Subcontracting and Relocating Union Work

Issue

What must companies do when eliminating union operations, subcontracting union work to third parties, or relocating work from organized facilities, and how can they minimize their obligations and legal exposure?

Brief Answer

Companies should avoid contract language that restricts their ability to reduce work at unionized locations. Assuming no contractual bar, companies can always unilaterally close all or part of their business. Conversely, they will normally be required to bargain over subcontracting and relocation decisions. Recent case law, however, has eliminated bargaining obligations in some subcontracting and work relocation situations where the decision can be characterized as a core entrepreneurial right falling outside the scope of mandatory bargaining. Even when decision bargaining is not required it may still be prudent to avoid charges that the decision was motivated by anti union animus. Bargaining over the decision's impact on affected employees will be required, even when decision bargaining is not.

Issues not unique to union facilities such as partial plan terminations, WARN, and COBRA obligations are not addressed in this memo.

Discussion

Assuming contract language does not prohibit a company from eliminating unit work, a series of NLRB and court decisions provide guidance on employer obligations when reducing work at union locations. The lead cases build on one another to construct a general roadmap, but fail to provide bright lines for all situations. Employers must bargain over some decisions to remove unit work, but not others. Primarily, the nature of the work elimination drives the decision bargaining obligation. For instance, decision bargaining is required in most subcontracting and relocation situations, but is not necessary when companies permanently close all or part of their business. Adding confusion are those decisions that can be characterized in more than one way. For example, one court treated a relocation as a partial business closure, and therefore outside the scope of mandated bargaining. Also, some courts have failed to impose bargaining obligations where subcontracting could be characterized as a core entrepreneurial decision. Even when decision bargaining is not required, it may still be prudent in some cases to counter any allegations that anti union animus, and not other legitimate business concerns, underlie the proposed change. Aside from decision bargaining, employers must negotiate over the impact their decision to eliminate work will have on affected employees.

I. Contract Issues.

Absent contractual work preservation clauses companies are free to eliminate, relocate or subcontract union work after any midterm bargaining obligations are satisfied. As each contract has unique language an examination of the pertinent provisions is critical. In general, where the contract does not contain a work preservation clause, and expressly or implicitly gives management the right to reduce unit work, companies may do so. Express work preservation provisions and zipper clauses may prevent such changes. The specific language will determine what if any midterm bargaining obligation exists.

Taking the most favorable first, where the contract contains no work preservation language and an express or broad implicit right, typically in the management rights clause, to eliminate, transfer or subcontract work, the employer may do so without engaging in midterm decision bargaining. UAW v. NLRB, 765 F.2d 175, 183 n.30 (D.C. Cir. 1985). An employer's obligation arguably was met when contract renewal negotiations took place.

The language giving management the right to make the contemplated change, however, must be "clear and unmistakable." Uforma/Shelby Business Forms, Inc. v. NLRB, 111 F.3d 1284, (6th Cir. 1997) citing Metropolitan Edison Co. v. NLRB, 460 U.S. 693, 708 (1983). See also Standard Motor Products v. UAW, 331 NLRB No. 195 (2000). In Uforma, the court found an employer did not violate § 8(a)(5) of The Labor Management Relations Act, 29 USC 141-87 (2001) ("LMRA") when it abolished third shift operations and laid off some affected employees without first bargaining with the union. It based its decision on the breadth of the management rights clause, which gave the employer the right to make such decisions unilaterally. The provision need not catalog every conceivable permutation of a decision to lay off, provided it is broad enough to encompass the action taken. Uforma, 111 F.3d at 1290.

Where no work preservation language is in place, but management has not previously bargained an express or broad implicit right to implement the contemplated change, decision bargaining may be required. Milwaukee Spring v. UAW, 268 NLRB 601, 602 (1984). For instance, work relocation and subcontracting situations will often trigger decision bargaining obligations. See discussion infra section II. Once bargaining reaches an impasse, however, the employer is free to implement its decision. Id. at 603.

