Citing Competitive Pressure as a Justification for Concessions May Expose an Employer to a Union's Requests for Information

A recent decision by the United States Court of Appeals for the District of Columbia Circuit may impact the reasons employers give to justify wage concessions during collective bargaining. In KLB Indus. Inc. v. NLRB, 700 F.3d 551 (D.C. Cir 2012), the Court enforced a National Labor Relations Board decision requiring KLB to provide a union with information to substantiate KLB’s claims that "competitive pressures" were to blame for proposed wage reductions.

During collective bargaining, the union asked KLB to produce information regarding the company’s customers, prices, price quotes, market studies and projected savings, in order to evaluate KLB's demand for concessions due to competitive pressures. KLB refused to provide the requested information, claiming that, because it was not asserting an inability to pay the union's demands, it was not obligated to provide financial information to the union. The NLRB ruled that KLB’s refusal to produce the information constituted an unfair labor practice.

In affirming the NLRB’s decision, the court acknowledged that, if a company asserts an inability to pay, it must provide the union with requested financial records to validate that assertion, and that a general claim of competitive pressure is not equivalent to a claim of inability to pay. Nonetheless, the court ruled that this case was distinguishable because here, the union was not seeking general access to KLB’s financial records. Instead, the union was seeking specific documents, tailored to the issue of whether KLB’s competitive pressures claims were true, and, as a result, the only question was whether the information was relevant. Finding that the requested information was relevant, the court held that KLB violated the National Labor Relations Act by failing to provide the requested information.

The practical implications of the KLB decision may be significant for employers who seek concessions in collective bargaining. Put simply, while an assertion of "competitive pressure" will not require the employer to open its books to the union, an employer who relies on such an assertion may be required to produce financial and other records to substantiate its position.