Employment Law Daily Its financial circumstances obligated employer to comply with union request for audit, 2-1 NLRB rules
Friday, August 5, 2016

Its financial circumstances obligated employer to comply with union request for audit, 2-1 NLRB rules

By Ronald Miller, J.D. An employer acted unlawfully when it refused a request by unions for a financial audit and this refusal prevented the parties from reaching a valid impasse, ruled a divided three-member panel of the NLRB in a 2-1 decision. The Board found that the employer’s communications about its financial circumstances, viewed in their entirety and in context, conveyed an inability to pay, rather than unwillingness. Additionally, it determined that, even assuming the parties reached a valid impasse, the employer acted unlawfully by unilaterally implementing terms and conditions of employment that did not reasonably fall within its final offer to the unions. Accordingly, the Board reversed an administrative law judge’s dismissal of those allegations. Member Miscimarra filed a separate opinion concurring in part and dissenting in part (Wayron, LLC, August 2, 2016). The employer owns and operates a metal fabrication shop. It employed metalworkers, mechanics, and painters represented by various craft unions. The parties’ negotiations for a new collective bargaining agreement were focused almost exclusively on labor costs. Throughout negotiations, the employer expressed its need to reduce the average per-hour costs of wages and benefits from $30.51 to $24 or less, so that it could be competitive in bidding for work. Initially, the unions demanded an increase of $1.25 per hour, but ultimately they sought only the continuation of the expiring agreement’s monetary terms. Financial hardship. It was undisputed that, before and during the negotiations, the employer was obtaining few of the jobs that it bid for and had laid off most of its unit employees. During bargaining sessions, the parties discussed the terms of their proposals to some extent but mainly spoke about the employer’s financial hardship and the limited pool of money available for compensation. Although the employer did not state that it was unable to fulfill current contractual obligations to actively working employees or was unable to pay those employees more money, it did assert that it was not going to be able to provide jobs if it was not competitive. It also informed the unions that it "needed the cost reductions ‘in a short term fashion’ due to the need to acquire a new line of credit." The employer also asserted that it was operating at a financial loss. On November 5, 2010, one of the unions requested access by a union-selected auditor of the employer’s financial records to substantiate the employer’s claim of inability to pay. The employer declined, asserting that it was not claiming an inability to pay wages and benefits under any contract. Rather, it reiterated, it was "unable to remain competitive in the current global economic climate, and is seeking methods of reducing costs to continue to secure work." Moreover, the employer rejected the suggestion that the existing CBA be extended for a year. The unions were unwilling to take reductions. Unilateral changes. Concluding that there was little chance of successful negotiations, the employer determined that it could not continue at current cost. Thereafter, it stated that it would implement new terms and conditions of employment on Monday, February 7, 2011. That afternoon, when employees went to clock out, they were told not to come in on Monday but to take employment applications and bring them in on Tuesday. Without input from the unions, the employer formulated a new wage and benefits package that was intended to conform to the final proposal’s average compensation rate of $24 per hour. Further, the employer discharged all of its employees, including those on layoff status. Actively working employees reapplied for employment and were returned to work under new terms and conditions of employment. Based on the discharges, the employer was found to have violated Sections 8(a)(1), (3), and (5). The employer did not file objections to those findings. After issuance of a Section 10(j) injunction, the employer resumed negotiations and reinstated to laid-off status employees who had not been hired after the February 7 terminations. Inability to pay. Under the rationale of Nielsen Lithographing Co., bargaining claims of an inability to pay differ from bargaining claims of competitive disadvantage. Here, the employer claimed competitive disadvantage, so that it was not obligated to submit to the unions’ requested financial audit. However, the Board found otherwise, disagreeing with the ALJ’s conclusions regarding the reasonable implications of the employer’s statements. Contrary to the law judge, the Board found that the unions would reasonably have understood that the employer was asserting its inability to continue compensating employees at the expiring contract’s rates, let alone at the increased wages and benefits sought by the unions. As a consequence, the Board concluded that the unions were within their rights to demand an audit of the employer’s financial records in light of those statements. The Board looked beyond the employer’s carefully phrased assertions that its position on employee compensation related to competitiveness and that it would never say that it could not afford the unions’ bargaining proposals. The Board pointed out that the unions made their request for an audit after the employer had set forth the exigency of its financial circumstances. The employer conveyed to the unions that it needed cost reductions ‘in a short term fashion’ due to the need to acquire a new line of credit. Consequently, the Board found that the facts and circumstances established that the employer, despite its surface characterizations to the contrary, was asserting that it could not pay, during the life of the contract being negotiated, the existing (or higher) levels of compensation the unions sought. Impasse. The Board also disagreed with the ALJ’s conclusion that the parties were at impasse, so that the employer acted lawfully in unilaterally implementing new terms and conditions of employment. Impasse requires more than the existence of a deadlock, as the parties experienced here. The employer must not have committed unfair labor practices that substantially affected the course of bargaining. Here, the employer was obligated to allow the unions to audit its books and it unlawfully failed to do so. The employer’s financial hardship and the extreme concessions it needed from the unions to alleviate that hardship were central to the parties’ negotiations. Because an audit might have confirmed the employer’s assertions of dire circumstances, and the need to agree to the substantial reductions sought, its refusal to provide information frustrated efforts to reach an agreement. Thus, the Board found that impasse was not reached and the employer unlawfully implemented changes to terms and conditions of employment. Partial concurrence and partial dissent. Member Miscimarra disagreed with the majority’s findings that the employer unlawfully refused to bargain when it denied the unions’ request for access to its financial records, and that this violation precluded the parties from reaching a valid bargaining impasse. Rather, he argued that the employer claimed competitive disadvantage, not inability to pay. Therefore, he would adopt the ALJ’s finding that the employer had no duty to grant the unions’ request for access to its financial records. Alternatively, he argued that even if the employer did claim an inability to pay, it still had no obligation to disclose its financial information to the unions since they made it clear that they would not agree to concessions regardless of the employer’s financial condition. However, Miscimarra agreed that the employer acted unlawfully when, post-impasse, it implemented specific wage and benefit changes without first giving the unions notice and the opportunity for bargaining regarding those changes. On the other hand, he disagreed with the remedies ordered for that violation, finding that they exceeded the scope of the violation committed.

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