Where there is a work preservation clause the employer will be required to bargain over its decision and may not unilaterally implement the decision without union consent. Id. at 604. Such language serves as an effective barrier to changes a union finds unacceptable, even in the face of business necessity. For instance, in IAM v United Technologies Corp, 230 F.3d 569 (2d Cir. 2000), a seemingly modest job security clause requiring the employer to make "every effort" to preserve work was found to be an effective bar to transferring unit work. Even though other contract provisions gave management the right to "direct operations," "assign work," and "transfer any part of an operation," the "every effort" clause was enough to mitigate those rights and require proof that every effort was taken. Construing the clause to require making "every reasonable effort to preserve bargaining unit work" the court suggested steps necessary for compliance. The employer must weigh restructuring options that explicitly take workforce preservation into account as a separate and important value; pursue in good faith reasonable concessions from the union or state; and show that a failure to transfer the work would entail serious financial consequences. Id. at 579. Finding the company had violated § 301 of LMRA when it failed to show it met the outlined test, the court upheld the lower court's action which enjoined the planned move. Clearly, even seemingly loose language inserted to quiet union concerns during negotiations about future work relocations will be strictly enforced by the Board and require the company to show concrete efforts were taken before implementing its decision.

Lastly, where the contract contains a zipper clause union consent is required, and the union need not even engage in midterm bargaining. UAW, 765 F.2d at 180.

Employers must avoid restrictive language limiting their right to move or eliminate work from a union facility. Only when specific work preservation or zipper clauses are added to the contract will an employer be effectively prevented from taking unilateral midterm action. Absent such provisions an employer may at worst have to bargain to impasse on its decision prior to implementing necessary operational changes.

II. Decision Bargaining Obligations.

LMRA requires employers to bargain over some decisions to eliminate unit work, and encourages them to do so in all situations. Section 8(a)(5) of LMRA makes it an unfair labor practice for an employer to refuse to bargain collectively with employee representatives. Section 8(d) defines the issues subject to mandatory bargaining; wages, hours, and other terms and conditions of employment. Over time, pertinent case law has clarified the scope of § 8(d).

A. A Decision To Close All Or Part Of A Business Is Not A Mandatory Subject Of Bargaining.

When an employer permanently terminates its entire business it is under no obligation to bargain about its decision. In Textile Workers Union of America v. Darlington Mfg. Co, 380 U.S. 263 (1965), the Court held that an employer has the absolute right to terminate its entire business for any reason, including anti union animus, without violating LMRA. Id. at 268. In Darlington, the company ceased all operations upon learning that its employees voted to unionize. Although clearly motivated by vindictiveness, the company's decision was found not to have violated § 8(a)(3) of LMRA because that section is designed to protect future collective rights, which no longer exist in permanent closure situations. Id. at 272-74. In addition, the Court found that there was no requirement to bargain concerning a business decision to terminate an enterprise. Id. at 267 n5. Employers therefore are free to permanently cease their operations at any time, and for any reason, without triggering decision bargaining obligations.

In 1981 the Supreme Court expanded the concept to partial business closures. In First Nat'l. Maint. Corp. v. NLRB, 452 U.S. 666 (1981), the Court held an employer had no obligation under LMRA to bargain over its decision to close a part of its business. Id. at 686. First National Maintenance ("FNM") performed commercial cleaning services for a number of clients in the New York City area. Each client location was considered a separate part of FNM's business. The company decided to terminate its relationship with a client, which led to the elimination of employees working at that site. FNM failed to bargain over its decision and the union charged it with violating § 8(a)(5) of LMRA. The Court referred to the balancing test outlined in Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203 (1964) in reaching its decision. Id. at 679-80. See discussion of Fibreboard factors infra section II B 1.

Applying the factors, it found the employer had no obligation to bargain over management decisions that have a substantial impact on employment unless the benefit for labor management relations and the bargaining process outweighs the burden placed on the conduct of the business. Id. at 679. Applying the criteria to partial closure decisions the Court held that the harm likely to be done to an employer's need to operate freely in deciding whether to shut down part of its business for economic reasons outweighed the incremental benefit union participation in making the decision may bring. Id. at 686.

The Court, like it did in Fibreboard, ruled on narrow factual grounds. While exempting partial closure decisions from § 8(a)(5) it signaled that subcontracting decisions will continue to be treated differently and will normally trigger bargaining obligations, based on a case by case analysis. Id. at 686 n22.

