THE 28TH ANNUAL MIDWINTER MEETINGOF
THE COMMITTEE ON THE DEVELOPMENT OF
THE LAW UNDER THE NLR
February 7, 2000
Key Largo, Florida
OPERATIONAL CHANGES: THE FIRST NATIONAL
by: John S. Irving
Kirkland & Ellis
When considering the obligation to bargain concerning operational
changes, such as partial closings, work relocation and subcontracting,
two Supreme Court decisions are at the starting place: Fibreboard
Paper Products Corp. v. NLRB, 379 U.S. 203 (1964) and First
National Maintenance v. NLRB, 452 U.S. 666 (1981). The critical
portion of Fibreboard is the Courts ultimate holding
that the subcontracting there was a proper subject for decisionbargaining.
However, Chief Justice Warrens decision included this limiting
are thus not expanding the scope of mandatory bargaining to hold,
as we do now, that the type of contracting out involved
in this case the replacement of employees in the existing bargaining
unit with those of an independent contractor to do the same work
under similar conditions of employment is a statutory subject of
collective bargaining under §8(d). Our decision need
not and does not encompass other forms of contracting out
or subcontracting which arise daily in our complex economy.
390 U.S. at 215. Importantly, this limitation thought was stressed
by Justice Stewarts concurring opinion in which Justices Douglas
and Harlan joined:
are other areas where decisions by management may quite clearly
imperil job security, or indeed terminate employment entirely.
An enterprise may decide to invest in laborsaving machinery.
Another may resolve to liquidate its assets and go out of business.
Nothing the Court holds today should be understood as imposing a
duty to bargain collectively regarding such managerial decisions,
which lie at the core of entrepreneurial control. Decisions
concerning the commitment of investment capital and the basic scope
of the enterprise are not in themselves primarily about conditions
of employment, though the effect of the decision may be necessarily
to terminate employment. If, as I think clear, the purpose
of §8(d) is to describe a limited area subject to the duty
of collective bargaining, those management decisions which are fundamental
to the basic direction of a corporate enterprise or which impinge
only indirectly upon employment security should be excluded from
This kind of subcontracting falls short of such larger entrepreneurial
questions as what shall be produced, how capital shall be invested
in fixed assets, or what the basic scope of the enterprise shall be.
In my view, the Courts decision in this case has nothing to
do with whether any aspects of those larger issues could under any
circumstances be considered subjects of compulsory collective bargaining
under the present law.
379 U.S. at 225. Obviously, then, the Court was not saying that
all subcontracting decisions are mandatory bargaining subjects.
Seventeen years later, the Court decided in First National Maintenance
(FNM) that an employer had no duty to bargain over the
decision to close part of its business. The operative portion
of Justice Blackmans majority opinion which, along with Fibreboard,
remains at the center of the debate over bargaining, is as follows:
management decisions, such as choice of advertising and promotion,
product type and design, and financing arrangements, have only an
indirect and attenuated impact on the employment relationship.
See Fibreboard, 379 U.S. at 223 (Stewart) J., concurring).
Other management decisions, such as the order of succession of layoffs
and recalls, production quotas, and work rules, are almost exclusively
an aspect of the relationship between employer and employee.
Chemical Workers, 404 U.S., at 178. The present case
concerns a third type of management decision, one that had a direct
impact on employment, since jobs were inexorably eliminated by the
termination, but had as its focus only the economic profitability
of the contract with Greenpark, a concern under these facts wholly
apart from the employment relationship. This decision, involving
a change in the scope and direction of the enterprise, is akin to
the decision whether to be in business at all, not in [itself]
primarily about conditions of employment, though the effect of the
decision may be necessarily to terminate employment.
452 U.S. at 676677. At the same time, this decision touches
on a matter of central and pressing concern to the union and its member
employees: the possibility of continued employment and the retention
of the employees very jobs.
Any discussion of operational change bargaining requirements must
focus on these two cases. More particularly, the broader the
bargaining obligation, the more expansive the emphasis on Fibreboard
and its conclusion that bargaining over subcontracting there was required.
The narrower the bargaining obligation, the greater the reliance on
the limitations of Fibreboard, particularly Justice Stewarts
concurrence, and the limitations expressed by the Court in FNM.In
any event, since 1981, FNM and Fibreboard have been
applied to one degree or another by the Board and the courts
to operational changes of all sorts: closings, partial closings,
work relocation, subcontracting, consolidation, automation, downsizing.
Often there is disagreement between the Board and the courts.The purpose
of this paper is to review where matters stand on bargaining about
operational changes. What is the Boards current position?
Under what circumstances is there an obligation to bargain over work
relocation, subcontracting, downsizing, consolidation, automation?
What about effects bargaining? When do bargaining obligations
arise? What information must be provided to the union concerning
an operational change? These are all practical issues that we
as labor lawyers confront repeatedly.How do we keep our clients out
of trouble? How can the legal traps and opposing strategies
be overcome or avoided?
1.The Starting Place: The Collective Bargaining
Before reviewing NLRA operational change bargaining requirements,
the place to begin is the labor contract, assuming there is one.
If the collective bargaining agreement forbids operational changes
and if the union would oppose them, there is no need to further ponder
the NLRA obligations, at least until the prohibitory contract expires.
If, on the other hand, a contractual bargaining waiver is clear, the
change is authorized by the contract.
