A new Ninth Circuit Court of Appeals ruling underscores that you are obligated to be truthful when you negotiate a union contract and should be prepared to substantiate the positions you take. We’ll explain how one employer got it wrong.
Negotiations Under Way
American Polystyrene Corp. manufactures plastics at its Torrance facility. Its production and maintenance employees there are represented by the International Chemical Workers Union Council.
In 2002, the company and union began negotiating a new collective bargaining agreement.
The union proposed increasing both wages and company-matching contributions to employee 401(k) plans. The company countered with smaller wage increases and discontinuation of 401(k) matching contributions for one year, as well as elimination of company-provided meals.
Company Says It Can’t Pay
Union representative Jeffrey Ferro asked if “things were really that bad” that the company had to cut off matching contributions and meals and not provide a meaningful wage increase. Company general manager Carolyn Tan replied that “things are tough.” When Ferro asked, “Are you saying you can’t afford the union’s proposals?” Tan allegedly said, “No, I can’t. I’d go broke.” The union then demanded in writing to review the company’s books, based on the company’s claims that it couldn’t afford the union’s proposals. The company replied in a letter that while it said times were tough, it at no time said it couldn’t afford the proposals. “Rather, in these uncertain economic times, we believe that we need to take a more cautious approach than what you propose.” The company said it would be inappropriate to permit the union to review its financial records because the company never said it couldn’t afford the union’s proposals.
But at a subsequent bargaining session, when Ferro again asked whether business was really that bad, Tan replied, “Have you seen sales lately?” The union once more requested access to company financial records, and the company refused. Several months later, while negotiations were still pending, the company laid off several unit members, citing unimproved sales and rising inventories.
NLRB Charge Filed
The union filed an unfair labor practice with the National Labor Relations Board (NLRB), which enforces the National Labor Relations Act (NLRA). The union charged that the company violated the NLRA requirement to bargain in good faith by refusing to supply financial information to substantiate its claims that it couldn’t afford wage and 401(k) increases. The NLRB sided with the company, and the union appealed to the Ninth Circuit Court of Appeals.
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Truthful Bargaining Required
The Ninth Circuit explained that good-faith bargaining requires that claims made by either side should be true. Thus, if an employer asserts an inability to pay for a union’s demands, it must provide some proof that the assertion is accurate when the union requests it. Here, the company’s repeated statements that it couldn’t pay for the union’s proposals—combined with the counterproposal to actually reduce benefits and the subsequent layoff—made it clear that the company was asserting an inability to pay. This, in turn, triggered a duty to disclose its financial records.1
Practical Advice
This case is a reminder that union contract negotiations must be conducted in good faith. Be sure to choose your bargaining position—and your words—wisely, and make sure you can substantiate any claims of inability to afford the union’s demands.
California Employer Advisor Online subscribers can link to this decision from the online version of this article. For more information on the requirement to respond to a union’s request for records, see CEA February 2004.