In recent weeks, the National Labor Relations Board has issued several labor-friendly decisions, quickly checking off key items on General Counsel Jennifer Abruzzo's agenda. On November 30, 2022, the General Counsel released a memorandum urging an expansion of the circumstances in which employers must share general financial information (e.g.,w financial statements, tax returns, or records of compensation paid to managerial or supervisory personnel) to unions during collective bargaining. By doing so, the General Counsel seeks to overturn decades of NLRB precedent that require a claimed "inability to pay" statement to trigger any disclosure obligations. If the General Counsel is successful, an employer may be required to provide its general financial information to the union even if it never puts its ability to afford the union's demands at issue during bargaining, marking another significant pro-union departure from existing standards.

An Employer's Obligation to Bargain in Good Faith

The obligation to bargain in good faith requires employers to furnish information requested by a union, so long as the information requested is presumptively relevant to the bargaining process. The NLRB has long held that information regarding an employer's finances is not presumptively relevant unless an employer claims an "inability to pay" or if the information is necessary to verify the truth of an employer's specific factual assertions made in support of its bargaining positions. The General Counsel, however, recently released a memorandum recommending that the NLRB adopt a more relaxed standard, handing unions increased access to financial information. And she provided them (and Region 19) the vehicle to do it.

In PacifiCorp, an electric power company located in Washington state informed the unionbefore successor negotiations had even begunthat it had budgeted 1.5% for a general wage increase. During negotiations, the union proposed a 4.25% general wage increase as part of its economic package, and the employer formally offered a 1.5% general wage increase. When pushed, the employer explained that it had budgeted a 1.5% increase for its overall economic package and any economic proposals would be deducted from the 1.5%. The employer further explained its wage offer was based on the fact that demand had declined during the pandemic, and that agreeing to anything more would "have an effect on its ability to provide competitive power prices due to regulations relating to rate payers." The employer repeatedly reiterated that 1.5% was all it had "budgeted" for a wage increase and all it "had to offer." The employer also repeatedly referred to the decline in electricity consumption as a justification for its position.

In response to the employer's stagnant position, the union demanded the employer open its financial records and provide the following information:

  • All documents used in consideration of the employer's "never changing" 1.5% wage increase, including but not limited to any financial records or calculations, budgets, sales records or sales projections that were considered in the making of this decision.
  • All documents that substantiate the employer's claim that it is unable to offer more than an increase of 1.5% for 2021 and 2.0% for 2022 or that it is unable to meet the union's demand of a minimum increase of 2.5% average general wage increase over the next two years.
  • All relevant documents describing the degree to which the company received any financial support, grant, concession, or financial relief from the federal government or from any individual state.
  • A copy of the operating budget and annual compensation provided by the company to all non-union staff including supervisory and management staff.

The employer refused to provide the majority of documents, noting that it never claimed it was unable to pay a larger increase, rather it simply reflected what the employer "was willing to provide." The union subsequently filed an unfair labor practice charge with the NLRB alleging that the employer had violated Section 8(a)(5) of the Act by failing to provide information.

The General Counsel made two key findings. First, the General Counsel concluded that the employer unlawfully refused to provide specific financial information which was necessary for the union to evaluate and verify the employer's factual statements made in support of its bargaining positions. The General Counsel determined that the employer had made specific factual assertions about how much it had budgeted for a wage increase and that its revenues decreased due to the pandemic. Therefore, the General Counsel determined that the employer violated Section 8(a)(5) of the Act by failing and refusing to provide the specific financial information.

The General Counsel, however, also concluded the employer did not violate the Act by refusing the union's demands for general financial information under existing law. As the General Counsel acknowledged, the employer never said it could not afford to pay higher wages or that it would soon go out of business if it agreed to do so. Instead, the employer explained that its revenues had declined due to decreased demands and rate increase moratoriums and that this adversely affected its ability to provide competitive power prices in the future. Nevertheless, the General Counsel urged Region 19 (which covers Alaska, Idaho, Montana, Oregon, and Washington) to use this case as a vehicle to urge the Board to overturn Arlington Metals Corp. and Nielsen Lithographing and adopt her proposed new approach to "inability to pay" cases.

Takeaway: The NLRB Is Not Likely to Give Employers the Benefit of the Doubt

Under the General Counsel's preferred standard, an employer would effectively assert an inability to pay anytime it raised profitability or competitiveness in response to a union's bargaining demands. Thus, whenever an employer asserts the union's demands will injure its business in some way, even if that injury is not imminent or likely to be felt even within the lifetime of the contract, the employer would put its general financial health at issue, allowing the union broad access to the employer's financial records. Such a rule would mark a significant departure of the current standard. Here are examples of statements employers often make about finances during bargaining, which now may find their way to the General Counsel's desk:

  • Demand has dropped significantly as a result of the pandemic. We are doing the best we can by our employees.
  • Economic conditions have changed fast and we have to cut everywhere. We have to react quickly just to maintain operations.
  • Competitors are trying to take our business away. We need to remain competitive right now. If we were to raise salaries to X, we won't be able to compete with other companies.
  • Costs are tight right now. Supply is down. There's a shortage of X that's resulting in increased costs.
  • We are hoping conditions will improve soon.

Given the General Counsel's stated interest in changing the inability to pay standard, unions will likely be aggressively demanding access to employers' financial records. Employers should be careful of the language they use when rejecting financial proposals, refusing to provide financial information, or generally making representations about the company's financial situation. Employers with questions or concerns should reach out to one of our labor attorneys for assistance.