice of appeal.

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I think the other point to be made with respect to whether this is properly before the court is that the... You can't just include an order.

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We've said over and over again, you have to explain why you're challenging an order.

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It doesn't work.

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Just put it factually in the papers.

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I appreciate that Judge Silverman.

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I believe there may have been some ambiguity.

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in the notice of appeal, but the scope of what was being brought before the court certainly was made clear by the fact that this document was attached.

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Well, the docketing statement references both.

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And for some reason, whoever filed these talked about the original decision.

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And then in response to, was a petition for rehearing filed?

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Yes.

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And what happened?

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And then you cite the rehearing denial.

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All right?

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So then you acknowledge that when your statement about issues to be

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raised, you didn't specifically mention the second denial.

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And then in your opening brief, of course, that's your first argument to this court.

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So your argument, as I understand it, is under our decision in Cinderella, we have jurisdiction.

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Somebody talking?

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We have jurisdiction to consider this issue.

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Now, you know what your opposing council are going to say, so this is your chance to respond if you want to.

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I apologize, Your Honor.

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I wasn't clear on whether you were finished with your question.

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Your Honor, what I would say is we think we've addressed in the brief

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the reasons why the issue is properly before the court.

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To the extent that's not persuasive, I'm prepared to go on and discuss what I think are more important arguments, namely with respect to why the board abused its discretion in overruling the administrative law judge.

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Well, you know that intervener's brief goes on and on and on.

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about why the recusal issue is not before this court.

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Do you think your brief adequately respond?

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There are two points, Judge Rogers.

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Number one, the argument, there's one argument that the motion to reopen the record is not before the court.

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And that's what I understand us to have been discussing just now.

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even if that argument is correct.

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The contention that member Emanuel's refusal to recuse himself is not before the court I think has no merit because what is before the court is the board's order of

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accepting the settlement and approving the settlement.

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And that order was signed by Judge, excuse me, Member Emanuel.

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In fact, he provided the deciding vote on that.

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And the question is whether that order is proper given the fact that one of the members who cast the deciding vote should not have been sitting.

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What is your theory of law?

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that supports that argument.

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Well, Judge Silverman, I know this is not an exact analogy, but I think it's somewhat comparable to the recess appointment cases where the Supreme Court

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was willing to say that you have this whole range of cases decided by the board that are essentially null and void because somebody participated on the decision who should not have.

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Is that a due process violation?

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I'm sorry.

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Is that a due process violation, having a disqualified member decide a case?

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Well, I think it's perhaps a due process violation and perhaps also a fact that it's a decision that has no weight.

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It's null and void because it was void ab initio.

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We decided last year on another case involving the surface transportation

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that individual opinions or status or individual opinions of members of a commission or board are not reviewable.

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Only the decisions of the board are reviewable.

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Now, as my colleague points out, if an individual has behaved in a certain fashion

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as to reflect an incredible bias, the argument then would be a violation of due process.

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That is not, as I see, taken up as arbitrary and capricious, which simply means the decision of the agency is unreasonable.

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But that would be, I think as my colleague points out, you would have to make a constitutional due process argument.

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And you didn't do that.

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We did not do that.

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Not on appeal.

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But do you concede the premise of his question?

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The premise being that that that it's a due process.

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Yes, violation night.

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Whether there is, as you point out, judge someone, whether there is a due process violation or not, you're correct that we have not argued that.

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I thought in one of our cases, and I'll get the name of it, we had said that a decision by an unbiased board that a litigant has a right to a decision by an unbiased decision maker.

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That's correct.

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And the question here, it seems to me,

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And I want to ask counsel for the board if he can explain this a little bit to me of how recusals work before the board.

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Because one of the questions I had in my own mind after you filed your motion to reopen and as you point out your motion for recusal was pending.

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Didn't the member at issue know what was on his recusal list?

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because his statement does not deny that in any way.

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He simply says he didn't represent anyone in the administrative proceeding here.

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But that is not the only question under the board's

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and the federal ethics standard that applies here.

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And under the board's regulation, there's that third prong about conduct that could reasonably give rise to an observer.

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All right, so that the person wasn't coming to the case with an open mind.

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I don't see that having been addressed.

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But we certainly argued in our brief that- No, I mean addressed anywhere by the member individually, much less by the board and to the extent the board didn't have to say anything, although it had that long footnote too in its opinion.

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Yes.

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Yes, I agree that that was not addressed and I think the

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You know, this is almost like, if I could suggest an analogy, if you could imagine two parties that have maybe a business partnership and it goes sour and they break up, one of them then later sues the other.

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And it turns out that the judge who is appointed to hear the case

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at the time of the partnership had been involved in giving legal advice to the defendant.

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And his statement as to why he doesn't have to recuse himself is because I was not giving legal advice to anybody, to a party in this particular litigation.

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And this is what Judge Emanuel, I believe, said as to why he was not required to recuse himself.

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It's because the legal advice that his law firm, his former law firm gave was with respect not to this actual litigation, but to the franchisees on the subject matter of this case.

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Not exactly.

[00:12:55] Speaker 04:
Not exactly.

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His statement is more limited.

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It's very carefully worded.

[00:13:02] Speaker 06:
Well, but there is a document in the record.

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I believe it's Joint Appendix 15, where Littler Mendelson explains what it was doing for franchisees and the services it would provide to franchisees.

[00:13:17] Speaker 04:
No, I understand it.

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What I'm saying is the judge's statement was simply that he hadn't represented any party in the administrative proceeding now before the war.

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Yes.

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That's a more limited statement.

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It doesn't deal with one part of the board's ethics regulation.

[00:13:39] Speaker 06:
Yes.

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I agree with you completely, Judge Rogers.

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And I think that's essentially the heart of the problem here, that he really didn't answer the serious questions.

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And the question then, given that you did have a motion for recusal

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pending and you filed to reopen and the board said we're not going to do it.

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So now it's before us and we're going to hear a lot of argument about how it's not before us and you're happy to rest on your briefs, I gather.

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Why don't you go to the point you wanted to go to, which merits the key to the case?

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Yes.

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Thank you, Judge Silverman.

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And I'll try to be very brief on this, but our central argument here, apart from the- But I want to be clear, counsel.

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It may be central, it may be important, and the judges want to hear about it.

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But you're not waving or abandoning your argument about

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why the recusal issue is properly before the court, are you?

[00:14:52] Speaker 06:
No, certainly not.

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All right.

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Let's get that on the record.

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Okay.

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Now, please proceed as Judge Silverman requested.

[00:15:01] Speaker 06:
Okay.

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So our argument is that in approving the settlement, in reversing the decision of the administrative law judge,

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the board abused its discretion.

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We concede that abusive discretion is the proper standard for this court to evaluate the board's decision, but that the board, in fact, abused its discretion for two separate reasons.

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The first was that the board departed from its own precedents, which required it to defer to the administrative law judge

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without providing any reason to explanation why it was doing so.

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On and on, didn't it counsel about why it was doing so?

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It said we never agreed with this.

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We proposed a rule change or a rule that's pending.

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Yes.

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So, I mean, as you know, abusive discretion the court doesn't have to agree with what he says but it clearly acknowledged, it had this precedent.

[00:16:03] Speaker 04:
It clearly acknowledged what its reasoning was what more did it have to do.

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Our point is that even though the board purported to provide an explanation in a footnote, I believe it's footnote 15 of its opinion, that explanation simply is not tenable because the board was saying basically that circumstances have changed since the ALJ issued her decision.

[00:16:37] Speaker 06:
But with respect to the standard that was going to be applied in deciding the joint employer issue in this case, the circumstances did not change at all with respect to what was in effect at the time the case was filed.

[00:16:51] Speaker 01:
I have a prior question, which was why is the standard of review that the board applies to an ALJ decision even

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the type of thing that is binding on the board.

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I mean, the board ultimately has the statutory authority.

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ALJs decide cases only because they have some delegated authority from the board.

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They don't have any sort of independent authority to decide settlements.

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So I'm not sure why this should even matter.

[00:17:18] Speaker 01:
It seems to me that the board possesses all of the statutory authority it needs to make this decision.

[00:17:23] Speaker 06:
That's absolutely right, Judge Rao.

[00:17:26] Speaker 06:
has that statutory authority, but the board in a whole range of decisions and... Isn't it fair to say that normally the board will defer to an ALJ on credibility determinations, not policy issues?

[00:17:43] Speaker 07:
Well, what the board said in... Isn't that fair?

[00:17:48] Speaker 07:
You know, I once practiced labor law.

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I've taught it for 35 years.

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I've written a number of opinions.

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I've never seen a case

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in which it was actually contested that the board had exceeded its scope of review of the ALJ.

