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.


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.

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