Conagra, Inc. v. National Labor Relations Board

WALD, Circuit Judge,

concurring:

The panel today declines to enforce a Board order requiring financial disclosures from an employer, on the ground that it represented an unexplained departure from the Board’s own precedent in The Nielsen Lithographing Company, 305 N.L.R.B. 697 (1991). See supra part II.A. This disposition is mandated by the “axiom[ ]” that agencies must either follow their own precedent or explain why they depart from it. Kelley v. FERC, 96 F.3d 1482 , 1489 (D.C.Cir.1996). I write separately to voice my belief that there are sufficiently serious theoretical and practical fissures in the Nielsen reasoning itself that the Board should revisit it with an eye to its consistency with the purposes of the National Labor Relations Act, 29 U.S.C. § 151 et seq. (“the Act”).

The Supreme Court’s decision in NLRB v. Truitt Manufacturing Company, 351 U.S. 149 , 76 S.Ct. 753 , 100 L.Ed. 1027 (1956), affirming a Board finding that it is an unfair labor practice for an employer to refuse to substantiate a claim that it cannot meet union bargaining demands because of its poor economic circumstances, dealt with “[o]ne of the most delicate tasks of our labor policy”— ensuring that employers and unions discharge their statutory duty to bargain in good faith. James A. Gross et al, Good Faith in Labor Negotiations: Tests and Remedies, 53 Cornell L.Rev. 1009, 1009 (1968). Among the factors complicating this task are the “difficulty of policing a subjective state of mind,” id., and the tension between the government’s twin objectives of ensuring effective collective bargaining and refraining from unduly restricting the parties’ negotiating tactics or requiring that negotiations result in particular outcomes. See id.; see also 29 U.S.C. § 158 (d) (“[T]o bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith ... but such obligation does not compel either party to agree to a proposal or require the making of a concession....”). The Board’s daunting task is to formulate rules governing the bargaining process that are clear enough to guide the participants in fulfilling their legal obligations, but which retain enough flexibility to enable the Board to ferret out bad-faith bargaining even when practiced in subtle ways.' See Gross et al, supra, at 1010-11 . As precarious an undertaking as it may be, overseeing the good faith of labor negotiations is essential to the goals of the Act, because an employer can destroy the bargaining status of a union “by going through the motions of negotiating almost as easily as by bluntly withholding recognition.” Archibald Cox, The Duty to Bargain in Good Faith, 71 Harv. L.Rev. 1401, 1413 (1958). The employer’s duty to supply the union with information relevant to the employer’s bargaining positions “epitomizes the basic issue concerning the meaning of good faith,” id. at 1425, and has understandably preoccupied the Board from the Act’s beginnings. See Pioneer Pearl Button Co., 1 N.L.R.B. 837 (1936); The Sherwin-Williams Co., 34 N.L.R.B. 651 (1941).

The Board’s original attempts to distill from Truitt an essential insight into the nature of the good-faith inquiry for financial disclosure were commendable; my concern is with the Board’s later Nielsen rule which, I think, extracts and applies the periphera of Truitt, rather than its core meaning. I conceive the essence of Truitt to be the principle that an employer displays a lack of good faith by making a claim purportedly based on objective economic data in the course of bargaining as to why it will not or cannot meet the union’s demands, and then refusing to accede to the union’s reasonable requests for information necessary to establish that the claim is made “honestfly],” Truitt, 351 U.S. at 152 , 76 S.Ct. at 755-56 , and is “accura[te],” id. at 153 , 76 S.Ct. at 756 —i.e., that the employer has not made the claim up out of whole cloth or out of an accidentally or intentionally self-serving misconstruction of relevant information in its possession.

