The company and the union began negotiations for a new collective bargaining agreement (CBA) on June 17, 1993. The company’s representatives initially made a presentation that focused on the company’s position and its importance within ConAgra and on the gap between the wages paid by the company under the existing CBA and those paid by the company’s competitors in Puerto Rico. The presentation included a chart showing that the company paid an average hourly wage of $17.84 whereas its competitors paid between $5.64 and $13.76, another showing that the company’s profits represented 1.6 percent of ConAgra’s profits in 1992, and another indicating that the company’s sales volume in animal feed had declined sharply during the prior year. After the presentation, the company’s chief negotiator presented the union with the company’s proposal to cut wages from $17.84 to $11.11.

At the next session, the union representative accused the company of negotiating in bad faith. The company’s representative acknowledged that the proposal was “radical,” adding that “we need to be competitive” and “we want the company to continue.” The union and the company then devoted the next eight negotiating sessions to noneconomic proposals.

The parties returned to the wage proposals at their 11th bargaining session, held on September 14, 1993. The company’s representative began by reintroducing the graphs that the general manager had used in his presentation at the first session and soliciting the union’s response to the individual components of the company’s economic proposals, each of which the union rejected. The union representative then stated that the union wanted to use its own proposal, which called for an increase in hourly wages from $17.84 to $20.00, as the basis for negotiation. The company’s representative agreed to consider the union’s wage proposal but reiterated that the company needed to reduce its overall labor costs to stay competitive.

At this point, the union requested that the company turn over its certified financial statements for the prior five years and a number of other financial documents, including information on ConAgra. The company’s representative asked the union to submit its information request in writing and to explain its relevance to the negotiations, stating, “Our positions are not based on the financial statement but more so on the competitiveness of our costs against a market.¼ The issue that we are bringing is not the company’s ability to pay but more so the competitiveness in our market, specifically in our labor costs.”

The union’s representative acknowledged that he understood the company’s assertion: “What you are saying is that the company is not alleging that it does not have the ability to pay.” Subsequently, on September 20, the union sent the company a letter repeating its information request and adding a request for the names of all the company’s clients for the past three years; the letter included no explanation of the reasons for these requests or of their relevance to the bargaining process.

The parties continued to meet through the end of October but made no substantial progress on the wage issue—the union stood by its demand to increase wages above their existing levels, while the company continued to propose reducing wages below existing levels. The union repeated its request for financial information, while the company continued to assert that it had never claimed that it was in poor financial condition or was unable to pay the wages sought by the union and to ask that the union explain the relevance of the requested information.

On October 27, the company’s representative delivered the company’s “last and final offer,” along with a letter stating that the parties had reached an impasse and giving the union notice of the company’s intention to close its facilities that evening. The company locked out the employees on November 1, citing the failure to reach agreement regarding a new CBA. The company had a contingency plan in place to handle a strike and added security for replacement workers.

On November 30, the union demanded financial information from the company again. The company provided the union with information regarding the company’s wages, its competitors’ wages, its pension plan, and the number of temporary workers employed at the company mills but asserted that the union was “not entitled” to any other information regarding ConAgra companies other than the company. The parties unsuccessfully met with a mediator several times between November 1993 and February 1994.

The NLRB brought charges of unfair labor practices against the company, and on June 13, 1995, an administrative law judges (ALJ) of the board issued a decision finding that the company had failed to bargain in good faith by withholding information it was obligated to provide, purposely creating a bargaining “impasse” and making unilateral changes in the terms and conditions of employment in the absence of a genuine impasse.

An employer commits an “unfair labor practice” under Sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act by refusing to bargain collectively with the legitimate representatives of its employees. The duty to bargain collectively includes the duty to meet and confer “in good faith” with employee representatives with respect to wages, hours, and other terms and conditions of employment. When labor negotiations have reached an “impasse” or deadlock, an employer’s unilateral changes in working conditions do not necessarily violate the act as they generally do in the absence of an impasse. Predictably, unscrupulous employers can exploit this rule by sabotaging the negotiations to create an impasse while making a show of negotiating in good faith; this practice is referred to as “surface bargaining.” The NLRB treats “surface bargaining” as a violation of Section 8(a)(5) of the act. The touchstone for determining whether a genuine “impasse” or deadlock exists is the absence of any realistic possibility that continuation of the negotiations will be fruitful.

The ALJ in this case concluded that the company entered these negotiations with a predetermined resolve not to budge from its initial position and that the company engaged in “surface bargaining” and created a false impasse. She relied heavily for this conclusion on the contents of a “contingency plan” that ConAgra sent to the company prior to the beginning of the negotiations. In her view, the contingency plan revealed that the company prepared its bargaining proposals knowing they would be so unacceptable as to ensure rejection by the union, leading to an impasse followed by a strike. She also rested this conclusion on her findings that the company presented the union with “predictably unacceptable” proposals and merely went through the motions of bargaining, arranged for improved security and replacement workers in anticipation of a strike, and hastily declared an impasse while the union continued to offer compromises.