What if the contract is less than clear? Here the Board and
a number of courts, including the D.C. Circuit, part company.
The Board applies a clear and unmistakable waiver test.
Even the slightest ambiguity will cause the Board to reject an argument
that the bargaining obligation has been waived. See Blue
Circle Cement, 319 NLRB 661, n. 4 (1995); Exxon Research
& Engineering Co., 317 NLRB 675 (1995). A number of
courts, however, notably the D.C., Sixth and Seventh circuits, reject
the Boards clear and unmistakable waiver analysis, and there
has been no ultimate Supreme Court test of this disagreement.See
NLRB v. U.S. Postal Service, 8 F.3d 832 (D.C. Cir. 1993) (no
obligation to bargain over unilateral change by employer where the
CBA reflects that the parties had bargained over the issue) (same);
Conoco, Inc. v. NLRB, 91 F.3d 1523 (D.C. Cir. 1996); see
also McDonnell Douglas v. NLRB,, 59 F.3d 230 (D.C. Cir.
1995) (case remanded to Board for reconsideration of Boards
decision not to defer contract interpretation to arbitration process,
the process agreed upon by the parties for determining contract disputes);
Automatic Sprinkler v. NLRB, 120 F.3d 612 (6th
Cir. 1997), cert. den., 523 U.S. 1106 (1998); Chicago Tribune
Co. v. NLRB, 974 F.2d 933 (7th Cir. 1992).
The court view in opposition to the Board is, first, that courts need
not defer to the NLRB with respect to interpreting contracts.
Courts interpret contracts all the time and do not need assistance
from the Board. Second, the courts try to ascertain the intent
of the parties and the meaning of the contract when the subject is
contained in the contract. The Boards overly simplistic
clear and unmistakable waiver test is rejected.
See NLRB v. U.S. Postal Service, supra.
My personal experience with this Board and court disagreement, aside
from my representation of the Chamber of Commerce in Dubuque,
was in the very interesting case of Elliott Turbomachinery,
320 NLRB 141 (1995) (vacated Sept. 30, 1996). In Elliott,
the Board found that bargaining over a relocation decision was mandatory
and issued a moveback order. Adhering to its clear and
unmistakable waiver test, two members of the Board panel concluded
that the management rights clause was ambiguous. The clause
Subject to the provisions of this Agreement, the Union hereby recognizes
that the management of the plant and direction of the working forces,
including the right to direct, plan, control plant operations, establish
and change working schedules, the right to hire, transfer, suspend
or discharge employees for cause, layoff employees because of lack
of work or for other legitimate reasons, the right to introduce
new or improved methods or facilities or to management the properties,
is exclusively vested in the Company. To decide location
of its plant, and to relocate the same; to permanently discontinue
the conduct of its business and operations.
According to thenMembers Browning and Truesdale:
. . [U]nder settled Board law, the critical question, however, is
not whether such a right might reasonably be inferred
from the management rights clause; it is whether that interpretation
is supported by clear and unmistakable language.
A320 NLRB at 14142. Member Cohen dissented, following the D.C.
Circuit approach of interpreting the contract terms and parties
intent when the contract covers the subject.
Asked by Elliott to appeal the Boards decision, I filed
for review in the D.C. Circuit and drew a panel which included Judge
Harry Edwards, the author of Postal Service. To make
a long story short, the Boards enforcement attorneys vigorously
sought to settle the case. A final settlement dropped the Boards
moveback remedy altogether, and called for the Board to vacate its
order and its decision. The Board agreed to do so and approved
the settlement on September 30, 1996, vacating not only its order
in Elliott but also its decision.
Interestingly, Elliott continues to be cited. In Dorsey
Trailers, the Board had to remind an administrative law judge
that its Elliott decision had been vacated, but nevertheless
confirmed the ALJs reasoning. Dorsey Trailers, Inc.,
327 NLRB No. 155, slip op. at p. 2 n.5 (March 12, 1999).
More recently, in EbyBrown, the Board itself cites Elliott,
but noting that Elliott was vacated pursuant to a settlement
by unpublished Executive Secretary Order dated September 30,
1996.EbyBrown Co., 328 NLRB No. 75, slip op. at p. 2
(May 26, 1999). The Board emphasis seems to be on the fact
that the Elliott case settled, not that its decision was vacated
altogether. Since 1996, two administrative law judges and two
Board panels have cited Elliott.
As one who was directly involved in the case, it is apparent that
the Board was anxious to settle Elliott, not just because the
parties had settled their differences, but because the Board feared
what would happen to its clear and unmistakable approach
to contract interpretation should this issue be reviewed once again
by Judge Edwards. The vacated Elliott decision simply
should not be cited at all, and least of all by the Board.
What if the contract is silent with respect to an operational
change? If the contract is silent, there is no waiver
of the unions right to bargain over the operational change assuming,
of course, that the change is not so fundamentally entrepreneurial
that no bargaining obligation exists in the first place as, for instance,
a product or design change, a withdrawal of investor capital, or a
customer cancellation. Even here, however, as discussed further
below, bargaining may be required over the adjustment needed to accommodate
a purely entrepreneurial change, as for instance, whether there should
be layoffs or some other means of work sharing or adjustment.
In any event, when there is no clear contractual waiver of the obligation
to bargain, bargaining most often is the prudent course, after which,
at impasse, the operational change may be implemented unilaterally.