B. Most Subcontracting and Relocation Decisions Are Mandatory Subjects Of Bargaining.

Companies deciding to subcontract unit work, or relocate work from a union facility will normally be required to bargain over their decision.

1. Management Must Bargain Over Most Subcontracting Decisions.

Subcontracting decisions generally fall within the scope of LMRA § 8(d), and trigger bargaining obligations. In Fibreboard, 379 U.S. 203, the Court held that a decision to replace unionized maintenance employees with third party contracted employees was a mandatory subject of bargaining, and a failure to do so violated § 8(a)(5) of LMRA. Id. at 209. It also supported the Board's remedy, which required the company to bargain with the union, and reinstate employees with back pay to the jobs they previously held. Id.

The Court took pains to emphasize that its holding was fact specific and did not apply to each and every instance of subcontracting. In Fibreboard, the contractor performed the exact same work done by union employees, in the very same plant. In effect, one group of workers replaced another. The Court examined the plain language of the statute, the purpose of LMRA to promote industrial peace, and industrial practices that indicated subcontracting was often a subject of collective bargaining. It then balanced these factors against the right of an employer to operate its business. In finding bargaining was required, the Court noted that the contemplated change did not alter the company's basic operation, nor was capital investment required. Therefore, the employer's right to manage its business was not significantly abridged, and national labor policy warranted subjecting the issue to the process of collective negotiation. Id. at 213-14.

The narrow nature of Fibreboard is reflected in a more recent case decided by the Court of Appeals for the Third Circuit. Dorsey Trailers, Inc. v. NLRB, 134 F.3d 125 (3d Cir. 1998). In Dorsey, the company, a maker of flatbed and dump trailers, unilaterally decided to subcontract a portion of its work to another manufacturer, without prior notice to, and without bargaining with the union. Id. at 128. The reason alleged by the company was to increase capacity and avert a loss of sales. It was not to avoid labor costs. The Board found the company violated § 8(a)(5) when it failed to bargain because the decision to subcontract work was not a change in the scope and direction of the business, but a direct replacement of unit employees with contractor employees. Id. at 129. The court reversed. Noting the narrow application of Fibreboard, and the Court's thinking in the later First National Maintenance case dealing with partial business closures, the Dorsey court looked at the reasons underlying the company's decision to subcontract work, instead of the type of decision being made. Id. at 131. Finding economic profitability was the sole reason for the company's action, the court relieved the employer of any decision bargaining obligation. Id. Relying principally on First National Maintenance, the court noted that given the employer's need for unencumbered decision making to run a profitable business, bargaining should be required only if the benefit from collective bargaining outweighs the burden placed on the business. Id. at 131. Where, as here, the employer's decision was prompted by factors outside the control of the union, bargaining places too great a burden on management.

The Dorsey court was careful to limit its decision to the facts presented and emphasized that certain subcontracting decisions must be submitted to union bargaining. Id. at 132. Where the motivation is avoidance of labor costs, including a desire to reduce or eliminate overtime, decision bargaining is required. Id. at 133.

Reinforcing the requirement to bargain where labor costs prompt the subcontracting decision is the Board's decision in Standard Motor Products, 331 NLRB No. 195. The company informed the union that it would subcontract work if necessary concessions were not provided. Finding that subcontracting is a mandatory subject of bargaining, unilateral action is impermissible prior to impasse. Rejecting the company's contention that impasse had been reached, the Board found the company violated § 8(a)(5). Impasse requires evidence that there is no realistic possibility that continued discussions will be fruitful. Standard Motor Products suggests the Board will continue to require decision bargaining in most subcontracting situations, and employers will be required to prove that impasse has been reached prior to implementing its plans.

When subcontracting work, bargaining obligations are fact sensitive. When third parties replace a current workforce and perform identical work within the same facility bargaining is required. Likewise, negotiations are necessary when labor costs are part of the economic rationale for the subcontracting decision. Only when economic considerations beyond the ability of the union to address drive the decision is an employer relieved of the obligation. It is better to err toward meeting with the union unless a clear case can be made that factors other than labor costs motivated the decision.

