In an Advice Memorandum dated April 20, 2022 and released on November 30, 2022, the Division of Advice within the National Labor Relations Board’s (“NLRB” or “Board”) Office of the General Counsel urged the Board to overturn existing Board law to significantly lower the standard for when an employer must furnish the union with its general financial information. This latest push to bolster unions during bargaining follows the NLRB’s General Counsel Jennifer Abruzzo’s (“GC”) issuance of Memorandum GC 21-04 regarding Mandatory Submissions to Advice on August 12, 2021, wherein she signaled her intent to change this standard.

The Current Standard for Requiring Employers to Disclose Financial Information

Under longstanding Board law, an employer is only required to provide general financial information requested by a union during contract negotiations if, and only if, the employer has “reasonably convey[ed] that it is unable to pay more than it has offered.”^[1] Examples of an employer’s claimed inability to pay under the current standard include an employer’s statements about insufficient assets, potential bankruptcy or layoffs, or an employer’s suggestions that it is facing a dire financial situation. Generally, an employer’s statement that it is unwilling to pay does not amount to a claimed inability to pay.

The Case At Issue

In the case underlying the Advice Memorandum, the employer explained to the union that it had budgeted a 1.5% increase for its overall economic package and that its offer was based on decreased revenue from reduced consumer demand and rate increase moratoriums caused by the COVID-19 pandemic. The employer also explained that any greater increase would affect its competitive prices and that 1.5% was all it “had to offer.” The union raised during the discussions that the employer provided other bargaining units with higher wage increases, to which the employer responded that it negotiated those other contracts prior to the COVID-19 pandemic. The employer never indicated that it was unable to pay more than the 1.5% increase. The union demanded a number of the employer’s financial records in response to the employer’s position. Though the employer turned over some documents, it withheld others on the grounds that it had not claimed an inability to pay. The union proceeded to file an unfair labor practice charge alleging that the employer violated the National Labor Relations Act (“Act”) by failing to provide the requested information.

In its Memorandum, the Division of Advice found the employer made claims during bargaining that caused certain specific financial information to become relevant. As such, the employer was required to turn over this information to the union. Specifically, since the employer had made statements about how it budgeted for a 1.5% increase and its revenue had declined due to the COVID-19 pandemic, the Division of Advice concluded the employer had to turn over all “budgets, sales records or sales projections” considered by the employer in forming its assertions as this information would allow the union to verify the employer’s statements.

As for the remainder of the union’s information requests that were not relevant to any of the employer’s specific assertions, the Division of Advice found that the employer’s refusal to turn over this information was appropriate under current Board law.

The Proposed Lower Standard for Requiring Employers to Disclose Financial Information

However, and consistent with the GC’s directive, the Division of Advice opined that the current standard relating to the disclosure of general financial information is too lenient for employers and should be replaced with a lower bar for requiring such disclosures. Thus, the Division of Advice has urged that the Board overrule current Board law and create a new standard under which an employer will be found to have claimed an inability to pay if it raises either its profitability or competitive advantage in response to a union’s bargaining demands. The Division of Advice explained that under this proposed standard, an employer’s general finances will become relevant if it discusses its ability to afford a union’s demands or if it discusses how agreeing to a union’s demands would cause injury to its business in the short or long term.

In reconsidering the case underlying the Memorandum using the proposed standard, the Division of Advice found that since the employer raised its competitive advantage and “effectively” communicated that it could not afford the union’s demands, the employer should be required to turn over all of the general financial information requested by the union. The remainder of the union’s information request included compensation data for non-bargaining unit staff, as well as supervisory and management staff, and documents substantiating the employer’s claim that it would not provide more than a 1.5% increase.

This Advice Memorandum signals an active attempt by the Office of the GC to advance unfair labor practice charges filed by unions to a Board hearing to argue for Board law that adopts its proposed standard.

Given this development, unions will likely be even more aggressive in demanding an employer’s financial information during bargaining. Employers should be careful in how they craft their presentation of their economic proposals and their responses to a union’s demands in order to avoid triggering a claim by the union that the employer expressed an inability to pay and is thus required to turn over its financial information.

FOOTNOTES

^[1] Lakeland Bus Lines, 335 NLRB 322, 324 (2001)