The key litigated issue in KLB Industries v. NLRB was whether a company's competitive disadvantage claim, invoked during the collective bargaining process to justify proposed wage concessions, triggered an obligation to respond to a union's request for business and financial information, including information about customers and products.

On September 20, 2007, KLB Industries, Inc. (KLB) began negotiating a new collective bargaining agreement (CBA) with a union. During negotiations, KLB demanded wage concessions based on its claims of increased competition from Asian manufacturers, rising production costs and decreased productivity. KLB also expressed concern about customer retention. The union, by contrast, sought wage increases.

On October 4, following KLB's presentation of a final offer that included wage reductions, the union sent KLB a letter requesting information relating to KLB's competitiveness claims, including:

The union explained in the letter that it needed the information to verify KLB's competitiveness claims. On October 18, KLB informed the union that it would not provide the information. However, KLB did disclose annual wage savings without providing its underlying calculations or predicted overtime. The union responded that the information was insufficient to address the proposed wage cuts.

On October 19, KLB informed the union that:

However, after the lockout began, KLB discovered that the cancellation of the employees' entire health plan meant that unit employees were ineligible for COBRA benefits. During the lockout, KLB also called the police to report that unionized employees had trespassed on its property when they placed picket signs on a public right of way.

The union filed unfair labor practice (ULP) charges against KLB, which were heard by an NLRB administrative law judge (ALJ). The ALJ concluded that KLB committed ULPs by:

However, the ALJ rejected a complaint allegation that KLB had bargained in bad faith.

The three-member panel heading the NLRB's judicial functions (Board) affirmed the ALJ's decision, with Member Hayes dissenting as to the disclosure and lockout rulings. KLB petitioned the US Court of Appeals for the District of Columbia Circuit for review. The Board cross-applied for enforcement of its order.

On December 4, 2012, the DC Circuit issued a 2-1 opinion affirming the Board's decision and granting its application for enforcement, with Judge Henderson dissenting.

The court noted that, in NLRB v. Truitt Manufacturing Co., the Supreme Court held that a company's failure to disclose information relevant to an argument against increasing wages can constitute a ULP under certain circumstances (see Practice Note, Collective Bargaining Under the National Labor Relations Act: Financial Information).

Following Truitt, the DC Circuit observed that two lines of cases had developed to interpret its holding, including:

In its decision, the NLRB applied the discovery line of cases, concluding that the union had properly requested information relevant to KLB's competitiveness claim. KLB challenged this conclusion, arguing that:

The DC Circuit rejected KLB's arguments, finding that:

Further, the court held that the Board reasonably concluded that KLB's claims could have been substantiated by examining the types of information that the union had requested. Acknowledging that the specific information necessary to verify a claim will vary depending on the circumstances, the court approvingly cited to the NLRB's decision in Caldwell Manufacturing Co., which examined whether a particular information request is tailored to a company's factual assertions. However, the court noted that KLB had not argued that the union's information request was irrelevant.

The court rejected additional arguments raised by KLB that:

The court also:

In dissent, Judge Henderson asserted that KLB's generalized statements regarding competitiveness did not trigger a duty of further disclosure to the union. Examining the evidence, Henderson found that KLB had made little more than generic competitive disadvantage claims during the bargaining process, and that these claims were properly analyzed under the Nielsen line of cases. Henderson found that under this framework, the union bears the burden of showing that its information is relevant to verifying the company's claim, and that without the requisite showing, KLB had no duty to divulge most of what the union had requested.

Traditionally, based on Truitt and Nielsen, employers have referred to competitive market forces or needs to stay competitive as grounds for:

In most circumstances, if the employer did not allege an inability to pay, the NLRB and federal courts have not required the employer to "open its books" for the union's inspection to test the employer's assertion. Asserted needs to "stay competitive" have typically been understood as a safe and polite way to reject a proposal that would increase labor costs (or to support a proposal that would decrease labor costs) without:

In light of this decision, employees that do not wish to make their financial and other business records discoverable through union information requests should: