competitive disadvantage

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

People at a Table

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.