As appearing in the Human Resources Association of Central Ohio (HRACO) newsletter
The Difference Between an Unwillingness to Pay and an Inability to Pay is Enormous
A company’s financial health is generally confidential information that is not known to the rank and file workforce or the union that represents them. Yet, there is a little known secret in the world of labor relations, and unsuspecting companies find themselves in a pickle when, during union negotiations, they insinuate they cannot afford to give their workers a raise.
The parlance is that a company “pleads poverty.” The penalty is that the company must allow the union to inspect their financial records to validate whether a raise is possible.
The company that makes Stella D’oro cookies was in the middle of labor contract negotiations. When the union pressed for wage increases, the company refused and said it was “not in the business to sustain losses” and “had to reduce the costs of the labor agreement in order for them to stay in business.” The union then demanded the employer’s audited financial statements to verify that claim. In response, the company allowed the union to inspect a 19-page audited financial statement at the next bargaining session but prohibited the union from retaining a copy of the confidential document.
The union filed an unfair labor practice charge against the company for refusing to allow it to keep the documents. The NLRB – not surprisingly – agreed that the employer should have given the confidential documents to the union and by not doing so committed an unfair labor practice. The employer appealed and the Board’s decision was overturned on the hair splitting difference between an “unwillingness to pay” and an “inability to pay.”
The Court of Appeals rejected the NLRB’s conclusions, and ruled that the NLRB had arbitrarily and improperly applied a key distinction in federal labor law: when an employer claims that contract proposals are unaffordable, the union is entitled to information to back up those claim, but an employer that merely states its unwillingness to pay triggers no such duty. Stella D’oro asserted an unwillingness – not an inability – to pay higher wages. Further, even if Stella D’oro had an obligation to provide the documents, that obligation was satisfied when the union reviewed the financial statement and took notes about them.
What Should HRACO Members Do
The key takeaway from this case is to recognize that in labor relations wording is everything. There are grave ramifications if you use one word over another when doing union avoidance training, election campaigning, and contract negotiations. Specific to this case, an employer that claims an inability to pay will be obligated to “open its books” to the union, and the NLRB will aggressively enforce that right. An employer that merely explains it believes a union proposal is foolish, or that is unwilling to agree to the union’s terms, avoids that obligation.
Matt Austin is a Columbus, Ohio employment lawyer who owns Austin Legal, LLC, a boutique law firm with offices in central and northeast Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. Matt can be reached by email at Matt.Austin@Austin-Legal.com or by phone at 614.285.5342.