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An Employer’s Bargaining Table Complaints as to Poor Business Conditions Is Not a Claim of Poverty Entitling a Union to Business Sensitive Information

While bargaining, unions often demand that employers produce information relevant to the bargaining process so that the union may fulfill its duties as bargaining representative. Under the law and absent some compelling reason for not doing so, NLRA Section 8(a)(5) compels employers to produce such relevant bargaining information. This informational duty is particularly unctuous for employers who have fallen on hard economic times for where an employer claims a financial inability to meet a union’s economic demands, it may be required to open its books to the union and to produce otherwise off-limits business sensitive information so that the union may assess the employer’s plea of poverty. See, e.g., NLRB v. Truitt Mfg. Co., 351 U.S. 149 (1956); Nielsen Lithographing Co., 305 NLRB 697 (1992). For a whole host of real world business reasons, employers finding themselves in such difficult circumstances are resistant to the public airing of such sensitive information.

On September 13, 2019, the NLRB issued its decision in Arlington Metals Corp., 368 NLRB No. 74, and while this decision has received little public fanfare, the Board’s ruling is nonetheless noteworthy because of the limits it appears to set on an ailing employer’s duty to open its business records to a union. In Arlington Metals, a unionized Illinois steel processor rejected a union’s bargaining demands, claiming that its wage proposals and its refusal to agree to the union’s wage proposal “fit [its] business environment,” citing the following as proof of that “environment”:

  1. It had been facing poor economic conditions that, if anything, were worsening and that it was doing the best it could to keep everyone employed;

  2. Its production volume was down, while it was faced with increased costs, increased taxes and pressure to lower its prices;

  3. Its competitors were attempting to take its business away and its business was leaving the state; and

  4. Although it had hoped that conditions would improve following the recession, its business was softening, pointing to its reduced tonnage, and stating that the business wasn’t what it used to be, adding that the iceberg it was on “[was] melting.”

Despite these statements, the employer’s bargaining representative also explicitly stated that it was not and never had claimed that it was unable to pay what the Union was demanding.

Based on the employer’s bargaining table statements as to the terrible and declining business conditions it was facing, the union claimed that the employer was pleading a financial inability to meet the union’s bargaining demands and demanded that the employer produce a broad range of private and highly sensitive financial records to buttress its bargaining position. The employer declined to produce the sensitive records because it had never asserted a financial inability to meet the union’s wage demands and, instead, presented a chart setting forth the declining steel tonnage it processed and its dwindling revenues over the material time period. Rejecting the adequacy of the employer’s informational response, the union filed an unfair labor practice charge, complaining about the company’s refusal to produce relevant bargaining information. After a trial, an administrative law judge issued a decision (ALJD) in which he agreed with the union and found that the employer’s statements at the bargaining table amounted to a claim that it was unable to pay the union’s demands, that the union was seeking relevant bargaining information and was, therefore, entitled to all of the financial information it had requested and further that Arlington’s failure to produce that information was a violation of Section 8(a)(5) of the Act.

On administrative review, the NLRB acknowledged that when an employer bases its bargaining position on an asserted inability to pay, a union is entitled to request and review the employer’s financial records. But the Board also observed that an employer’s claim that concessions are necessary in order for the employer to avoid competitive disadvantage was not the same as a plea of poverty and that an employer was not obliged to open its books to the union in that instance, citing the Board’s decisions in North Star Steel Co., 347 NLRB 1364 (2006) and AMF Trucking & Warehousing, 342 NLRB 1125 (2004) (finding that the employer did not assert an inability to pay where it pointed to significant economic pressure but never asserted that the survival of the company was at stake). In reversing the ALJD and dismissing the case, the Board found that the employer’s statements during bargaining (regarding the poor state of the industry, diminishing future orders and declining prices) amounted to an assertion of competitive disadvantage rather than a present inability to pay. In reaching this conclusion, the Board observed that in communicating its position, the employer focused primarily on external conditions and competitive pressures and never stated it did not have sufficient assets to meet the union’s bargaining demands. In the current Board’s view, such statements are not a plea of poverty entitling a union to the production of the employer’s books.