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This is the first time I've seen it.

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But if it made any sense at all, it's on credibility questions, because the ALJ listens to the testimony, never on policy issues.

[00:18:18] Speaker 06:
Well, they are legal questions.

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Sure.

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But what the board said in the Pueblo sheep metalworkers case is that its review of the ALJ's decision to accept or reject a proposed settlement is limited to whether the ALJ, and I'm going to quote here,

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acted arbitrarily or capriciously or otherwise abused her discretion.

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And I think that the problem here, Judge Silverman, is that the board abandoned that standard in this case.

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It acknowledged that its normal standard was to reduce it.

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As my colleague pointed out, it explained the core issue on which you're fighting

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and I understand full well, is whether McDonald is a joint employer.

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Now, the board, the general counsel wished to test that issue when he brought the complaint.

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Under a prior general counsel, as you and I know, the board shifts around a lot depending on the membership of the board.

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The new board, actually the board that you're challenging, had a different view of that question, which is a fundamental policy, legal policy issue, and they were gonna handle it in a different way.

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So why wouldn't, as my colleagues suggest, although you might wanna defer to ALJs on credibility determination, the board's not gonna ever defer to an ALJ on a major policy question.

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Well, my first point, Judge Silverman, is that

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The board, it's not the board that was making the decision here to settle the case.

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It was the general counsel.

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And I think what you're certainly correct that when a new board majority comes in, there's frequently a change in policies, a change in emphases and so forth.

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That's not at all unusual at the NLRB.

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When new general counsel comes in,

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he or she will have separate new litigation priorities and so forth.

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But I think it's highly unusual in this case is for the general counsel in his capacity as the prosecutor of this case to simply abandon what had been begun and had gone on for three years under his predecessor.

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I think that's what always happens when there's a settlement, right?

[00:20:57] Speaker 01:
There's a

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You know, I mean, sure.

[00:21:00] Speaker 07:
But isn't that exactly why Biden fired the general counsel?

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But there's a settlement.

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The board's law makes very clear, and this is in the board's rules as well, that after the board, after the ALJ has begun to hear evidence, to receive evidence, that any settlement is an adjudicative function

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which is subject to her approval.

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And so here, you have not only the ALJ hearing evidence, having heard evidence for three years, what she called the longest case in the history of the NLRB, with hundreds of exhibits, 150 hearing days, and

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almost finished, only two more witnesses to be heard from.

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Um, and the new general general counsel comes in and says, Oh, nevermind.

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We're just going to sell the new council.

[00:22:07] Speaker 04:
Maybe you want to move on to the merits of the board's decision, given that it decided to review the case, not with deference, but

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de novo okay what are the errors in the board's decision.

[00:22:27] Speaker 04:
All in that respect, in your view.

[00:22:34] Speaker 06:
In my view, there are a number of problems that are discussed in our briefs, but the central problem, which I'd like to focus on here, is the fact that under the independent stave test, which I think everybody agrees is the applicable standard here, there's a four-part test, but the key issue is whether the settlement was reasonable.

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And what the general counsel, and this relates to what I was just trying to explain to Judge Silverman, the general counsel in abandoning the whole issue of attempting to hold McDonald's liable or at least test whether McDonald's could be held liable as a joint employer,

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after three years of hearing with the record virtually complete, that was simply unreasonable.

[00:23:31] Speaker 06:
And it was unreasonable also because as the ALJ explains in her opinion, and I'd refer the court particularly to pages 644 to 46 of the joint appendix,

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She goes on and talks about the record that had been compiled having copious evidence showing that McDonald's coordinated and directed on a nationwide basis the activities of its franchisees in responding to the union campaign.

[00:24:00] Speaker 07:
Isn't it fair to say that this joint employer issue is a major policy question that the general counsel was seeking to modify

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prior board law on.

[00:24:15] Speaker 07:
And the new general counsel said, no, I'm perfectly happy with the old board law.

[00:24:20] Speaker 07:
I don't want to change.

[00:24:21] Speaker 06:
OK, but here's the key, Judge Silberman.

[00:24:24] Speaker 06:
And there was a rulemaking.

[00:24:26] Speaker 06:
So let me get to that in a second.

[00:24:27] Speaker 06:
But first of all, in response to Judge Silberman, the standard that the new general counsel was proposing to go back to through the rulemaking

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was the same standard that had been in existence for determining joint employer status at the time the case was originally filed.

[00:24:47] Speaker 04:
So in the rulemaking, there is a reference to, what is it, independent estate.

[00:24:56] Speaker 06:
Independent estate, yes.

[00:24:57] Speaker 04:
So that signals in a way, I suppose, that the board wasn't proposing to abandon that.

[00:25:07] Speaker 04:
Is that your point?

[00:25:09] Speaker 06:
Well, I don't think they were proposing to abandon that.

[00:25:12] Speaker 06:
What they were proposing to abandon was the board's Browning-Ferris decision.

[00:25:18] Speaker 04:
I understand that.

[00:25:20] Speaker 04:
We're trying to get to the standard here that you're saying the board didn't follow.

[00:25:24] Speaker 04:
And all I was saying is there was this proposed rulemaking, but it didn't abandon Independence Day, did it?

[00:25:33] Speaker 06:
No.

[00:25:34] Speaker 06:
No.

[00:25:34] Speaker 06:
And I don't think anybody suggests otherwise.

[00:25:39] Speaker 06:
But the so so the board was proposing through this rulemaking.

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to abandon the broader Browning-Ferris standard that had been adopted by the board in 2015.

[00:25:53] Speaker 06:
But this case was brought in 2014 at a time when the standard that the board was proposing to go back to, the narrower pre-2015 standard, was in effect.

[00:26:07] Speaker 06:
And that's the standard under which you got it.

[00:26:09] Speaker 04:
Counsel, you've got to deal with the point that all three judges have noted.

[00:26:14] Speaker 04:
You know new administration comes in new general counsel comes in, he says, I know everybody spent the last three or four years.

[00:26:23] Speaker 04:
On this matter, but here's my position and here's how I want to proceed and.

[00:26:30] Speaker 04:
works with some of the respondents and says, I'm satisfied with this settlement and submits it to the ALJ.

[00:26:41] Speaker 04:
The ALJ doesn't like it.

[00:26:44] Speaker 04:
The board is satisfied with it.

[00:26:47] Speaker 04:
So what is the court to do?

[00:26:49] Speaker 04:
And I mean, you can think hypothetically a new assistant, not assistant, but a US attorney comes in and his predecessor has been sending years on an investigation.

[00:27:01] Speaker 04:
And he says, I'm not pursuing it anymore.

[00:27:04] Speaker 04:
You know, I'm done with it.

[00:27:05] Speaker 04:
I want to settle this matter.

[00:27:08] Speaker 04:
So I'm just asking you to focus on, let's just for purposes of argument, assume that the new general counsel could so proceed.

[00:27:20] Speaker 04:
what was wrong with the settlement, either under independent states, since there's no suggestion it's abandoning that, or as a matter of law, or as a matter of firmly established policy that the board did not propose to abandon.

[00:27:44] Speaker 06:
What was wrong with the proposed settlement is that the general council no longer had the authority on his own without agreement of the ALJ to adopt a settlement.

[00:28:04] Speaker 04:
Well, we've been through that.

[00:28:06] Speaker 04:
So my question is, and the issue that I had,

[00:28:12] Speaker 04:
in thinking about this case was you have the petitioners and you have the respondents and you have the intervener.

[00:28:22] Speaker 04:
And the settlement, as I understand it, did not purport to have the agreement of the petitioners.

[00:28:33] Speaker 06:
That's absolutely right, Your Honor.

[00:28:35] Speaker 04:
Well, is that a problem or not?

[00:28:39] Speaker 06:
Well, it's certainly something that needs to be taken into consideration.

[00:28:43] Speaker 04:
Well, before it took it into consideration, I mean, they knew what they were doing.

[00:28:46] Speaker 04:
What I'm asking is the cases before us.

[00:28:50] Speaker 04:
And normally, when you have a settlement, everybody may not be happy with all of it, but the parties have come together.

[00:28:58] Speaker 04:
Here, the charge, not the charging party, but the complaining party, was not amenable.

[00:29:08] Speaker 04:
And I thought part of the argument was, well, once you file a complaint with the board, what happens to it is a general counsel's decision, not the complainants decision.

[00:29:23] Speaker 04:
So what's your response to that?

[00:29:27] Speaker 06:
Your honor, we are not arguing that the refusal of the charging parties to agree to the settlement in and of itself made it unreasonable or illegal.

