By:  Kenneth R. Dolin, Esq.

Labor negotiations are, as the name suggests, a series of negotiations that historically are conducted in an adversarial manner during which both parties often defend their proposals with, among other things, a mixture of rhetoric, logical appeals, and argument.  The Board has long recognized that during this process the employer must be given some leeway (as is the union regarding other types of claims) to be able to argue that particular union proposals are not in the company’s best economic interest because it would harm the company’s ability to compete.  The employer has historically been able to make these sorts of statements during negotiations without running the risk that union will be then entitled to review some or all of the company’s finances–as long as the company never claimed “it could not pay” for the union’s proposals. 

To review briefly the law, in NLRB v. Truitt Mfg. Co., 351 U.S. 149 (1956), the Supreme Court endorsed Board precedent holding that an employer claiming an inability to pay may be required to disclose financial information to the union to substantiate that claim.  As the court put it, “[g]ood faith bargaining necessarily requires that claims made by either bargainer should be honest claims, and if such claim is important enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy.”  Id. at 152-153.

Two lines of Board cases have applied the Truitt “honest claim” principles: (1) one where the issue is simply whether the employer claimed an inability to pay, entitling the union to full access to the employer’s financial records, and (2) one where the employer makes claims that are short of an asserted inability to pay, but which nonetheless are relevant to the parties’ bargaining proposals and thus subject to verification by the union.  See, e.g., National Extrusion Mfg. Co., 357 NLRB No. 8 (2011), enf’d sub. nom. KLB Industries, Inc. v. NLRB, 700 F.3d 551 (D.C. Cir 2012).  However, an employer’s assertion of competitive disadvantage does not, in and of itself, constitute a claim of inability to pay.  See e.g., Nielson Lithographing Co., 305 NLRB 697 (1991) enf’d sub. nom. Graphic Communications Local 508 v. NLRB, 977 F.2d 1168 (7th Cir. 1992).

The Obama Board, however, is apparently unhappy with this line of  cases, and has recently noted that “in an appropriate case,” it would revisit the historical distinction between “inability to pay” and “competitive disadvantage” claims. 

In particular, in Coupled Products, LLC, 359 NLRB No. 152 (July 10, 2013), the Board held that the employer did not unlawfully deny the union’s request to audit its financial books during negotiations in which the employer demanded steep reductions in wages and benefits.  In agreeing with the ALJ, the Board found (1) no violation because the employer did not claim an “inability to pay the union’s demands,” but rather claimed only a competitive disadvantage from paying more for labor and benefits than other area manufacturers; (2) the parties’ impasse in negotiations was valid and the employer therefore lawfully implemented the terms of its final proposal; and (3) a strike that began after the employer’s refusal to provide information was found to be an economic, not an unfair labor practice, strike.

The employer in Coupled Products had notified the union that it was shutting down its unionized plant in Columbia City, Indiana and moving the bargaining unit work to its other plant in Mexico in order to save $2 million in labor costs.  The employer offered to engage in effects bargaining and thereafter explained that the unionized plant was “too expensive to maintain.”

During discussions in 2010 and 2011 with the union, the employer told the union that the employer as a whole made a profit but that the Columbia City plant had lost money.  The union asked if there was any way the Columbia City plant could continue to operate.  The employer responded that it would be willing to continue operating this plant at break-even or even a small loss.  At the union’s request, the employer produced a one-page unaudited profit-and-loss statement and indicated that it would consider any proposals from the union to keep the plant open. 

Thereafter, negotiations for a renewal agreement commenced; the union sought wage increases and the employer sought to reduce certain wages and benefits.  The employer based its proposal in part on research into area wages and labor statistics, which revealed that it paid significantly higher wages for non-skilled labor than the market rate.

The union thereafter formally requested to review the employer’s books for proof of the employer’s finances to substantiate its concessionary proposal.  The employer produced a one-page unaudited financial statement to the union for the unionized plant only showing a loss and stated this plant was losing customers and money and was uncompetitive.  The union thereafter offered to freeze current wages, but the employer insisted on its proposed wage reductions. 

