Court Reverses NLRB to Find Lockout Lawful

By Scott M. Wich Nov 30, 2016

In recent years, the lockout has become an increasingly used economic weapon for employers during union contract negotiations. The measure gave rise to an adverse National Labor Relations Board (NLRB) decision, where Kellogg implemented a lockout to exert pressure on a union to accept a contract proposal that sought to expand the use of casual employees. The 6th U.S. Circuit Court of Appeals reversed, concluding that Kellogg's lockout was in support of a lawful bargaining demand.

Kellogg and Local 252-G of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union maintained a master agreement, covering multiple facilities, and a local agreement for its Memphis, Tenn., facility. In September 2013, Kellogg and Local 252-G commenced negotiations for a new local agreement in Memphis, which was set to expire in October 2013. The master agreement, in contrast, was effective through October 2015.

Negotiations stalled over a proposal by Kellogg to expand its ability to use casual employees. The Memphis agreement had detailed terms concerning the use of casual employees. However, the master agreement was silent on the issue, save for a single reference to wage rates for casual employees. In October 2013, Kellogg locked out approximately 200 bargaining unit employees in an effort to exert pressure on the union to agree to its contract proposal.

[SHRM members-only HR Q&A: Collective Bargaining Agreement: What employee categories are excluded from the bargaining unit?]

The NLRB found that Kellogg's proposal had the effect of permitting it to "cease hiring all regular employees in the future and replace them with lower paid 'casual' employees." The master agreement contemplated a wage and benefits package for a "core work force of permanent full-time employees." In that Kellogg's demand would impact the wages and benefits available for newly hired employees (who, in the opinion of the NLRB, would be casual rather than "permanent" employees), the NLRB concluded that, by implication, it called for a midterm modification of the master agreement. As a permissive subject of bargaining, the midterm modification of the master agreement could not lawfully justify the lockout.

The appeals court disagreed and noted that the relevant inquiry on midterm modifications, under long-standing labor law, begins with identification of the specific term sought to be modified. It found that the master agreement, by its terms, applied only to "matters specifically included [t]herein." The master agreement did not address a system for the use of casual employees. Further, the court refused to adopt a position, as urged by the NLRB, that a midterm modification may be implied.

The court held that the lockout was lawful because it was in support of Kellogg's bargaining position on the use of casual employees. Since casual employees were addressed in the local Memphis agreement, and not in the master agreement, the issue did not amount to a demand for a midterm modification. The appeals court concluded that it would not rubber-stamp unexplained departures from precedent by the NLRB.

Kellogg Co. v. National Labor Relations Board, 6th Cir., Nos. 15-2031/2183 (Oct. 26, 2016).

Professional Pointer: Labor contract terms that initially appear innocuous may carry considerable legal significance under changed circumstances. Slightly different terms in the Kellogg contracts may have foreclosed the company's lockout ability. Care should be taken during negotiations to consider the potential impact, both currently and in the future, of contract language proposals.

Scott M. Wich is an attorney with Clifton Budd & DeMaria, LLP in New York City. 

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