2. Work Relocation Decisions Will Often Require Negotiations.

Management obligations regarding work relocation decisions were substantially clarified in 1993. Where at least part of the company's basis for relocating work is labor cost, and negotiations could possibly cure employer concerns, bargaining over the decision is required. In United Food & Commercial Workers v. NLRB, 1 F.3d 24 (D.C. Cir. 1993) ("Dubuque"), the court approved the Board's test to determine decision bargaining obligations in work relocation situations. Id. at 1. In Dubuque, the company announced its decision to relocate operations from one plant to another without bargaining with the union over its decision. The Board concluded the failure to bargain violated LMRA § 8(a)(5). It made its decision by applying a newly announced test that drew on prior Supreme Court decisions which had shaped the contours of bargaining obligations in other settings. First National Maintenance Corp., 452 U.S. 666 (partial business closures), and Fibreboard, 379 U.S. 203 (subcontracting).

Specifically, the test initially places the burden on the Board's General Counsel to establish that the relocation was unaccompanied by a basic change in the nature of the employer's operation. Where met, an employer will only be able to escape a bargaining obligation if it can prove that the relocation involves a change in the scope and direction of the enterprise, or that the work at the new location varies significantly from that at the former location, or that the work is no longer performed anywhere. Alternatively, the employer may proffer a defense that direct and indirect labor costs were not a factor in the decision, or that even if they were the union could not have offered concessions that could have changed the employer's decision. Id. at 29-30.

In interpreting the test the court noted that it involves three layers of analysis. First, it recognizes a category of decisions lying at the core of entrepreneurial control in which employers may take unilateral action. Second, it looks at the subjective reasons for the move and only where labor costs are a factor is the third layer implicated. The third layer provides a futility provision permitting the employer to escape bargaining obligations where the union either would not, or could not offer sufficient concessions to change the employer's mind. Id. at 30. Even when bargaining is required the court noted that the Board pledged to consider circumstances, such as the need to implement relocations expeditiously, in determining when an impasse has been reached. Id.

The Dubuque test gives employers guidance when structuring the rationale for a relocation decision. Decisions based on factors other than labor cost, or when projected labor savings exceed what a union would or could offer in concessions, excuse an employer from any decision bargaining obligation. Even where bargaining is required, impasse may be reached quickly if time is of the essence in moving to the new location.

At least one Appellate Court, however, has rejected Dubuque. Dorsey Trailers, Inc. v. NLRB, 233 F.3d 831 (4th Cir. 2000). Dorsey, the same company involved in the subcontracting case discussed above, decided approximately two years after subcontracting the work in the first case, to actually relocate its operations to a facility in Georgia. Following failure of contract renewal bargaining, the decision to relocate was made. Although bargaining continued during the strike, and the company gave the union specific demands that may have prevented the relocation, the Board found the company implemented its decision before impasse was reached and violated § 8(a)(5). Id. at 837.

The court failed to uphold the Board's decision, and found the relocation not to be a term or condition covered under LMRA § 8(d). Id. at 841. Relying on First National Maintenance instead of Dubuque, the court considered the relocation decision to be more akin to an elimination of part of a business than one that falls within the definition of a term or condition of employment. Quoting First National Maintenance, it noted that "Congress had no expectation that the elected union representative would become an equal partner in the running of the business enterprise in which the union's members are employed." Id. at 841. While noting that the First National Maintenance Court did not reach the question of whether its decision applied to relocations, the Dorsey court inferred it did. Id. at 842. Preferring to look at the Court's reasoning in First National Maintenance instead of rigid categorization by decision type, the Dorsey court found the company's decision to commit investment capital fundamental to the basic direction of a corporate enterprise, and that a plant relocation is not a term or condition of employment. Although the decision may affect "tenure," tenure is a distinct and separate concept from a term or condition. Id. at 842-43. While bargaining over the impact the relocation had on employees is required, decision bargaining is not. Id. at 843.

The court specifically rejected Dubuque in making its findings. It found Dubuque flatly inconsistent with First National Maintenance. It also found Dubuque's logic flawed in trying to separate labor costs from other economic considerations. Id. at 844. In summing up its position, the court stated that § 8(a)(5) simply does not cover plant relocations or partial closures. Expanding § 8(a)(5) to cover such decisions would expand the statute beyond all proper bounds. Id. at 843.