The type of bad-faith negotiating that troubled the Truitt Court would be easily discernible in analogous situations outside of the collective bargaining context. For example, *1448 if a prospective buyer of a house assures the house’s owner that his bid is much more attractive than it might appear because a recent geological survey shows that the house sits on an earthquake fault, the buyer’s refusal to turn over the survey upon request would intuitively east doubt on his good faith, and introduce a strong suspicion that his claim was dishonestly made. The buyer knows that the owner needs the survey in order to appraise a crucial factual claim that he himself has introduced into the negotiations. If he refuses to turn it over, he forces the owner to make a “Hobson’s choice” of the type described by then-Judge (now Chief Judge) Posner in Nielsen Lithographing Company v. N.L.R.B., 854 F.2d 1063 (7th Cir.1988), indulging in the hope that the owner will be too risk-averse to play “Russian roulette” (as most of us are), and will simply assume that the buyer’s representations are accurate and accept the offer. See id. at 1065 . 9 Of course, an employer’s refusal to turn over information in its possession might not constitute bad faith even when the information could assist the union in assessing the accuracy of the employer’s bargaining positions, if the employer has a good-faith reason for refusing to turn it over. The Supreme Court and the Board have recognized that the duty to turn over relevant information upon request is not absolute, see Detroit Edison Company v. NLRB, 440 U.S. 301, 318 , 99 S.Ct. 1123, 1132-33 , 59 L.Ed.2d 333 (1979), and that an employer may legally refuse to accede to an information request for legitimate reasons, such as a need to keep the information out of the hands of its competitors or to protect the privacy of its employees. See, e.g., Minnesota Mining & Mfg. Co., 261 N.L.R.B. 27 (1982). But if, as in Truitt, the employer denies the request based on an illegitimate reason or no reason at all, see Truitt, 351 U.S. at 150-51 , 76 S.Ct. at 754-55 , the employer’s bad faith seems evident.

The Board’s Nielsen rule, however, permits employers to withhold financial information that would assist the union in evaluating the accuracy of the employer’s negotiating claims for no reason at all, even when the accuracy of these claims is crucial to the union’s choice of negotiating strategy and cannot be established without access to supporting financial information. The Board’s dissenting Chairman in Nielsen pointed out that Nielsen had sought to explain the need for concessions from the union by making factual claims about its present economic condition, and concluded that under the Truitt principle Nielsen’s refusal to turn over the information constituted bad faith. See Nielsen, 305 N.L.R.B. at 706-07 (Chairman Stephens, dissenting). The dissenting Chairman’s construction of Truitt as encompassing a disclosure obligation whenever the employer makes factual claims the accuracy of which could be evaluated using information in the employer’s possession is consistent with the Seventh Circuit’s Nielsen opinion, see id. (citing Nielsen), and in my view the Board strayed from the “essential meaning” of Truitt in declining to extend it at least that far. Nielsen, 305 N.L.R.B. at 700.

Placing upon employers the obligation to supply the union, upon request, with financial information necessary to substantiate the employers’ objectively verifiable negotiating claims would introduce a valuable measure of self-regulation into the collective bargaining process. Such a rule would give unions leverage to keep employers honest, mitigating the Board’s need to police the employers’ subjective state of mind. See Gross et al., supra, at 1009; cf. Truitt, 351 U.S. at 152 , 76 S.Ct. at 755-56 (“Good-faith bargaining necessarily requires that claims made by either *1449 bargainer should be honest claims.”). It also would enable unions to correct assertions by employers that are honestly offered, but inaccurate. Cf. Truitt, 351 U.S. at 153 , 76 S.Ct. at 756 (“If [an asserted inability to pay an increase in wages] is important enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy”). The Nielsen rule accomplishes these ends, but in too limited an arena — it extends only as far as the line separating claims of “competitive disadvantage” from claims of “inability to pay"’ during the term of the CBA. The rationale for this line set forth in the Seventh Circuit’s decision in NLRB v. Harvstone Manufacturing Corporation, 785 F.2d 570 , 577 (7th Cir.1986), and accepted by the Board in its Nielsen decision, was that even an employer operating at a competitive disadvantage would “quite conceivabl[y]” be able to pay increased wages during the course of one CBA. But that rationale becomes shaky if the term of the CBA under negotiation is relatively long — as it was when the negotiations between the parties in this case began. See Deferred Appendix at 1155 (proposed CBA for a term of five years).

