NLRB Decisions Curb Employers’ Ability to Make Unilateral Changes

Leah Shepherd By Leah Shepherd September 5, 2023

​Two new rulings from the National Labor Relations Board (NLRB) prohibit employers from modifying employment terms, such as pay, schedules and benefits, during a gap between union contracts.

The rulings handed down on Aug. 30 overruled Raytheon, a 2017 decision that gave employers greater leeway to make unilateral changes affecting unionized workers during a contractual hiatus or during negotiations for a first contract. The ruling confirmed that employers cannot rely on a past practice of making unilateral changes before employees were represented by a union to justify unilateral changes after the workers have selected a bargaining representative. Allowing employers to do so would be inconsistent with Supreme Court precedent and undermine the pro-bargaining policies of the National Labor Relations Act (NLRA), the board said.

If union negotiations end or reach a stalemate, then the employer can legally alter pay rates and other terms of employment.

In the first ruling, Wendt, the board found that Wendt Corp., a Buffalo, N.Y.-based manufacturer, illegally laid off 10 workers during union negotiations in 2018. The company declined to comment on the case.

In the second case, Tecnocap, the NLRB overruled a different aspect of Raytheon that wasn't addressed in Wendt. The board held that an employer's past practice of unilateral changes that was developed under a management-rights clause cannot authorize unilateral changes made after a collective bargaining agreement expires and while bargaining for a new agreement is underway.

In general, management-rights clauses establish the employer's right to take certain actions to run its operations without having to bargain. A management-rights clause does not extend beyond the expiration of the collective bargaining agreement, the ruling stated.

When the parties are engaged in negotiations, an employer has an obligation to refrain from unilateral changes, unless an impasse has been reached, the NLRB noted.

The board found that Tecnocap, a Glen Dale, W.Va.-based manufacturer, violated the NLRA in 2020 by increasing employee cost-sharing under the health plan and implementing mandatory 12-hour and 11-hour work shifts while collective bargaining was ongoing.

The NLRB said the Raytheon precedent harmed the collective bargaining process in two ways: It forced unions to bargain to regain terms of employment lost to changes after the contract expired, and it discouraged unions from initially agreeing to management-rights clauses.

"An employer's change might, for example, give employees a benefit that they don't value greatly and would have been willing to trade for something more important. Once they have the benefit, however, it is more difficult to give it up for the benefit they prefer. The unilateral change thus interferes with the bargaining process," said Ann Hodges, a labor law professor at the University of Richmond Law School in Richmond, Va.

Under Raytheon, the tolerance of unilateral changes during bargaining undermines collective bargaining as a means to diffuse workplace discontent and damages the union's stature in the eyes of the employees they represent and shows them the union is helpless to prevent an employer from acting on its own, the NLRB said.

NLRB Chairman Lauren McFerran said the Tecnocap decision "returns to a more faithful application of Supreme Court precedent" and "better promotes the collective bargaining process that lies at the core of the NLRA." Tecnocap did not respond to a request for comment.

The new standard "means that the bargaining obligation has expanded a bit, and the need to bargain has gotten more robust," said Benjamin Sachs, a labor law professor at Harvard Law School in Cambridge, Mass.

Combined, the two decisions indicate that an employer must bargain over any exercise of discretion impacting the terms and conditions of employment, said Grant Pecor, an attorney with Barnes & Thornburg in Grand Rapids, Mich.

"These decisions from the board place high value on the collective bargaining process and protect the employees' right to bargain for the benefits that they prefer," Hodges said.

"The adverse impact these decisions will have on employer operations is significant. In times of economic distress where an employer's need to make layoffs is critical, as was the case in Wendt, an employer will be unable to promptly act to stem economic losses and will, instead, have to bargain with the union about its layoff decision," said Eve Klein, an attorney with Duane Morris in New York City. "This rule will serve to prevent employers from making changes sorely needed for business operations in most cases or, at a minimum, will substantially delay them."

Timing Is Important

It's typical for collective bargaining to address wages, benefits, schedules, paid time off, premium and holiday pay, and seniority rules, so employers will need to be careful about when and how they modify those areas.

Employers[KK2]  should "get important business done before the collective bargaining agreement expires, as long as the rules that apply to that business are acceptable. The employer is much better off operating under a good management-rights clause than in a hiatus in implementing its plans," said Arthur Telegen, an attorney with Seyfarth in Boston.

"Absent a clear and unmistakable waiver, the safest practice is to provide the union representing your employees with notice and the opportunity to bargain over any potential changes to your employees' terms and conditions of employment," Pecor said. "It does not matter if it is a positive change for employees or not. Any act of discretion involving a unilateral change to your represented employees' terms and conditions of employment will be an unfair labor practice absent a sufficient waiver."

Given recent NLRB decisions, employers will be better served by a collaborative approach with unions, rather than an oppositional one, Sachs said. "A more collaborative approach will be more productive and less costly" for employers, he said.



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