NLRB Affirms Important Distinction Between Claiming Inability and Unwillingness to Pay in Labor Negotiations

In a recent decision, the National Labor Relations Board (the NLRB or the Board) affirmed a longstanding precedent and held that a union is not entitled to audit an employer’s financial records if the employer claims an unwillingness to pay, versus an inability to pay, in collective bargaining negotiations. Coupled Products LLC, 359 NLRB No. 152 (July 10, 2013).

Facts

Coupled Products manufactures car and truck parts out of two plants, one in the United States and the other in Mexico. The Union represents skilled and non-skilled employees at the US plant, located in Columbia City, Indiana. In October 2010, eight months before the expiration of their collective-bargaining agreement, Coupled Products notified the Union that it would move the work performed at the Columbia City plant to its plant in Mexico to save $2 million in labor costs and offered to engage in effects bargaining. It explained in a notice to employees that the Columbia City plant was “too expensive to maintain.”

In late 2010 and early 2011, Coupled Products and the Union engaged in discussions concerning the planned closure. During those discussions, the employer proposed that it would not move the plant if the Union agreed to steep reductions in wages and benefits. The Union proposed a wage and benefit freeze. The Union demanded to audit the employer’s financial records, but the employer refused, claiming it was unwilling, but not unable, to pay the current wages and benefits. The employer eventually declared an impasse, and implemented its final offer. The Union went out on strike and the employer hired replacement workers. The Union filed unfair labor practice charges.

The administrative law judge (ALJ or Judge) found no violation because the employer did not claim an “inability to pay the Union’s demands,” but rather claimed a competitive disadvantage from paying more for labor and benefits than other manufacturers in the area. The Judge accordingly found that the parties’ impasse in negotiations was valid and thus that the employer lawfully implemented the terms of its final proposal. As a result, the ALJ concluded, the strike that began after the employer’s refusal to provide information was an economic strike, not an unfair labor practice strike.

The Board’s Decision

In NLRB v. Truitt Mfg. Co., 351 U.S. 149 (1956), the Supreme Court endorsed the Board precedent holding that an employer claiming an inability to pay a union’s bargaining demand 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 a 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.”

The Acting General Counsel of the NLRB and the Union excepted to what they characterized as the ALJ’s focus on “magic words,” claiming that he did not adequately consider the context of the events leading up to the negotiations, including the employer’s midterm threat to move the bargaining unit work to Mexico to save labor costs. The Board agreed that no “magic words” are required to establish a claim of inability to pay: the employer’s statements and actions need only be specific enough to convey that claim. However, the Board did not agree that the ALJ violated that principle in this case. “Although the judge highlighted the parties’ jousting over precisely what words [Couples Products’] negotiator used, he reasonably concluded that [Coupled Products’] statements and conduct both before and during the negotiations were consistent with its position that it was unwilling (not unable) to meet the Union’s demands.”

The Board concluded that Coupled Products did not violate the NLRA by denying the Union’s information request for unfettered access to the company’s financial records. The Board explained that the “inability to pay doctrine” does not mean that a union faced with something less than or different than that specific doctrine cannot have any financial information. Thus, the Board explained, where a union is not entitled to broad access to an employer’s financial records, the union still may be entitled to specific and relevant information regarding the employer’s assertions about its business. However, the nature of the request may not be “all or nothing” as it was in this case. In other words, in an unwillingness to pay case, the Union may not require that the only viable remedy is a full exploration of the company’s books. The Board held that this is what the Union had done to Coupled Products in this case and thus affirmed the ALJ’s decision in the company’s favor.

Conclusion

This case affirms a longstanding Board precedent that an employer does not have to open its financial books during bargaining when it does not claim it is unable to pay. However, it also affirms that even if it is not claiming inability to pay, an employer may be required to disclose some financial information upon request from the Union if it is relevant and necessary to the bargaining process and not privileged from disclosure. Obviously, it is very important for employers to conduct labor negotiations carefully with skilled negotiators to minimize problems like this from occurring.

If you have any questions about this case, or about collective bargaining in general, please contact the authors or any other members of the Arent Fox Labor & Employment Group.