NLRB: Kellogg Impasse, Lockout Violated NLRA

By Allen Smith May 28, 2015

In the latest in a series of seesaw opinions on food manufacturing company Kellogg’s nine-month lockout of workers, which started in 2013 and lasted into 2014, the National Labor Relations Board (NLRB) reversed an administrative law judge’s decision upholding the lockout.

The company violated the National Labor Relations Act (NLRA) by insisting to impasse on proposals that would constitute midterm modifications of an existing master collective-bargaining agreement, the NLRB decided May 7, 2015. The board said the violations included threatening to lock out employees at its Memphis, Tenn., plant unless the union gave in to unlawful bargaining demands, and then locking out 200 bargaining-unit employees.

Master Agreement

Since 1958, four different local unions of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union have represented different units of employees at Kellogg’s cereal plants in Battle Creek, Mich.; Lancaster, Pa.; Omaha, Neb.; and Memphis, the board noted.

The employment relationship at each site is governed by two collective-bargaining agreements: a master agreement between Kellogg, the international union and the local unions, covering all four plants; and a separate supplemental agreement between Kellogg and the local union at each plant. The most recent master agreement is effective until Oct. 3, 2015. The most recent Memphis supplemental agreement expired on Oct. 20, 2013.

The master agreement establishes uniform wages, benefits and overtime premiums for regular employees at the four plants, and contains prohibitions against negotiating provisions in supplemental agreements that conflict with the master agreement. In master agreement negotiations in 2005, 2009 and 2012, Kellogg attempted to obtain concessions in the wage, benefit and overtime premium provisions for regular employees, but the union rejected these proposals, agreeing only to maintain a reduced wage rate for regular employees for a year. This resulted in new employees progressing to 100 percent of the basic wage rate in four years, rather than the previous three-year progression.

Supplemental Agreement

Kellogg and the Memphis local union began negotiations for a successor supplemental agreement on Sept. 17, 2013, and met 13 times over a period of four weeks. At the first negotiating session, Kellogg announced that the Memphis plant was “at risk” and needed to “fix labor costs.” Kellogg then proposed extensive changes to the supplemental agreement, most of which entailed an expansion of the “casual worker program.”

The most recent supplemental agreement stated that the purpose of the casual worker program was to provide regular employees with relief from extended work schedules. The agreement imposed a 30-percent cap on the number of casual employees, and stated they could not be used when regular employees are laid off, or before overtime is offered to and refused by all regular employees.

In addition, the most recent supplemental agreement provided that the terms of the supplemental and master agreements do not apply to casual employees, and the only fringe benefits they were entitled to receive were uniform and shoe subsidies, break and lunch periods, and shift differentials. They could not accumulate seniority or grieve the discontinuation of their employment. Their maximum wage rate was 80 percent of the applicable job rate.

In the supplemental agreement negotiations, Kellogg proposed that “casual employee” be redefined to mean any employee hired to perform work and that there be no limits on its right to hire casuals. Kellogg suggested that casual employees serve a probationary period, and then would be granted seniority, job bidding rights and the same grievance rights as regular employees. Casual employees would continue to be paid at a lower wage rate—$6 an hour less than the usual job rate, consistent with the master agreement. And they would be excluded from major benefits, including health benefits.

Kellogg’s chief negotiator acknowledged that under its proposal, the company would never have to hire another regular employee, and could lay off regular employees and bring them back as casuals.

The local union rejected this proposal, asserting that these issues were for bargaining only at the master level. Kellogg had unsuccessfully tried to get these proposals included in the master agreement and was now trying to get them into the supplemental agreement, the union maintained.

With the parties at impasse, Kellogg provided its last offer and said it planned to lock out the unit employees if the offer was not accepted by Oct. 22, 2013. The union rejected the last offer and Kellogg locked out the employees.

NLRA Violations

Although Kellogg maintained that it was merely seeking to expand the casual employee program, the company’s proposals would, as its chief negotiators said, be “blowing out of the water” how people used to think of casual employees, the NLRB noted. Casuals would become “the employee of the future,” its chief negotiator said.

Kellogg “thus sought to retain all of the traditional attributes of regular employees that benefit it the most—i.e., having a stable, core workforce of full-time, permanent employees available to meet its regular day-to-day needs—while instituting across-the-board cuts to the wages and benefits that were bargained for newly hired regular employees in the master agreement,” the board stated.

By relabeling new full-time permanent employees as casuals, Kellogg “sought to circumvent the economic terms of the master agreement pertaining to regular employees, in order to take advantage of the $6 hourly wage rate reduction intended solely for ‘nonregular employees,’ ” the NLRB determined. Kellogg therefore violated the NLRA by insisting to the point of impasse on its casual employee proposals.

The proposals would have constituted midterm modifications of the master agreement and did not qualify as a legitimate bargaining position that Kellogg could lawfully pursue through the use of a lockout, the board also held.

It ordered Kellogg to offer employees who were locked out and have not yet been reinstated immediate and full reinstatement either to their former jobs or substantially equivalent positions.

Kellogg reportedly intends to appeal the decision.

This decision is Kellogg Company, 362 NLRB No. 86.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.


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