However, there may be other contractual obstacles, such as a zipper
clause. A contractual zipper or complete agreement
clause may excuse a union from negotiating over mandatory bargaining
subjects during the life of the agreement, and may operate as a union
veto over a proposed operational change. See Auto
Workers v. NLRB (Milwaukee Spring II), 765 F.2d 175 (D.C. Cir.
1985); CBS Corp., 326 NLRB No. 73 (August 27, 1998); Mead
Corp., 318 NLRB 201 (1995). That is, a zipper clause may
excuse the union from bargaining at all, thus avoiding any agreement
or impasse after which a change may be implemented. The zipper
clause, then, as well as certain other contractual provisions e.g.,
work preservation or guarantees may also operate to thwart or
postpone operational changes during the life of an agreement, just
as if there were outandout prohibitions.(It is for these reasons that
I recommend against zipper clauses in most situations. They
are more trouble than they are worth).
2. The Statutory Obligation to Decision Bargain
Assuming there is no contractual bar or clear waiver, what are the
requirements for bargaining about operational changes? Where
decisionbargaining is required, it must be good faith bargaining,
of course, but union consent itself not required. Taylor
Warehouse, 314 NLRB 516 (1994).
The law on closings is reasonably clear. An employer may decide
to shut down and go out of business for any reason, even an antiunion
reason. Textile Workers v. Darlington, 380 U.S. 263 (1965).
Even a partial closing for antiunion reasons does not violate the
Act, unless the partial closing is intended to chill unionism at other
employer facilities. Id. at 275. See also
First National Maintenance, 452 U.S. at 682 (the unions
legitimate interest in fair dealing is protected by §8(a)(3),
which prohibits partial closings motivated by antiunion animus, when
done to gain an unfair advantage).
We hardly need to be reminded of the Board fits and starts over the
past 20 years concerning the obligation to decisionbargain about the
relocation of bargaining unit work. It was the case involving
the Dubuque Packing Company that provided the vehicle for the evolution
of the Boards current view. Thus, in 1987, the Board issued
its first Dubuque decision on the obligation to bargain over
the decision to relocate work. Dubuque Packing, 287 NLRB
499 (1987) Dubuque I. In 1989, the D.C. Circuit remanded
Dubuque and instructed the Board to formulate an understandable
and consistent position on work relocation bargaining requirements.
UFCW Local 150-A v. NLRB, 880 F.2d 1422 (D.C. Cir. 1989).
Two years later, and after oral argument, the Board issued Dubuque
II on June 14, 1991 (303 NLRB 386). That Board decision
was enforced by the D.C. Circuit on August 10, 1993. UFCW,
1 F.3d 24 (D.C. Cir. 1993).
We are all familiar with the decisionbargaining
requirements of Dubuque II:
the burden is on the General Counsel to establish that the employers
decision involved a relocation of unit work unaccompanied by a basic
change in the nature of the employers operation. If
the General Counsel successfully carries his burden in this regard,
he will have established prima facie that the employers relocation
decision is a mandatory subject of bargaining. At this juncture,
the employer may produce evidence rebutting the prima facie case
by establishing that the work performed at the new location varies
significantly from the work performed at the former plant, establishing
that the work performed at the former plant is to be discontinued
entirely and not moved to the new location, or establishing that
the employers decision involves a change in the scope and
direction of the enterprise. Alternatively, the employer may
proffer a defense to show by a preponderance of the evidence: (1)
that labor costs (direct and/or indirect) were not a factor in the
decision or (2) that even if labor costs were a factor in the decision,
the union could not have offered labor cost concessions that could
have changed the employers decision to relocate.
NLRB at 391.
The evolution of the decisionbargaining obligation did not end with
D.C. Circuit approval of Dubuque II. In Dubuque II,
the Board relied heavily on its interpretations of Fibreboard
and the Supreme Courts 1981 decision in First National Maintenance.
As is often the case under the NLRA, it did not take long for judicial
disagreements to develop over the Boards reading of FNM
and the bargaining requirements set out by the Board in Dubuque
II. In particular, the Fourth Circuit had differing views
of FNM. In Arrow Automotive, the Fourth Circuit
viewed work relocation in connection with a plant closing more as
an FNM entrepreneurial partial closing about which
FNM teaches there is no bargaining obligation. Arrow
Automotive Indus., Inc. v. NLRB, 853 F.2d 223 (4th Cir. 1988).
In 1994, the Supreme Court granted certiorari in Dubuque
II to resolve the conflicts between the D.C. Circuit in Dubuque
and the Fourth Circuit in Arrow. Apparently not anxious
to have its FNM interpretation views tested, the Board settled
Dubuque, thus mooting the case and heading off Supreme Court
To this day, tension remains between the Fourth Circuit on the one
hand and the Board and the D.C. Circuit on the other, along with questions
concerning the proper interpretation of FNM. Since 1994,
the only major Board development on work relocation was former Chairman
William Goulds preference for abandoning Dubuque II.
Chairman Gould wished to renounce Dubuque II and simply require
decisionbargaining over work relocation in all situations where
the reasons underlying the relocation of unit work are amenable to
bargaining.Q-1 Motor Express, Inc., 323 NLRB 767, 770
(1997); see also Detroit Newspaper Agency I, 326 NLRB
No. 64, slip op. at p. 22 n.11 (Gould Statement)
(Aug. 27, 1998). It is fortunate that Chairman Gould was
unable to persuade any other Board members to his view. That
view, of course, would throw management back into the nevernever land
of never knowing for sure when it has a decisionbargaining obligation.Who
is to know in hindsight whether bargaining might have done some good?