The union asked whether the employer was unable to pay wages and the employer replied only that it was “not willing to pay” what the union proposed.  The union rejected the employer’s proposal and asked several more times to audit the employer’s finances.  The employer’s final proposal reduced wages for certain employees and eliminated certain benefits.  The union membership rejected the proposal and the employer rejected the union’s final counterproposal.  The union made another request for the employer to open its books, but the employer refused, denying that it claimed an “inability to pay” and repeated its claim that it was uncompetitive in the marketplace.

The union began its strike and shortly thereafter, the employer implemented the terms of its final proposal and hired replacement employees.

The Board found that the employer did not violate Section 8(a)(5) by refusing to open its books to the union because the employer did not claim an inability to pay, but rather only claimed that it wished to overcome its competitive disadvantage.  The Board found that the ALJ reasonably concluded that the employer’s statements and conduct both before and during the negotiations were consistent with its position that it was unwilling, but not unable, to meet the union’s demands based on (1) the employer’s statement to the union that its recent inquiries and results indicated that the employer was overpaying for non-skilled labor; and (2) the employer’s discussions with the union about the then-planned closure where it told the union many times that the employer as a whole was profitable in 2010 and 2011.

The Board rejected the argument that the focus should be just on the unionized plant because the employer never insisted that the unionized plant had to stand on its own.  To the contrary, the employer suggested that it was willing to keep the unionized plant open if the plant could come close to breaking even.  Moreover, the union did not limit its request to financial information pertaining to the Columbia City facility only; rather, it had requested that the employer open its books in their entirety.

The Board also rejected the argument that an employer’s assertion that it will close a facility if economic concessions are not made is necessarily a claim of inability to pay because the employer’s decision-making was driven primarily by its desire to minimize losses at Columbia City, rather than by a risk of insolvency during the term of the proposed agreement.

Finally, the Board rejected the argument that where a union demands only the sort of financial information disclosures triggered by an “inability to pay” claim, and no such claim was actually made, the employer still must provide other information relevant to the claim it has made, even if the union has not requested such information.  Rather, the Board found that a union must first request such information.

In sum, the Board found that the employer did not violate the Act by denying the union’s information request for unfettered access to the employer’s financial books because the employer did not claim an inability to meet the union’s contractual demands.  The Board left undisturbed its precedent emphasizing that the “inability to pay” doctrine does not mean that “a union faced with something less than an inability-to-pay claim is not entitled to any information.  Thus, even where a union is not entitled to broad access of an employer’s financial records, the union may still be entitled to specific assertion about its business and competitiveness – provided, of course, that it requests such information.  See National Extrusion Mfg. Co., 357 NLRB No. 8 (2011), enf’d sub. nom. KLB Industries, Inc. v. NLRB, 700 F.3d 551 (D.C. Cir. 2012)(disccused here).

The Aftermath

The Board expressly noted that neither party asked it to override the Board’s inability-to-pay decisions.  However, it then stated that this case illustrated that the post-Truitt analytical distinction between inability-to-pay cases and less than inability-to-pay cases often leads parties to become preoccupied with magic words, “distracting them from genuine dialogue and information sharing that can lead to productive collective bargaining.”  The Board then concluded that “in an appropriate case,” it would consider how the Board has distinguished between “inability to pay” and “competitive disadvantage” claims in post-Nielsen cases and whether these distinctions best promote good-faith bargaining.  359 NLRB No. 152 sl. op. at 2-3 fn. 6.

It appears that the Board will consider following the test then-Member Wilma Liebman noted in her dissent in Richmond Times-Dispatch, 345 NLRB 195, 202 fn. 5 (2005).  There, she suggested revisiting the Nielsen ruling because it permits inconsistencies and often sanctions “hide-the-ball” conduct at the bargaining table contrary to the obligation to bargain in good faith as explicated by the Supreme Court in Truitt.  Then-Member Liebman contended that a “better” rule would pace on employers “the obligation to supply the union, upon request, with financial information necessary to substantiate the employers’ objectively verifiable claims concerning their financial condition.”