[00:29:40] Speaker 06:
But it's certainly a factor that was very important, particularly given where this case was after three years of litigation and

[00:29:51] Speaker 06:
given the terms of the settlement, which basically absolved McDonald's of any liability as a joint employer.

[00:30:06] Speaker 06:
What the settlement provided, so I want to emphasize in this regard, where we have a

[00:30:21] Speaker 06:
evidence that the ALJ discussed in her opinion showing that McDonald's was coordinating and directing

[00:30:31] Speaker 06:
the anti-union efforts that led to these unfair labor practices, you have a settlement that imposes no penalty at all on McDonald's.

[00:30:42] Speaker 06:
The only things that McDonald's were required to do was collect the money from somebody else and pay it to the board.

[00:30:52] Speaker 06:
none of its own money, and if there was any breach of the settlement by any of the franchisees, then McDonald's was required to send out a supplemental notice, but a notice in which McDonald's disclaimed any liability for the franchisee's unfair labor practices, disclaimed any liability for breach of the settlement agreement, and disclaims any liability as a joint affair.

[00:31:18] Speaker 07:
Isn't it fair to say from the beginning of this

[00:31:21] Speaker 07:
proceeding from the beginning of the chart, in this case, the question of the relationship between an owner and franchisees, whether they were joint employer or not, was very much up in the air.

[00:31:42] Speaker 06:
Up in the air in the sense of not being resolved?

[00:31:44] Speaker 06:
Right.

[00:31:45] Speaker 06:
Yeah, that's true.

[00:31:47] Speaker 07:
Okay.

[00:31:48] Speaker 07:
So you have a new general counsel comes in and says,

[00:31:51] Speaker 07:
You know what?

[00:31:53] Speaker 07:
Not only do I not want to try to answer that in this case, but after all, there's going to be a rulemaking on this question.

[00:32:02] Speaker 07:
But most importantly, put aside the rulemaking.

[00:32:05] Speaker 07:
I just don't want to answer it in this case.

[00:32:07] Speaker 06:
Well, my response to that, Judge Silverman, is simply that that is not within the general counsel's authority

[00:32:16] Speaker 06:
at that point.

[00:32:18] Speaker 06:
Why?

[00:32:18] Speaker 06:
Because the board's rules say that once the ALJ has started to receive evidence, which she'd been doing for three years in this case, a settlement can be reached only with the agreement of the ALJ.

[00:32:35] Speaker 07:
No, no, no.

[00:32:35] Speaker 07:
It doesn't say that.

[00:32:36] Speaker 07:
It doesn't say that.

[00:32:39] Speaker 07:
The ALJ doesn't have a veto.

[00:32:43] Speaker 06:
I think that's wrong, Judge Silverman.

[00:32:45] Speaker 07:
No, your argument is

[00:32:47] Speaker 07:
Her decision is reviewable as abusive discretion.

[00:32:54] Speaker 07:
But not that she has a veto.

[00:32:56] Speaker 06:
She has a veto in the sense that she can veto the settlement as she did, but her veto is reviewable by the board.

[00:33:05] Speaker 06:
Oh, okay.

[00:33:06] Speaker 06:
I'm sorry.

[00:33:07] Speaker 06:
I was not clear on that.

[00:33:08] Speaker 07:
And that's a policy call.

[00:33:10] Speaker 06:
Well, it's a policy call.

[00:33:12] Speaker 07:
Certainly the board's decision to engage in a rulemaking to try and... No, no, even determining whether her position should be supported or not was a policy decision.

[00:33:26] Speaker 06:
Well, it was a policy decision for the general council, but the determination as to whether the settlement that put into effect that policy decision was reasonable under the independent state's standards.

[00:33:39] Speaker 07:
It's up to the board, and the board made a policy call.

[00:33:44] Speaker 06:
It made a policy call, but it's not free to just say, this is the policy we want to engage in, therefore we think it's reasonable.

[00:33:53] Speaker 06:
Why?

[00:33:53] Speaker 06:
Because the board is required to follow and apply its own precedents.

[00:34:00] Speaker 07:
And one of the factors would be consistent with a policy call on that.

[00:34:04] Speaker 06:
Well, one of the factors in the independent state is whether the settlement is reasonable.

[00:34:10] Speaker 06:
And for all the reasons that- And for the board doesn't think, the board thinks it is reasonable, which is a policy.

[00:34:17] Speaker 06:
What the board said is, in its footnote 15, is that it was going to depart from its general practice of deferring to the ALJ's decision because of the changed circumstances

[00:34:31] Speaker 06:
And part of my argument here, Judge Silverman, is that the circumstances were not really changed as far as the standard that was going to be applied in determining joint employer as compared to the time the case was begun and what was going to be put in place by the board through its rulemaking proceedings.

[00:34:55] Speaker 01:
We assume that that's correct, that that is somehow unreasonable, I think you have said, for the board to decide.

[00:35:01] Speaker 01:
I mean, how is it an abuse of discretion?

[00:35:04] Speaker 01:
Because you conceded that our review of the board's decision is abuse of discretion.

[00:35:08] Speaker 01:
I mean, if reasonable minds could disagree about, you know, whether they would change circumstances or the like, then don't we affirm the board?

[00:35:19] Speaker 06:
Your review is for abuse of discretion, but the board abused its discretion in this case by adopting a, by approving a settlement that was contrary to its standards in independent state.

[00:35:41] Speaker 06:
And General, let me just say that if you all were to agree with me,

[00:35:49] Speaker 06:
and hold that the board abused its discretion and send this back to the board.

[00:35:55] Speaker 06:
It would not be the first time this court has done that.

[00:35:59] Speaker 06:
I'd refer you to the oil, chemical, and atomic workers case written by Judge Edwards back in 1986, where the posture of the case was very much the same.

[00:36:12] Speaker 06:
The ALJ had rejected a settlement

[00:36:15] Speaker 06:
The board had overruled the ALJ and approved the settlement, and this court found that to be an abuse of discretion and sent it back.

[00:36:27] Speaker 06:
Because the board had not explained, and there it was not explaining at all, here it's not explaining satisfactorily its reasons for departing from its precedent.

[00:36:44] Speaker 04:
Okay, why don't we hear from Council for Respondent.

[00:37:02] Speaker 03:
Good afternoon, may it please the court.

[00:37:04] Speaker 03:
Joel Heller for the National Labor Relations Board.

[00:37:08] Speaker 04:
Hi, Mr. Keller, you heard me mention I was going to ask you about recusal procedures before the board, or rather, let me put it this way.

[00:37:18] Speaker 04:
If I were to be appointed to the board, would I be interviewed about my recusals?

[00:37:36] Speaker 03:
Would you be interviewed about your accuser?

[00:37:38] Speaker 04:
How would the board know what I thought I couldn't?

[00:37:42] Speaker 04:
What kind of cases I could not sit on?

[00:37:46] Speaker 03:
Well, so board members are subject to the two standards we discussed in the brief, the Office of Government Ethics, Rags and the executive order.

[00:37:54] Speaker 04:
And that's not my question, counsel.

[00:37:57] Speaker 04:
What I'm trying to understand is the brief is written as though the judge here didn't know anything about

[00:38:06] Speaker 04:
the statement of recusal involving McDonald's.

[00:38:11] Speaker 04:
Is that correct?

[00:38:13] Speaker 04:
Or are you talking about it?

[00:38:15] Speaker 04:
And that's why his explanation of why he didn't need to refuse in this particular case was limited as it was.

[00:38:27] Speaker 03:
So member Emanuel consulted with the board's designated agency ethics official.

[00:38:33] Speaker 03:
in making the recusal determination.

[00:38:36] Speaker 03:
That is the process, the internal process for determining recusal obligations of members.

[00:38:45] Speaker 03:
And so he did that here.

[00:38:47] Speaker 03:
And in consultation with that officer, he decided that he did not need to recuse from this case.

[00:38:54] Speaker 03:
And that's the explanation

[00:38:55] Speaker 03:
in the boards.

[00:38:58] Speaker 04:
But I just want to understand suppose there was no question at all that the judge either just before he was appointed or just after he was appointed said do not assign me any cases involving McDonald's.

[00:39:16] Speaker 04:
Who determines after that what cases the judge may be assigned or is that just

[00:39:26] Speaker 04:
each and every case up to the individual judge by individual board member.

[00:39:32] Speaker 04:
Excuse me.

[00:39:33] Speaker 03:
Are you talking about the kind of internal mechanics of how cases are assigned?

[00:39:38] Speaker 07:
No, she's asking who would make the decision.

[00:39:41] Speaker 07:
Is this decision made by the individual board member or I think what my colleague is saying

[00:39:48] Speaker 07:
Does the full board as a whole answer the question.