The Gould view was never openly adopted by a Board majority.
However, there are recent indications that a Board majority now may
be headed for the Gould result without adopting his view that Dubuque
II should be abandoned. Thus, in EbyBrown a Board
majority (Truesdale and Fox) held that a trucking employers
work relocation decision required decision bargaining, even though
the employers credited reasons for relocating the work, as set
forth in Member Hurtgens dissent, involved (i) the employers
desire to be closer to its customers, (ii) reduced inventory
expenses, (iii) reduced rent and utility expenses, (iv) lower
taxes, (v) reduced costs of overnight delivery and lodging, (vi) reduced
numbers of partial loads, and (vii) improved ability to provide
nextday service to its customers. EbyBrown, supra,
328 NLRB No. 75, slip op. at pp. 56. Even though these
factors do not relate directly to wages, hours and working
conditions, citing Dubuque II, the Board majority held that
these were indirect labor costs, and that the employer
had failed to establish that the Union could not have offered
sufficient concessions to affect the transfer decision.
Id. at p. 2. In other words, almost any economic
factor can be indirectly related to or offset by labor costs and,
who knows, bargaining might have done some good the Gould approach.
As Member Hurtgen stated in dissent:
If such reasoning were used, virtually all decisions would be mandatory,
for virtually all of them are driven by economics, and wages theoretically
could offset the [unions] benefits. Clearly, the Supreme
Court did not intend this result.Id. at p. 5 n.2
The clearest Board case finding no decision bargaining obligations
predates EbyBrown by nearly four years. See NuSkin
International, Inc., 320 NLRB 385 (1995). In NuSkin,
the factors leading to the relocation decision were so overwhelmingly
business related that not even the EbyBrown majority would
be likely to find a bargaining obligation. There was simply
no way that union bargaining could have overcome the employers
compelling core business reasons, which included a dramatic drop of
more than 50% in the companys orders and net sales, labor cost
savings from the relocation almost equal to the total bargaining unit
payroll, and a reduction in jobs at the plant where the work was moved.
The Board almost invariably applies Fibreboard broadly, and
woodenly, when deciding 8(a)(5) subcontracting cases. Since
its lead 1992 decision in Torrington Industries, 307 NLRB 809
(1992), the Board disregards its burden-shifting Dubuque test
in subcontracting cases and requires decisionbargaining whenever it
can find so-called Fibreboard subcontracting, i.e.,
when all that is involved is the substitution of one group of
workers for another to perform the same work at the same plant under
the ultimate control of the same employer. Torrington,
307 NLRB at 810. See, e.g., Dorsey Trailers, supra,
321 NLRB at 616; RockTenn, 319 NLRB 1139 (1995);
Geiger Ready-Mix, 315 NLRB 1021 (1994); Furniture
Rentors, 311 NLRB 749 (1993) Furniture Rentors I.
Thus, with rare exception, the Board will ignore employer
motives for deciding to subcontract even when the decision appears
not to involve labor costs.
Courts, however, do not uniformly accept this approach. In refusing
to enforce a Board order in Furniture Rentors, the Third Circuit
found the Boards mechanical approach simplistic and .
. . potentially ham-handed. Furniture Rentors v. NLRB,
36 F.3d 1240, 1250 (3d Cir. 1994). The Board in Furniture
Rentors had determined that employee theft, as well as customer
service complaints concerning bargaining unit employees, were indirect
labor cost problems that the employer was obliged to attempt to resolve
through collective bargaining, rather than by unilaterally subcontracting
out the bargaining unit work. See supra, Furniture
Rentors I. The Court disagreed:
do not read Fibreboard and First National [Maintenance]
as requiring employers to automatically bargain with employee representatives
over the inviolability of their own property, without regard to
the benefit likely to be obtained from the process. Nor are
we able to perceive any likelihood of benefit to be derived from
subjecting the problem of employee thievery to collective bargaining.
Furniture Rentors, 36 F.3d at 1250. While the Third Circuit
continues to utilize this Dubuquelike analysis to look
carefully behind subcontracting decisions, see, e.g., Dorsey Trailers
v. NLRB, 134 F.3d 125, 133 (3d Cir. 1998) (no obligation to bargain
over subcontracting decision that was implemented to fill orders
and maintain a healthy, viable business), other circuits have
not followed suit. See, e.g., Rock-Tenn Co. v. NLRB,
101 F.3d 1441, 1446 (D.C. Cir. 1996) (the Board permissibly
distinguishes what it calls a Fibreboard subcontract from a relocation
Nor has the Board departed from its rigid application of Torrington.
See, e.g., Westchester Lace, Inc., 326 NLRB No. 119, slip op.
at p. 17 (Board affirms ALJ conclusions that the Boards
decision on remand in Furniture Rentors was merely law
of the case, and that subcontracting decisions based primarily
on productivity factors and not labor costs are amenable
to bargaining); see also CBS Corporation, 326 NLRB No.
73, slip op. at p. 12 n.7 (Aug. 27, 1998) (Torrington reaffirmed);
Rock-Tenn Co., supra, 319 NLRB at 1139 n.1 (employers
subcontracting decision held a mandatory bargaining subject under
both Torrington and the Third Circuits approach in Furniture
Rentors). However, recent NLRB General Counsel complaints
have begun supporting alleged Torrington subcontracting violations
with alternative Dubuque arguments. WPLTTV, 12CA20022
(Complaint authorized December 13, 1999).