Adopting the theory of the dissenting Chairman in Nielsen would also correct an inaccurate assumption made by the Nielsen majority. The Nielsen majority’s central premise is that an employer’s claim of economic difficulties or competitive disadvantage is, for all practical purposes, identical to an unadorned refusal to pay what the union proposes. See Nielsen, 305 N.L.R.B. at 700 (“[T]he employer who claims only economic difficulties or business losses or the prospect of layoffs is simply saying that it does not want to pay.”). In fact, these two types of claims are fundamentally different, and the difference is crucial to the bargaining process. Whereas an employer’s pure unwillingness to pay is verified simply by the employer’s statement to that effect, a claim of pending competitive ruin generally requires some external verification before a union can reasonably rely upon it in deciding how to structure its negotiating strategy. Experience demonstrates that unions may well decide to modify their proposals in the face of the employer’s verified claims of economic hardship or competitive disadvantage. Unions frequently put job security at the top of their negotiating agendas, see, e.g., Michael H. Cimini, Labor-management bargaining in 1995, Monthly Lab. Rev., Jan./Feb.l996 at 32, and may seek to further this interest by lowering their wage demands in order to buy an increase in the employer’s long-term ability to provide jobs. A union might also seek increased linkages between employee compensation and the profitability of the company in return for reducing its hourly wage demands. See id. at 38 (“[S]everal airlines asked their unions to agree to wage and benefit concessions ... The unions wanted something in return for those concessions— stock in the carriers, a greater voice in how the airlines are run, and improved job security.”); id. at 39 (“Delta asked the pilots union ... to make wage and productivity concessions. The union said it would agree to terms if Delta gave it concessions in return— a representative on the airline’s board of directors, stock options, profit sharing ....”); see also Compensation is Increasingly Linked to Corporate Profits, NAM President Says, Daily Lab. Rep. (BNA), Apr. 18, 1997, at A-9 (“Corporations are increasingly tying compensation to business profits as hourly wages increasingly account fora smaller share of compensation-”); Ed-wajrd Cohen-Rosenthal & Cynthia E. BuR-ton, Mutual Gains: A Guide to Union-Management COOPERATION 253-60 (2d ed.1993); IBEW Local Reaches Tentative Agreement with L.A. Department of Water and Power, Daily Lab. Rep. (BNA), June 19, 1996, at A-9. But absent the information necessary to ascertain whether the employer’s claims of financial hardship or competitive disadvantage are accurate, the union must guess at whether such a course truly represents the best interests of its constituents. In this sense it faces the same “Hob-son’s choice” that obtains when the employer makes an unsupported “plea of poverty.”

I believe that the Board’s Nielsen rule has weakened the “gravitational field of Truitt” too severely for that opinion to retain its vitality, Nielsen, 854 F.2d at 1067 , and hope that the Board will see fit to reexamine its Nielsen rule in the near future, and adopt an *1450 alternative more consistent with the spirit of Truitt and the purposes of the Act.

. The "Russian roulette” situation does not exist in a wellfunctioning market, because the presence of alternative buyers enables the seller to reject an offer tainted by a prospective buyer's apparent bad-faith bargaining. But as the Supreme Court observed in United Steelworkers v. Warrior & Gulf Navigation Company, 363 U.S. 574, 580 , 80 S.Ct. 1347, 1351-52 , 4 L.Ed.2d 1409 (1960), no such option generally exists in the collective bargaining context, wherein the parties are under a "compulsion to deal with one another, as opposed to dealing with other parties.” Thus, although the type of bad-faith bargaining represented in the house-selling hypothetical is the same as that present in the collective bargaining context when a party refuses to turn over information, the consequences of that bad-faith bargaining differ in the two contexts; the prospective purchaser of a house would not be under any legal obligation to turn over information relevant to his bargaining claims.