[00:39:51] Speaker 03:
I see.

[00:39:52] Speaker 03:
So in this case, the recusal motion was addressed to member manual and member Manuel individually in consultation with the agency ethics officer decided not to recuse in this case.

[00:40:03] Speaker 07:
And so then that decision was never reviewed or commented on by his colleagues.

[00:40:10] Speaker 03:
It was not commented on.

[00:40:11] Speaker 04:
I mean, the- Well, footnote two goes on about it for a long time.

[00:40:16] Speaker 04:
So you can't say it didn't comment on it, but they acknowledged he had made this decision.

[00:40:21] Speaker 03:
Sure.

[00:40:22] Speaker 03:
The other members on the case certainly permitted the decision to issue.

[00:40:27] Speaker 03:
So in that sense, they were aware of his recusal determination and did not, I suppose, object to it because- Well, there's only one other person on the case, right?

[00:40:37] Speaker 04:
And one other board member.

[00:40:38] Speaker 03:
Well, there's the dissenting board member as well.

[00:40:40] Speaker 03:
And she talks about it in putting a one of her decision comments on the on the recusal issue.

[00:40:47] Speaker 03:
And but the recusal issue is is subjected to an abuse of discretion review in this court.

[00:40:52] Speaker 03:
And I think it clearly meets that it's not grounds to reverse under that standard.

[00:40:58] Speaker 04:
So an abuse of discretion, as we and other circuits of hell, is not only

[00:41:06] Speaker 04:
sort of the judgmental discussion that my colleague was having with Petitioners Council, but it also involves whether there was an error of law.

[00:41:19] Speaker 04:
So when the recusal decision is, I was not representing any party in the case before me, period.

[00:41:32] Speaker 04:
But it doesn't say anything about

[00:41:36] Speaker 04:
what I may have done when I was working for the law firm that was actively engaged undisputably with the underlying facts here of the $15 request and the unionization drive

[00:42:04] Speaker 04:
And yet the board's regulation has three parts to it.

[00:42:13] Speaker 04:
And that statement doesn't address the third part.

[00:42:19] Speaker 03:
So, Your Honor, there are not separate board regulations on ethics obligations.

[00:42:24] Speaker 04:
Yes, there is.

[00:42:26] Speaker 04:
You cited in your brief.

[00:42:27] Speaker 04:
Everybody cited.

[00:42:28] Speaker 04:
It's not at issue.

[00:42:30] Speaker 04:
In that sense, it is a regulation of the board.

[00:42:34] Speaker 03:
These are regulations from the Office of Government Ethics.

[00:42:37] Speaker 03:
Those are government-wide ethics obligations.

[00:42:39] Speaker 04:
All right.

[00:42:39] Speaker 04:
But the board does not deny that it applies to the board.

[00:42:44] Speaker 03:
Right.

[00:42:45] Speaker 03:
That's what applies to the board.

[00:42:46] Speaker 04:
And so I'm saying... And your brief particularly addresses it.

[00:42:51] Speaker 03:
Member Emanuel addresses those regulations.

[00:42:54] Speaker 04:
I'm talking about Section 2635.502A.

[00:43:03] Speaker 03:
Correct.

[00:43:04] Speaker 03:
And that is what is addressed in that footnote too.

[00:43:08] Speaker 03:
In a way explains that Littler Mendelsohn, his former law firm, did not represent a party in the particular proceedings of this case.

[00:43:17] Speaker 04:
And that is the- But the regulation has three parts.

[00:43:22] Speaker 04:
All right?

[00:43:24] Speaker 04:
One is where you have a direct and predictable effect on the financial interest of a member.

[00:43:31] Speaker 04:
Or you know a person with whom he has a covered relationship or represent a party to such matter.

[00:43:42] Speaker 04:
And where the employee determines that the circumstances would cause a reasonable person with knowledge.

[00:43:51] Speaker 04:
To question his impartiality in the matter.

[00:43:54] Speaker 04:
comma, the employee should not participate unless he has informed the agency designation of the appearance problem and received authorization from the agency designee in accordance with paragraph D of this section, right?

[00:44:12] Speaker 03:
Yes, correct, Your Honor.

[00:44:13] Speaker 03:
And so that part, there's two parts to that.

[00:44:16] Speaker 03:
We're putting aside the financial conflict because no one claims that that's it.

[00:44:21] Speaker 03:
The next part, though, there are two prongs to it.

[00:44:24] Speaker 03:
First, that there has to be a former employer or someone with a covered relationship, in this case, a former employer, is or represents a party to this matter.

[00:44:35] Speaker 03:
That's one.

[00:44:36] Speaker 03:
And two.

[00:44:37] Speaker 04:
A person with whom he has a covered relationship.

[00:44:41] Speaker 03:
Yes.

[00:44:42] Speaker 03:
And that would be a former employer.

[00:44:44] Speaker 04:
Or represents a party to such matter.

[00:44:48] Speaker 07:
A person with whom he has a covered.

[00:44:51] Speaker 07:
It doesn't say or, it says and.

[00:44:54] Speaker 04:
No, no, it says or.

[00:44:56] Speaker 04:
There are three circumstances.

[00:44:58] Speaker 04:
And if you fall within any one of those circumstances, then it says and, where the employee determines blah, blah, blah.

[00:45:10] Speaker 03:
Correct, and so the person with whom he has a covered relate, so this is when you're recused.

[00:45:16] Speaker 03:
If one, a person with whom you have a covered relationship is or represents a party, that is not met here because Littler Mendelsohn does not represent a party.

[00:45:28] Speaker 03:
And then prong two, and a reasonable person with knowledge of the facts would question your impartiality.

[00:45:36] Speaker 03:
Since prong one is not met,

[00:45:38] Speaker 03:
You don't have to get to prime two.

[00:45:41] Speaker 03:
But even so, Member Emanuel does address in that final paragraph of footnote two, he does say that he does not believe his former affiliation with the law firm would, under the factual, legal, or temporal circumstances here, quote, cause a reasonable person with knowledge of the relevant facts to question his impartiality, quoting the very language we were reading here.

[00:46:02] Speaker 04:
Then why did the motion

[00:46:08] Speaker 04:
to reopen attached this statement saying that he was refused from cases involving McDonald's.

[00:46:21] Speaker 03:
So the motion to reopen, which again is reviewed under an abuse of discretion standard, tries to put in this document here.

[00:46:32] Speaker 03:
But as the board explained in its order denying that motion,

[00:46:37] Speaker 03:
the document would not require a different result, which is the standard for granting a motion to reopen.

[00:46:43] Speaker 03:
It does not change any of the underlying facts about the fact that Litlan Mendelsohn does not represent a party in this proceedings.

[00:46:51] Speaker 03:
It does not engage with the legal analysis that were the basis for the motion to recuse the OGE regs or the executive order.

[00:47:01] Speaker 03:
And it was from well before

[00:47:03] Speaker 03:
the motion to recuse was filed and even longer before the decision issued in this case.

[00:47:09] Speaker 04:
Well, but there was a decision to grant a special appeal.

[00:47:12] Speaker 04:
Oh, incidentally, what is a special appeal?

[00:47:17] Speaker 03:
A special appeal is essentially an interlocutory appeal.

[00:47:20] Speaker 04:
Is that defined by an agency regulation somewhere?

[00:47:23] Speaker 03:
Yes, it is.

[00:47:24] Speaker 03:
I couldn't decide what the site is, but that's what a special appeal is.

[00:47:29] Speaker 03:
That's why you need permission to take a special appeal in addition to the board ruling on the merits if it grants permission to take a special appeal.

[00:47:37] Speaker 04:
Thank you.

[00:47:38] Speaker 03:
You're welcome.

[00:47:43] Speaker 03:
Right.

[00:47:44] Speaker 03:
The decision to recuse was made by a member of Emanuel in consultation with the agency ethics officer.

[00:47:50] Speaker 03:
And that is the decision that is under review here.

[00:47:53] Speaker 03:
The recusal list that the committee wanted to put into the record comes from a different office within the agency, the executive secretary's office, which is essentially the clerk's office for the board.

[00:48:06] Speaker 03:
And even if that was made in consultation with the agency ethics officer, it clearly wasn't her final views on the topic.

[00:48:13] Speaker 03:
Because 21 months later, when the recusal decision was actually made, it was clear that member Emanuel had consulted with her.

[00:48:23] Speaker 04:
And we don't know what she thought.

[00:48:26] Speaker 04:
He consulted.

[00:48:28] Speaker 04:
All right.

[00:48:28] Speaker 03:
She disagreed with him, I suppose, in the consultation.

