NLRB Makes Change Easier for Unionized Employers

Ruling will result in less bargaining with unions

By Allen Smith, J.D. Jan 2, 2018
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​Unionized employers will have an easier time making changes to group health benefits plans based on past practices because of a Dec. 15, 2017, National Labor Relations Board (NLRB) decision.

Actions consistent with past practices—such as making changes to group health benefits each year—do not really deviate from the status quo and require no bargaining with unions, the board decided.

The Raytheon Network Centric Systems decision will be most important for benefits professionals, as health care coverage changes each year are common. Employers often have collective bargaining agreements (CBAs) that grant them flexibility for group insurance changes, said Mark Kisicki, an attorney with Ogletree Deakins in Phoenix.

However, the decision may be more far-reaching than that, he noted. For example, if a unionized employer has a past practice of discharging employees for violating an attendance policy for the third time, the employer may not have to bargain with the union if such a violation occurs, he said.

The Republican-dominated board's Raytheon decision overturned the Democrat-dominated board's ruling in 2016 in E.I. du Pont de Nemours ("DuPont"), which had held that even actions consistent with an established past practice constitute changes that require bargaining with the union.

Yearly Group Health Plan Changes

In Raytheon, the board concluded that the employer's alterations to employee health care benefits in 2013 were a continuation of its past practice of making similar unilateral changes at the same time every year from 2001 to 2012. As a result, the company did not violate the National Labor Relations Act (NLRA) by failing to notify or bargain with its union before making the 2013 changes, the board held, rejecting DuPont.

[SHRM members-only HR Q&A: What is the function of the National Labor Relations Act (NLRA)?]

Raytheon "revives the previous board law that was in effect for 50 years prior to 2016," said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis. He predicted that the opinion "will allow companies—and more specifically their HR functions—to continue to operate their business and make changes, in some circumstances, without the administrative burden of bargaining with a union each and every time changes are made." That will be true as long as the changes are consistent with unilateral changes the company has historically made, he added.

Employers "can't change willy-nilly anything they want to" after Raytheon, cautioned Phillip Wilson, president and general counsel with the Labor Relations Institute in Broken Arrow, Okla. There still is the obligation to bargain over wages, hours and terms of employment—and even health insurance—if a CBA specifies that such terms are to be subject to bargaining, he noted.

In Raytheon, the union represented 35 production and maintenance employees at its Fort Wayne, Ind., facility. The Raytheon group health plan documents provided that the company reserved the right to amend the plan, including the right to reduce or eliminate benefits. The business changed premiums for health care from 2001 to 2012, as well as making other changes to available benefits, medical options, deductibles and co-payments. The union did not object to these changes.

After the CBA expired, the union informed Raytheon that it wanted to change contract provisions granting the company the right to make annual changes to group health insurance. The company rejected the union's proposals to modify the contract and provided a counterproposal, which the union rebuffed. The parties did not reach agreement on a new contract.

The union asked the company to exclude the unit employees from the upcoming open enrollment period, but Raytheon refused. On Jan. 1, 2013, the company implemented several changes to its health plan, including the expansion of its wellness rewards and conversion of a medical insurance plan into a health savings account.

The union sued, and an NLRB judge, relying on DuPont, found that the company's modifications without notice or negotiation constituted an unfair labor practice.

Change Without Altering the Status Quo

The board reversed, overturning DuPont. It disagreed with the DuPont board's reasoning that if an employer's actions involve any discretion, this always means a change occurred requiring notice and bargaining, even when the employer "obviously was continuing its past practice and was not altering the status quo."

A change may not alter the status quo, the board said, quoting from Board Member Philip Miscimarra's dissent in DuPont: "Take, for example, an employer that has always painted factory walls blue every summer and green every winter. When doing this painting the employer exercised discretion: it varied the precise shade of blue and green and it also varied the precise time when the painting would be done. Summer approaches. If the employer again paints the factory walls blue, will that constitute a 'change'? In my view, because this is what the employer has always done, it is not a 'change' for the employer to do the same thing again."

'Discretionary Cloud'

Dissenting Board Members Mark Gaston Pearce and Lauren McFerran said the board's decision "clearly cannot be right." The board fundamentally misinterprets Supreme Court authority by holding that an employer may continue to make sweeping discretionary changes in employment terms even after a contractual provision authorizing such changes has expired and while the parties are seeking to reach a new CBA, they stated.

In NLRB v. Katz, the Supreme Court "says the exact opposite: that an employer's unilateral change violates the NLRA, even where the change is consistent with a past practice of changes made, if the changes involve significant employer discretion," they said.

The dissenters said that in Raytheon, "The union faced a discretionary cloud, not knowing which health benefits would be reduced or eliminated or whether and to what extent employees would be burdened with increased costs for their healthcare. Plainly, the statutory goal of encouraging good-faith collective bargaining is not advanced by the majority interpretation."

 

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