Finally, even bargaining does not excuse discriminatory subcontracting.
See Joy Recovery Technology Corp., 320 NLRB 356 (1995);
Automatic Sprinkler Corp. of America, 319 NLRB
401 (1995); Uforma/Shelby Business Forms, Inc. (Miami Systems Corp.);
Allegheny Ludlum Corp., 320 NLRB 484 (1995); Gold Coast
Produce, 319 NLRB 202 (1995).
According to the Board, an economic decision to lay off bargaining
unit employees normally is amenable to resolution through the
collective bargaining process and constitutes a mandatory bargaining
subject. Lapeer Foundry and Machine, Inc., 289 NLRB 952
(1988). While Lapeers reliance on Otis Elevator
for some of its analysis has been disavowed by the Board following
Dubuque, the essential conclusion of Lapeer about the
broad duty to bargain over layoffs remains intact. See, e.g.,
Executive Cleaning Services, Inc., 315 NLRB 227, 227 n.5 (1994).
Even when layoffs are an effect of an otherwise entrepreneurial
core decision about which there is no decisionbargaining
obligation, decision and effects bargaining are required with
respect to such layoffs. In Odebrecht Contractors of California,
Inc., 324 NLRB 396 (1997), the Board avoided this decisionbargaining
issue by concluding that the General Counsel had asserted only an
effects bargaining violation. (The employer in Odebrecht
unilaterally eliminated a rotating shift due to California wage &
hour requirements, resulting in layoffs.) But then, in a very
recent case, Bridon Cordage, Inc., 329 NLRB No. 35 (Sept. 29,
1999), a Board panel of Chairman Truesdale and Members Fox and Liebman
concluded that there is a decisionbargaining obligation with respect
to layoffs even when they result from operational decisions that do
not require bargaining. In Bridon, layoffs were prompted
by the entrepreneurial decision to reduce inventory. According
to the Board:
. . . [E]ven where the layoffs are the direct result of a decision
that is not itself a mandatory subject of bargaining, there is still
room for bargaining about the layoffs themselves. There are
alternatives that an employer and a union can explore to avoid or
reduce the scope of the layoff without calling into question the
employers underlying decision.
Id., slip op. at p. 2.
Notably, however, where an employer has violated this derivative obligation
to bargain over a layoff decision, the Board applies a Transmarine
Navigation effects bargaining remedy, not the full back pay and
reinstatement remedy applied in cases where there is an independent
and separate obligation to bargain over layoffs. Bridon Cordage,
329 NLRB, slip op. at 2 n.11.
D. Work Reassignment/Transfer.
The Board also applies Fibreboard/Torrington subcontracting
analysis to unilateral work transfers or reassignments, unless the
employers actions can be categorized as representing a significant
change in the scope or direction of the business. In Geiger
Ready-Mix, the employers transfer of unit work to its nearby
facilities resulted in unit layoffs. See Geiger Ready-Mix
Co. of Kansas City, 315 NLRB 1021 (1994), enfd. in rel.
part, 87 F.3d 1363 (D.C. Cir. 1996). The employer cited
economic and other entrepreneurial reasons to justify its actions,
arguing for application of Dubuque analysis.Rejecting this
approach, the Board stated that the Dubuque test was devised
for plant relocations potentially involving complex decisions respecting
both the allocation of capital and the replacement of one group of
employees with another, and not for decisions of lesser scope,
especially when unaccompanied by any permanent plant closure or relocation.315
NLRB at 1022;see also Wells Fargo Armored Service Corp., 322
NLRB 616 (1996) (work reassignment for economic reasons without anti-union
animus, held a mandatory bargaining subject).
E. Automation/Technological Advances.
Prior to First National Maintenance, the Board required employers
to bargain over the decision to implement automation or other technological
advances that reduced the size of the bargaining unit.
See Town & Country Mfg., 136 NLRB 1022 (1962)
(holding that virtually any employer decision that results on the
elimination of jobs is mandatory bargaining subject).
In FNM, the Supreme Court specifically identified automation-related
decisions as potentially falling outside the scope of the holding
in that case. FNM, 452 U.S. at p. 686 n.22.
In its Dubuque of work relocation, the Board indicated, too,
that it was not discussing automation. Dubuque II, supra,
303 NLRB at 390 n.8. In 1991, the Office of the General Counsel
issued a Guideline Memorandum advising Regional Directors on how to
apply Dubuque in relocation cases, instructing them to submit
to the Division of Advice automation and other category three
operational charges identified in FNMs footnote 22.
See General Counsel Memorandum GC 919 (Aug. 9, 1991);
see also 1991 Daily Labor Report (BNA) No. 157, at F-1 (Aug.
14, 1991). No Board decision or GC Advice Memorandum released
since then has squarely addressed the decisionbargaining test in automation
cases. Some Board rulings suggest an FNM analysis, with
the obligation to bargain over technology-driven decisions hinging
on the degree of change caused by the new technology on the scope
and direction of the employers business. See Noblit
Brothers, Inc., 305 NLRB 329, 330 (1992) (no bargaining obligation
over employers creation of new telemarketing division and streamlining
of operations with telephone and computer advancements, despite possible
impact on bargaining unit jobs, where change . . . clearly amounts
to a decision basically concerned with the scope and direction
of the enterprise that the Court in First National Maintenance
held was not a mandatory subject of bargaining [footnote omitted]).Compare
The Winchell Co., 315 NLRB 526, 526 n.2 (1994) (bargaining obligation
existed over introduction of desktop computers, resulting in layoffs,
where the technological advance . . . changed the Respondents
operation by degree not kind); see generally, James L.