Indeed, Judge Cabrares, in a concurring opinion, also suggested that the Board might wish to reconsider whether the Board’s “inability to pay” standard is consistent with Truitt and that it may be able to provide a more “precise” ruling in the future by explaining that an employer claiming during bargaining that it is unprofitable due to labor costs is “effectively” claiming an inability to pay for such costs.  See SDBC Holdings, Inc. v. NLRB, 711 F.3d 281, 295 (2d Cir. 2013).

By: Kristin E. Michaels, Esq.

The National Labor Relations Board has reminded employers once again that there is a right way and a wrong way to object to union information requests on the grounds that the information sought by the union is irrelevant, unduly burdensome, overbroad or confidential.  The Board revisited this issue recently in Salem Hospital Corp., 359 NLRB No. 82 (March 22, 2013).  In short, the Board’s message is:  raise such objections quickly, couple the objection with an explanation, and offer an accommodation.  Anything short of this may lead to an unfair labor practice finding against the employer.

Unlike oft-asserted defenses by employers to plaintiffs’ discovery requests in employment litigation, employers’ claims that union information requests are irrelevant, burdensome, overbroad, or seek confidential information are scrutinized under a tough standard by the NLRB.  These objections will not pass muster unless the employer understands some key points and takes certain steps:

  1. The definition of “relevant” under the National Labor Relations Act is very broad.

A union is entitled to information needed for contract negotiations, to evaluate grievances, and the catch-all, “for contract administration.”  All information related to bargaining unit employees and their terms and conditions of employment is presumptively relevant.

      2.   Rarely claim as an initial response that requested information is irrelevant.

When responding to an information request, asserting as a first response that requested information is irrelevant – whether as a delay tactic or in the hopes that the union will drop its request – is a risky move.  Merely taking the position that presumptively relevant information is irrelevant can lead to an unfair labor practice finding.  Where information requested is not presumptively relevant, the best course of action still is not to immediately claim “irrelevancy,” but rather to respond with a statement that the employer “does not understand the relevancy of the request.”  This puts the burden on the union to establish relevancy, while at the same time not constituting an outright, and perhaps premature, refusal to provide information.

       3.   Objections must be raised in a timely fashion.

A delay in responding to an information request is just as much a violation of the National Labor Relations Act as not responding at all.  Further, a delay in raising objections to requested information may result in the employer losing valid confidentiality, burdensome, overbroad, and irrelevancy objections.  The Board so found in Salem Hospital, where the employer waited months before raising such objections.

        4.    Explain the objection.

As stated in Salem Hospital, an employer must not only timely raise objections, but also must “substantiate its defense.”  In other words, merely stating that a request is overbroad, unduly burdensome and the like is not enough.  An employer must explain the reason for the objection.  If the objection is “unduly burdensome,” explain, for example, how many hours would be required to gather the information.  If the objection is “overbroad,” explain why the information sought goes beyond the union’s stated need for it.

        5.  Don’t assume that there is a valid confidentiality objection.

Employers sometimes assume, as the employer in Salem Hospital did, that certain types of requested employee information, such as medical information, can be objected to on the grounds of confidentiality.  But it is important to remember that some statutes, such as HIPAA (the Health Insurance Portability and Accountability Act), have been interpreted or contain provisions which allow disclosure of medical information, without authorization, if done pursuant to the NLRA.  Thus, a confidentiality objection in such a situation would not be valid.

        6.   Offer an accommodation.

Rarely will raising a timely objection and explaining the basis for that objection be sufficient in the Board’s eyes for meeting an employer’s obligations under the Act.  The employer also must offer an accommodation if it objects to providing relevant information.  For example, if the objection is “confidentiality,” consider offering to produce the information after sensitive data is redacted, or after the union agrees to a confidentiality agreement limiting the use and dissemination of the information.  If the objection is “unduly burdensome,” consider offering to provide snapshots or a sampling of requested information, or consider offering to hire temporary personnel to gather the information if the union assumes or shares in the cost.  Even information that is objected to on the basis of irrelevancy may warrant an offer of accommodation.  If information requested contains both irrelevant and relevant information, offer to produce the information with irrelevant information redacted.

