Withholding Wage Increase During Bargaining Negotiations Unlawful: NLRB

Practical Law Legal Update 9-607-7767 (Approx. 6 pages)

Withholding Wage Increase During Bargaining Negotiations Unlawful: NLRB

by Practical Law Labor & Employment

Background

Arc Bridges provides services for disabled individuals. In 2006 and 2007, two separate portions of its workforce became unionized. In 2007, while Arc Bridges's management was negotiating an initial collective bargaining agreement with the union, its executive director reexamined the company's plan to give a 3% increase to all employees. Wage increases had been granted in July 2005 and 2006, and the company's board of directors had authorized granting a third consecutive across-the-board 3% wage increase for the new fiscal year beginning in July 2007. The executive director held off on granting the wage increase in July 2007, and the represented employees voted to strike in August. In October 2007, the executive director granted a wage increase only to non-represented employees retroactive to July, prompting the filing of an unfair labor practice (ULP) charge was filed. In 2010, the Board decided that the employer's:

Practice of granting across-the-board wage increases to employees each July was an established condition of employment.
Failure to provide an existing benefit to represented employees was "inherently destructive" of their Section 7 rights.
Withholding of the wage increase to represented employees violated Section 8(a)(3) and (1).

The Board noted that the evidence indicated anti-union animus, but its 2010 decision did not rely on such evidence. The Board also reserved judgment on whether the evidence of the company's anti-union animus would have been sufficient by itself to establish a violation of the NLRA under a Wright Line theory.

Arc Bridges sought review in the DC Circuit. On December 9, 2011, the DC Circuit found that the across-the-board wage increase was not an established condition of employment. The DC Circuit set aside the Board's order and remanded the case to the NLRB in light of the Board's reserving of judgment on the Wright Line theory (See Legal Update, Discretionary Wage Increases Are Not Terms and Conditions of Employment Under the NLRA: DC Circuit).

Outcome

On remand, a majority of the Board (Chairman Pearce and Member Hirozawa) ruled against Arc Bridges for a second time, this time basing its decision on a Wright Line theory that the employer's decision to refrain from giving non-represented employees a wage increase in 2007 was unlawfully motivated by anti-union animus.

The majority considered whether the employer’s differing treatment of represented and non-represented employees was a permissible bargaining strategy or was due to the employees choosing a union to represent them (see Shell Oil Co., 77 NLRB 1306 (1948)). The Board majority looked at the record evidence and found the latter, noting that Arc Bridges:

Intended to grant the across-the-board wage increase until the employees voted for the union.
Had shown its opposition to the union through written and verbal statements, including:
- a written note from a manager to employees stating that she took it “personally” that they were supporting the union;
- a verbal statement by a supervisor urging an employee to vote against a strike and to tell other employees to do the same;
- a verbal statement by a supervisor telling an employee that employees would receive “a pat on the back" for opposing the union; and
- a verbal statement that “the union would be gone by November (2007).”
Made statements encouraging employees to blame the union for the Executive Director’s decision to withhold the wage increase, and claiming that significant money in the budget that would have been used to cover the wage increase had to be used to pay the company’s lawyers.

The Board majority rejected Arc Bridges’ argument that it had a legitimate business justification for not granting the wage increase to represented employees, rejecting as pretextual the company’s purported justifications that:

A 3% wage increase would have made the represented employees unhappy and increased the likelihood of a strike. According to the Board, this contention by Arc Bridges was undermined by the fact that the Executive Director had offered a smaller wage increase of 1.5% during bargaining subsequent to the strike vote.
The wage increase granted to non-represented employees was intended to reduce a high turnover rate among managers and supervisors. According to the Board, this contention was belied by the fact that wage increases were granted to all unrepresented employees, most of whom were not managers or supervisors.

The Board majority found that the company’s decision to delay the wage increase in July 2007 and to ultimately grant the wage increase only to non-represented employees in October 2007 was made purposely in light of the approaching end of the certification year for one of the unionized segments of its workforce (November 2007).

Taking all of the above evidence and findings into consideration, the Board majority held that:

Protected activity by its unionized workforce was a motivating factor in the employer’s decision to withhold granting the wage increase to represented employees, and the employer’s decision was unlawfully motivated by anti-union animus under Wright Line in violation of Section 8(a)(3) and (1) of the NLRA.
Arc Bridges had failed to meet its rebuttal burden under Wright Line to show that it would have made the same decision even in the absence of protected activity by its represented employees.

Member Miscimarra dissented, finding that:

Arc Bridges was in a no-win, damned-if-you-do, damned-if-you-don’t situation because the parties had not yet reached an agreement or impasse in October 2007, when the wage increase was withheld for represented employees. Therefore, by unilaterally granting the wage increase, Arc Bridges would have been subject to a ULP refusal-to-bargain charge under Section 8(a)(5) of the NLRA.
The evidence did not come close to supporting a finding of anti-union motive by Arc Bridges, as the majority relied mainly on statements made by individuals who had a limited role in the decision to withhold the wage increase.
The majority failed to follow the DC Circuit’s holding that wage increases were not a condition of employment. Therefore, not providing a wage increase to represented employees was the status quo that Arc Bridges should have maintained in order to avoid violating Section 8(a)(5).
The wage increase was withheld for legitimate, non-discriminatory reasons, including:
- preserving bargaining leverage;
- preventing a strike; and
- avoiding a ULP charge under Section 8(a)(5).

Practical Implications

The Board’s decision in Arc Bridges, Inc. illustrates the difficulty employers face in navigating the terrain between ULP charges under Section 8(a)(3) and ULP charges under Section 8(a)(5). Member Miscimarra’s dissent highlights the notion that employers can be put in a no-win situation when faced with deciding whether to grant a benefit to represented employees that has already been extended to other employees. They can withhold the benefit and maintain the status quo in order to avoid a ULP charge under 8(a)(5), but then risk a ULP charge under 8(a)(3) premised on a Wright Line theory of anti-union animus. Alternatively, they can extend the benefit but risk finding themselves vulnerable to a ULP charge under 8(a)(5). The majority’s decision suggests that employers who choose the first option should be careful to refrain from making any statements that could appear to reflect anti-union animus.

Withholding Wage Increase During Bargaining Negotiations Unlawful: NLRB | Practical Law