Atkinson, Automating the Workplace: Mandatory Bargaining
Under Otis II, 1989 U. Ill. L. Rev. 435.
The Board analyzes work consolidations
or mergers, which normally involve work relocation and the closing
of plants, under Dubuque II. See NLRB v. OwensBrockway
Plastic Products, Inc., 311 NLRB 519 (1993).
In OwensBrockway, the Board determined that the employer failed
to prove that its consolidation and plant closing was the result of
an entrepreneurial reorganization involving a change in the scope
and direction of the enterprise. Rather, the Board determined
under Dubuque II analysis that the work reassignment involved
decisions that resulted in relatively insignificant changes in the
companys operations. The employer therefore had not satisfied
its burden of showing that the union could not have offered labor
cost concessions that could have changed the employers decision
to relocate the bargaining unit work. See also Dorsey
Trailers, supra, 327 NLRB No. 155, slip op. at 24; NuSkin,
supra, 320 NLRB at 387 n.5.
Of course, following the Fourth Circuit, the closing of a plant, even
though work transfers are involved, is subject to a First National
Maintenance, not a Dubuque, analysis. rrow Automotive
Industrial v. NLRB, 853 F.2d (4th Cir. 1988).
G. Change of established
The obligation to bargain over the
decision to change an established practice seems to depend on whether
the change is dictated by some core entrepreneurial or
outside factor, or whether the change is prompted by economic considerations
on which a union might consistently bargain. Thus, bargaining
was not required over the decision to eliminate a rotating shift due
to the impact of state overtime requirements. Odebrecht Contractors
of California, Inc., supra. Similarly, in Bridon
Cordage, Inc., supra, there was no obligation to bargain
over a decision to reduce inventory by reducing production.
However, implementation of a new attendance policy without bargaining
was simply a change in working conditions over which advance notice
and decision bargaining were required. Roll and Hold Warehouse
& Distribution Corp., 325 NLRB No. 1 (Nov. 8, 1997),
enfd 162 F.3d 513 (7th Cir. 1998). See also
Blue Circle Cement Co., 319 NLRB 661 (1995) (change in rotating
shift policy); Burns International Security Services, 324 NLRB
485 (1997) (change in holiday pay practice).
3. At what Point Must Decision Bargaining occur?
There are essentially two aspects to this timing question legal timing
requirements and practical timing requirements.
Normally, required decisionbargaining must take place sufficiently
in advance of the final decision to give the union a reasonable opportunity
for meaningful input and to satisfy its representational obligations.
See, e.g., Associacion Hosp. del Maestro, 317 NLRB 485,
523 (1995), enfd. 77 F.3d 460 (1st Cir. 1996); Paramount
Liquor Co., 270 NLRB 339, 343 (1984); Smyth Mfg. Co., 247
NLRB 1139, 1168 (1980). Timing will vary depending upon the
circumstances. The Board has recognized, as in Dubuque,
that exigencies may require swifter union reaction and permit compression
of the bargaining. See Dubuque II, 386 NLRB at
392 n.18 The same general requirements prevail for decision
bargaining over other operational changes. A union must have
a reasonable opportunity for meaningful bargaining input. To
simply present the union with a fait accompli does not satisfy
the employers bargaining obligation. See Roll
& Hold Warehouse & Distribution Corp., supra; Detroit
Edison Co., 310 NLRB 564, 56566 (1993); CibaGeigy Pharmaceuticals
Div., 264 NLRB 1013, 1016 (1982), enfd., 722 F.2d
1120, 112627 (3rd Cir. 1983).
However, practical considerations often control the timing of decision
bargaining. For instance, what will the unions reaction
be? Will it seek to obstruct or delay the change? Will it attempt
to string out the bargaining with information or other demands?
How long will it take to get a legally cognizable impasse
after which the operational change may be implemented unilaterally?
These are the practical considerations that most often influence employer
decisionbargaining timetables.In order to convince the Board, if necessary,
that there has been good faith bargaining and a legally cognizable
impasse, an employer must leave ample time for bargaining and ample
time to cope with opposing union tactics. Union information
demands must be anticipated. See, e.g., Lehigh Portland
Cement, 286 NLRB 1366 (1987); International Paper Co.,
319 NLRB 1253 (1995), enf. den. on other grounds, 115 F.3d
1045 (D.C. Cir. 1997). And time must be allowed for transitional
impasses to come and go. See Charles D. Bonanno Linen
Service v. NLRB, 454 U.S. 404 (1982).From
an employer viewpoint, the Board, or at least a Board majority, simply
abhors an impasse. The best example of this abhorrence is the
Boards recent decision in Anderson Enterprises (Royal Motor
Sales), 329 NLRB No. 71 (Sept. 30, 1999). In the lengthy
Royal decision, a Board majority reversed an administrative
law judges 1989 determination that a valid good faith impasse
existed in 1988 among car dealers in California that were bargaining
with a number of unions.Ten years later, the Board majoritys
methodical dismantling of the ALJs impasse findings represents
a classic example of how far the Board will go to avert an impasse.
