United States: Could The NLRB Make It Easier For Unions To Access Employers' Financial Records?

Last Updated: September 16 2016
Article by Daniel Altchek

Many practitioners at one time or another have been frustrated by the lack of clear and consistent guidance from the National Labor Relations Board ("NLRB" or the "Board") regarding union requests for employer financial information. Much of the confusion concerns whether and to what extent an employer must furnish financial information when it has not claimed an inability to pay at the bargaining table, but rather has asserted an unwillingness to pay, typically based on concerns about a labor cost-driven competitive business disadvantage.

This has left bargaining parties uncertain about the scope of their respective rights and obligations when it comes to financial information requests.

A recent decision by the Board suggests that change may be forthcoming – but not necessarily the kind of change employers would like. That is because, as discussed below, the Board has hinted that it may be inclined to significantly expand the scope of employers' obligations to share their financial information.

Background

The general rule governing union requests for financial information was articulated by the Board in Nielsen Lithographing Co., 305 NLRB 697 (1991), aff'd sub nom, Graphic Communications Local 50B v. NLRB, 977 F.2d 1169 (7th Cir. 1992). In Nielsen, the Board held that a union is entitled to the employer's general financial information – e.g., a union audit of the employer's financial records – when the employer has made a claim of inability to pay at the bargaining table. A claim of "inability to pay" is a claim that the employer cannot afford the current or proposed level of wages and benefits during the term of the collective bargaining agreement under negotiation without putting its own survival at stake. General financial information must be provided upon request where the employer claims inability to pay because, according to the Board, that type of information is necessary to verify or substantiate the employer's claim. But, the Board went on, that obligation is not triggered when an employer asserts that maintaining wages and benefits would place the employer at a competitive disadvantage. The latter type of claim, the Board found, amounts to an unwillingness to pay which the employer is not obligated to substantiate. In determining whether there has been a claim of inability to pay, the Board evaluates an employer's statements and conduct in the context of the particular circumstances in that case; in other words, the Board has pointed out, there are no "magic words" which amount to a claim of inability to pay.

This rule was subsequently applied by the Board in a number of decisions that yielded confusing and occasionally contradictory results. This muddled state of the law was recognized by the Board's then-Acting General Counsel Lafe Solomon in a 2011 Guideline Memorandum. As the Memorandum observed:

"Since Nielsen, however, there has been no clear delineation as to what exactly constitutes a statement of an inability to pay. Indeed, the Board appears to have often come to differing conclusions on facts that are difficult to distinguish."

The Memorandum reviewed these cases and came to the conclusion that claims of competitive disadvantage, while not triggering a duty to provide general financial information such as an audit, may still require the production of more limited financial information to verify the specific claims made by the employer at the bargaining table. A claim of competitive disadvantage, for example, could obligate an employer to provide data on its competitors, even if it would not require total access to the employer's books. The Memorandum also pointed out that in some cases a request for financial information should be analyzed under both frameworks – i.e., whether the request is warranted by a claim of inability to pay, and also whether other employer assertions and representations during bargaining make specific financial information relevant and therefore subject to disclosure to the union even if there has been no claim of financial hardship. Essentially, the Memorandum advocated sharpening the distinction between inability to pay claims and competitive disadvantage claims, and taking different analytical approaches to evaluating financial information requests depending on which type of claim has been made by the employer.

A Hint of Things To Come

Fast-forward to August 2016, when the Board issued its latest decision concerning financial information requests, Wayron, LLC, 364 NLRB No. 60 (Aug. 2, 2016), a case involving a convoluted fact pattern. The employer, which sought major reductions in wages and benefits, repeatedly asserted in negotiations that it was not claiming inability to pay, while at the same time complaining about competitive disadvantage and making ominous remarks about the company's chances for survival. The Board majority found that the employer's statements, viewed in context and in their totality, constituted a claim of inability to pay. The dissent interpreted the employer's statements differently and argued that the employer had merely claimed a competitive disadvantage and was therefore not obligated to grant the union's request for a financial audit.

Interestingly, nowhere in Wayron did the Board consider the notion that a claim of competitive disadvantage could trigger a duty to furnish specific financial information, as outlined by the 2011 Guideline Memorandum. To the contrary, the Board appears to have rejected the Memorandum's analytical framework in its entirety, leading off the legal analysis portion of its decision with the statement that "under the rationale of Nielsen Lithographing Co., bargaining claims of an inability to pay differ from bargaining claims of competitive disadvantage: the former require the party making the claim to provide substantiating financial information if requested, while the latter do not." This formulation of the law is at odds with the 2011 Guideline Memorandum— not to mention much of the Board's own precedent – which described how even claims of competitive disadvantage could require the employer to provide substantiating information even if that information is less than the "general" financial information warranted by an inability to pay claim. Instead, the Board in Wayron focused solely on whether or not the employer's statements rose to the level of an inability to pay claim, with no consideration given to whether the undisputed competitive disadvantage claim by itself obligated the employer to provide some if not all of the requested financial information.

A possible explanation for the Board's disregard of the 2011 Guideline Memorandum's analytical framework can be found in a footnote in Wayron. Specifically, the Board remarked that in this case it had not been asked to overrule its "inability to pay cases," but observed that parties' preoccupation in negotiations with "magic words" (i.e., whether the employer used words amounting to a claim of inability to pay) "distract[s] them from genuine dialogue and information sharing that can lead to productive bargaining." 364 NLRB No. 60 at n.27. Accordingly, the Board went on, "in an appropriate case, we would consider how the Board has distinguished between 'inability to pay' and 'competitive disadvantage' claims in post-Nielsen cases and whether these distinctions best serve the Act's goal of promoting good faith bargaining." Id. In other words, whereas the Memorandum sought to sharpen the distinction between inability to pay claims and competitive disadvantage claims, the Wayron footnote suggests the Board may be close to dispensing with that distinction altogether.

What's next?

Due to turnover among Board members and the coming change in presidential administrations, the Board has been issuing major decisions, including reversals of established precedent, at a rapid clip in recent weeks. The aforementioned footnote in Wayron suggests that we could soon see another significant change in this area of Board law as well. Although it is unwise to predict the content of any future cases, it stands to reason that the elimination of the distinction between inability to pay claims and competitive disadvantage claims would result in a much broader obligation upon employers to provide financial information upon request. Essentially, the Board appears inclined to lower the bar for when employers must provide general financial information. It remains to be seen whether the Board will receive the "appropriate case" for making such a significant change in the law. Until then, employers should give serious thought before making statements in bargaining concerning their financial condition and any requests for financial information should be given careful consideration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.