The duty to bargain in good faith also includes the obligation to provide the union with information relevant to the collective bargaining process in certain circumstances. Although the relevance of information concerning the terms and conditions of employment is presumed, no such presumption applies to an employer’s information regarding its financial structure and condition. A union must demonstrate that any requested financial information is relevant to the negotiations to require the employer to turn it over. The Supreme Court has held that, in the context of negotiations over a new CBA, an employer’s refusal to attempt to substantiate a claim of inability to pay increased wages may support a finding of a failure to bargain in good faith. The Court emphasized that it was not saying that the union is entitled to supporting information in every case in which economic inability is raised as an argument against increasing wages; rather, the Court noted that each case must turn on its particular facts. The inquiry must always be whether, under the circumstances of the particular case, the statutory obligation to bargain in good faith has been met.

Prior to 1986, the NLRB construed the Truitt decision to oblige employers to provide unions with supporting financial information even when the employer’s only statements tending to put its financial condition in issue consisted of assertions that acceding to the union’s wage demands would create or exacerbate a “competitive disadvantage.” Subsequently, however, in response to a decision by the U.S. Court of Appeals for the Seventh Circuit, the board underwent a change of heart. The appeals court rejected the board’s finding that the employer claimed an “inability to pay” when an employer asserts that the wages demanded by the union would put the employer at a competitive disadvantage unless the union could show that the employer’s claim was for the time period of the CBA being negotiated. The board announced that it would deal with employer claims of “inability to pay” by distinguishing between employer statements and conduct asserting inability to pay union proposals at some point during the term of the CBA under negotiation and employer statements and conduct suggesting, in a more general fashion, that accession to union demands would create economic difficulties or business losses or the prospect of layoffs someday in the future.

Decision:

The court rejected the NLRB’s conclusion that the company engaged in surface bargaining was not supported by evidence. Although the Contingency Plan is certainly evidence that ConAgra and company thought it likely that the union would resist the proposed concessions, preparing for a possible breakdown of negotiations is quite different from intentionally causing one. Rather, the plan simply shows that ConAgra made a judgment that the union was likely to steadfastly resist any attempt to cut wages below their existing levels. ConAgra and the company were entitled to act on this judgment by preparing for the possibility that the union’s resistance would be strong and persistent enough to deadlock the negotiations and cause a strike.

This same principle applies to the company’s security improvements and arrangements for hiring replacement workers. The company no doubt took these actions in anticipation of a strike but it does not follow that the actions constitute evidence that the company intended to bring about the strike.

With the Contingency Plan as a “smoking gun” removed from the mix, the evidence of the company’s alleged “surface bargaining” is impermissibly weak. The company’s bargaining proposals were predictably a hard sell, but not so unreasonable as to have been predictably unacceptable. The company proposed to reduce wages and benefits significantly below their existing levels, but not below the levels at several of the company’s competitors—including competitors represented by the same union. The company did not categorically refuse to alter its proposals as the negotiations continued, but in fact increased its proposed wages and benefits and its proposed medical coverage. When these modifications failed to advance the negotiations, the company suggested that the parties turn to mediation; the union refused to do so.

The Board also counted the company’s refusal to provide some of the financial information requested by the union as evidence of the company’s bad faith. However, the record indicates that the company did not attempt to use the issue of the information request to deadlock the negotiations; on the contrary, the company sought to defuse the issue by repeatedly pointing out that it was not claiming an “inability to pay” the wages sought by the union, and seeking an explanation of the information’s relevance to the negotiations.

Finally, the Board said that the company had “hastily” declared an impasse even as the union continued to display sufficient flexibility to negate the existence of a genuine impasse. But the company’s announcement that it believed the parties had reached an impasse came only after the parties’ irreconcilable differences had become incontrovertible in numerous fruitless sessions.

Because the Board’s finding that the company engaged in “surface bargaining” was not supported by substantial evidence in the record, and the financial information was not wrongfully withheld, the court denied enforcement of the NLRB’s Order. ^[1]

Answer the following questions:

1. Although it is very rare for an employer to begin negotiations with a request to reduce wages, do you think it is always a symptom of bad faith for a company to do so?

2. Would you think differently if it was the first CBA being negotiated?

3. Under the “duty to bargain in good faith” standard articulated by the Supreme Court, did the company commit an unfair labor practice by failing to provide the union with the requested financial information?

4. Was the company engaging in “surface bargaining?” If so, why wasn’t the union also guilty of surface bargaining because it wouldn’t agree to the company’s wage offer?

Answer rating: 100% (QA)

1 well this is not always every company has their one policy and they try to enhance al... View the full answer