The Board majority also unraveled the ALJs findings that the
employers lockout and withdrawal of recognition were lawful.
Dissents by Members Hurtgen and Brame place the weaknesses of the
majoritys reversal into sharp focus. The Board is headed
for trouble if Royal finds its way to court.
To reiterate, though, the practical timetable for decisionbargaining
most often controls, rather than the more theoretical timing placed
on bargaining by the Board and courts. Ample time must be reserved
to deal with union opposition and to later satisfy Board suspicion.
Often it is difficult for management attorneys and client human resources
personnel to convince operations officials of the need for ample time
4. Effects Bargaining
Effects bargaining, unlike decision
bargaining, is relatively uncomplicated: An obligation to bargain
about effects almost always exists whether or not an operational change
first requires decisionbargaining. And, under 8(2)(5), bargaining
over the effects of a decision must be conducted in a meaningful manner
and at a meaningful time, and the Board may impose sanctions to insure
its adequacy. FNM, supra, 452 U.S. at 68283.
There can be exceptions where the collective bargaining agreement
already contains clear effects language or clearly waives effects
bargaining altogether, or where some entrepreneurial or financial
reason makes effects bargaining futile. Normally, however, employers
recognize that the duty to bargain over effects is broad. They
understand, also, that there is no obligation to grant effects bargaining
concessions. It simply is better, and more practical, to offer
to bargain over effects and to avoid legal entanglements.
The trickiest effects issue relates to when the effects bargaining
duty arises. At what point must a union be provided notice of
an operational change in order to afford it the opportunity to engage
in effects bargaining. The usual rule is that notice must be
sufficiently in advance of the change so as to give the union a meaningful
opportunity to bargain, i.e., at a time when it maintains at
least some remaining bargaining leverage. Of
course, as a practical matter, notice already exists where decisionbargaining
over the operational change has occurred. In some cases, there
are special notice rules, as with the sale of all or part of a business.
See, e.g., Riedel International (Willamette Tug and Barge),
300 NLRB 282 91990) (notice required in advance of closing, not while
sale is being negotiated).
In some cases, failure of advance notice may be excused, as when a
sudden change is prompted by third parties (customers, parent companies,
creditors). See, e.g., Raskin Packing Co., 246 NLRB
78 (12979) (no notice violation where plant closure necessitated
immediately by banks refusal to extend line of credit);
M&M Transportation Co., 239 NLRB 73 (1978) (notice obligation
excused where employer ceased operations immediately upon learning
that reasonably anticipated loan has fallen though. Here, however,
the burden is on the employer to prove that its failure to provide
advance notice is excusable. Compact Video Services, Inc.,
319 NLRB 131, 131 n.1 (1995), enfd. 121 F.3d 478 (9th
Cir. 1997); Willamette Tug, supra, 300 NLRB at 283 n.5;
see generally, FNM, 452 U.S. at 68386.
Finally, as discussed above, an effects bargaining obligation, e.g.,
over an entrepreneurial operational change, can give rise to new decision
and effects bargaining obligations. For instance, a production
cutback can give rise to an obligation to bargain over the decision
to layoff employees as well as the effects of the layoff. See
Bridon Cordage, Inc., supra, 329 NLRB No. 35.
Generally, however, it is not difficult to comply with effects bargaining
obligations, and it is better to do so and avoid legal entanglements,
hopefully to ensure a smooth transition with a satisfactory shutdown
agreement being a prime example.Frequently, too, effects bargaining
and WARN obligations overlap, with both requiring advance notice.
How much information must be supplied
about operational changes and when must it be supplied?
Everyone knows the general
ground rules. Information concerning the bargaining unit which
may be needed by the union for collective bargaining or contract administration
purposes, is presumptively relevant and must be timely
supplied. See NLRB
v. Truitt Mfg. Co., 351 U.S. 149 (obligation to supply relevant
information during bargaining) (1956); NLRB v. Acme Industrial
Co., 385 U.S. 432 (obligation to supply relevant information during
the term of the contract) (1967) Where information sought is
extra unit, i.e., relates to matters outside the
bargaining unit, there is no presumptive relevance, but the union
may establish relevance. See, e.g., Crowley Marine
Services, 329 NLRB No. 92 (Nov. 10, 1999). Positions
taken by the employer during bargaining also may establish relevance,
as with the need to conform pay and benefits to nonunit employee groups
or pleas of inability to pay. See Conagra, 328
NLRB No. 24 (April 29, 1999). Confidential information,
even if relevant, may be withheld if an employer can make a substantial
case for confidentiality and offers to bargain in good faith over
reasonable accommodations to satisfy the unions legitimate needs
and the employers legitimate confidentiality concerns.
Detroit Edison, 440 U.S. 301 (1979); see also Metropolitan
Edison Co., 330 NLRB No. 21 (Nov. 25, 1999).
When a bargaining obligation does exist a decision or effects
bargaining obligation there is an accompanying obligation to supply
relevant information. What information and how much must be
supplied varies in particular situations. Since the obligation
is quite broad, the duty often becomes a trap for the unwary employer
or the employer bent on testing the limits of the unions entitlement.
There can be no good faith bargaining or lawful unilateral implementation
where an employer has missed an information stitch.
