n March 31, 2023, New York City Comptroller Brad Lander, on behalf of the five New York City retirement systems, announced a new shareholder proposal at Chipotle Mexican Grill, Inc., asking the board of directors to adopt a “policy of noninterference” at the company. The proposed policy would mimic the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, and “prohibit the company from interfering with workers exercising their right to form or join a trade union and require timely collective bargaining.” The proposal “also calls for the creation of robust accountability processes if the policy is violated.”

Background

Section 7 of the National Labor Relations Act (NLRA) affords employees the “right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 7 also guarantees employees the right to refrain from those activities, i.e., not to support a labor union. And Section 8(c) of the NLRA confirms employers’ right to free speech, i.e., to express any “views, argument, or opinion” about a labor organization as long as “such expression contains no threat of reprisal or force or promise of benefit.”

Many pension funds have a vested interest in unionization. Why? Because pension funds operate on employer contributions that often are made under collective bargaining agreements negotiated between employers and labor unions. Similarly, union officers often participate as trustees of pension funds. For example, the trustees of the New York City Employees’ Retirement System include the executive director of District Council 37 of the American Federation of State, County and Municipal Employees, the president of the Transport Workers Union Local 100, and the president of the International Brotherhood of Teamsters, Local 237.

Policy of Noninterference and Its Repercussions

Comptroller Lander’s and the pension funds’ proposal seeks to restrict Chipotle’s rights under Section 8(c) of the NLRA, and employees’ rights under Section 7 of the NLRA. Although presented under the guise of neutrality, the “policy of noninterference” suggests that should Chipotle wish to share facts, truthful information, and its lawful views surrounding unionization—a right protected by the NLRA—it will face recourse from the pension funds. This policy treads thin ice on violating both employers’ and employees’ rights under the NLRA. Union officials’ involvement as trustees of the pension funds only highlights the proposal’s one-sided goal of restricting employer speech while enhancing the union’s.

Multiple pension funds have proposed these gag-order shareholder proposals to well-known retailers across the country. This appears, however, to be the first proposal directly limiting an employer’s freedom of speech under the NLRA. The pension funds intend to present this proposal at Chipotle’s shareholder meeting, which has yet to be scheduled.

While such proposals may seem harmless, or even desirable for companies wishing to be viewed as progressive, employers should closely review such proposals to ensure that any initiative that could result in a diminution of statutory rights, including the rights of employees to hear the company’s point of view and make well-informed decisions, has been fully vetted.

Ogletree Deakins’ Environmental, Social, and Governance (ESG) Practice Group will continue to monitor shareholder proposals that may affect NLRA rights and will post updates on the firm’s Traditional Labor Relations blog as additional information becomes available.