[00:48:31] Speaker 03:
But under the OGE regs.

[00:48:32] Speaker 04:
The point is, it's his decision.

[00:48:35] Speaker 03:
It is his decision.

[00:48:39] Speaker 03:
So his decision is set forth in the decision here.

[00:48:43] Speaker 03:
It is not represented in the document that the committee attempted to put into the record.

[00:48:50] Speaker 03:
And that is a high standard for reopening the record.

[00:48:53] Speaker 03:
You must show extraordinary circumstances and that it will require a different result.

[00:48:58] Speaker 03:
And the board's determination that it would not require a different result is reviewed by this court under abuse of discretion.

[00:49:04] Speaker 04:
And so you read covered relationship to mean what in the right covered relationship.

[00:49:12] Speaker 03:
Yeah.

[00:49:12] Speaker 03:
So if you look at the definition section, it looks like Roman in rule four, a covered relationship is any person whom the employee has within the last year served as dot, dot, dot an employee.

[00:49:25] Speaker 03:
So the relevant definition of relationship here is a former employer, a member of Maynard's former law firm.

[00:49:31] Speaker 04:
Right.

[00:49:32] Speaker 04:
And when he voted on the special appeal, how long had he been with the board?

[00:49:40] Speaker 03:
The special appeal came out in December 2019.

[00:49:42] Speaker 03:
He had been at the board since September 2017.

[00:49:46] Speaker 04:
So not quite two years.

[00:49:51] Speaker 03:
A little over two years he had been at the board.

[00:49:54] Speaker 03:
So September 2017 he came.

[00:49:56] Speaker 03:
The decision was issued December 2019.

[00:49:58] Speaker 04:
Thank you.

[00:49:59] Speaker 03:
Right.

[00:50:00] Speaker 03:
But even if there is a covered relationship, it's not with someone who is or represents a party.

[00:50:07] Speaker 03:
So there was no recusal obligation here under the OG, the plain language of the OG regs.

[00:50:12] Speaker 03:
So moving, if I may, to the merits of that.

[00:50:15] Speaker 04:
I just want to be clear from the board's perspective then.

[00:50:19] Speaker 04:
If I am appointed and confirmed as a member of the board,

[00:50:29] Speaker 04:
And I have spent my entire life professionally working for law firm A. And I've been involved with all of their significant clients.

[00:50:47] Speaker 04:
Nevertheless, I, under this regulation, can decide I am not required

[00:50:59] Speaker 04:
to recuse because no reasonable person with knowledge of the relevant facts would question my impartiality because I'm not representing anybody who's in the administrative proceeding.

[00:51:21] Speaker 03:
It's not about whether you represent someone, it's whether your former employer, your former law firm represents someone.

[00:51:29] Speaker 04:
That's why I asked you what a covered relationship was.

[00:51:33] Speaker 04:
My covered relationship is I've been working for this law firm forever and now this law firm is before me in a case involving presumably one of its major clients.

[00:51:49] Speaker 04:
And my hypothetical is, you know, I've been a very important member of the law firm all these years, working with all its significant clients.

[00:51:57] Speaker 04:
That's all I'm getting at.

[00:52:00] Speaker 03:
So in your hypothetical is your former law firm is now appearing before you as a board member in a case?

[00:52:07] Speaker 04:
No, no, no.

[00:52:10] Speaker 03:
I'm sorry.

[00:52:11] Speaker 04:
My former law firm is in the case before me, before the board.

[00:52:17] Speaker 04:
The general counsel,

[00:52:21] Speaker 04:
complaint makes allegations against my law, former law firm.

[00:52:30] Speaker 04:
So there's no problem, you're telling me under the office of government ethics regulation 502.

[00:52:39] Speaker 03:
There would not seem to be a problem if your, if your firm, if your former firm, I guess was the charged party in a case, if there was a board case against your former firm.

[00:52:51] Speaker 03:
I don't, under the OGE regs, that would not be, that would not by itself be enough to dictate your recusal.

[00:53:04] Speaker 04:
Even though the party who is specifically named, naming these franchisees, operate under an agreement with the client my firm represented while I was with the firm.

[00:53:20] Speaker 03:
So the only evidence in the record of Littler Mendelsohn's involvement with McDonald's or its franchisees is that we know what's in the record.

[00:53:30] Speaker 04:
I mean, your brief says what's in the record and how this what hotline franchise call in connection with unionization and the $15 rate.

[00:53:45] Speaker 03:
That is great.

[00:53:46] Speaker 03:
That was their involvement in 2013 and 2014.

[00:53:49] Speaker 03:
Yeah.

[00:53:49] Speaker 03:
And the recusal motion was filed in 2018.

[00:53:56] Speaker 04:
After the complaint.

[00:53:56] Speaker 03:
The recusal motion was filed well after the complaint.

[00:54:00] Speaker 03:
Yes, it was not until the special appeal of the ALJS rejection of the settlement that the recuse was filed.

[00:54:06] Speaker 03:
Right.

[00:54:07] Speaker 03:
Speaking of the settlement, the board has broad discretion whether to accept the settlement in lieu of further litigation.

[00:54:16] Speaker 03:
And the board acted within its discretion, in this case, to accept a settlement resolving one of the largest cases in agency history.

[00:54:24] Speaker 03:
There's a deferential abuse of discretion standard for such issues, and the committee offers no compelling reasons to upend the resolution of this case.

[00:54:33] Speaker 04:
That's the standard, no compelling reasons?

[00:54:38] Speaker 03:
That is our argument, Your Honor.

[00:54:40] Speaker 04:
Is that the standard?

[00:54:43] Speaker 03:
Oh, sorry, is that the standard?

[00:54:44] Speaker 03:
The standard is abuse of discretion.

[00:54:46] Speaker 04:
Right.

[00:54:46] Speaker 03:
So the determination that the settlement was reasonable is reviewed by this court for an abuse of discretion.

[00:54:53] Speaker 03:
And that analysis is informed by two overarching principles.

[00:54:56] Speaker 03:
First, the board and the court's longstanding recognition that settlement is a key component of federal labor policy.

[00:55:04] Speaker 03:
And second, the fact that all settlements entail compromise.

[00:55:07] Speaker 04:
So we got it right here.

[00:55:10] Speaker 04:
Didn't get the

[00:55:13] Speaker 04:
Compliance, consent, or agreement.

[00:55:18] Speaker 03:
That is correct.

[00:55:19] Speaker 04:
That's what's unusual about this settlement, it seems to me.

[00:55:23] Speaker 03:
Well, the first prong of the independent stave standard is whether the parties have agreed the position of the party.

[00:55:32] Speaker 03:
And so the board found that that was neutral here because some parties agreed with the settlement and some parties disagreed with the settlement.

[00:55:38] Speaker 03:
But the fact that that is a prong of the analysis

[00:55:42] Speaker 03:
means that they're going to be sometimes when some of the parties don't agree.

[00:55:46] Speaker 03:
Because if any party could veto a settlement, that would be the end of the story.

[00:55:49] Speaker 03:
There wouldn't need to be any other factors.

[00:55:52] Speaker 03:
And of course, the board and courts have long said that one party cannot veto, a charging party cannot veto a settlement agreement on its own.

[00:55:59] Speaker 03:
You have to show that this settlement was a reasonable one.

[00:56:02] Speaker 04:
And for the reasons we discussed- That's what I'm trying to focus on, all right?

[00:56:07] Speaker 04:
What the complaint alleged

[00:56:12] Speaker 04:
All right.

[00:56:14] Speaker 04:
And then a new general counsel comes in and we've been through, you know, you can change his view on policy.

[00:56:23] Speaker 04:
But nevertheless, even in the notice of proposed rulemaking, on which the board is relying, the new general counsel to the board is relying.

[00:56:40] Speaker 04:
Independent stave is still the standard.

[00:56:44] Speaker 03:
So independent stave is the standard for reviewing a settlement.

[00:56:48] Speaker 03:
The rulemaking has nothing to do with settlements.

[00:56:50] Speaker 03:
The rulemaking has to do with the subsequent.

[00:56:51] Speaker 04:
No, I know.

[00:56:52] Speaker 04:
But they cited independent stave favorably.

[00:56:56] Speaker 04:
They weren't suggesting they were abandoning that.

[00:57:00] Speaker 04:
That's all my point is.

[00:57:02] Speaker 04:
It presented it as though it was a law which was agreed.

[00:57:06] Speaker 04:
If the rulemaking is finalized,

[00:57:09] Speaker 04:
There's nothing in there that says now we no longer apply independent state standards.

[00:57:15] Speaker 03:
The rulemaking has nothing to do with independent state.

