By:  Kenneth R. Dolin

Over the last year, the Board has greatly expanded the scope of requested information that an employer must provide to a labor union upon the latter’s request during collective bargaining, especially when the requested information is financial in nature.

For example, in National Extrusion & Mfg. Co., 357 NLRB No. 8 (2011), the Board majority (Hayes dissenting) held that, because it found the employer premised its demand for substantial wage concessions on a need to remain competitive in the marketplace, the union was entitled to information it requested concerning the employer’s current and former customers, job quotes, outsourcing, pricing structure, market studies and competitors.

The employer had stated during negotiations that the concessions were necessary to make its facility more competitive, particularly since it had faced competition from Asia, its production costs had increased, and its productivity had diminished.  The union therefore claimed the information it requested was necessary to evaluate the truth of the employer’s repeated assertions that it needed wage concessions to improve its competitive position.

The consequences to the non-compliant employer in National Extrusion were severe.  The Board majority found that, because the employer unlawfully withheld the requested information, the employer’s lockout of employees, temporary replacement of them, and cancellation of their health insurance coverage was unlawful.

Similarly, in Stella D’oro Biscuit Co., 355 NLRB No. 158 (2010), another 2-1 decision, the Board held that an employer during labor negotiations with a union “effectively” claimed that it was unable to pay the costs of the expiring labor agreement, and therefore obligated itself to furnish the union with the requested documentation of that claim, even though the employer did not “expressly” plead an inability to pay.

The Board found that the employer “effectively” claimed an inability to pay based on the following employer statements to the union:

• that it could not continue to run the business at a loss;
• that it could not survive under the current labor contract and had to reduce those costs to stay in business;
• that the concessions it sought were needed for the survival of the company and if it did not obtain them it would close;
• that it required savings in its labor costs or it would not be going forward; and
• that it did not have the money to go forward with the business unless it implemented the cost reductions it proposed.

The Board found that the employer at a minimum claimed an inability to pay during the life of the contract under negotiation, because it repeatedly and continually indicated that its very survival was linked to obtaining concessions from the union.  Moreover, the Board reasoned that the unmistakable message conveyed to the union was that the employer would become unable to pay absent the owner’s financial contributions and that absent concessions, the owner would be unwilling to continue its financial investments.  Thus, the owner’s “short-term” willingness to fund losses was plainly contingent with the concessions the employer demanded.

The employer’s offer to allow the union to view, but not retain in its possession, an audited financial statement was found insufficient to satisfy its obligation and its confidentiality claim was found “weak.”

The Board concluded no bona fide impasse was reached even though the union, by its second negotiating session, had fully corroborated the financial data and had all the information it needed to confirm the employer’s assertion.  This at most hypertechnical violation precluded a finding of a bona fide impasse and resulted in a finding that the subsequent strike was an unfair labor practice strike!

In light of National Extrusion and Stella D’oro, an employer unwilling to open its books should avoid making any statements that it is losing money and should especially  avoid linking its unprofitability to its inability to survive or its investor’s continued willingness to support it financially.  Likewise, an employer claiming a “lack of competitiveness,” while not triggering an obligation to open its books, will nevertheless trigger an obligation to provide information upon request relevant to this claim, including information about customers, pricing, market shares, and competitors, especially when the employer is seeking wage cuts or other concessions.

An employer’s argument that a union’s request for such financial information is abusive or harassing the employer and meant to forestall a bargaining impasse will likely be rejected absent specific evidence that the union is acting in bad faith.

Also, an employer’s confidentiality claim will be strictly scrutinized when it refuses to provide information found relevant to determine whether this confidentiality concern was raised during bargaining and whether the union offered appropriate assurances to mitigate this concern.

National Extrusion and Stella D’oro show that an employer’s unlawful refusal to provide relevant information can preclude an impasse and taint an otherwise lawful lockout or permanent replacement of strikers when the information at issue is related to a central point of disagreement during negotiations.