Although the judiciary has not universally followed Dubuque it continues to be the test used by the Board. In two post Dorsey cases the Board relied on Dubuque to analyze whether an employer met its decision bargaining obligations in relocation situations. See Vico Products Co. v. UAW, 2001 NLRB LEXIS 836 (2001) (finding employer failed to meet obligations); and Bell Atlantic Corp. v. CWA, 2001 NLRB LEXIS 944 (2001) (finding employer did meet obligations).

While Dorsey has brought some uncertainty to decision bargaining over relocations it is still prudent to engage in the process until a more definitive ruling is issued by the U.S. Supreme Court, especially for firms located outside the Fourth Circuit.

3. Timely Notice Requirements.

When decision bargaining is required it is critical that timely notice be given to the union. A union's failure to request decision bargaining following receipt of notice waives its right to file a § 8(a)(5) charge. The waiver though must be clear and unmistakable. Dunbar v. Carrier Corp, 66 F. Supp. 2d 346 (N.D. N.Y. 1999).

An employer desiring to make material changes in terms and conditions has a duty under LMRA to give timely notice to the union, and afford it a meaningful opportunity to bargain before implementing the changes. Bell Atlantic Corp., 2001 NLRB LEXIS 944. Where notice is given too close to the date of implementation, or under circumstances where it is clear that the employer has no intention of bargaining, the act is violated.

While union notification after a general announcement will often be considered untimely, employers may announce plans to the workforce just after, or simultaneously with, informing the union, provided implementation of the plan is not immediate, and the union has an opportunity to change the company's mind. Id. Employers may even present a fully developed plan as long legitimate consultation can occur before the plan takes effect. Id.

For instance, in Bell Atlantic, the company informed the union, and several hours later announced a relocation plan to the workforce that would not be implemented for some six months. It then gave the union an opportunity to bargain. Finding effective notice, the Board refused to merit a § 8(a)(5) claim, and additionally found the union waived its rights when its only request was for information related to the move some two months following the announcement. Id. See also Mercy Hosp. of Buffalo v. CWA, 2001 NLRB LEXIS 994 (2001) (union's failure to seek decision bargaining after effective notice waived its right to claim § 8(a)(5) violation).

Consistent with national labor policy, only clear and unmistakable waivers will be recognized. Dunbar, 66 F. Supp. at 351. Where, however, untimely notice is given, a failure to request bargaining will not be fatal to a union § 8(a)(5) charge. In such cases the union faces a fait accompli and is effectively denied a meaningful opportunity to negotiate. Id. See also Standard Motor Products, 331 NLRB No. 195.

C. Job Eliminations May Also Trigger Charges Of Anti Union Animus.

In making changes that impact employment levels companies should conduct themselves in a way that prevents claims of anti union animus. Section 8(a)(3) makes it an unfair labor practice for an employer to discriminate in regard to hire, tenure, or on the basis of any term or condition of employment based on union affiliation. Section 8(a)(1) makes it unlawful to interfere with, restrain, or coerce employees in the exercise of self-organization and concerted activity rights guaranteed them in § 7 of the Act.

When anti union animus is claimed, and §§ 8(a)(1) and (3) are invoked, courts will often apply the test outlined in NLRB v. Wright Line, Inc., 662 F.2d 899, 901-02 (1st Cir. 1981). The General Counsel must first make a prima facie showing sufficient to support the inference that the employer's opposition to protected conduct was a motivating factor in its decision. Once established, the burden shifts to the employer to demonstrate the same action would have taken place even in the absence of the protected conduct. Id. at 901-02. Where legitimate economic reasons drive the company's decision, the employer will be found to have met its burden. Dorsey Trailers, Inc., 233 F.3d at 840-41.

Actions taken solely to avoid the costs and obligations of a collective agreement do not fall within the spectrum of legitimate business reasons. Such single focused decisions have been found to violate §§ 8(a)(1) and (3). Los Angeles Marine Hardware Co. v. International Bhd. of Teamsters, 235 NLRB 720, 736 (1978).