[00:57:18] Speaker 03:
Independent state is the standard for reviewing settlement agreements.

[00:57:21] Speaker 04:
Well, I wonder why they cited it.

[00:57:24] Speaker 03:
They don't cite it.

[00:57:25] Speaker 04:
They do.

[00:57:26] Speaker 04:
It's in the Notice of Proposal.

[00:57:27] Speaker 04:
It's in the record.

[00:57:29] Speaker 04:
I'm not making this up.

[00:57:33] Speaker 03:
Well, I

[00:57:36] Speaker 04:
You haven't seen it?

[00:57:37] Speaker 03:
For why it wouldn't be mentioned.

[00:57:38] Speaker 04:
It's in the analysis of why we're doing this.

[00:57:43] Speaker 04:
And it goes on with a number of things.

[00:57:45] Speaker 04:
OK, so all right, you can have a settlement where basically the complaining parties don't get what they want and they get a complex system and

[00:58:04] Speaker 04:
I understand it now, and tell me if I'm wrong, that the back pay claims have all been resolved.

[00:58:15] Speaker 04:
And the only question is future findings of violations.

[00:58:28] Speaker 03:
the settlement agreement provides for 100% of back pay to all of the employees who suffered monetary damages as a result of the alleged violations.

[00:58:40] Speaker 03:
Pursuant to the settlement, that money has all been paid and actually had been paid at the time the settlement agreement was initially introduced.

[00:58:49] Speaker 04:
There's no claim by any employee of one of these franchisees that it's entitled to back pay and it hasn't received it.

[00:58:58] Speaker 03:
Correct.

[00:58:59] Speaker 03:
They received all the back pay.

[00:59:02] Speaker 04:
My understanding is the way the settlement read, if the allegation wasn't in the complaint, the original complaint that was filed, you couldn't recover.

[00:59:12] Speaker 04:
Is that correct?

[00:59:15] Speaker 03:
If there were future violations by the franchisees that were the same as those violations alleged in the complaint,

[00:59:25] Speaker 03:
the employees would receive a payment out of the settlement fund.

[00:59:30] Speaker 03:
So if a franchisee had discharged an employee for engaging in union activity, and that was alleged in the complaint, that employee already got money out of the settlement.

[00:59:42] Speaker 03:
But then if in the future that same franchisee discharges another employee for engaging in union activity, that employee would receive money out of the settlement fund without need for any further litigation.

[00:59:55] Speaker 04:
So I thought what you had to do is you have to file a notice, or you have to file a claim.

[01:00:02] Speaker 03:
Someone has to inform.

[01:00:03] Speaker 04:
And then that now issues a notice.

[01:00:06] Speaker 04:
And then you, the employee, have to file a complaint.

[01:00:09] Speaker 04:
Is that not right?

[01:00:12] Speaker 03:
If there was a future, if there was another violation, it was the same type of violation.

[01:00:18] Speaker 04:
That's what I'm getting at.

[01:00:20] Speaker 03:
If there was a subsequent violation by the same franchisee,

[01:00:24] Speaker 03:
then someone would have to inform the board about this.

[01:00:29] Speaker 03:
But then there would be a payout from the settlement fund.

[01:00:33] Speaker 04:
Counsel, you're jumping the gun here.

[01:00:36] Speaker 04:
There's an allegation of a violation.

[01:00:44] Speaker 04:
There hasn't been any determination yet as to that future violation, that there was a violation.

[01:00:51] Speaker 04:
And as I understand it, the way you get that after a McDonald's issues the notice is you file a complaint.

[01:00:58] Speaker 03:
So no, under the settlement, the payment from the settlement fund does not require starting over at the beginning and going through the entire board process, filing a charge, a complaint, a hearing, and so on.

[01:01:12] Speaker 03:
You look at page 63 of the joint appendix, kind of towards the bottom, that explains, that's one of the settlement agreements, explains how the settlement fund works.

[01:01:22] Speaker 03:
So if a regional director of the board finds that a franchisee has breached the settlement by committing the same type of violation... My point is, the regional director is acting on a complaint filed by the employee.

[01:01:37] Speaker 04:
He's not full of sponte doing this.

[01:01:40] Speaker 04:
The regional director has to make some findings of fact as to whether there was a violation or not.

[01:01:46] Speaker 04:
Just because the employee alleges it doesn't mean there was.

[01:01:51] Speaker 03:
I suppose there would have to be some internal investigation.

[01:01:53] Speaker 04:
Yes.

[01:01:56] Speaker 03:
In order to determine.

[01:01:57] Speaker 03:
Right.

[01:01:58] Speaker 03:
But once the regional director has made that determination.

[01:02:00] Speaker 04:
Right.

[01:02:01] Speaker 04:
But I'm just talking about the burdensome process

[01:02:05] Speaker 04:
on the employee who, after all, we keep hearing this case has been going on for so long, et cetera.

[01:02:12] Speaker 04:
And now everybody wants to get rid of it.

[01:02:14] Speaker 04:
But it takes care of back pay.

[01:02:17] Speaker 04:
But as to these future allegations, you have to get a decision out of the regional director.

[01:02:24] Speaker 04:
So you have to file a complaint.

[01:02:26] Speaker 04:
How else can you get a decision from the regional director?

[01:02:33] Speaker 03:
Kind of as a matter of fact, under the process of the settlement, yes, you would have to get some kind of determination from the settlement or from the regional director, but you would not have to go through the entire board process that you would have to if there was a new complaint, a new charge file.

[01:02:48] Speaker 04:
You have to file a complaint that the regional director could resolve.

[01:02:54] Speaker 04:
That's my only point.

[01:02:56] Speaker 03:
Correct.

[01:02:56] Speaker 03:
And that is something that is unique to this settlement agreement.

[01:02:59] Speaker 03:
Yes, it is.

[01:03:01] Speaker 03:
If you didn't have the settlement, you would just have to start over and go through the entire process.

[01:03:06] Speaker 03:
So there is a benefit to this settlement of the creation of this.

[01:03:10] Speaker 04:
Well, I don't think that's the issue here, is it?

[01:03:12] Speaker 04:
Because the case could have proceeded absent a settlement.

[01:03:16] Speaker 04:
I mean, both the new general counsel didn't like the proposed settlement.

[01:03:21] Speaker 03:
If the case had proceeded and there had been no settlement, and we went all the way down the line and we got a decision in favor of finding a violation,

[01:03:31] Speaker 03:
The order that the board would issue would not include a settlement fund.

[01:03:35] Speaker 03:
So this is something that you get as part of the settlement that you wouldn't get.

[01:03:38] Speaker 04:
Well, yeah, you don't know.

[01:03:40] Speaker 04:
At any rate, if the board issued an order and then the hearing decision on individual claims, the franchisee would have to pay.

[01:03:50] Speaker 04:
And the franchisee can negotiate that with McDonald's.

[01:03:56] Speaker 04:
That's all I want to get.

[01:03:58] Speaker 04:
I mean, in terms of understanding

[01:04:01] Speaker 04:
the board's decision that this was a reasonable settlement.

[01:04:10] Speaker 03:
And the settlement fund is one aspect of the settlement, certainly.

[01:04:13] Speaker 03:
The overall, the board's determination that this is reasonable is based on the facts that it provides immediate and certain relief to all of the affected employees.

[01:04:22] Speaker 03:
It remedies all the alleged violations.

[01:04:25] Speaker 03:
It essentially accomplishes much of what full litigation on the merits would have done.

[01:04:29] Speaker 04:
Well, I understand the back pay is resolved.

[01:04:32] Speaker 04:
I wasn't clear that the retaliation claims are resolved.

[01:04:38] Speaker 04:
So there were three times before, you know, a regional director file a complaint and go to the regional director.

[01:04:47] Speaker 03:
The retaliation charges in the complaint or allegations in the complaint are all resolved by the settlement agreement.

[01:04:55] Speaker 03:
All violations are resolved by the settlement agreement.

[01:04:58] Speaker 03:
There's money payout, there's notice posting, there's notice mailing, which again is something that wouldn't generally be a part of a board order after full litigation.

[01:05:07] Speaker 03:
So that's another bonus.

[01:05:09] Speaker 04:
So the franchisees and McDonald's agreed to pay out money for all these alleged violations?

[01:05:16] Speaker 03:
Yes, 100% of back pay for all of the alleged violations.

[01:05:20] Speaker 04:
No, back pay is not the same thing as

[01:05:25] Speaker 04:
damages for retaliation and you know that council better than I do.

[01:05:31] Speaker 04:
So different.

[01:05:35] Speaker 04:
But you're telling me all the retaliation claims have been resolved in favor of the employees.

