Duty to Disclose for Employers Claiming “Competitive Disadvantage” in Labor Negotiations

In a divided opinion published on December 4th, the U.S. Court of Appeals for the D.C. Circuit provided a reminder that employers should always be prepared to substantiate representations made during labor negotiations and clarified the scope of disclosure obligations for employers relying on competitive pressures as a basis for seeking concessions. In KLB Industries, Inc. v. National Labor Relations Board, No. 11-1280 (D.C. Cir. 2012), the employer justified proposed wage concessions by citing, among other things, heightened competition from foreign manufacturers. Union representatives requested an array of information to test the employer’s claim, but the employer largely refused.

The Court of Appeals agreed with the National Labor Relations Board that the employer’s refusal constituted an unfair labor practice under the National Labor Relations Act, which requires employers to furnish relevant information that unions need to perform their role as bargaining representatives. The court found that once an employer makes specific claims of “competitive disadvantage” in labor negotiations, bargaining representatives are entitled to request specific information tailored to verify those claims.  In so doing, the court rejected the suggestion—made by the employer and endorsed by the dissent—that “competitive disadvantage” claims are exempt from these liberal disclosure obligations.

Have questions? With Orrick’s expertise in traditional labor law, we can help you in navigating union-management relationships and in responding to unfair labor practice charges.

D.C. Circuit Enjoins NLRB Posting Requirement

In a key update regarding an issue that will affect all employers, on April 17, 2012 the U.S. Court of Appeals for the District of Columbia Circuit issued an injunction requiring the National Labor Relations Board (“NLRB”) to preserve the “status quo” in its ongoing push to require employers to post its controversial “Employee Rights Notice” informing employees of their rights to organize unions.  As a result of this order, the NLRB is prohibited from enforcing its new requirement that employers post the notice by April 30, 2012.  The NLRB has appropriately acknowledged the Court’s injunction, stating on its website that “The DC Circuit Court of Appeals has temporarily enjoined the NLRB’s rule requiring the posting of employee rights under the National Labor Relations Act” and that “[t]he rule, which had been scheduled to take effect on April 30, 2012, will not take effect until the legal issues are resolved.  There is no new deadline for the posting requirement at this time.”

The D.C. Circuit’s order is an important and welcome “time out” given the uncertainty of the “legal issues” surrounding the NLRB’s posting requirement.  Just last week, the U.S. District Court for the District of South Carolina granted summary judgment to the U.S. Chamber of Commerce in its bid to invalidate the posting requirement, holding that the posting requirement was in violation of the Administrative Procedures Act and that the NLRB’s role is to be “reactive” rather than “proactive.”  But earlier this year, the U.S. District Court for the District of Columbia upheld the NLRB posting requirement against a challenge by the National Association of Manufacturers.  That case is presently on appeal, the outcome of which will determine the next development in this saga.

For now, at least, employers should breathe a sigh of relief and know that they do not need to post the NLRB’s “Employee Rights Notice” until its legality is determined by the courts.

Stay tuned for further developments.