In reviewing claims of anti union animus courts will also closely inspect the employer's motivation leading to the contemplated change. In International Paper Co. v. NLRB, 115 F.3d 1045 (D.C. Cir. 1997), the court relying on NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 34 (1967), divided employer conduct into two categories. That which is "inherently destructive" and that which is "comparatively slight." Id. at 1048. Where the conduct is inherently destructive of important employee rights no proof of anti union motivation is needed, and the Board can find an unfair labor practice even if the employer introduces evidence that the conduct was motivated by business considerations. If the adverse effect is comparatively slight, anti union motivation must be proved if the employer offers evidence of legitimate and substantial business justification for the conduct. Id. In International Paper the court concluded that the company's decision to permanently subcontract work while engaged in a lockout, but after fulfilling its bargaining obligation, feel into the comparatively slight category.

In then looking at the company's proffered reasons for its decision the court found no § 8(a)(3) violation. Specifically, the company proved the economic benefits of implementing the permanent subcontract during the lockout. The court also found no improper motive even though reductions in labor and overtime costs were part of the subcontracting rationale. The court noted, however, that an improper motive, even when accompanied by legitimate business considerations, is enough to prove a § 8(a)(3) violation. Id. at 1052 n6. While employers must be prepared to articulate legitimate business reasons for their decision, they must also avoid appearances of unlawful motivation.

Often, however, § 8(a)(1) and § 8(a)(3) allegations are brought in conjunction with § 8(a)(5) claims. These so-called "runaway shop" claims allege anti union animus, and not a legitimate entrepreneurial rationale is behind the company's conduct, and its failure to engage in decision bargaining further evidences its animosity. See, e.g., Fibreboard Paper Products Corp., 379 U.S. 203; Dorsey Trailers, Inc., 233 F.3d 831; International Paper Co., 115 F.3d 1045; Uforma/Shelby Business Forms, Inc., 111 F.3d 1284; Bell Atlantic Corp., 2001 NLRB LEXIS 944; Vico Products Co., 2001 NLRB LEXIS 836; Westchester Lace, Inc. v. Unite, 326 NLRB 1227 (1998); and Milwaukee Spring, 268 NLRB 601.

To avoid "runaway-shop" claims employers should eliminate any basis for a claim of discrimination, and may also want to bargain even when not strictly required. Voluntary bargaining will help avoid anti union animus claims. For instance, in Milwaukee Spring the Board held that absent a § 8(a)(5) violation, there is no basis for a derivative § 8(a)(3) claim. Therefore, decision bargaining in the absence of an independent § 8(a)(3) claim allows the employer to avoid both § 8(a)(5) and § 8(a)(3) charges. Conversely, a failure to bargain at least opens the door to both claims.

Some scholars believe that Milwaukee Spring also implicitly overturned the Board's holding in Los Angeles Marine, and employers can now base their decision solely on labor cost avoidance, without violating § 8(a)(3), if they engage in decision bargaining. This too provides an incentive to engage in decision bargaining where a claim may be made that contract cost avoidance was the sole reason for the employer's decision. Others, however, believe Los Angeles Marine remains firmly entrenched, and bargaining will not prevent § 8(a)(3) violations when labor cost alone drives the employer's decision. See Jan W. Sturner, An Analysis of the NLRB's "Runaway Shop" Doctrine in the Context of Mid-Term Work Relocations Based on Union Labor Costs, 17 Hofstra Lab. & Emp. L.J. 289, 306-10 (2000). Employers should probably continue to avoid basing decisions solely on labor cost avoidance, even when it otherwise meets § 8(a)(5) requirements until the issue becomes fully settled.

While bargaining can protect employers from derivative § 8(a)(3) charges, an independent § 8(a)(3) claim eliminates the right of an employer to defend its failure to bargain on the grounds that its decision was based on legitimate entrepreneurial considerations outside the scope of § 8(d). Westchester Lace, Inc., 326 NLRB at 1227 citing Joy Recovery Tech. Corp., 320 NLRB 356, 356 fn.3 (1995). In Westchester Lace the Board found the employer violated § 8(a)(3) when it threatened to close its plant if the union continued to complain about layoffs stemming from subcontracting decisions. Having established an independent basis for the § 8(a)(3) violation, the Board rejected the company's defense that it was not obligated to bargain over the subcontracting decision because it was a core entrepreneurial right motivated solely by economic reasons. Once anti union animus is found the employer loses its right to raise effective defenses against § 8(a)(5) charges. Id.