[01:05:44] Speaker 04:
And you're saying that's been done through the payment of back pay back pay interest and

[01:05:52] Speaker 03:
what's called the compensation for the consequences of receiving a lump sum.

[01:06:00] Speaker 04:
You understand what I'm getting at, don't you?

[01:06:02] Speaker 04:
Back pay is one thing.

[01:06:06] Speaker 03:
I don't understand what you're getting at.

[01:06:07] Speaker 03:
I apologize.

[01:06:08] Speaker 04:
You don't understand the difference between back pay and damages for retaliation?

[01:06:16] Speaker 07:
Not under the NRA.

[01:06:18] Speaker 07:
Not under the NRA.

[01:06:20] Speaker 07:
If I'm correct, it's only black pay.

[01:06:24] Speaker 04:
It can be.

[01:06:26] Speaker 07:
No authority on the board to reward damages.

[01:06:31] Speaker 03:
Under current law, there are no compensatory damages if that's what you're getting.

[01:06:35] Speaker 03:
Right.

[01:06:36] Speaker 03:
It's a board order monetary remedies.

[01:06:39] Speaker 03:
is back pay interest in the adverse tax consequences that I mentioned before.

[01:06:44] Speaker 03:
That's what you get under board law as it currently stands.

[01:06:49] Speaker 03:
And that's what the employees got under the settlement.

[01:06:53] Speaker 04:
OK.

[01:06:54] Speaker 04:
So the only thing that's outstanding then, taking what Judge Silverman and you just said, is future possible violations that are alleged against the franchisees.

[01:07:07] Speaker 03:
I mean, if there are future violations, then- Oh, yes, allegations.

[01:07:12] Speaker 07:
That would be the only thing that isn't- Then the board would proceed through contempt.

[01:07:19] Speaker 03:
Yeah.

[01:07:20] Speaker 03:
If there's a breach of the settlement agreement by virtue of there being further violations, then yes, that would then trigger the default proceedings under the settlement agreement.

[01:07:33] Speaker 03:
where the board general counsel reissues the complaint and get a default judgment by the board and a consent judgment from the court of appeals.

[01:07:41] Speaker 03:
And then, of course, the franchisee or McDonald's, as the case may be, would be subject to contempt.

[01:07:49] Speaker 04:
Right.

[01:07:49] Speaker 04:
So we're back where we were.

[01:07:51] Speaker 04:
You've got to file a new complaint.

[01:07:52] Speaker 04:
Anyway, counsel, I understand.

[01:07:54] Speaker 04:
Thank you, Judge Silverman.

[01:07:57] Speaker 04:
Anything further from my colleagues?

[01:08:01] Speaker 03:
No.

[01:08:03] Speaker 03:
Thank you all.

[01:08:04] Speaker 04:
We ask you to thank you very much.

[01:08:08] Speaker 04:
So.

[01:08:10] Speaker 04:
Council for respondent intervener.

[01:08:33] Speaker 02:
May it please the court, Fatih Shah for Intervener, McDonald's USA.

[01:08:37] Speaker 02:
In my limited time, unless the court prefers otherwise, maybe I'll go straight to what the petitioners call the key issue in their argument here today.

[01:08:46] Speaker 02:
And that's whether the board abused its discretion in approving these fully now fully consummated settlement agreements just because they did not allow for further development

[01:08:58] Speaker 02:
of the joint employer law in the way that they would prefer.

[01:09:01] Speaker 02:
As Judge Silverman has said, that is a policy call.

[01:09:07] Speaker 02:
But if there is any doubt about whether the ALJ's preference, policy preference, as to that call should trump the judgment of the Senate-confirmed general counsel and the Senate-confirmed board,

[01:09:21] Speaker 02:
That doubt has to be resolved in this case by the time of the board's decision there can be no doubt that the board's decision in this case, whatever the general answer might be was reasonable because as the board explained in great detail in its opinion.

[01:09:39] Speaker 02:
It had already initiated a formal agency rulemaking to revisit and clarify joint employer law.

[01:09:49] Speaker 02:
So therefore, the ALJ's reasoning, the principal reason the ALJ disapproved these settlements was the ALJ believed the case should be remanded so it could develop joint employer law.

[01:10:02] Speaker 02:
But by the time of the board's decision, the board already had a rulemaking pending on that.

[01:10:07] Speaker 02:
And as it turns out,

[01:10:09] Speaker 02:
That proposed rule is now a final rule that is in the books that will dictate joint employer law going forward as a prospective matter.

[01:10:19] Speaker 07:
Would not the board position be authorized without regard to the rule of make?

[01:10:26] Speaker 02:
Yes, Your Honor.

[01:10:27] Speaker 02:
And that's where I started with.

[01:10:30] Speaker 02:
Your premise is correct.

[01:10:31] Speaker 02:
This is a judgment policy call.

[01:10:33] Speaker 02:
The ALJ's policy preference cannot trump that of the general counsel and the board.

[01:10:38] Speaker 02:
If the court doesn't want to go that far, but that is the correct answer, you could stop there.

[01:10:43] Speaker 02:
If the board wanted to, if this court wanted to instead rely on the typical APA principle, which is as long as a board explains its decision as to what it's doing, then you apply normal abuse of discretion review to the board.

[01:10:58] Speaker 02:
Here, that happened in spades because the board explained it makes no sense to rely on the ALJ's justification that remand would allow for development of joint employer law when they have a rulemaking, which wasn't

[01:11:13] Speaker 02:
initiated at the time of the ALJ's decision, but had been initiated since and is now, in fact, a final rule.

[01:11:21] Speaker 07:
There's an interesting point here.

[01:11:24] Speaker 07:
The board, I understand, it takes the position.

[01:11:29] Speaker 07:
Put aside the rulemaking in the future.

[01:11:32] Speaker 07:
We do not believe that the ALJ's view of joint employer is correct.

[01:11:40] Speaker 02:
If that were the basis, that would be adequate in and of itself.

[01:11:45] Speaker 07:
The trouble with the rulemaking, that deals with the future.

[01:11:49] Speaker 07:
Whereas the question before the board is whether or before the general counsel is whether there was a violation of law, which is retroactive, which is passed.

[01:12:00] Speaker 02:
Right.

[01:12:01] Speaker 07:
And we've just dealt with cases in which the board agencies improperly look to rulemaking

[01:12:10] Speaker 07:
to answer present adjudication.

[01:12:13] Speaker 07:
Sure.

[01:12:13] Speaker 07:
So I, although the important point is the board did not believe the ALJ's view of joint employer was correct under existing law.

[01:12:25] Speaker 02:
Correct.

[01:12:26] Speaker 02:
The board explained in its opinion that unlike the ALJ's view of it, it was not a slam dunk that they were going to prevail on, that the charging parties were going to prevail on joint employer law.

[01:12:38] Speaker 02:
In fact,

[01:12:38] Speaker 02:
Join employer law had been a mess and in fact McDonald's despite many cases in all sorts of different forums has never been held to be a joint employer.

[01:12:47] Speaker 02:
The board pointed that out.

[01:12:49] Speaker 02:
It pointed all of that out and said in light of that, this settlement is

[01:12:53] Speaker 02:
Is very reasonable it provides the actual victims of the alleged violations every employee all 181 violations fully redressed 100% compensation they would not have received a sent more a sent more even if this had gone on for years.

[01:13:11] Speaker 02:
They had received full judgments from the board on appeal, affirmed, not assent more.

[01:13:17] Speaker 02:
Under that context, the board said, this is a very reasonable settlement.

[01:13:22] Speaker 02:
The only aspect of the settlement was a joint employer.

[01:13:25] Speaker 07:
Now, I'll go quickly to your jurisdictional point.

[01:13:27] Speaker 07:
Yes.

[01:13:28] Speaker 07:
You're generally correct that we review a board, not an individual member's position.

[01:13:34] Speaker 07:
We've said that in a recent opinion last term.

[01:13:40] Speaker 07:
for the surface transportation board.

[01:13:45] Speaker 07:
However, if it was determined that one of the board members had taken a bribe or had financial interest in the case, wouldn't that be challenged on due process grounds?

[01:14:02] Speaker 02:
Yes, your honor.

[01:14:03] Speaker 02:
In that case, I would not have my jurisdictional argument anymore because you would still have your jurisdictional argument.

[01:14:09] Speaker 07:
You would say you can't do that under arbitrary and capricious.

[01:14:12] Speaker 07:
You have to bring

[01:14:14] Speaker 07:
a constitutional claim of violation of due process.

[01:14:17] Speaker 02:
Exactly.

[01:14:18] Speaker 02:
So if, in fact, you had a case where, as your hypothetical states, it was a bribery claim, I would expect the other side would have brought a challenge that says this violates due process.

