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An employer committed an unfair labor practice by refusing to provide the union with financial information after asserting an inability to pay the union’s proposed increases in wages and 401(k) contributions, according to the 9th U.S. Circuit Court of Appeals.
In April 2002, American Polystyrene Corp. and the United Food and Commercial Workers International began negotiating a successor collective bargaining agreement. During the first bargaining session, the union proposed increases in wages and company contributions to employee 401(k) plans. The company countered with a proposal of a small wage increase, discontinuation of the 401(k) contributions for one year and the elimination of company-provided meals.
After reviewing the company’s proposal, a union representative asked the company’s general manager whether “things were really that bad” for the company. The general manager responded that “things are tough,” and the union representative asked, “Are you saying that you can’t afford the union’s proposals?” The general manager replied, “No, I can’t. I’d go broke.” The company later tried to deny the statement.
In NLRB v. TruittMfg. Co., 351 U.S. 149 (1956), the Supreme Court established the rule that when an employer bases its bargaining position on an asserted inability to pay, information about the employer's finances becomes relevant to the negotiations and the union may be entitled to examine the company's books to verify the claim. The Supreme Court emphasized, however, that the analysis of whether an employer’s actual position is one of inability to pay turns on the circumstances of the particular case.
When the union demanded access to review the company’s financial records, the company rejected the union’s demand, stating that while “times are tough,” at no time did the company state that it could not afford the union’s proposals. Rather, the company needed “to take a more cautious approach” than what the union had proposed. On June 18, 2002, the union filed an unfair labor practice charge with the board, alleging that the company violated the National Labor Relations Act by refusing to produce the requested financial information.
Less than two months later, the company informed the union that “due to unimproved sales and rising inventories,” it was planning to stop production and lay off six of its eight bargaining unit employees. The administrative law judge (ALJ) found that the company had committed an unfair labor practice. Specifically, the ALJ concluded that the general manager did make the “I’d go broke” statement, and that the company was obligated to provide the requested financial information because its actions following the statement did not constitute a retraction.
On appeal, the board reversed the ALJ’s decision. A 2-1 majority held that the general manager’s “I’d go broke” statement was not a definite claim of inability to pay, and that by clarifying its bargaining position within a day of the alleged declaration of an inability to pay, the company effectively relieved itself of any duty to provide the requested financial information.
The union appealed the NLRB ruling to the 9th Circuit. The appeals court agreed with the ALJ that the company had asserted a position of financial hardship, and failed to bargain in good faith when it refused to provide the financial information. According to the 9th Circuit, the company’s efforts to deny the statement that it would “go broke” were nothing more than “semantical games” that failed to absolve the company of its duty to provide the union with the financial information.
International Chemical Workers Union Council of the United Food & Commercial Workers International and Its Local IC v. NLRB, 9th Cir., No. 04-72270 (June 30, 2006).
Professional Pointer: Unless an employer is in dire economic circumstances and needs to obtain the cooperation and understanding of the union, employers should avoid statements that even suggest an inability to pay the union’s proposals. If, however, a comment indicating an inability to pay is mistakenly made, an employer should correct its position in writing to the union as soon as possible and its further actions and statements during negotiations should not express an inability to pay. An employer can take the position that it will not pay, but an employer cannot take the position that it cannot pay if it wants to avoid having to release its financial information.
Adam S. Belzberg is a attorney with the firm of Shawe Rosenthal LLP in Baltimore, a Worklaw® Network firm.
Editor’s Note: This article should not be construed as legal advice.
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