III. Impact Bargaining Obligations.

Even when decision bargaining is not required, employers will still be required to negotiate the effects the decision will have on affected employees. See, e.g., First National Maintenance Corp., 452 U.S. at 679 n15 (requiring impact bargaining in partial closure); Fibreboard Paper Products, Corp., 379 U.S. at 208 n2 (recognizing duty to bargain effects from subcontracting); NLRB v. Nat'l. Car Rental Sys., Inc., 672 F.2d 1182, 1187-88 (3d Cir. 1982) (requiring impact bargaining over work relocation); Universal Sec. Instr., Inc. v. NLRB, 649 F.2d 247, 257 (4th Cir. 1981) (requiring impact bargaining over closure); NLRB v. Royal Plating & Polishing Co., 350 F.2d 191, 196 (3d Cir. 1965) (requiring impact bargaining in plant closures).

In addition, the notice given must be provided sufficiently in advance of the actual date of impact to give the union a meaningful opportunity to bargain with the employer. NLRB v. Borg-Warner Corp., 663 F.2d 666, 668 (6th Cir. 1981). Also, the information must be accurate. NLRB v. Waymouth Farms, Inc., 172 F.3d 598 (8th Cir. 1999). In Waymouth Farms the court found the company violated § 8(a)(5) when it misrepresented material facts that thwarted the union's ability to effectively bargain about the impact a plant closure would have on employees. Id. at 600. The company told the union it planned to close the plant and possibly relocate to another state when in fact it had purchased another facility seven miles away. Instead of bargaining about relocation rights the union concentrated on severance benefits. To remedy the situation the court upheld the Board's order requiring the company to renegotiate an impact agreement. Id. at 599.

Section 8(a)(5) requires timely notice, truthful information, and good faith bargaining to impasse on the impact a company's decision will have on affected employees. All decisions involving business closures, partial closures, third party subcontracting, or relocations to other company facilities trigger effects bargaining.

Conclusion

Employer obligations when eliminating bargaining unit work are complex and fact sensitive. In most subcontracting and relocation situations decision bargaining will be required. Conversely, companies may make decisions to close all or part of a business unilaterally. Even when decision bargaining is not required, engaging in the process may prevent unions from effectively bringing anti union animus claims. Aside from any decision bargaining obligations, employers must always bargain over the impact their decision has on affected employees.

Employers can take a number of practical steps to reduce legal exposure when eliminating, subcontracting or relocating unit work. First, they should avoid work preservation and zipper clauses in collective bargaining agreements. Instead, a strong management rights clause should be sought, preferably spelling out an express right to subcontract and relocate work.

Second, employers should err toward bargaining about the decision unless it clearly involves a total or partial business closure, or labor costs are not part of the rationale, or potential labor cost savings are so great that the union could not or would not grant concessions sufficient to equal them. Bargaining, even when not required, also serves as a shield against derivative anti union animus claims. It also serves a practical purpose in informing the union about the reasons for the change and may convince them the factors leading to the action are beyond their ability to cure.

When bargaining obligations exist companies should provide the union with timely notice and accurate information so that the union is unable to claim they were presented with a fait accompli. Where negotiations fail to produce an agreement, companies must be sure an impasse has been reached prior to unilaterally implementing any changes. Alternatively, when the union fails to engage in negotiations employers must make sure the union has clearly and unmistakably waived its right to do so before going forward with the planned action.

Third, aside from decision bargaining obligations employers should conduct themselves in a manner that produces no fodder for the union to use in alleging an independent claim of anti union animus. Not only will employers face sanctions for their unlawful conduct, they will also lose the right to claim that their decision is based on legitimate business considerations and is therefore outside the scope of any bargaining obligation.

Fourth, employers should always be prepared to bargain about the effects that a decision has on affected employees. While the law continues to evolve, taking these steps will help prevent charges, and place employers in a stronger position to defend themselves.