Asserting an unwillingness to pay a union’s demands during negotiations is different that asserting a financial inability to pay.
During negotiations for an initial collective bargaining agreement, an employer effectively retracted its claim of inability to pay a union’s wage and benefit proposals, thereby limiting its obligation to produce financial documents to the union, ruled the Ninth Circuit. Moreover, the appeals court agreed with the NLRB that the employer’s conduct both at and away from the bargaining table did not establish that it acted in bad faith in violation of the NLRA. Rather, substantial evidence supported the Board’s findings that the union did not sufficiently test the employer’s willingness to bargain prior to filing its bad-faith bargaining charge (International Alliance of Theatrical Stage Employees, Local 15 v. NLRB, April 29, 2020, Hunsaker, D.).
The employer provides event technology services to hotels and conference centers nationwide. In December 2015, the union was certified as the exclusive bargaining representative for the company’s riggers and technicians. The employer challenged the union’s certification and refused to bargain until the Board denied its request for review of the certification order. A few days after its request for review failed, the employer acknowledged the union as bargaining representative and promptly responded to the union’s request to begin negotiations. From mid-2016 through early 2017, the parties engaged in bargaining but failed to reach an agreement.
Contract proposals. In its first contract proposal, the union sought wages of $33 to $45 per hour—a 73- to 120-percent increase, depending on job classification. The union also sought provisions on overtime pay, pension and benefit contributions, limits on the employer’s ability to subcontract work, progressive discipline, just cause termination, and arbitration. The employer made a counter-proposal of wages from $15 to $30 per hour depending on job classification. It also proposed that current employees “maintain their current rate of pay and not be subject to a reduction in pay as a result of this Agreement,” to pay overtime as required by law, provide the same benefits as those provided to unrepresented employees, base employee discipline on a “reasonable belief” standard, and provide that arbitration proceedings would be final.
During the second bargaining session, the employer’s attorney stated that agreeing to the union’s proposed wage increase would be “suicide” and put it “underwater.” The union reduced its requested wage rates by $2 an hour and adjusted its overtime and discipline proposals. Still no agreement was reached on these issues, but tentative agreements were reached on other terms.
Request for financial information. After the second session, the union requested financial information supporting the employer’s dire predictions regarding the impact of the union’s wage proposal on the company. The employer’s attorney rebuffed the requests, stating “[t]his is not an inability to pay for lack of revenue. It’s a refusal to pay an hourly rate that would be detrimental to the business.” He further explained that “no employer in this business would pay such a wage to its hourly workforce that was so grossly outside of its business model and if it did so, it would be suicide for the company.” The union did not respond to the employer’s clarification that it was unwilling, rather than unable, to pay its requested wages. Thereafter, the parties exchanged additional counterproposals, but neither party changed its position on wages, benefits, or discipline. A third bargaining session failed to produce agreement on any of the key points of disagreement.
NLRB charges. Less than a month later, the union filed a charge with the NLRB asserting that the employer unlawfully refused to provide it with requested information. In response, the employer sent a letter to the union and the entire bargaining unit defending its wage proposals, and explaining that the union’s wage proposal was based on contracts from the California market, where union employees were hired as needed with no expectation of regular hours. The parties cancelled future bargaining sessions but continued to exchange contract proposals. In January 2017, the union filed another Board charge alleging that the employer was bargaining in bad faith.
An administrative law judge found that the employer violated Section 8(a)(5) and (1) of the NLRA by not giving the union the financial information it requested and by not bargaining in good faith. The Board agreed in part with the ALJ regarding certain document requests. However, with respect to document requests related to the inability-to-pay claim, it concluded that the employer had retracted and so did not have to provide that information. It further held that the employer had not acted in bad faith.
Appeal. At issue on appeal was whether the employer effectively retracted its claim of inability to pay the union’s wage and benefit proposals, thereby limiting its obligation to produce financial documents to the union. The appeals court also took on the union’s assertion that the employer’s conduct at and away from the bargaining table established that it failed to bargain in good faith.
Retraction. When an employer justifies its bargaining position by claiming an inability to pay the union’s demands, the union may “request financial documents sufficient to substantiate the employer’s position,” observed the appeals court. However, an employer asserting only an unwillingness to pay does not have a duty to produce information about its financial viability, and an employer may retract an inability-to-pay claim and avoid having to produce financial information. A retraction is effective if the employer makes it “unmistakably clear to a union that it has abandoned its plea of poverty.”
The employer conceded that statements by its attorney at the second bargaining session constituted an inability-to-pay claim. However, after the union requested financial information, the attorney clarified that the employer’s position was not an inability to pay the union’s requested wage rates due to lack of revenue; it expressly communicated that its refusal to pay stemmed instead from a judgment regarding appropriate business strategy. The Ninth Circuit agreed that this was a clear disavowal of a claim of poverty, rejecting the union’s assertion that the retraction was not effective because the employer had maintained the same bargaining posture after its purported retraction.
Substantial evidence supported the Board’s finding that the substance of the employer’s bargaining position was an unwillingness to pay the union’s demands, not an inability to pay. Although the employer expressly declined to deviate from its business model due to financial considerations, not every financially motivated decision by an employer establishes that the employer lacks an ability to pay, explained the appeals court. As a result, the court affirmed the Board’s decision that the employer’s failure to produce financial documents did not violate the Act.
Bad-faith bargaining. Pointing to the employer’s conduct during bargaining, the union further asserted that it failed to bargain in good faith. With regard to its wage proposal, the employer specified a starting pay range for new employees with an opportunity for merit increases and guaranteed existing employees that they would not have their wages reduced under the proposed wage structure. Moreover, it provided its performance-appraisal scale—it did not hide how it would set employee compensation. The fact that the employer never changed its wage proposal did not itself establish that it acted in bad faith. Thus, substantial evidence supported the Board’s conclusion that the employer’s wage and benefit proposals did not indicate bad faith.
Nor did the employer’s discipline proposals or its conduct away from the bargaining table evidence bad faith, including its withholding certain documents, or the company president telling Philadelphia employees, the day before their union election, that negotiations in Seattle were at a stalemate and that the company would not enter into an agreement that would negatively impact the business.
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