On April 29, 2020, the Ninth Circuit Court of Appeals affirmed a National Labor Relations Board decision where an employer was lawfully permitted to refuse a union’s request for financial information because it appropriately clarified its previous “inability to pay” statements and explained that it was only unwilling, not unable, to meet the union’s wage demands. 

Normally, when an employer justifies its bargaining position by claiming an inability to pay a union’s demands, the union may request financial documents sufficient to substantiate the employer’s position. The Supreme Court held in NLRB v. Truitt Mfg. Co., 351 U.S. 149, 153-54 (1956), that a union is entitled to an employer’s financial information when an employer bases its bargaining position on an asserted inability to pay. That said, the NLRB has long held that a union is generally not entitled to this information without an employer claiming an inability to pay across the bargaining table. In this regard, the Ninth Circuit noted that an employer “asserting an unwillingness to pay a union’s demands during negotiations is different than asserting a financial inability to pay” and such an employer “does not have a duty to produce information about its financial viability upon request from the union.”

In the instant case, the employer initially told the union it would be committing “suicide” and put the company “underwater” if it granted the union’s wage demands, statements that the employer conceded constituted an inability to pay position.  Thereafter, however, the employer further explained its bargaining stance and stated how “no employer in this business would pay such a wage to its hourly workforce that was so grossly outside of its business model and if it did so, it would be suicide for the company.” This, the employer clarified, was “not an inability to pay for lack of revenue” but rather “a refusal to pay an hourly rate that would be detrimental to the business.” In affirming the NLRB, the Court held that the employer’s subsequent explanation established a proper disavowal of its previous inability to pay statements, and that the employer had a legal right to do so.

Ultimately, the Court found that the overall weight and substance of the employer’s bargaining position was an unwillingness to pay the union’s wage demands. The Court noted that “[n]ot every financially-motivated decision by an employer establishes … an [in]ability to pay” and, to this end, the employer not referencing “financial nonviability after retracting its inability-to-pay claim” reinforced its finding that the employer was simply unwilling to pay, not unable.

Any employer bargaining with a union must be careful not to make inability-to-pay-type statements during negotiations, or otherwise risk opening up its financial records to a union. This case helps solidify the NLRB’s current position on when employers may lawfully withhold turning over financial information to a union and, specifically, how employers can retract/disavow prior inability to pay claims under certain conditions. The guidance in this case should provide helpful tips for those employers taking an unwillingness – not an inability – to pay stance during contract negotiations.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.