Employer Labor Relations Blog

In A “Startling” And “Troubling” Decision, The Board Requires An Employer To Continue Providing Annual Wage Increases Beyond Contract Expiration

Posted in Collective Bargaining, Current Events, NLRB, Unfair Labor Practices

By Kenneth R. Dolin.

In a decision that Board Member Hayes found “startling” and “troubling,” the Board required an employer to continue providing wage increases post-contract expiration.  Specifically, the Board in Finley Hospital, 359 NLRB No. 9 (September 24, 2012), recently found that an employer had a statutory duty to maintain the “dynamic status quo” by continuing to grant annual 3 percent pay increases after the collective bargaining agreement had expired, even though the cba wage provision clearly limited the employer’s contractual obligation to provide wage increases only for the one year term of the agreement.  Thus, the employer was found to have acted unlawfully by unilaterally discontinuing the annual 3 percent pay raises provided for in the parties’ collective bargaining agreement upon the expiration of the agreement.

The collective bargaining agreement language that contained the phrase “for the duration of this agreement” and specified the amount of the increase as 3 percent “during the term of this agreement,” did not, according to the Board, “unequivocally and specifically” express the parties mutual intention to permit unilateral action with respect to the annual wage increases.  While the contract language limited the effective period of the contractual obligation, it did not address the employer’s post-expiration conduct or obligation or authorize unilateral employer action of any kind.  Thus, the Board concluded that the employer failed to prove a waiver of its statutory obligation to maintain the status quo established by the expired collective bargaining agreement.

Member Hayes dissented from the Board’s finding of a violation, stating that the Board majority erred in identifying the proper statutory status quo for wages and that the proper status quo that the employer was obligated to maintain was the new wage “rate,” including the contractual increases, not the right to additional wage increases.  According to Member Hayes, the parties agreed to a single wage increase on each nurse’s anniversary date occurring during the contract year.  Once each employee’s pay had been adjusted there was no statutory duty to make further post-expiration adjustments.  He criticized the Board majority for “morphing” the employer’s one-year commitment into a statutory obligation to maintain a status quo of change, especially given the limiting language contained in the expired collective bargaining agreement (“during the term of this Agreement”).  Accordingly, Member Hayes believed the employer acted lawfully when it ended wage increases upon expiration of the parties’ contract and when it explained to the employees it was unable to give them further increases until the parties reached a new agreement.

This case is significant because it applies the unilateral change in wages or benefits principle beyond unilateral changes to the levels of wages or benefits.  The Board justified this extension by asserting that the annual raises defined the status quo under the “well-established ‘dynamic status quo’ doctrine.”

No prior Board cases have required an employer to adhere to a purported “dynamic status quo” of annual increases based on a one-year contract.  Rather, the dynamic status quo principle was developed and applied when unrepresented employees received wage or benefit increases with such sustained frequency and regularity that they were regarded as established terms of employment that an employer was obligated to continue when entering into a new collective bargaining relationship.  Here, the Board extended this principle to a situation based solely on a single negotiated wage increase that the parties agreed would be granted for the one year of the contract term.  This result is especially vexing for employers because the Obama Board has narrowed its application of the “dynamic status quo” principle in the context of employer post-contract expiration rights.

Following Finley Hospital, employers choosing to terminate their post-contract statutory obligations to maintain the status quo established by the expired collective bargaining agreement must obtain clear and unambiguous language in the collective bargaining agreement that addresses an employer’s post-expiration conduct or obligation or authorizes unilateral employer action.  Examples of an effective waiver of an employer’s obligation to maintain the status quo established by the collective bargaining agreement include the following language (1) “at the expiration of the collective bargaining agreement, any employer obligation shall terminate;” or (2) “upon expiration of the collective bargaining agreement, the employer agrees to continue to contribute until such time as either party notifies the other party in writing of an intent to cancel.”

In the words of Member Hayes, Finley Hospital is a “startling and troubling revelation to employers of a heretofore unknown obligation to continue giving non-discretionary wage and benefit increases post-expiration at the rate given in the final year of a collective bargaining agreement.”  According to Member Hayes, “employers must now bargain for ironclad language expressly providing that no increases will be paid beyond a contract term, or face the consequences of having to continue those increases until they reach an agreement on a successor contract or impasse.”