In International Chemical Workers Union v. National Labor Relations Board (— F.3d
—, 2006 WL 1118514, 179 L.R.R.M. (BNA) 2647, C.A.9, Apr. 28, 2006), the United States Court of Appeals reviewed a case in which a company in collective bargaining negotiations with a union claimed it could not afford the union’s request for increased wages and benefits, but refused to turn over its financial records to document its claim.
The Court found that the company negotiated in bad faith when it asserted an inability to pay, and tried to avoid its duty to corroborate the claim by disclosing its financial records, thereby violating the National Labor Relations Act (“Act”).
Facts
The International Chemical Workers Union (“Union”) was in collective bargaining negotiations with American Polystyrene Corporation (“Company”), a plastics manufacturing company in Torrance. The Union’s proposals included higher wages and increased company contributions to employees’ 401(k) plans. Company General Manager Carolyn Tan (“Tan”) responded that the company couldn’t afford those increases, telling a Union representative, “No, I can’t. I’d go broke.”
The Union demanded to review the Company’s books to verify the claim, but the Company refused. In refusing, Tan added that she had not said the proposals were unaffordable, just that difficult economic times demanded a more cautious approach. The Union filed an unfair labor practice charge with the National Labor Relations Board (“Board”), alleging the refusal to allow review of the company’s financial records violated the Act.
An Administrative Law Judge (“ALJ”) found that the Company had a duty to disclose evidence to support its claim that it would “go broke” if it agreed to the Union proposals, and found that the Company violated the Act when it refused to do so. The Company appealed to the Board. The Board reversed the ALJ, finding that the “go broke” statement was not necessarily a claim of inability to pay, and that the Company had quickly clarified its bargaining position. The Union appealed.
Decision
The Court ruled that the Board was wrong to find that the Company’s “I’d go broke” statement did not assert an inability to pay. To the contrary, “the Company could not have used simpler words to declare that its financial situation was the cause of its refusal,” the Court said.
Further, the Company’s clarification, that “we need to take a more cautious
approach,” actually corroborated rather than altered its position that it was rejecting the union’s demands for financial reasons, the Court said. It also noted that the Company had proposed reducing benefits and threatened layoffs. “The obvious interpretation of the Company’s conduct was that its financial health was to blame for its refusal to pay for the Union’s proposals,” the Court said.
The Court concluded that the Company had asserted an inability to afford the Union’s proposals, and had not subsequently changed that position. Its disavowals “amounted to nothing more than a clumsy effort to shed a statutory responsibility to substantiate a bargaining position.”
Accordingly, the Court found that the Company negotiated in bad faith when it claimed an inability to pay and improperly tried to avoid its duty to disclose the financial evidence. The Union’s appeal was granted.
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