Unfair labor practice findings against employers due to a failure to appropriately assert objections to union information requests are all too common, although they easily can be avoided.  The potential ramifications for failing to appropriately respond to a union information request can be quite serious:  a finding against the employer by the NLRB of bad faith bargaining, the inability to declare impasse in bargaining, and converting an economic strike into an unfair labor practice strike, to name a few.  Following the above steps will help avoid these problems.

By:  Kamran Miraffati

For over 34 years, witness statements obtained by an employer during an investigation of employee misconduct have been considered confidential and were not required to be produced to the union that represented the employee.  However, in a newly released decision, Piedmont Gardens, 359 NLRB No. 46 (2012), the National Labor Relations Board (“Board”) continued its recent agenda of reversing longstanding precedent and overturned this simple bright-line rule.  Employers are now forced to apply the balancing test articulated by the Supreme Court in Detroit Edison Co. v. NLRB, 440 U.S. 301 (1979) — no longer guaranteeing confidentiality of witness statements.

At issue here was whether an employer violated Sections 8(a)(1) and (5) of the National Labor Relations Act (“NLRA”) by failing to provide a union with the names, job titles, and written statements of three individuals who witnessed an employee sleeping on the job.

The Administrative Law Judge (“ALJ”) held that failure to provide the witness names and job titles violated the NLRA.  In contrast, the ALJ held that disclosure of the witness statements was not required based upon the longstanding precedent of Anheuser-Busch, Inc., 237 NLRB 982 (1978) (obligation to provide relevant information to union did not apply to witness statements).

The Board upheld the ALJ’s finding that the failure to disclose witness names and job titles was unlawful.   It found that an employer’s policy of keeping witness names confidential did not establish a substantial confidentiality interest and that the union’s ability to obtain the requested information elsewhere did not excuse the obligation to provide the information.

With respect to the witness statements, the Board disagreed with the Judge’s reasoning and overruled the bright-line rule of Anheuser-Busch.  Instead, the Board indicated that the Detroit Edison balancing test should be used for all future matters involving confidential witness statements.  Under this test, employers must conduct a fact-specific analysis that balances a union’s need for the information against the employer’s legitimate and substantial confidentiality interests.  The employer may no longer simply refuse to furnish the requested information, but must raise its confidentiality concerns in a timely manner and then seek an accommodation from the union.

The Board reasoned that since Anheuser-Busch predated Detroit Edison, the Anheuser-Busch Board did not have the opportunity to consider whether the Supreme Court’s test for confidential information should apply to witness statements.  Although the Board recognized that there would some potential risk of employee intimidation or employee reluctance to provide statements, there was no basis to assume that all witness statements, no matter the circumstances, warrant exemption from disclosure.  The Board further indicated that the flexible approach of Detroit Edison adequately protects the interests of the employer and witnesses, while preserving the general right of requesting unions to obtain relevant information.

As a surprising token of good will to employers, the Board applied the new rule prospectively — only to refusals to disclose occurring after the date of this decision.  As a result, the Board adopted the ALJ’s findings that two of the witness statements were exempt from disclosure under Anheuser-Busch.  However, the third statement was not considered a “witness statement” because the employee did not provide the statement under an assurance of confidentiality from the employer.  This reasoning is consistent with Hawaii Tribune-Herald, 359 NLRB No. 39 (2012), which was decided just a day earlier and held that an employer must produce witness statements obtained without any assurance of confidentiality.

The new Board standard for witness statements is likely to result in several adverse consequences for employers:

  • Employers can no longer guarantee confidentiality of witness statements upfront.  Nothing is certain until the Board, or perhaps a reviewing court, makes a final determination whether a disputed statement must be disclosed.
  • Employers can no longer protect witnesses from harassment or intimidation and witnesses are likely to be more reluctant to provide statements.
  • Employers are likely to face an increase of litigation.  Unions will almost certainly now ask for witness statements in any instance of a represented employee’s alleged misconduct.  If the employer refuses to provide them based on a claim of confidentiality, the union will have to file an unfair labor practice charge.  During the ensuing investigation and possible litigation, the grievance arbitration will grind to a halt awaiting a final Board decision, even though the misconduct issue involves no statutory matter other than the information request issue.

