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Second Circuit Narrowly Construes When an Employer Must Provide Financial Information During Collective Bargaining Negotiations


By Allison Champagne

Last month, the U.S. Court of Appeals for the Second Circuit overturned a National Labor Relations Board (NLRB) decision, which held that an employer had committed unfair labor practices in violation of the National Labor Relations Act (NLRA) when it failed to provide the workers’ union with financial statements supporting the employer’s claims of financial difficulty.  The NLRA requires that, during labor negotiations between an employer and the workers’ union, the employer must provide supporting evidence of its financial condition when it states to the union that certain monetary concessions would cause financial hardship.  But the NLRA only requires an employer to turn over financial statements when the employer claims it is unable to make monetary concessions.  The employer in this case, however, stated to the workers’ union that it was simply unwilling to make concessions.

Employer’s Refusal to Provide a Photocopy of Financial Statements
The employer operated a bakery plant and its workers were represented by a labor union.  During negotiations for a new Collective Bargaining Agreement, the union had requested, among other things, higher wages for the workers.  The employer expressed concerns to the union regarding declining sales, increasing expenses, and overall operating losses.  The employer also told the union that if the company were unable to turn a profit, the employer’s parent company would shut down and sell the company.  The employer did make clear, however, that the parent company was willing to invest substantial amounts in an effort to achieve profitability.  The union asked the employer to provide financial statements in order to prove the employer’s claim of financial difficulty.

Upon the union’s request, the employer brought its financial statement to the negotiation meetings, but declined to provide a photocopy to the union for fear of the statement falling into the wrong hands.  The employer did tell the union that the bargaining committee could inspect and take as many notes on the statement as needed at the meeting’s location.  The employer also brought the financial statement to subsequent negotiation meetings, and repeatedly invited the union to examine it and take notes.  The employer further told the union that the statement was available at the employer’s office where the union’s attorney or accountant was free to visit and take notes.  The union’s representative agreed to this arrangement, but later changed her mind and demanded a photocopy.

No agreement between the employer and union was reached, and the workers went on strike.

NLRB Says Employer Committed Unfair Labor Practices
Because the employer declined to provide the union with a photocopy of its financial statement, the NLRB held the employer committed unfair labor practices in violation of the NLRA. The NLRB reasoned the employer had asserted an inability to pay worker wages and, therefore, the employer was required by law to provide a photocopy of the financial information.  The NLRB imposed a series of penalties against the employer, and the employer petitioned the Second Circuit for review of the NLRB’s decision.

Second Circuit Overturns the NLRB’s Decision
In overruling the NLRB, the court found that the employer did not assert an inability to pay the union’s wage demands, but rather an unwillingness to do so.  The court emphasized the need to look at the entire context of the negotiations, and noted that in this situation, the employer had expressed its parent company’s willingness to invest a substantial amount of money in order to achieve greater profitability.  When the context of the negotiation was viewed as a whole, the court concluded the employer did not claim an inability to pay.  Therefore, it was not required to provide a photocopy of its financial statement.

Furthermore, the Second Circuit determined the union’s access to the financial statements was sufficient.  The NLRB did not properly take into account all of the evidence the employer had provided, including multiple channels and venues for the union to examine the financial statement and take notes.

This decision helps to demonstrate when an employer must provide financial information to a labor union.  In doing so, the Second Circuit narrowly defines an employer’s mere unwillingness to pay worker wages as distinct from the employer’s inability to do so.  Lastly, be on the lookout for an expanded employer obligation to provide financial information.  The concurring judge in the court’s opinion wrote that “an employer claims an ‘inability to pay’ for particular labor costs when the employer asserts in the course of bargaining that its operations are unprofitable given those costs.”  Should the NLRB adopt this formulation, employers might have a more difficult time claiming that it merely stated unwillingness as opposed to inability to pay.

Read the case here.


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