Snell & Wilmer
Legal Alert
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September 16, 2013

The Employer’s Duty to Provide Financial Information to the Union – Diluting the Nielsen Principle

  1. Established Legal Principles

It has long been established that, while an employer is obligated to disclose financial information requested by its employees’ collective bargaining agent that is relevant and necessary to the union’s bargaining responsibilities and contract negotiations,[1] said information is “relevant” only if the employer alleges an inability to pay.

... an employer’s obligation to open its books does not arise unless the employer has predicated its bargaining stance on assertions about its inability to pay during the term of the bargaining agreement under negotiation.[2]

It is equally well-established that, while information regarding the terms and conditions of employment of the bargaining unit employees is presumptively relevant to the union’s bargaining obligation, the presumption does not exist where the union demands information regarding employees outside the bargaining unit.  When the union demands information regarding non-unit employees, the union must prove relevancy in order to require the employer to disclose said information.[3]

The above well-established principles have long provided clarity and definition to the collective bargaining process. The parties’ negotiation strategies have recognized the proposition that the employer’s obligation to open its financial books to the union is triggered when it claims an inability to pay and not when it claims an unwillingness to pay. Similarly, collective bargaining parties have formulated their proposals and counter-proposals with the understanding that information regarding non-bargaining unit employees is not presumptively relevant. 

  1. The Erosion Process

Recent decisions by the National Labor Relations Board (“NLRB”) signal a trend to modify these well-established rules. The certainty is being removed by vague statements as to what may be better “to promote good faith bargaining.” 

Thus, in a decision last July,[4] the NLRB took the opportunity to emphasize that “no ‘magic words’ are required to establish a claim of inability to pay: the employer’s statements and action need only be specific enough to convey that claim.” In a footnote, the NLRB noted that “in an appropriate case” it would consider the distinction between inability to pay cases and less than inability to pay cases and address whether those distinctions “best serve the central purpose of the Act: to promote good-faith bargaining.”

A recent decision by an Administrative Law Judge[5] (“ALJ”) may provide the NLRB with the “appropriate case” that it seeks. In that case, the employer made clear that it was not claiming an inability to pay. The employer rejected the union’s request for wage increases on the basis that it wished to continue “to keep costs and wages stable.” Eventually, the employer agreed to a wage increase, contingent on the application of the same percentage increase to the wages of non-bargaining unit employees. The union promptly demanded the company’s financial records with respect to the wages, benefits, increases in salary, general labor costs and compensation packages for management and other non-bargaining unit employees for the last two years.

Predictably, the employer defended that it had not made a claim of inability to pay. Furthermore, the information requested by the union was confidential and not presumptively relevant, since it applied to non-unit employees.

The ALJ recognized that the employer had not made a claim of inability to pay and that the requested information involved employees outside the bargaining unit. Nevertheless, the ALJ found that since the employer made a claim that it wanted to keep labor costs stable, the information requested by the union was “relevant” since it was “narrowly tailored” to respond to the employer’s claim. The ALJ stated “I find that the union needed the information in order to determine if in fact there were any wage and benefit increases of non-unit employees, to verify the accuracy of the employer’s claim that it wanted to keep costs stable.” 

  1. The Confidentiality Claim

The employer’s claim that the information requested was confidential was quickly dismissed on the basis that the confidentiality interests “were not so significant as to outweigh the union’s need for the information.”[6] Furthermore, the employer had never sought an accommodation that would meet the needs of both parties.[7]

  1. Conclusion

Employers’ collective bargaining negotiators need to recognize that the rule that financial records need not be disclosed to the union unless the employer claims an inability to pay may no longer be available. The current NLRB appears unlikely to maintain said rule. Any statements regarding the employer’s interest in maintaining stable labor costs and competitiveness will be closely scrutinized by the NLRB to determine whether the employer’s statements and activities “convey” an inability to pay claim and therefore whether the “ability to pay” jurisprudence should be applied.

[1] NLRB v. Truitt Mfg Co., 351 U.S. 149 (1956); Detroit Edison Co. v. NLRB, 400 U.S. 301, 303. [back]

[2] Nielsen Lithographing Co., 305 NLRB 697 (1991). [back]

[3] NLRB v. Acme Industrial Co., 385 U.S. 432 (1967). [back]

[4] Coupled Products, 359 NLRB No. 152 (July 10, 2013). [back]

[5] AFL Web Printing JD (NY) – 12-13, Case 22-CA-078497. [back]

[6] Detroit Edison, supra; Nat’l Steel Corp., 335 NLRB 747 (2001). [back]

[7] GTE California, Inc., 324 NLRB 424 (1997). [back]




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