[01:14:29] Speaker 02:
There's actual taint, actual prejudice, due process violation.

[01:14:33] Speaker 02:
Give me a relief.

[01:14:34] Speaker 07:
They have not made those arguments.

[01:14:35] Speaker 07:
Next question.

[01:14:36] Speaker 07:
I want to be very quick on this.

[01:14:38] Speaker 07:
This government-wide rule on recusals.

[01:14:44] Speaker 07:
your honor.

[01:14:46] Speaker 07:
Why is that binding on the NLRB?

[01:14:49] Speaker 02:
Perhaps that's a question better given to agency council.

[01:14:54] Speaker 02:
They have taken the view, your honor, that there are two sources of binding ethics obligations.

[01:15:00] Speaker 02:
The first source is the executive order ethics pledge, which again, their only argument under that is directly and substantially related.

[01:15:08] Speaker 02:
And we know that directly and substantially related is defined in the executive order to mean that you

[01:15:14] Speaker 02:
that you are a party or represent a party.

[01:15:17] Speaker 02:
All right the next the next point.

[01:15:19] Speaker 04:
Could I just ask here just as a follow-up council I didn't read the board's brief to suggest it wasn't bound.

[01:15:28] Speaker 04:
Now whether or not it's Judge Sillerman's question

[01:15:31] Speaker 04:
suggests maybe it isn't.

[01:15:33] Speaker 04:
But that was never challenged by the board, was it?

[01:15:37] Speaker 04:
It simply said that it had no authority to review the decision because it was an individual decision.

[01:15:46] Speaker 07:
I agree.

[01:15:47] Speaker 07:
I agree.

[01:15:47] Speaker 07:
I was just curious about the point.

[01:15:50] Speaker 04:
I just want to be clear about that, that the board has never argued that it doesn't apply.

[01:15:56] Speaker 07:
I understand.

[01:15:56] Speaker 07:
I'm just curious.

[01:15:57] Speaker 07:
Now, will you do take the position

[01:16:01] Speaker 07:
that any violation of your rules would be equivalent to a violation of due process?

[01:16:09] Speaker 02:
Any violation of the board's rules?

[01:16:12] Speaker 02:
Right.

[01:16:13] Speaker 02:
I would not answer yes to that question if I were the board.

[01:16:15] Speaker 02:
But if you're asking me as McDonald's, I don't think that would be.

[01:16:20] Speaker 02:
Because due process, and there's jurisprudence on this, the standard is different.

[01:16:24] Speaker 02:
You have to show actual

[01:16:27] Speaker 02:
It's a heightened standard, right?

[01:16:29] Speaker 02:
The rules, you may be violation of the letter of the rule, but that doesn't mean that you haven't gotten a fair shake.

[01:16:35] Speaker 02:
That may be an appearance concern.

[01:16:37] Speaker 02:
It may be this sort of thing.

[01:16:38] Speaker 02:
I think you're right.

[01:16:39] Speaker 07:
I think you're right.

[01:16:41] Speaker 02:
And just to square the circle as to why you're asking these, perhaps, is they have not made any of those other bucket of arguments that would fall into the due process camp of actual bias, bribery, actual taint.

[01:16:55] Speaker 02:
And that's why we haven't addressed them.

[01:16:57] Speaker 02:
If they had, they would be meritless.

[01:16:59] Speaker 04:
Well, Counsel, one of the things in reading last term's decision, I thought, well, how did that three-judge panel have authority to overrule all of our previous cases on what the standard is about due process?

[01:17:18] Speaker 04:
That a litigant is entitled to

[01:17:24] Speaker 04:
an independent decision maker.

[01:17:32] Speaker 04:
You didn't need to address that because you weren't arguing it, but just Judge Silverman's question.

[01:17:38] Speaker 02:
Right, your honor, just to be clear, they have not made any sort of due process or other sort of arguments.

[01:17:43] Speaker 02:
Their arguments on recusal are limited to the two regulations that we've talked about, the executive order and the CFR regulation.

[01:17:52] Speaker 02:
And it is now undisputed, and obviously you can ask Mr. West to confirm that, that there is no dispute that Littler Mendelson is neither a party nor represents a party.

[01:18:03] Speaker 02:
That is a requirement.

[01:18:05] Speaker 02:
under either the executive order or the federal regulations to get recusal.

[01:18:11] Speaker 02:
They do not satisfy that requirement.

[01:18:13] Speaker 02:
So even if this court has jurisdiction, they properly preserved it and dotted all their i's and crossed their t's, and you issue merits, it's not even a close call.

[01:18:23] Speaker 02:
And it's definitely not an abuse of discretion on behalf of member Emanuel or the board for him not to be recused in this case.

[01:18:36] Speaker 04:
If there are no further anything further from my colleagues.

[01:18:43] Speaker 07:
Oh, thank you.

[01:18:44] Speaker 04:
Thank you.

[01:18:44] Speaker 04:
Council here from council for petitioners.

[01:18:54] Speaker 06:
Thank you.

[01:18:54] Speaker 06:
Your honor and I have 3 points that I would like to make and I'll try to be really brief on all 3 of them.

[01:18:59] Speaker 06:
First of all, as to the argument that both council made that the settlement accomplishes most of what the litigation would have done that people could not have gotten a penny more.

[01:19:10] Speaker 06:
That's correct with respect to the 20 individuals who had been fired or had their work time shortened or things like that.

[01:19:20] Speaker 06:
But it's really important.

[01:19:23] Speaker 06:
principle that the board has often repeated, that this court has often repeated, that the board is to function, but the board's function is to be performed in the public interest and not solely in the vindication of individual rights.

[01:19:39] Speaker 06:
And I would refer you again to Judge Edwards' decision in the oil, chemical, and atomic workers case where he, after quoting that principle,

[01:19:50] Speaker 06:
He says, you know, in a footnote, really what our role is in reviewing the board's decision to accept the settlement, our role is really not unlike that of a district court in reviewing a class action settlement, in that it's not sufficient to determine that the interests of the individual named plaintiffs have been taken care of.

[01:20:15] Speaker 06:
There's a much larger

[01:20:16] Speaker 06:
issue at stake.

[01:20:17] Speaker 07:
Isn't it the general counsel who's supposed to represent the public?

[01:20:23] Speaker 06:
He is.

[01:20:23] Speaker 06:
And if he doesn't, this court is there to remedy the situation, I would think.

[01:20:30] Speaker 06:
And that's our submission, Judge Silverman, that is he did not represent the public by capitulating to McDonald's on the critical issue in this case.

[01:20:44] Speaker 06:
There was a mention, my second point, the board's rulemaking is going to resolve everything because you'll have all these issues that are coming up in this case resolved through the rulemaking.

[01:21:00] Speaker 06:
That's not at all correct.

[01:21:01] Speaker 06:
The rulemaking is on the general joint employer.

[01:21:05] Speaker 06:
Standard that's true, but it is does not go in at all specifically to the context of franchise franchise or franchisee relationships and here here on that particular point.

[01:21:22] Speaker 06:
You had the ALJ making a record over the course of three years, going specifically to the nature of the relationships between McDonald's and its franchisees.

[01:21:36] Speaker 06:
And what the general counsel did is simply threw that all away, all of that effort, and capitulated on that issue.

[01:21:45] Speaker 06:
And finally, Judge Silverman, in response to your point that

[01:21:51] Speaker 06:
that there had been no determination, that the ALJ, the general counsel disagreed with the ALJ's determination about joint employer.

[01:22:01] Speaker 06:
That's not quite correct because in fact there had been no determination made by the ALJ.

[01:22:07] Speaker 06:
What she ruled on was simply whether the settlement was reasonable and had that not been overruled by the board, then she would have had the opportunity to take the evidence that had been assembled over the course of three years

[01:22:20] Speaker 06:
and apply the joint employer law as it existed at the time, whether under Browning-Ferris or under the board's new rulemaking, and apply it to the facts of the case that had been assembled through this very arduous and lengthy hearing.

[01:22:38] Speaker 06:
And what the board did, or the general counsel did, approved by the board, it foreclosed any possibility of doing that.

[01:22:47] Speaker 06:
and addressing that point on the basis of the record that had been assembled.

[01:22:52] Speaker 04:
All right.

[01:22:53] Speaker 04:
Anything further from my colleagues?

[01:22:56] Speaker 07:
Not me.

[01:22:57] Speaker 04:
No.

[01:22:58] Speaker 04:
Thank you.

[01:22:59] Speaker 04:
Thank you, counsel.

[01:23:00] Speaker 04:
We will take the case under advisement.