By Amanda A. Sonneborn

On December 4, 2012, in KLB Indust. Inc. v. NLRB, the D.C. Circuit Court of Appeals upheld a National Labor Relations Board ruling that an employer violated the National Labor Relations Act by failing to provide information to the union concerning the employer’s customers and pricing after telling the union that competition required the employer to seek wage reductions.  The Court found that the union was entitled to seek proof of the alleged competitive pressures that the employer used to justify its request for wage cuts.

Specifically, during bargaining for a new contract, the employer told the union that it needed to secure significant wage cuts from the employees due to pressure from overseas manufacturers.  In response to the employer’s claim, the union requested information regarding the company’s customers, as well as price quotes, market studies, and projected savings from the proposed wage reduction.  The employer refused to provide much of the information requested by the union.  The union then filed an unfair labor practice charge, alleging that the union’s failure to provide the information violated the Act.

An ALJ and the NLRB agreed with the union’s position, finding that the employer violated the Act by failing to provide the information the union requested.  The employer appealed that decision to the D.C. Circuit, which, by a 2-1 vote, upheld the Board’s conclusion.  In reaching this conclusion, the Court majority noted that the information sought by the Union was relevant because the employer relied on an alleged competitive disadvantage when it explained its need for wage cuts.  The Court noted that the accuracy of the employer’s claims could be proven by an examination of the documents the union sought, and therefore, the union was entitled to the information.  A dissenting judge disagreed with the Court’s decision, based on the notion that the employer’s statements about its need for wage reductions were general in nature and not sufficient to justify the request.

This case illustrates the careful consideration employers must give to statements made during bargaining, as even general comments may provide justification for intrusive information requests by unions.

By Joshua M. Henderson.

Here’s a new one: A union sends a written request for irrelevant information to an employer, and the employer blows off the union’s request and undoubtedly sends the request to the “circular file,” or trash can.  The union files an unfair labor practice charge for the employer’s failure to respond to its request for irrelevant information.  Employer wins, right?

Wrong.  In IronTiger Logistics Inc., 359 NLRB No. 13 (October 23, 2012), the Board held in a 2-1 decision that the employer was obligated to respond timely to the union “in some manner” (the emphasis is in the Board’s own opinion) even to an information request that was later found by a judge to be irrelevant.  The union did not challenge the judge’s finding that the information sought was irrelevant.  Indeed, the union’s representative conceded the employer’s argument that he was “`asking for a lot of bullshit.’”  On this point, the judge’s opinion below contains this gem of a passage:  “[The union representative’s] agreement that the information sought was ‘bullshit,” absent an explanation regarding why the information was needed, confirms my finding that the information requested was irrelevant.”        

The union’s request concerned supplementary information involving the unit of drivers represented by the union.  The employer previously provided a 29-page response to a prior request for information.  The employer ultimately responded to the union’s supplemental request for information 4½ months after the request was made, and 2½ months after the union filed its charge.  

The majority held the employer’s actions to be unlawful.  In its opinion, the key was the presumptive relevance of the information sought.  Even though a judge ultimately held that the information sought was irrelevant, the information was presumptively relevant because it concerned the unit of employees represented by the union.  Under these circumstances, according to the majority, the NLRA “requires a timely response even when an employer may have a justification for not actually providing requested information.”  This was consistent with the employer’s obligation to act in good faith.

In dissent, Member Hayes observed that the majority was making new law under the guise of following earlier precedent: “Until today, the Board has never held that there is an independent statutory duty to respond to a request for presumptively relevant information, even if that presumption was rebutted in litigation.”  Although the employer had not established to the judge’s satisfaction that the union’s information request constituted harassment or was made in bad faith, the majority’s decision (according to the dissent) “gives even greater latitude for unions to hector employers with information requests for tactical purposes that obstruct, rather than further, good-faith bargaining relationships.” 

The majority offers no bright-line rule in this decision for what is a sufficiently prompt response to satisfy an employer’s obligation under the Act.  Time will tell.

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.