Likewise, putting aside the issue of whether the employer had pled poverty, the Board also found the information requested by the union to be irrelevant to the parties’ bargaining. In the current Board’s view, information not pertaining to bargaining unit employees is relevant and need be produced only if a union is seeking specific information to evaluate the accuracy of the employer’s specific claims and to respond appropriately with counterproposals. In Arlington Metals, the union’s informational request did not meet this standard because the information sought did not relate to (and could not be read to) validate or invalidate the employer’s bargaining claims, i.e. that it was facing a terrible and declining steel market. For this reason, the union’s request called for information irrelevant to the parties’ bargaining, and the employer was therefore under no obligation to produce it.

TAKEAWAYS:

  1. An employer’s delivery of bad economic news at the bargaining table is not synonymous with a plea of poverty. Indeed, an employer may rely on external market conditions to justify a tough bargaining position without having to open its books to a union – provided, of course, the employer does not also claim a financial inability to meet a union’s bargaining demands.

  2. An employer who comes to bargaining with such bad economic news needs to emphasize that it is merely reporting and relying upon external conditions that are beyond its control and disclaim that it is making a plea of poverty.

  3. Union informational requests that do not pertain to bargaining unit employees are presumptively irrelevant; a union seeking such information must be specific in what they request and be able to demonstrate why and how the information it is seeking is relevant to bargaining issues. Absent such proof, an employer need not produce bargaining irrelevant information.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Keahn Morris, Sheppard Mullin Law Firm, San Francisco, Labor and Employment Law Attorney
Associate

Keahn N. Morris is an associate in the Labor and Employment Practice Group in the San Francisco office.Keahn’s practice focuses on all areas of labor and employment law, with an emphasis on traditional labor law, high-stakes employment-related litigation, and proactive counseling of management-side clients. Recognized by Super Lawyers as a "Rising Star", Keahn was identified as a top rated labor and employment attorney in San Francisco in 2014, 2015, 2016, and 2017. He has significant experience in all aspects of labor-management relations law, including union corporate...

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John Bolesta, Lawyer, Employment, Sheppard Mullin Law Firm
Special Counsel

John S. Bolesta is a Special Counsel in the Labor and Employment Practice Group in the firm's Washington, D.C. office

Areas of Practice

Mr. Bolesta represents management in a wide variety of labor and employment litigation matters. He represents clients in a broad range of industries during union organizing attempts and litigation before the National Labor Relations Board, contract negotiation and labor arbitrations. Additionally, he advises clients on best practices in employee relations and the development of comprehensive labor strategies to preserve the ability to maintain direct relationships with employees.

Mr. Bolesta also regularly counsels clients on all aspects of federal, state, and local equal employment opportunity and fair employment practices laws and regulations, and regularly advises clients on confidentiality, trade secrets, no solicitation and non-compete matters. Moreover, Mr. Bolesta represents clients in whistleblower matters under a broad range of statutes, including the Occupational Safety and Health Act, the Surface Transportation Assistance Act, the Toxic Substances Control Act and the Clean Air Act. His experience ranges from conducting investigations and developing position statements to litigating whistleblower cases before Administrative Law Judges and in court.

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James Hays, Legal Specialist, management of labor and employment law
Partner

 Mr. Hays is a partner in the Labor & Employment Practice Group in the firm's New York office and co-chairs the firm's Traditional Labor Law Team.

Areas of Practice

Mr. Hays' practice focuses on management labor and employment law. He represents clients in collective bargaining negotiations, labor arbitrations, and all stages of the labor election process, including election campaigns and hearings before the National Labor Relations Board. He also represents clients in employment litigation in federal and state courts, as well as...

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