There are many cases in which the failure of impasse has hung on the
failure to comply with the obligation to supply information.
See, e.g., supra, Leigh Portland Cement and International
Paper Co., see also U.S. Testing Co., 324 NLRB 854
(1997), enfd., 160 F.3d 14 (D.C. Cir. 1998).Even
where there may be no obligation to supply information about, for
instance, an entrepreneurial decision, such as a decision to partially
close, may be a duty to supply information based on a unions
contract administration duties and needs, e.g., as to whether
to file and process grievances or proceed to arbitration. The
contract administration obligation to furnish information is every
bit as broad, and a failure to fulfill that obligation can needlessly
complicate matters for the employer and taint its efforts to comply
other bargaining requirements. See supra, NLRB
v. Acme Industrial; see also Metropolitan Edison Co.,
330 NLRB No. 21 (and cases cited therein) (Nov. 26, 1999).Typical
union information requests include requests for copies of the purchase
An entire purchase agreement including its financial provisions need
not always be supplied, but provisions dealing with employees, their
benefits, collective bargaining agreements, and respecting their employment,
must be disclosed. See, e.g., Southern Ohio Coal Co.
v. NLRB, 87 F.3d 1309 (Unpublished Decision) (4th Cir. 1996) (reversing
NLRB order to disclose entire purchase agreement, and remanding for
Board in camera determination of relevant purchase agreement
information); see also Knappton Maritime Corp., 292
NLRB 236 (1988) (entire agreement required to be supplied where employer
makes agreement terms relevant); Supervalue, Inc. v. NLRB,
184 F.3d 949 (9th Cir. 1999 full agreement needed for WARN compliance).
RBH Dispersions, 286 NLRB 1185 (1987) (employer permitted to
redact confidential price information from sales agreement).
A typical request would be for information concerning employer compliance
with contractual successorship provisions. An employer would
refuse such a request at its peril.Other
anticipated operational changes e.g., work relocation, subcontracting,
downsizing, automation typically raise contractual issues or suggest
operational alternatives that a union might wish to propose in order
to reduce the impact on bargaining unit employees. Information
often must be supplied in such situations. See, e.g.,
International Paper, supra, 319 NLRB 1253 (internal
cost analyses); Wehr Constructors, Inc., 315 NLRB 867 (1994),
enfd. in rel. part, 159 F.3d 946 (8th Cir.) (subcontracts);
Facet Enterprises, Inc., 290 NLRB 152 (1988) enfd.
in rel. part, 907 F.2d 963 (10th Cir. 1990) (work relocation and
downsizing); Reece Corp., 294 NLRB 448 (1989) (management study);
Hofstra University, 324 NLRB 557 (1997).
There is every indication that bargaining requirements over operational
changes, as they have for the last quarter century, will continue
to evolve. Will Dubuque II be applied to other types
of operational changes besides work relocation? Will Dubuque
II itself be overruled or modified interpretively? Will
the Board follow the General Counsels lead and bring its bargaining
requirements for subcontracting more in line with Furniture Rentors?
When will the Supreme Court have an opportunity to further explain
the meaning of Fibreboard? When will the Court have the
opportunity to clarify its decision in First National Maintenance
and to resolve the differences between the Fourth Circuit and the
Board and D.C. Circuit over relocation bargaining requirements?As
labor lawyers, all of us would love to be paid by clients to help
resolve these interesting legal issues. The problem is that
clients are not interested in spending resources so that we can satisfy
our intellectual curiosity. They would rather stay out of trouble
in the first place. Which is why nearly all of us recommend
that clients bargain when they can (sometimes with reservations about
their obligation to do so) and set realistic time tables for the completion
of bargaining.It is better
from a clients standpoint to satisfy potential bargaining obligations
if there are ways of doing so without undermining the needed change
or the timetable for accomplishing it. This is the real skill
test for management lawyers -- how to satisfy bargaining requirements,
if necessary, unilaterally implement an operational change, and be
able to convince a reluctant Board, or better still the General Counsel,
that the change was only made after a legally cognizable
e.g., Oklahoma Fixture, 314 NLRB 958, 960 (1995) (no bargaining
obligation where employers subcontracting decision was based
on core entrepreneurial desire to avoid potential
legal liability that could ruin the company).
- Labeling this type of
decision mandatory could afford a union a powerful tool for achieving
delay, a power that might be used to thwart managements
intentions in a manner unrelated to any feasible solution the
union might propose.FNM, supra, 452 U.S. at
employer would have difficulty determining beforehand whether
it was faced with a situation requiring bargaining or one that
involved economic necessity sufficiently compelling to obviate
the duty to bargain. If it should decide to risk not bargaining,
it might be faced ultimately with harsh remedies forcing it to
pay large amounts of back pay to employees who likely would have
been discharged regardless of bargaining, or even to consider
reopening a failing operation. FNM, supra,
452 U.S. at 684685.
normal Transmarine, remedy for failure to bargain
over effects seeks to restore bargaining leverage to the union
by providing two weeks back pay and restarting the back pay clock
while required effects bargaining takes place. See, e.g.,
See Odebrecht Contractors, supra, 324 NLRB
No. 74, slip op. at 1 n.2 (1997) (citing Transmarine Navigation,
170 NLRB 389 (1968)).
- A union
owes a similar duty. See California Nurses,
326 NLRB No. 142 (Sept. 30, 1998) (union has duty to supply
relevant grievance information).